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Education e-briefing - Augar review recommends wide-ranging changes to education and funding at higher and further education institutions

  • United Kingdom
  • Education - Briefings

06-06-2019

The long awaited report from the Augar review of post-18 education and funding in England was published by the Department for Education on 30 May 2019. Most of the widespread national media coverage focussed on the much anticipated recommendation for a cut in undergraduate tuition fees. This is, however, only one of the 53 recommendations made in the report, which is far more wide-ranging in scope and potential impact than the immediate press coverage suggests.

Indeed a clear focus in the report is on the strategic balance of public funding for different sectors of tertiary education. The recommendations include a shift of emphasis and funding from HE to FE to address what it describes as the disparity between the 50% of young people who participate in higher education and “the rest” and the UK skills and productivity gap. The report contrasts the fact that, in 2017-18, more than £8 billion of public funding was committed to support 1.2 million UK undergraduate students in English HE institutions in 2017-18 while £2.3 billion of public funding supported 2.2 million full and part time adult FE students in the same period.

Comment and reaction

Theresa May, who commissioned the review, has welcomed its proposals including the reintroduction of means-tested maintenance grants, the reduction in tuition fees and increased financial support for FE. However, what is less clear is what approach her successor will take. Continuing political uncertainty creates significant doubt as to which recommendations will be implemented, to what extent and over what timescale - the review must be seen as a potential direction of travel rather than any definitive blueprint for reform.

For universities a key issue and concern will be the proposed lower tuition fee cap of £7,500 and the impact this may have on income and sustainability, particularly when combined with other financial threats and uncertainties (e.g. increased pension costs, Brexit and challenges to international student recruitment). The review expressly positions the lower fee cap and its freezing until 2022/23 as “the best way to encourage the sector to achieve further efficiencies”.

If this proposal is taken forward, a critical issue will be the degree to which the Government is prepared to replace this shortfall in full by increasing the teaching grant. Indeed responding to the recommendations Alistair Jarvis, Chief Executive of Universities UK, said "On the face of it the fee-level recommendations may look good for students, but unless the government gives a cast-iron guarantee on full replacement funding, it could prove to be a wolf in sheep's clothing”.

Commenting on the review’s recommendations on tuition fees UCU have said “From what we have seen, the recommended tuition fee changes look like the worst of all worlds. Institutions would have their hands tied on funding while students would still graduate with tens of thousands of pounds of debt that many will never fully pay off. It is crucially important that changes don't leave institutions with less resource as that would be hugely damaging for students and staff”.

Another important consideration will be the extent to which this “top up” will vary according between different degree courses. The review expressly proposes a rebalancing of funding - via a differentiated teaching grant top up - “towards high-cost and strategically important subjects and to subjects that add social as well as economic value to students and taxpayers”. This is likely to impact institutions with significant numbers of students in arts, humanities and social sciences subjects, reducing the extent to which fee income from these courses can cross subsidise teaching in other areas. The report also expressly states that its proposals will “rebalance” funding towards high-cost and high-value subjects and “are likely to result in more funding going to institutions with a strong research base”.

The longer term threat, at least at HE provider level, is of greater intervention in a currently competitive but autonomous market via the imposition of a contextualised minimum entry threshold and/or a selective numbers cap, in relation to courses with poor retention, poor graduate employability and poor long term earnings benefits. Institutions will also note the numerous references to OfS’ regulatory powers, e.g. in relation to senior pay and governance, grade inflation, entry tariffs and unconditional offers, and generally in relation to poor quality provision and outcomes.

Questions have also been raised as to whether the proposals will widen participation and criticism that they mainly benefit higher earning graduates.

At FE level the report has been broadly welcomed, with David Hughes, Chief Executive of the AoC commenting “We need a diverse and thriving post-18 education sector, led by universities and colleges, working closely with employers and communities. The post-18 review report helps us start building that system and supporting everyone throughout their lives”.

Foreword

The Foreword to the report describes post-18 education in England as “a story of care and neglect”. It acknowledges that universities are one of the UK’s world class industries and, as such they are “cared for” and “worth caring about” and large parts of the report are “devoted to building on their considerable achievements”. However, the report states strongly that “the neglected” 50% of the 18-30 year-old population who do not go to university, and older non-graduates, are also worthy of attention.

The report’s recommendations are guided by eight principles adopted by the review panel:

• post-18 education benefits society, the economy, and individuals

• everyone should have the opportunity to be educated after the age of 18

• the decline in numbers of those getting post-18 education needs to be reversed

• the cost of post-18 education should be shared between taxpayers, employers and learners

• organisations providing education and training must be accountable for the public subsidy they receive

• government has a responsibility to ensure that its investment in tertiary education is appropriately spent and directed

• post-18 education cannot be left entirely to market forces

• post-18 education needs to be forward looking

The panel’s main recommendations are summarised below, using the six headings adopted in the report.

