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My Lords, it is the Government’s intention that the OfS’s running costs will be shared between the sector, in the form of registration fees charged on registered providers, and government. The Bill enables this, granting the OfS the power to charge fees to cover the cost of its functions, with the detail of those fees to be set out in secondary legislation following proper consultation with the sector. That consultation is now open.
Moving to a co-funded model will be more sustainable, bringing the approach to funding the OfS in line with that of other, established regulators, such as Ofgem and Ofcom. It also reflects current practice in sector-owned bodies, including HESA and the QAA. Asking providers to contribute will strengthen their incentive to hold the OfS to account and challenge its efficiency. To reassure your Lordships, the total amount of funding raised by fees would represent less than 0.1% of the annual income that the sector generates.
Turning to Amendment 423, I thank the noble Lord, Lord Stevenson, for his thoughtful contribution. Let me assure him that the fees consultation seeks views on guiding principles in relation to areas where the Secretary of State may provide supplementary funding to the OfS. This could include funding to cover set-up costs and elements of its running costs. If we were to specify this in legislation, however, in the way that the amendment does, it would inadvertently prohibit the Secretary of State from giving money to the OfS to distribute as teaching grant.
The Government are therefore actively seeking to address the concerns raised by the amendment through consultation, and to ensure that sector views help to shape the final funding model so that it is fair and proportionate. I also remind noble Lords that the OfS will need to ensure that it charges only fees sufficient to cover its costs, and has a general duty to operate economically and efficiently. It will also operate transparently: the final fee structure will be subject to Treasury consent and set in secondary legislation subject to the negative resolution procedure, and the OfS will lay an annual report before Parliament. So there is a wide degree of transparency about what will happen.
I turn to the amendments tabled by the noble Baroness, Lady Wolf. Fees should be fair and proportionate, neither creating disproportionate barriers to entry nor disadvantaging any category of provider. The HE White Paper announced that fees will vary in part by the size of a provider, recognising sector concerns around affordability. We are consulting on this issue, including the points raised, and will reflect on responses. However, it would be premature and potentially unfair on some providers to restrict the fees in the way that the amendment suggests.
On Amendment 421A, I reassure the noble Baronesses, Lady Wolf and Lady Brown, that the Government remain wholeheartedly committed to the principles of the regulator’s code. Clauses 2(1)(f) and 7 already require the OfS to have good regulatory practices reflecting many principles in the regulator’s code. If necessary, the Government could make the body formally subject to the code by order. I say to the noble Baronesses that we are content to look into this further. The Government do not believe that the designated bodies should be subject to the code, as they are not responsible for the rules of regulation and are not public bodies.
It is the Government’s intention that these reforms should further strengthen the overall quality and diversity of our world-class HE sector. This is in the student interest and certainly in the interest of all providers. Sharing the costs of regulation between the Government and the sector is a more sustainable approach common to other regulators. It creates a strong incentive for providers to hold the regulator to account for its efficiency, and that efficiency is further assured by explicit safeguards in the Bill. The Government are absolutely committed to developing a charging system that is fair and proportionate, which is why we are consulting on this very issue. In these circumstances, having regard to my remarks, I ask the noble Baroness to withdraw Amendment 420.