Sector-wide 'baseline' regulation needed for traditional and 'private' English universities, says watchdog

A new report by the UK's main competition watchdog found that the existing HE regulatory framework was no longer fit for purpose, given increased competition between providers and the fact that students were now covering a higher proportion of the cost of their own education through increased fees. This meant that some students were not as well protected as others, it said.

"Higher education is a key contributor to the UK economy, providing a graduate workforce which helps to increase productivity and drive economic growth while improving life chances for students," said CMA senior director John Kirkpatrick. "It is important that regulation protects what matters to those students while allowing new and innovative approaches to the delivery of higher education provision and encouraging providers to compete on the quality of the experience they offer to students."

The CMA said that it would assist the government to develop a new 'baseline' quality standard, which should be kept to the minimum level needed to promote competition. This baseline should cover minimum governance, transparency, student redress and consumer protection standards, while still allowing scope for providers to compete on higher standards. Any additional regulation above this baseline level should not be attached to other public policy objectives, such as migration control or public finance management, in a way that would imply that providers bound by those additional rules offered better quality, according to the CMA's report.

Any new regulatory rules or funding requirements developed in response to the CMA's recommendations should not act to discourage "new and innovative" approaches to HE delivery, it said in its report. As part of this, the government's Department for Innovation and Skills (BIS) should consider how to introduce more flexibility into annual funding rules in order to support courses structured in non-traditional ways. Any regulatory sanctions should be "competitively neutral" and based on the risks facing students, rather than the type of institution or risk to public finances, according to the report.

The CMA was asked to provide assistance to the HE sector on the design of a new regulatory regime as part of a March 2014 review of competition in the sector by one of its predecessor bodies, the Office of Fair Trading (OFT). In its report, the OFT said that current regulatory rules were "increasingly at odds" with a system that is now largely based on competition and student choice via tuition fees rather than direct government funding through the Higher Education Funding Council for England (HEFCE).

In its report, the CMA found that different types of HE providers were subject to different quality assurance rules based on the extent to which they had traditionally received HEFCE funding, and that some were not subject to quality assurance at all. In addition, the current rules risked restricting market entry and expansion; while rules governing student loan entitlement potentially restricted the potential for innovative course delivery models. The CMA also found that the lack of a sector-wide 'exit regime' meant that some students were not protected against the risks of their course closing or provider failing.

The number of 'alternative' HE providers, which do not receive direct state funding in the same way as universities but for which students can apply for funding support through the public student loans system, has risen rapidly to around 140 institutions since higher education reforms were introduced in 2011. The UK government intends to introduce tougher quality standards for these institutions, backed by information requirements and formal rights of access to providers' premises, from academic year 2015/16 to address recent concerns about the standard of education on offer by some of these institutions and potential for misuse of public funds.

The CMA published advice and guidance for HE providers and their students on their obligations and rights on consumer protection law earlier this month, following a separate review of HE providers. It intends to review compliance from October 2015. Providers should update their terms and conditions and ensure that all faculties and employees are sufficiently aware of their legal responsibilities ahead of this review or risk further action, the CMA said.

"The higher education sector has experienced significant changes over the last decade and the current form of regulation no longer meets the requirements of a more dynamic market," said competition law expert Richard Snape of Pinsent Masons, the law firm behind Out-Law.com. "The CMA's report presents a significant opportunity for the sector to engage with the CMA and governmental institutions to ensure that any regulatory amendments promote an effective competitive environment."