I beg to move amendment 76, in clause 47, page 26, line 42, after “authorise” insert “authorised”.

This amendment and amendment 77 limit the power of the Secretary of State to make regulations allowing the OfS to authorise registered higher education providers to enter into validation arrangements on its behalf. The providers are required to be “authorised” (defined in the new subsection (6A) added by amendment 78), both to grant the taught awards or foundation degrees to which the arrangements relate, and to enter into the validation arrangements to which the arrangements relate.

With this it will be convenient to discuss Government amendments 77 and 78.

The Government’s higher education reforms will allow providers to choose which model of HE provision best suits their needs, removing any unnecessary barriers to market entry for high-quality providers and promoting institutional competition and student choice. To achieve that, it is essential that along with a direct entry route to market, HE providers that can meet relevant quality thresholds and have a degree they want to introduce into the higher education market should be able to access first-class validation services, if they feel that would be the right choice for them.

Clause 47 enables the Secretary of State to authorise the OFS to act as a validator of last resort if he or she deems it necessary or expedient. It also states that the powers set out in regulations may allow the OFS to authorise registered HE providers to validate taught awards and foundation degrees on its behalf. We intend to give the OFS the ability to validate only if there are serious circumstances that warrant it, for example if serious or intractable validation failures exist. It is vital, though, that we set the right parameters for use, which is why it will be for the Secretary of State to authorise the OFS to act as a validator of last resort should he or she deem it necessary or expedient, having taken the OFS’s advice.

The Secretary of State would then need to lay secondary regulations before Parliament, which I would expect to set out the terms and conditions of any OFS validation activity. They would provide Parliament with the opportunity to see those conditions, and Parliament would retain the power of veto. In addition, the OFS should authorise only HE providers that have the necessary degree-awarding powers to validate taught and foundation degrees on its behalf. The clause does not make that explicit, so my amendments ensure that the Secretary of State’s powers are explicitly limited in that way. That important limitation safeguards academic standards and quality, to protect student interests, and I therefore ask hon. Members to allow the amendments to be made.

Amendment 76 agreed to.

Amendments made: 77, in clause 47, page 27, line 2, at end insert—

“(4A) But regulations under subsection (1) may not include power for the OfS to authorise a provider to enter on its behalf into validation arrangements which are—

(a) arrangements in respect of taught awards or foundation degrees that the provider is not authorised to grant, or

(b) arrangements that the provider is not authorised to enter into.”

See the explanatory statement for amendment 76.

Amendment 78, in clause 47, page 27, line 11, at end insert—

“(6A) In this section, ‘authorised’, in relation to a registered higher education provider, means authorised to grant taught awards or foundation degrees, and to enter into validation arrangements, by—

(a) an authorisation given—

(i) under section40(1),

(ii) by or under any other provision of an Act of Parliament, or

(iii) by Royal Charter, or

(b) an authorisation varied under section43(1).”—

This amendment defines “authorised” for the purposes of clause 47, using the same definition as is used in clause 46.

Question proposed, That the clause, as amended, stand part of the Bill.

Because of the lateness of the hour I will try to be as brief as possible, even though the Opposition believe that it is fundamentally important that the clause be deleted. I have listened to the Minister and I appreciate the modifications made by his amendments—that is why we did not oppose them—but the fact remains that there is something very strange indeed about setting out powers that could ultimately make the OFS both the regulator of the market and a participant in it. I am rather surprised to hear the Minister, with his emphasis on competitive zeal, proposing a closed shop, which is what it would be. It is not just we who think that; UUK, most of the existing groups and other contributors have said the same.

If the Government want people to trust the OFS to represent student interests properly and protect the quality of HE, it must have a vested interest in those things and in nothing else. For the Government to be producing legislation that could eventually allow the OFS to compete with other providers to validate degrees—it might one day have to be judge and jury—risks tainting the reputation of the OFS from the start, and at the very least placing it in an invidious position. That is why UUK has said that it has grave concerns about the powers in the clause. It says:

“We cannot foresee any circumstances which would justify the creation of such a clear conflict of interest in the position of the OfS, and therefore do not think the bill should grant the OfS this power regardless of any protections through parliamentary scrutiny or governmental oversight. We recommend that clause 47 is removed from the bill.”

We agree with UUK, for the reasons I have just explained, and we will oppose clause 47 standing part of the Bill.

It is essential that along with a direct entry route into the market, new providers can choose to access first-class validation services if they feel that would be right choice for them. We need to consider how these arrangements would work in the context of the new single regulatory framework and market entry reforms, rather than the existing system. For new providers without their own degree-awarding powers that do not want to choose the direct route to market entry, their ability to find a validating partner and to negotiate a good value-for-money validation agreement with them is vital in order to become degree-level providers and to generate good-quality, innovative provision.

