Competition body expected to run market study of sector

Source: Kobal

There’ll be no hiding|: price competition would be a big focus of any investigation of a higher education market

The new Competition and Markets Authority is thought likely to undertake a “market study” of English higher education as one of its first cases – scrutinising the setting of tuition fees by universities and possibly even the £9,000 cap itself.

The CMA is due to take over the roles of the Competition Commission and the Office of Fair Trading from April, and it will be eager to prove its effectiveness if it tackles higher education.

Higher education sources say that it is likely that the OFT will follow up its initial call for information on English undergraduate education, which closed to submissions in December, with a full market study that could last a year.

Possible outcomes from a market study include recommendations to the government to change policy or “competition or consumer enforcement action”, according to the OFT website.

Sonia Sodha, head of public services at Which?, said the organisation is “really hopeful” that the OFT “will respond to our call” to undertake a market study.

Which? has an influential role in regard to the OFT. It can trigger a market study with a “super-complaint” – but there is not thought to be any prospect of such a move at present.

“There is evidence that the higher education system isn’t working as well as it could to deliver value for money for students,” Ms Sodha said. She cited concerns about the “variability” of the academic experience at different universities, about the information that universities provide on factors affecting student choice (such as graduate earnings) and about the obstacles to students “switching” between institutions.

Which? surveyed 26,000 students to explore the academic experience in a study published with the Higher Education Policy Institute last year.

‘Problems in the market’

In its submission to the OFT’s call, Which? cites fees among the “evidence that there are problems in the market”. It continues: “Fees will average £8,600 in 2014-15, very close to the £9,000 cap, despite evidence of wide variance in terms of the academic experience (for example, amount and type of scheduled teaching and amount and nature of feedback) and also the outcomes that graduates of particular courses and institutions achieve in the labour market.”

Which? also warns that regulation “has become increasingly light touch and the Quality Assurance Agency regulatory framework focuses more on processes than outcomes”.

After highlighting risks from the planned abolition of undergraduate number controls, Which? adds: “There is a risk that, as the market in HE further develops, academic quality could decline…The regulator is not acting as a back-stop to ensure that quality and standards are protected and there are not adequate regimes in place to protect students where universities fail.”

The prospect of an OFT examination of higher education was anticipated last year in a paper co-authored by David Palfreyman, director of the Oxford Centre for Higher Education Policy Studies.

He told Times Higher Education that a market study would need to address fees. “Is there price competition among suppliers to the benefit of consumers, or is there ‘tacit collusion’ whereby the inefficient operation of the market encourages suppliers to drift towards charging the same (high) price because they have no incentive to charge less?”

Another key question, Mr Palfreyman continued, was whether “government interference in terms of still setting a price cap” is “contributing to market inefficiency”.

Fees focus

Universities UK’s submission to the OFT starts by addressing fees – indicating that the issue is likely to be a key battleground.

While UUK notes that average fees were about £8,200 in 2012‑13, it says that “this clustering is understandable” – highlighting that income from higher fees was a substitute for much reduced public funding and was “not additional income”.

UUK also says that “the primary basis for competition in the sector has been quality, and in this sense the fee level acts as a signal of quality of provision”.

The submission from GuildHE highlights the pace of policy change and appears to warn the OFT against opening the door to drastic action.

GuildHE argues that “we should acknowledge that the current regime is incomplete and that legislation should be the primary way to address the majority of the issues that the OFT raises. Requirements for changes in the meantime may not necessarily be helpful and recommendations or next steps should assess potential impact with this in mind.”

The OFT plans to announce its decision on whether to go ahead with a market study in mid-March.

john.morgan@tsleducation.com