COMMONS

Financial support for students at alternative higher education providers

24 February 2015

Public Accounts Committee publishes report on control over funding for alternative higher education bodies.

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, said:

"Since the Department for Business, Innovation and Skills embarked upon the expansion of the private higher education sector, it has ignored repeated warnings about the potential waste and abuse of public money intended to support legitimate students and institutions.

Between 2010/11 and 2013/14, there was an extraordinary rise in the number of students claiming support for courses at alternative providers, from 7,000 to 53,000. The total amount of public money paid to these students, through tuition fee loans and maintenance loans and grants, increased from around £50 million to around £675 million.

The Department pressed ahead with the expansion of the alternative provider sector without sufficient regulation in place to protect public money. In our view, the risks associated with proceeding without the necessary legislative powers were sufficiently great that the Accounting Officer ought to have sought a Ministerial Direction.

The Department was explicitly warned by the Higher Education Funding Council for England and the Universities and College Union about these risks but chose to disregard them both before and after implementation.

As a result of its lax approach, the Department allowed £3.84 million of public money to be given to ineligible EU students in the form of student loans and grants, where EU students had either chosen not to or had been unable to prove that they met eligibility criteria on residency.

Furthermore, it has been unable to quantify how much money has been lost when it has funded students who have failed to attend, or failed to complete courses, or were not proficient in the English language, or were not entered for qualifications, or where courses themselves were poorly taught.

The Department failed to learn from previous Government experience, such as Individual Learning Accounts where rapid expansion led to serious problems, and it has also been slow to react to obvious red flags.

For example, the rapid expansion in numbers was concentrated in five colleges that accounted for 50% of the expansion. 20% of students receiving funding were not registered for a qualification and drop-out rates were very high in some institutions.

Even though the intended purpose was to widen access to higher education for students in England, 40% of the publicly funded students attending these colleges are EU students, compared to 6% in the rest of the higher education sector. The Department’s record in collecting loan repayments from EU students who have returned overseas is already poor.

There was also evidence from whistleblowers that proficiency in English language was not tested, that some institutions were recruiting students on the streets, and that students claiming funding were not attending colleges.

The Department took over a year to tighten up some of its procedures to control public expenditure more effectively. It has also failed to protect the interests of legitimate students, the taxpayer and the reputation of those alternative providers who may be performing well.

The Department must systematically assess and control the specific risks identified by the National Audit Office and at our evidence session, and provide us with a clear explanation of how it will manage these risks in future.

It should also report back to us urgently with an assessment of how much public money is at risk of being wasted."

Margaret Hodge was speaking as the Committee published its 41st Report of this Session which – on the basis of evidence from Martin Donnelly, Permanent Secretary, Department for Business, Innovation and Skills, Professor Madeleine Atkins, Chief Executive, Higher Education Funding Council for England, Rod Bristow, President, UK and Core Markets, Pearson and Mick Laverty, Chief Executive, Student Loans Company – examined financial support for students at alternative higher education providers.

The Department for Business, Innovation & Skills (the Department) has failed to learn lessons from past policies such as Individual Learning Accounts. It failed to heed warnings from organisations such as the Higher Education Funding Council and University and College Union. The Department allowed the rapid expansion of support for students attending private Higher Education providers. The Department allowed £3.84 million of public money to be given to ineligible EU students in the form of student loans and grants. Furthermore the Department has been unable to quantify how much money has been lost when it has funded students who have failed to attend, or failed to complete courses, or were not proficient in the English language, or were not entered for qualifications, or where courses themselves were poorly taught. The Department took over a year to tighten up some of its procedures to control public expenditure more effectively.

Approximately 140 institutions offering higher education are termed ‘alternative providers’. These alternative providers comprise a diverse range of organisations ranging from private companies to charitable institutions. They do not receive government grants directly but do access public funding through student loans which are used to pay their fees. Following the announcement of higher education reforms in 2011, and the associated increase in tuition fee loans, there has been substantial and rapid growth in the sector. 40% of the publicly funded students attending these colleges are EU students, compared to 6% in the rest of the higher education sector. Between 2010/11 and 2013/14, the number of students claiming support for courses at alternative providers rose from 7,000 to 53,000. Over the same period, the total amount of public money paid to students at alternative providers, through tuition fee loans and maintenance loans and grants, has risen from around £50 million to around £675 million. The Department has overall responsibility for oversight of publicly-funded higher education, including alternative providers with publicly-funded students. The Student Loans Company is responsible for paying out loans and grants to students.