Higher education

The review considers that the HE sector “broadly fulfils” the objective of a sector which is “accessible to all, supported by a funding system that provides value for money and works for students and taxpayers, incentivises choice and competition and encourages the development of the skills we need as a country.” However, the review considers that a significant minority of university students are “left stranded” with poor earnings and mounting “debt”, with consequences for them personally and economic consequences “for the state that foots the bill.” A significant aspect of this section of the review is the proposed interventions to address perceived low value degree courses within an expanding sector and an “accidental over-investment in some subjects and an under-investment in others that is at odds with the government’s Industrial Strategy and with taxpayers’ interests.”

As widely anticipated, the headline recommendation in relation to HE is a reduction in the cap on tuition fees for undergraduates studying at English institutions. The proposal is a maximum fee of £7,500 per annum (down from the current figure of £9,250), to be introduced by academic year 2021/22. This fee cap would be frozen until 2022/23 and then increased in line with inflation from 2023/24.

This recommendation is based on three observations:

• fees at English universities are amongst the highest internationally

• £9,250 is considered to be more than the reasonable cost of providing the lowest cost courses

• the Government should have more say in how the state subsidy for higher education is spent given the public subsidy of higher education through teaching grants and the significant proportion of student loans which will not be repaid

Importantly, however, the review recommends that the overall fee income which would otherwise be “lost” by universities if tuition fees are reduced should be replaced, in full, by increases in the Government the teaching grant. However, while the aim is to leave the average unit of funding unchanged at sector level in cash terms, the report recommends that some subjects should receive a greater share of the teaching grant “top up” than others. The review explicitly states that it would expect some subjects to receive little or no subject specific teaching grant over the £7,500 base rate (whilst suggesting that that the Office for Students (OfS) should consider separate arrangements to support specialist institutions offering the highest quality provision that might otherwise be adversely affected by this). The review concludes that the fact that almost all HEIs have set fees at the maximum level has resulted in some subjects receiving an effective increase in income at more than twice the income of others, a differential for which the panel found no basis in the cost of provision.

To determine how much, if any, teaching grant each subject should receive, the report recommends that the OfS carry out a review of the reasonable costs for different subjects in the light of sector best practice, historical levels and international comparisons. It is envisaged that this “should rebalance funding towards high cost and strategically important subjects and to subjects that add social as well as economic value”.

The report also recommends that a portion of the increased teaching grant should be used to more effectively support access, participation and success for students who have experienced socio-economic disadvantage, including part-time and mature students.

The current freeze on average per-student resources should also, in the panel’s view, continue for three further years, with inflation based increases resuming in 2023/24. This is expressly suggested as a means to help fund investment in other parts of post-18 education and reflects the panel’s view that the HE sector generally can absorb this freeze because its overall financial position is reasonably sound, with an overall strong balance sheet and operating surplus.

One of the more controversial elements of the review has been the question of whether a minimum entry threshold should be applied to undergraduate courses. The report has stopped short of an immediate recommendation for this, recognising that such a threshold would be a “significant intervention into what has been designed as a competitive autonomous market”. However, the panel recommends that if, by 2022/23, the sector has failed to address the problem of recruitment to courses which have poor retention, poor graduate employability and poor long term earnings benefits, the Government should intervene by way of a contextualised minimum entry threshold, a selective numbers cap or a combination of both.

Finally, the report recommends that student finance should no longer be offered for foundation years, unless agreed with the OfS in exceptional cases. Here the report is looking at one-year courses offered by universities for students who do not have the prior attainment requirements to enter the course of their choice in order to give them the knowledge they need to progress on to the first year of their chosen course.

The review has concluded that some universities are using foundation years to create four-year degrees in order to entice students who do not otherwise meet their standard entry criteria. However, in recognition of the potential impact on widening participation, the panel recommends that this measure should not be implemented without at least two academic years’ notice and encourages universities to develop their own Access to HE Diplomas (discrete courses of further education at Level 3) or collaborate with further education colleges to create these.

Further education

The report sets out a vision for FE colleges as core contributors to employment, productivity and growth and the changes it believes necessary to achieve this.

Many of the recommendations made in this section relate to finance, to address the fact that total spending on adult skills has fallen by approximately 45 per cent in real terms between 2009/10 and 2017/18 and the Association of Colleges’ observation that 40 per cent of FE colleges were in deficit in 2016/17.

The review concludes that funding rules are complex and inflexible and do not allow FE colleges to respond to local labour market needs; the FE college estate is in poor condition with limited capacity in the sector to address it and that the recruitment of a high quality workforce is challenging for many FE colleges (noting that “the most important barrier to workforce improvement is simply a lack of money”).