We only need to look at recent events at Teesside University. Following a change of leadership, Teesside University said in March this year that it would be ending its validation of higher education programmes in the wider college network outside the Tees valley in 2017—a decision that will affect 10 FE colleges. Teesside admitted that the decision was made

“purely on the university’s strategic direction of travel and not as a reflection on the quality of the provision” it had been validating. Martin Doel, chief executive of the Association of Colleges, said that the announcement had come as a “very unwelcome surprise” to colleges, and that it would create

“significant problems and additional work and cost” for them as they try to seek new validating partners.

Ensuring that new high-quality providers are not locked out of the market via their preferred entry route is essential to ensuring that students are able to access the right type of higher education for them. I therefore want to ensure that the OFS has all the necessary tools at its disposal and is properly empowered to recognise and reward good practice or to quickly intervene and correct any serious systemic failures that might occur. If the OFS finds that there are insufficient providers with the capacity or appetite to enter into direct validation agreements with other providers or into commissioning arrangements with the OFS, or if those fail to correct the problem, the OFS will need to find another way to promote competition and choice.

Without these further powers, the OFS could be forced to stand by and watch while good-quality providers that do not want to seek their own degree-awarding powers remain locked out of degree-level provision indefinitely. That would be especially problematic if severe or stubborn intractable validation failures emerge. Jonathan Simons, head of education at the Policy Exchange think-tank, said that the Teesside case was a good example of why institutions should not be forced to rely on incumbents to validate their degrees. As he put it,

“Being dependent on a university for validation puts colleges in a subservient position and at the mercy of universities making decisions about withdrawing partnerships, not least when universities and colleges are competing for the same students…This is exactly why either colleges should be able to have awarding powers themselves, or there should be some sort of degree awarding council.”

Clause 47 enables the Secretary of State to authorise the OFS to act as a validator of last resort should he or she deem that necessary or expedient, having taken OFS advice. We expect the OFS board to have experience of providing HE, so its members will be well placed to understand if there is a systematic problem with validation services across the sector. I also expect OFS advice to be informed by consultation with the sector, so that it has a better understanding of the root causes of any problems and how providers and stakeholders think those can be best fixed. I envisage that the consultation would culminate in the OFS presenting the Secretary of State with a compelling, evidence-based argument that clearly demonstrates the scale, nature and severity of the validation problem and why giving it powers to validate through secondary regulation is the right solution to address that.

Such a power would also allow the OFS to delegate this role to other registered providers that can be authorised to validate awards on its behalf, as we have discussed. For example, I envisage that the OFS could choose to contract in people with the right skills and practical experience of higher education so that the validation service has access to the cohesive academic community it needs to perform this function effectively. In doing so, I expect the OFS to assure itself of the quality of any potential contracting partners, including by obtaining information from the designated quality body.

I am aware that some providers and stakeholders have raised concerns about the potential for the clause to create a conflict of interest—in other words, if the OFS is operating in the market it is regulating, as the hon. Member for Blackpool South put it. I would like to provide reassurance that that option is intended to be used only in extreme circumstances, after other measures have been tried and failed. As I have already said, regulations giving the OFS that power will be put before Parliament. If made, that secondary regulation would essentially allow the OFS to unblock any unnecessary and intractable barriers to degree-level market entry, essentially fixing a market failure.

Would not the Minister question why no other validating body is validating those courses? There is not a body of evidence out there—even at the moment—of lots of high-quality courses not being able to be validated, so I struggle to envisage a set of circumstances in which a course had gone to lots of validating panels and had not been validated and the OFS would think, “Oh yes, it’s great: I’ve got to commission something just to validate this course.” In what circumstances?

We see this power as coherent with our overall vision for the sector of encouraging a competitive market. We see it as a backstop power that will address effectively what would be a market failure in the absence of providers able to validate high-quality provision in a certain area or subject. I urge the hon. Lady to reread the evidence the Committee was given from parties who had had difficulty securing validation agreements or who could attest to the difficulty that others had had in securing validation agreements. They are high-quality providers who had needlessly been made to run an obstacle course in pursuit of validation arrangements.

As I said, I want to provide reassurance that this option is intended to be used only in extreme circumstances after other measures have been tried and failed. It will come before Parliament in the form of secondary regulations. If made, it will allow the OFS to unblock any unnecessary and intractable barriers to degree-level market entry, enable new providers to introduce a more diverse range of innovative degree programmes to students and enable students to achieve an OFS-validated degree award.

I would expect the OFS, as the regulator of HE quality and standards and champion of student interests, to be best in class in demonstrating that its validation services abide by best practice validation principles and deliver to the highest standards. I would also expect the OFS to put in place appropriate governance arrangements that ensure that an appropriate level of independent scrutiny is applied to the validating arm of the organisation and safeguards to protect student interests.

Question put, That the clause, as amended, stand part of the Bill.

The Committee divided:

Ayes 11, Noes 6.

Question accordingly agreed to.

Clause 47, as amended, ordered to stand part of the Bill.

Clause 48 ordered to stand part of the Bill.

Clause 49