Higher Education (Monetary Penalties and Refusal to Renew an Access and Participation Plan) (England) Regulations 2019

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 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 to 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.

Turning to the specifics of these regulations, I will use the bulk of my time to focus on the nature of the monetary penalties. Of course, it has to be right that those who fail to comply with the necessary regulations face some variation of a punishment. But such penalties must find the right balance between being stern enough to ensure compliance and not so harsh as to create extraordinary financial difficulties for providers that receive a penalty.

In previous consultations, the maximum fine suggested was 5%, as the Minister said, rather than 2%. Although I think the House will agree that the latter is the better choice, I would welcome the Minister’s saying how the Government reached that conclusion and chose to pitch at the lower level. Did any stakeholders suggest that a higher limit would be better or preferable? What factors did the Government assess when deciding on the nature of the penalties?

I am particularly concerned that, if the penalties are too overbearing, they will create insurmountable financial trouble for providers that are already struggling, as the Minister will be aware. Indeed, reports emerged in late 2018 that up to three higher education institutions may be on the brink of bankruptcy, and last month, the Guardian reported that 25% of English universities were in deficit. Post Augar, this picture could worsen. Can the Minister hint when the Augar review will be published and explain the relationship between that and this system of penalties?

The regulations make it clear that the OfS has the discretion to impose a monetary penalty but are not entirely clear about what factors will be considered. For example, will the financial position of the provider be taken into consideration? Universities UK has made it clear that penalties must be awarded proportionately and effectively, and that what this looks like will vary according to individual circumstances and the position of the institution involved. I urge the Minister to ensure a degree of flexibility in the application of penalties.

On communicating these changes, it is right that the Government make sure that those who will be impacted upon fully understand how the new regime will work, as with any regulatory change. Although higher education providers should be aware of their access and participation responsibilities, they should be reminded of monetary penalties that could be awarded if they fail to comply. How has the Minister’s department communicated the monetary penalties to the 350 education providers now registered with the Office for Students?

Before concluding, I will touch briefly on Regulation 9, which allows the Secretary of State to appoint either an individual or panel and pay remuneration and allowances. Aside from the fact that this must comply with the code on public appointments, the regulations give no further indication or clue as to what factors will be considered when making appointments of this nature. Could the Minister explain why not? How will the Secretary of State make such appointments? Will there be a need for a further statutory instrument?

In conclusion, the concerns that I have raised are not enough for us to oppose the regulations in their entirety; indeed, we welcome the Government’s limited attempt to promote greater regulatory compliance regarding HE access and participation. However, I ask the Minister to take far more ambitious steps to ensure that we make higher education more welcoming for students from all backgrounds. Given that over 12,000 fewer English undergraduate students from low-participating areas now start courses each year than did so in 2011-12, we cannot underestimate the scale of the challenge. I would welcome any details from the Minister on how his Government intend to rectify this and ensure the access that I think all sides of your Lordships’ House would very much welcome for HE students.

As I say, there are some concerns about the effect of the fines, which I hope will be monitored as we go along to see whether they have an adverse effect on universities being able to provide for disadvantaged students. If not, of course, we have no intention of imposing this measure.