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Consultation response | Department of Education inquiry into OfS registration fees

OfS fee principles

OfS Registration Fees Inquiry

A response from the University of Southampton

University of Southampton | March 2017

Read the call for evidenceDownload the response

Written evidence submitted by the University of Southampton

1. Do you broadly agree with the proposed set of principles to underpin the registration fee funding model

Broadly disagree

The University of Southampton supports many of the principles set out in the consultation. However, we believe that the key overriding principle is that the registration fee model is “proportionate to the cost of regulating a provider.” (First bullet, page 15)

To be fair to all, we think that a specific stated principle of any funding regime should be that that one HEI provider should not significantly subsidise the cost of regulating another. Unfortunately, we believe that the regulatory regime being proposed does in fact do this.

For most of the areas of regulations covered by the OfS, there is no clear link between the size of a provider and the costs of regulating it, as HEIs of different sizes will all be providing the same quantity of information to be assessed. We would like the Government to publish any evidence it has which demonstrates the link between institutional size and cost of regulation.

In order to fulfil the overriding principle that the registration fee model is “proportionate to the cost of regulating a provider”, we need to have a risk-based regulatory framework. The consultation notes that this has yet to be developed, and this means that an OfS fee structure model that meets this principle cannot in fact be designed properly at this time. We would therefore propose that the introduction of a charging structure for the OfS is delayed until after the risk-based regulatory framework is established. If this is not possible, then we propose that whatever regime is initially established for the charging structure for the OfS, it is clearly and publicly stated that this will only be for a period of say three years and the entire model will be considered from first principles once the risk-based regulatory framework is in place.

In all cases, we need to have a transparent breakdown of the costs of regulating providers and how much they are being charged.

We note that two of the principles are likely to be in conflict with one another. It may not be possible to design a system which is both “proportionate to the cost of regulating a provider” and which “does not deter high-quality new entrants”. The reason is that new entrants are likely to require a larger degree of regulation and oversight in their initial stages. It is also true that such providers may be small, and as stated above, the costs of regulating a small institution are actually very similar to that regulating a large one, but the financial burden on a small institution could be a deterrent to entry.

We do not believe that it is fair that the additional costs associated with regulating small, new and potentially higher risk providers should be absorbed by larger established providers. There is a danger of this being the effect from the way the principles are set out, particularly if there is a significant relationship between OfS fee and number of students, which as already stated we do not think is justified.  

If the Government wishes to support the entry of new providers in to the HE market, and it believes that the real costs of regulating them is too much for such institutions to bear, then we believe that it should fund the additional costs centrally, not pass them on to others in the sector (as set out in our answer to Question 10)

Finally, we think it should be one of the core principles that existing levels of Government funding for HEFCE (non-research) and OFFA should be transparently identified and transferred across to the new OfS, and netted off what is requested from providers in the way of fees.

2. Do you support the principle of varying the registration fee by category of registration (currently: Basic/Approved/Approved (fee cap)

No

What is needed, as stated in the answer to Question 1, is a risk-based regulatory regime, with a commensurate risk-based regulatory charging regime. We have no clarity on that, or indeed on what the registration fee actually covers. In the absence of both of these, we do not believe that varying the registration fee by category of registration as stated in the Consultation meets the Government’s own started aim of a fee “proportionate to the cost of regulating a provider.” Instead, we believe there is a danger that well-established providers are being asked to subsidise the costs of potentially higher-risk new entrants.

3. Do you support the proposal to measure the size of a provider by HE student numbers?

No

The consultation states:

“Although it is not yet clear at this early stage in the move to the new regulatory system whether there will be a direct correlation between a provider’s size, and the cost of regulating them, varying fees by provider size will help ensure that they are affordable and do not create disproportionate barriers to entry for smaller providers on the basis of cost.”

This is in clear contraction to the principle set out earlier in the document that the fee should be “proportionate to the cost of regulating a provider.”

We believe that the Government should only vary the fee by size of provider when it has evidence of how the size of a provider relates to cost of regulating that provider. The consultation makes it clear that at this stage, it does not know whether such a link exists or what it is. It might well be that it is in fact more expensive to regulate smaller institutions.

Ideally, the fee should be risk based, and as set out in our answer to question 1, we do not think that OfS fees should be charged until a fee-based regulatory framework is in place. However, if a temporary fee structure is needed, we believe that it should be a flat fee for all providers.

