Universities reliant on overseas students - report

Higher-education providers in England have an "unhealthy dependency" on international students, to compensate for frozen tuition fees and increased costs, a Lords committee report warns.

Neither the government nor the regulator, the Office for Students, is tackling the "looming crisis", the Industry and Regulators Committee says.

The OfS lacks independence and is not trusted by providers, the report says.

But the OfS said it had taken steps to address many of the issues raised.

It became the regulator for higher education in England in 2018 and oversees 425 universities, colleges and other providers, aiming to hold them to account and ensure they give students value for money.

But the report says the OfS has not paid "sufficient attention" to the financial risks facing a sector "increasingly reliant" on international and postgraduate students, following the freezing of the cap on tuition fees for home students and loss of European Union research funding.

The government says undergraduate fees were frozen at £9,250 in 2018 to deliver better value for students. But institutions now make a loss when teaching domestic students and conducting research, the report says.

'Geopolitical shifts'

Former University of Hull vice-chancellor Prof Susan Lea told the committee providers were using the international market to replace the shortfall in funding for domestic students.

There were 469,160 international students in the UK in 2017-18, rising to 679,970 by 2021-22, according to Higher Education Student Statistics. And last year, OfS figures show, 22.3% were from China.

The report warns "geopolitical shifts" could affect student numbers.

And the OfS has written to 23 providers with high levels of students from China to ensure they have contingency plans in case of a sudden drop in overseas students.

The government controls the main sources of income for higher education providers, through the tuition-fee cap and its immigration policy's influence on international student recruitment, the reports says. And it urgently needs to put in place "a stable, long-term funding model for the sector".

The committee is also calling on the OfS to hold more regular talks with providers about their financial situation.

Lord Hollick, who chairs the committee, said the OfS "does not command the trust or respect of either providers or students". And peers were surprised by the regulator's view the sector's finances were "in good shape", as this assessment was not shared by the committee or its witnesses.

'Significant risks'

As university is now a very significant financial commitment for students, the OfS also needs to hold providers to account - and consider tougher consequences - to ensure prospective students receive clear information on their course, its long-term costs and the amount of online and in-person learning, the report says.

The committee found too many examples of the OfS "acting like an instrument of the government's policy agenda rather than an independent regulator".

The report says the perception the OfS lacks independence is not helped by the fact Lord Wharton, who chairs the OfS, continues to take his party's whip in the House of Lords. And the committee has asked the government to consider making serving politicians resign any party-political whip before chairing independent regulators.

Lord Wharton said the OfS was "alive to the significant risks" facing the sector, including "an over-reliance by some on international students".

"Our important work in this area is often not publicly visible but we will continue to identify risk and use the tools we have to protect the interests of students if an institution encounters financial difficulties," he added.

The Department for Education said the higher education sector "remains financially stable overall" and that international students accounted for "just 15% of all undergraduate entrants at UK providers in 2021/22".

An official added: "The Office for Students is driving up the quality of higher education by holding our world-leading universities to account and championing students' interests.

"We will consider all of the recommendations in full and respond in due course."