My Lords, we have come a long way since the passage of the Higher Education and Research Act 2017 and I thank noble Lords for the scrutiny they provided, both to HERA itself and to the HERA regulations laid before this House since HERA gained Royal Assent in April 2017.
Let us step back and take a look at the progress of the Office for Students. Since its formation, the OfS has registered over 350 higher education providers, while ensuring that academic freedom and autonomy are core principles of the governance of all registered providers. In registering these providers, the OfS has satisfied itself that each provider has met a range of registration conditions including, but not limited to, quality and standards, access and participation, management and governance, financial sustainability and student protection. It has also helped to introduce the Teaching Excellence and Student Outcomes Framework, to highlight where to find high-quality teaching and the best graduate outcomes, as well as providing an incentive to improve standards. We know that the TEF has encouraged providers to focus more attention on their teaching and learning strategies. Dame Shirley Pearce is conducting an independent review of how the TEF currently operates and we expect her to submit her report in the summer. The OfS has also ensured that all registered providers with fee caps at the higher level have comprehensive access and participation plans to improve access and support for students from disadvantaged backgrounds and underrepresented groups.
Widening access and participation in higher education is a priority for this Government. This means that everyone with the capability to succeed in higher education should have the opportunity, regardless of their background or where they grew up, and we are making progress. In 2018, 18 year-olds from disadvantaged backgrounds were proportionally 52% more likely to enter full-time higher education than in 2009. But we know that there is more to be done. Through the Government’s guidance to the Office for Students we have asked for greater and faster progress on access and participation. On the provision of information to students, the OfS is working in partnership with the Department for Education on the best way to enhance and improve the information given to students on the quality and standard of teaching that they can justifiably expect. I am sure your Lordships will agree that this is a considerable achievement, on which the OfS should be congratulated.
I now turn to the regulations and first to Section 15 of HERA, which gives the OfS the power to impose monetary penalties on providers that fail to comply with their ongoing conditions of registration. The OfS register is the route for providers to charge fees that attract student loans, become eligible for grant funding, offer degrees or call themselves a university. In return for these considerable benefits, providers have to comply with registration conditions relating to, for example, their financial sustainability, quality of provision and student protection. The register—noble Lords may know this, but I wish to go over the details again—is divided into two categories: “approved” and “approved fee cap”. A provider’s registration category determines its exact benefits and obligations. Providers on the register with an agreed access and participation plan are in the approved fee cap part of the OfS register.
HERA also gives the OfS the power to apply specific conditions on a particular provider if there is cause for regulatory concern. These are not specified in the Act but, by way of example, the OfS has placed specific ongoing conditions of registration in relation to their access and participation plans on certain universities. They have been required to report on their evaluation of financial support made available to students.
Adherence to the registration conditions is a vital component of our reforms to the regulatory landscape. It is critical to safeguarding the interests of students and the quality and reputation of our higher education sector. The power for the OfS to impose a monetary penalty on providers is a crucial tool for the OfS to have at its disposal to enforce registration conditions and to encourage compliance. Regulations are required to make provision for the amount of the penalty that can be imposed and may set out the matters to which the OfS must, or must not, have regard when exercising the power to impose a monetary penalty. Failure to put these regulations in place will mean that the OfS will not have this essential regulatory tool at its disposal at the very point at which it most needs it.
I move on to the consultation on monetary penalties. Monetary penalties provide an effective incentive to comply with regulation and an enforcement tool, but they must also be proportionate and fair. There was no statutory obligation to consult on these regulations. However, a commitment was made during the passage of HERA through this House to consult on the matters that the OfS must have regard to when imposing a monetary penalty. As a result, the department conducted its consultation between December 2017 and March 2018. To reassure your Lordships, as these are new regulatory powers, we also took the opportunity to seek views on the maximum monetary penalty amount. It is through this extensive consultation that we have established the fair and balanced approach set out in these regulations.
The consultation process identified some concerns that monetary penalties could take away provider income that might otherwise be used for the benefit of students. The majority of respondents did not support the department’s proposals for the maximum penalty, but respondents were broadly supportive of the proposed factors, especially that relating to impact on students. The Government have listened. In response, the Government adopted the lower of their options for a maximum penalty amount—2%, rather than 5%, of qualifying income—but remain of the view that monetary penalties need to be set at a level that ensures there are visible and meaningful consequences, without being unduly punitive. By this I mean that the penalties should have the potential to be of sufficient magnitude to have a real impact on providers, which will encourage them to comply with their registration conditions. However, the legal restraints these regulations place on the OfS, including the mandatory factors to which it must have regard when setting a penalty, are designed to ensure that the OfS is required take appropriate, reasonable and proportionate action. In doing that, the regulations ensure that the interests of students—both at the provider in question and those of students more generally—are taken into account. Your Lordships will be reassured to know that the regulatory framework published by the OfS last year sets out its approach to imposing sanctions, including monetary penalties. In addition, the OfS will produce more detailed guidance on how it will take decisions to impose monetary penalties and on the amount of penalty to be imposed.
I now turn to the second part of the regulations. These allow the Office for Students to refuse to renew a provider’s access and participation plan. Given the importance of access and participation, we have asked the Office for Students to secure greater and faster progress in this very important area.
From our debates during the passage of HERA 2017, I know that your Lordships share a desire to see more young people from disadvantaged and under- represented groups accessing and then successfully participating in higher education. Currently, the key way of achieving this is through access and participation plans. Each higher education provider which intends to charge higher-level fees must set out in its plans the measures it will take to support students from disadvantaged backgrounds. This can include helping students to access higher education and supporting them to participate successfully in its courses, as well as helping to tackle, for example, drop-out rates, attain qualifications and progress from higher education.
Given the importance that we place on access and participation, the OfS should have strong powers where it has concerns that a provider has failed to deliver on its commitments or has exceeded the specified limits for course fees. Where this happens, the OfS could, as one of a number of actions available to it, refuse to renew a provider’s next access and participation plan. Refusing to agree a provider’s plan would represent substantive regulatory action. It would mean that the provider would not be able to charge higher-level fees, and this would have real financial implications for most providers.
Given the major implications of refusing to agree a plan, the regulations include a review mechanism. Providers can ask, within 28 days, for a decision made by the OfS to be considered by an independent reviewer. This should provide additional reassurance about the fairness of the process.
Other sanctions and interventions that the OfS could use where a provider falls short in relation to its access and participation plan include enhanced monitoring, monetary penalties or suspending a provider from the register. All are aimed at addressing underperformance and encouraging progress. As a last resort, the OfS has the ability to deregister a provider.
These regulations make sure that the OfS is consistent in using its regulatory powers to impose a monetary penalty or refuse to renew an access and participation plan. The OfS must consider broadly the same factors when deciding to impose either of those sanctions.
It is planned that the regulations will come into force on