CEO Blog: Cost of private provider growth must not be social mobility cuts

20 Nov 2013

It comes as no great surprise that, according to the Guardian, ‘college course subsidy has spiralled out of control’.

The numbers are significant, with a reported £80 million ‘overspend’ on loans for students studying at private colleges in one year alone. It can hardly be a shock that private colleges have responded to the decision of Ministers to lift the fee cap without further regulating the basis on which private providers could access the student market. After all who would spurn the opportunity to double income per student via a state-backed fee loan, especially when combined with the opportunity to recruit unlimited student numbers?  Incentivise one part of a market  - or to put it more accurately, fail to create a level playing field - and inevitably suppliers afforded preferential treatment will take advantage.

Whereas universities and further education colleges have strict limits placed on student numbers and are required to sign up to a national quality assurance system and an independent student appeals process, the private market has been allowed to expand without such constraints or protections for students.

What is puzzling is why Ministers and officials did not anticipate the outcome or the impact in the years to come. The immediate result is that the Department of Business, Skills & Innovation has an unnecessary ‘overspend’ that it now feels will have to be accommodated by reducing other areas of spending. No wonder that the dawning realisation of the scale of the problem has required a written Ministerial Statement to the House of Commons. Perhaps more disappointing is that all Romanian and Bulgarian students have been written to asking them for further evidence of their right to access student loans. Of course the criteria for student loans should be properly applied but it is unlikely that unfounded claims or targeting one group of students can possibly explain away the large hole that has been left in the Department’s budget.

This particular ‘deficit’ is forecast to soar to a third of a billion pounds in the next two years as the ‘additional’ students recruited by private providers progress through their courses. The measures required to properly regulate the post-2012 higher education market needed primary legislation and parliamentary time. Both were abandoned in favour of the ill-fated attempt to reform the House of Lords. Given where we are in the political cycle and the desire of the parties not to remind voters of the hike in tuition fees prior to the 2015 general election, this is not going to happen any time soon. This makes the decision to increase fees and allow the private market to expand without any restriction on student numbers look even more risky although Ministers may try to draw some lines in the sand via regulations or on the basis of their current powers.

In the meantime, sadly, the tab is likely to be picked up by universities and colleges and their students. It seems that the Access to Learning fund and what is left of the much depleted teaching grant may now be in line for further cuts to help balance the BIS budget. Worryingly the £300m now being mentioned as the ‘overspend’ at the end of 3 years is equivalent to the Student Opportunity fund (recognised as an important area of spending by the Deputy Prime Minister, Nick Clegg, in his recent paper on social mobility).  But the fact that these areas may be a focus for further reduction raises fundamental questions about how the government views investment in social mobility support.  

In light of the interest of all party leaders in improving social mobility, the government should not now treat funds targeted at widening access to education as the fall guy. Improved university participation of those from more socio-economically disadvantaged groups has demonstrable value to the Exchequer, society, the wider economy, and the individual. As such, decisions on how government supports this investment must be based on analysis of its long-term outcomes and not a short term fix to resolve a budget crisis that should have been avoided. Everyone makes mistakes – including Ministers. It’s how they address this budget ‘problem’ on which they will be judged.