It seems that the Government is concerned that charging the actual cost of regulation to small providers may not be affordable to those providers, and may make it difficult for new providers to enter the market. We understand this concern but do not accept that as a consequence, larger providers should pay more than that which is “proportionate to the cost of regulating a provider” just to offset these costs. If the Government wishes to support new and small providers, it should do so through central funding. 

4. Do you support using a system of bands to group providers by size?

No

As stated in our answer to Question 3, we would only support varying the fee by size of provider when it has evidence of how the size of a provider relates to cost of regulating that provider. The consultation already notes that it does not have this evidence.

5. Do you think that, where additional specific ongoing registration conditions are placed on particular providers, these conditions should be taken into account when calculating their registration fee?

Yes

This is all part of a risk based regulatory system. As a general rule, the costs of additional regulatory measures imposed on particular providers should be passed on to them. They should certainly not be passed on to other providers.

6. Are there other variables that you think should be taken into account in the calculation of a provider’s registration fee?

Yes

The Government is committed to a risk-based regulatory system. The implications of this are that different providers will have different levels of regulatory burden based upon their risk level. If the fee is then set at a level that is “proportionate to the cost of regulating a provider”, it should be based on this differentiated regulatory burden. This will be related to some measure of risk associated with each provider, which we have yet to see established.

As stated in previous answers, we do not think that the Government can introduce a fair fee regime in the absence of a risk-based regulatory system, and would recommend that fees are not charged until this is in place. If this is not possible, then as stated in our answer to Question 1, we propose that whatever regime is initially established for the charging structure for the OfS, it is publicly and clearly stated that this will only be for a period of say three years and the entire model will be considered from first principles once the risk-based regulatory framework is in place.

7. You are invited to provide any additional evidence on the potential impact of registration fees, including any impacts under the Public Sector Equality Duty (PSED)

The introduction of a fee for a service which used to be free will impose additional costs on the University, which inevitably will result in less money being available from student tuition fees for other things. How this affects our ability to support students depends enormously on the size of the fee, but reductions in widening participation activities or cuts to certain student support functions, for example, would disproportionately affect some students. A large fee might make that inevitable. However, the University of Southampton is incredibly proud of the diversity of its student population and the way they are supported through their educational programmes, and we would work hard to minimise any effects the introduction of fees would have.

8. Based on your experience of the HE sector and or previous interactions with HEFCE and OFFA, please provide examples relevant to your organisation or the wider sector of the types of activity that you think should be covered by ‘other fees’.

No specific comments.

9. You are invited to provide any additional evidence on the potential impact of other fees, including any impacts under the Public Sector Equality Duty

As stated in our answer to Question 7, the introduction of a fee for a service which used to be free will impose additional costs on the University, which inevitably will result in less money being available from student tuition fees for other things. How this affects our ability to support students depends enormously on the size of the fee, but reductions in widening participation activities or cuts to certain student support functions, for example, would disproportionately affect some students. A large fee might make that inevitable. However, the University of Southampton is incredibly proud of the diversity of its student population and the way they are supported through their educational programmes, and we would work hard to minimise any effects the introduction of fees would have.

10. Do you broadly agree with the proposed principles that would help inform judgements around where the government might contribute funding to the OfS?

Not sure

As stated in previous answers, we do not believe that the fee should vary with size of institution, and that a fee is charged which is “proportionate to the cost of regulating a provider.” And as stated in our answer to Question 1, we think that a specific stated principle of any funding regime should be that that one HEI provider should not significantly subsidise the cost of regulating another.

The difficulty is that a system that charges a “fair” fee is quite possibly not in fact affordable for small and new providers. The question is what the Government does about that. We believe that one thing it should certainly not do is pass these costs on to other providers. Providing some funding for OfS centrally may be the way forward. However, there may be State Aid rules involved in this. Whatever the Government decides, it must be clear and transparent about what it is doing and by how much it is subsidising new and small providers.

The Government should note that if a fee is charged which is “proportionate to the cost of regulating a provider”, some institutions may never be able to afford this level of fee. It needs to have a plan for how to deal with this.

11. Are there any activities/types of activity types of provider/provider circumstances that you feel should be exempt from the registration fee? b) are there any activities/types of activities/types of provider/provider circumstances that you feel should be partially subsidised by government.

No

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