In response, the report recommends:

• the unit funding rate for economically valuable adult education courses should be increased. This should be achieved by a rebalancing of funding from less economically valuable parts of the Adult Education Budget (AEB) and possibly other funding streams - such as the European Social Fund or its replacement

• the reduction in the core funding rate for 18 year-olds should be reversed

• the Government should provide FE colleges with a dedicated capital investment of at least £1 billion over the next Spending Review period (in addition to funding for T levels) and should also consider redirecting the HE capital grant to further education

• investment in the FE workforce should be a priority, allowing improvements in recruitment and retention, drawing in more expertise from industry, and strengthening professional development

• the Education and Skills Funding Agency funding rules should be simplified, allowing colleges to respond more flexibly and immediately to the particular needs of their local labour market, with the Government providing an indicative AEB that enables colleges to plan on the basis of income over a three-year period and the possible introduction of additional flexibility to transfer a proportion of AEB allocations between years

In relation to consolidation and specialisation, the report notes the programme of FE area reviews which has recently concluded. The panel’s view is that, although there has been considerable change, there are still issues of over-capacity in some areas, while in others learners do not have access to good quality specialised provision. The panel believes that the Government should actively promote partnerships, group structures, and specialisation, in order to deliver a national network of colleges that puts all learners within reach of high quality provision.

To that end it recommends that the structure of the FE college network should be further modified, particularly in large cities, to minimise duplication; in rural and semi-rural areas, small FE colleges should be strongly encouraged to form or join groups in order to ensure sustainable quality provision in the long term and the Government should develop procedures to ensure that there is an efficient distribution of Level 3, 4 and 5 provision within reasonable travel-to-learn areas.

Finally in this section, the review recommends that FE colleges should be more clearly distinguished from other types of training provider in the FE sector, with a protected title similar to that conferred on universities.

Apprenticeships

The review has concluded that as the current reforms to the apprenticeship system remain very much in progress it is not appropriate to undertake a wholesale evaluation of the current arrangements. However, the panel have made recommendations to address emerging issues which they consider to have a direct bearing on whether the current reforms succeed.

Firstly, the panel has concerns about the subjects being studied and their level. The vast majority of apprenticeships are in Business, Administration and Law and very few apprenticeships are at Levels 4 and above (and even then heavily concentrated in a few sectors). Therefore, the report recommends that the Government closely monitors the extent to which apprenticeship take up reflects the priorities of its Industrial Strategy, both in content and in geographic spread.

Secondly, the review identifies specific concerns in relation to degree apprenticeships (level 6 and above), in particular that some employers are rebadging existing training activity – including graduate schemes – to claim apprenticeship funds, and putting senior managers through Level 7 courses paid for by the levy (the review questions whether this represents good value to the public purse); and that early figures show that degree and higher level apprentices are more likely to come from areas with higher participation in education. Consequently, it recommends that funding for Level 6 and above apprenticeships should normally be available only for apprentices who have not previously undertaken a publicly-supported degree.

Thirdly, it believes that the large number of training providers and the wide range of levels of apprenticeship provision make supervision a complex task, with seven responsible bodies working together under the Quality Alliance umbrella. The proposed solution is to make Ofsted the lead responsible body for the inspection of the quality of apprenticeships at all levels with a provision that no provider without an acceptable Ofsted rating should receive a contract to deliver training in their own right.

Fourthly, the review recommends that all approved providers of government-funded training, including apprenticeship training, must make clear provision for the protection of learners in the case of closure or insolvency.

The student contribution system

This section of the report examines the financial contributions students make to their undergraduate studies (the review does not consider the loan system for postgraduate study). It points out that the tripling of student fees in 2012 made little difference to the repayments made by graduates in the bottom four deciles but markedly increased the total amount repaid by higher earners.

According to Government forecasts, the top 30% of lifetime earners will repay more than 100% of their original debt on average (due to the repayment of both their original debt and a large portion of interest accrued); the middle 40% will repay 45% and the lowest-earning 30% will repay less than 10%. The report is concerned that under the existing system the proportion of borrowers who repay very little is too high and it therefore make proposals to change this. The changes would not apply, with one exception to existing borrowers but rather to those commencing their studies in 2021/22.