Conclusions and Recommendations

The Department pressed ahead with the expansion of the alternative provider sector without a robust legislative framework to protect public money.

Since the Government announced higher education reforms in 2010, there have been multiple warnings about the risks associated with a rapid expansion of the private higher education sector. In particular, this Committee, the Higher Education Funding Council for England (HEFCE) and the University and College Union raised concerns about proceeding without a robust regulatory framework. Although it became clear in 2012 that the legislation required to establish a new regulatory framework would not be passed within the current Parliament, the Department continued with implementation but failed to think through how it would manage the risks in the absence of the expected legislative powers. In particular the Department has no rights of access to alternative providers. In these circumstances, the Accounting Officer at the Department could have sought a Ministerial Direction to proceed, but did not, so must bear responsibility.

Recommendation: Accounting Officers should not proceed with implementing schemes without being assured that risks can be appropriately managed. If risks to public money cannot be sufficiently controlled, whether through legislative or other means, they should seek a Ministerial Direction.

The Department failed to identify and act quickly on known risks associated with the rapid introduction of schemes to widen access to learning.

The Department did not learn from previous Government experience, in particular the introduction of Individual Learning Accounts where rapid expansion led to serious problems. Furthermore, the Department has been slow to react to warning signs. The rapid expansion in numbers was concentrated in five colleges that accounted for 50% of the expansion. 20% of students receiving funding were not registered for a qualification and drop-out rates were very high in some institutions. There was also evidence from whistleblowers that proficiency in English language was not tested, that some institutions were recruiting students on the streets, and that students claiming funding were not attending colleges. Rather than respond to the warning signs by conducting a broader investigation, the Department chose to focus on specific issues and specific providers, and even then has failed to apply adequate sanctions in some cases.

Recommendation: The Department must systematically assess and control the specific risks identified by the National Audit Office and at our evidence session, and provide us with a clear explanation of how it will manage these risks in future.

The Department does not know how much public money may have been wasted.

The Department has not attempted any calculation of the total financial impact of its weak oversight. The Department was able to tell us that it had paid out £3.84m to EU students who were not eligible for student loans. The Department’s record in collecting monies from EU students is already poor. Furthermore, it did not know how much public money may have been wasted where larger than expected numbers of students have failed to complete their qualifications, or how much funding has gone towards paying for additional EU students rather than for the intended purpose of widening access to higher education for students in England. The Department also does not know why there is a 20% difference between the number of students enrolled with alternative providers and the number registered with the qualification awarding body and whether this represented a misuse of public funds. It has not established whether there has been any waste of public money as a consequence.

Recommendation: The Department should report back to us urgently with an assessment of how much public money is at risk of being wasted.

The Department has failed to protect the interests of legitimate students, the taxpayer and the reputation of those alternative providers who may be performing well.

The Higher Education Statistics Agency provides published data to enable students and others to assess and compare the performance of higher education institutions. No data is provided to assess the performance of private providers. In particular, whistleblowers told us that some institutions admitted students with unacceptably low fluency in English who were therefore not equipped to pursue qualifications for which they had enrolled. These students will have a poor experience, may fail or drop out, and will have taken on significant loans they may be unable to repay. With no reliable data, the reputation of all private higher education colleges is tarnished by the unacceptable standards in a few of the colleges.

Recommendation: The Department needs to ensure that it has a much firmer grip on the quality of teaching and the standard the students can expect in private sector higher education colleges. It needs to identify poor performers and take appropriate action to protect students and the sector as a whole.

The Department does not monitor what it is achieving from expansion of the alternative provider sector.

One of the objectives of the Government’s higher education reforms was to improve student choice by supporting a more diverse sector. More opportunities for part-time study, sandwich courses or distance learning were intended to widen access for groups who were previously less likely to enter higher education, for example older students or those on low incomes. However, the Department did not define any measures that would allow it to judge whether implementation of the policy has been successful. Furthermore, the Department has not collected sufficient data on the alternative provider sector, such as the number of students from lower socio-economic groups who have gained a higher education qualification. Such information would help the Department assess whether the policy is working.

Recommendation: The Department needs to set specific, measurable objectives for this policy, and collect and analyse the right data in order to evaluate the full impact, taking account of any unanticipated impacts, such as the recruitment of EU students.

Further information

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