Key components of the current system are the income levels at which repayment starts (the contribution threshold); the payment over which payments are made (the contribution period) and the amount of interest charged. The report recommends the following changes:

• the contribution threshold should be set at the level of median non-graduate earnings. On current prices, this would mean a reduction from £25,000 to £23,000 but by 2021/22 it will be approximately £25,000. The panel considers that the increase in the contribution threshold from £21,000 to £25,000 in 2018 took many borrowers out of repayment at very significant cost to the taxpayer

• the contribution period should be extended from 30 to 40 years

• on interest rates, the in-study interest (charged from the day a loan is taken out until the student becomes eligible to make repayments) should be reduced to track inflation rather than inflation plus 3%, whereas the post-study interest rate should remain at inflation plus 3%

Because interest is paid on the loan, some borrowers will repay more than 100% of their initial loan, and those that pay back more slowly – in the middle to upper end of the earnings distribution – can pay proportionally more than the very highest earners who are exposed to interest for a shorter time. The report acknowledges that a longer repayment period of 40 years could exacerbate this and recommends that the introduction of a lifetime cap on repayments of 1.2 times the initial loan amount in real terms. It suggests that this cap should be introduced for all current Plan 2 Borrowers (those loans originating from 2012 when terms were changed) as well as future borrowers.

Finally, the report says it is widely recognised that the current terminology used to describe student finance can be unhelpful and misleading. It suggests that the Governments introduces new finance terms under the banner of a new ‘student contribution system’ reducing focus on ‘debt’ levels and interest and emphasising contribution rates.

Post-18 maintenance

The report says that maintenance should be available to all learners on equal terms, whether in HE or FE to reflect the principle that everyone should have the opportunity to be educated after the age of 18. Maintenance should apply to higher levels of study (Levels 4 to 6), adjusted for the duration and intensity of study and be set on a basis that reflects the needs and characteristics of learners at different levels and across different modes of study.

The report concludes that the current system works well for most groups but debt is still a deterrent for the disadvantaged - such students leave study with higher levels of debt (particularly since the removal of maintenance grants in 2015/16) and there are growing concerns about the student cost of living.

Amongst the recommendations are:

• that students from low-income households should receive a substantial part of their maintenance support in the form of a grant in order to reduce their level of debt on graduation – a minimum of £3,000 is proposed

• maximum maintenance support should be set in line with the National Minimum Wage for age 21 to 24 on the basis of 37.5 hours per week and 30 weeks per year - higher levels of support should continue, as now, for courses which are longer in duration

• in delivering a maintenance system comprising a mix of grant, loan and family contribution, the Government should ensure that the level of grant is set as high as possible to minimise or eliminate the amount of additional loans required by students from disadvantaged backgrounds

In relation to student accommodation, the report recommends that the OfS should examine the cost more closely and work with students and providers to improve the quality and consistency of data about costs, rents, profits and quality.

The review concludes that the proposed maintenance system for students at Levels 4 to 6 would not be appropriate for learners at Level 3 and below. Instead the funding available for bursaries should increase to accommodate the likely growth in Level 2 and Level 3 adult learners and the support on offer to Level 2 and Level 3 learners should be made clearer by both the Government and FE colleges to ensure that prospective learners are aware of the support available to them.

Skills

The review considers the capacity of the post-18 education system to produce a suitably skilled workforce, and how this might be improved. The panel concludes that the small number of Level 4 and 5 students - only 4% of 25 year-olds hold qualifications at his level as their highest achievement compared with 30% for level 6 - translates into persistent skill gaps at technician level and reduces opportunities for people who are unable, for whatever reason, to progress directly from Level 3 to Level 6.

To promote the uptake of higher technical qualifications and flexible study the report recommends:

• the introduction of a single lifelong learning loan allowance of £30,000 for tuition loans at Levels 4, 5 and 6, available for adults aged 18 or over without a publicly funded degree

• learners should be able to access student finance for tuition fee and maintenance support for modules of credit-based Level 4, 5 and 6 qualifications

• the Equivalent or Lower Level Qualification (ELQ) rules that generally mean that funding for tuition fees or maintenance loans is not provided for students taking equivalent or lower qualifications in HE at Levels 4, 5 and 6 should be scrapped for those taking out loans for these Levels

In order to help students who have to interrupt their studies, and to motivate students struggling to complete their current year successfully, it is proposed that universities should change the way they award qualifications by awarding at least one mid-point qualification to all students who are following a Level 6 course successfully.

Further recommendations are that the number of Level 4 and 5 qualifications should be streamlined (in 2016/17 there were over 3,000 separate qualifications at Levels 4 and 5 available to learners); that the OfS should become the national regulator of all non-apprenticeship provision at Levels 4 and above and that, in order to ensure a national network of high quality technical provision, the Government should provide additional support and capital funding to specific FE colleges and work with the OfS to determine how best to allocate this.

On fees, the report concludes that the wide range charged by universities and colleges for prescribed HE Level 4 and 5 courses should be rationalised with a fee cap of £7,500 from 2021-22. In the longer term, the review considers that fees up to this cap should only be chargeable for kite marked Level 4 and 5 qualifications meeting the new employer-led national standards. On lower level courses, the current age cap should be removed so that a first ‘full’ Level 3 is available free to all learners whether they are in work or not and full funding should be restored for the first ‘full’ Level 2 qualification, for those who are 24 and over and who are in employment.

 

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