Transcript of Susan Lapworth’s speech at AdvanceHE's Governance Conference

Good afternoon. And thank you Collette for your introduction.  

You’ve been hearing from some fascinating speakers today and I’m pleased to be with you to talk about the role of the Office for Students and to think about governance – specifically good governance. 

I know I’m preaching to the choir today – to AdvanceHE colleagues, and all of you in the audience – when I say that good governance is key to delivering the goals of individual institutions and the higher education sector more widely. 

So, it’s important to all of us. 

I’m going to suggest that, from the OfS’s perspective, good governance is a means to an end. A necessary part of delivering the things that matter to students and society. 

I'm going to illustrate that by talking about three current live policy issues: quality, financial sustainability, and protecting public funding. And I’m going to leave you with some governance-shaped questions about the challenges of delivering them in practice in the real world. 

Quality 

First, let’s think about quality. 

Quality is one of the two main areas of focus in the OfS’s strategy. 

We think all students should have a high quality academic experience that equips them for future work or further study. 

It’s closely linked to our second area of focus: equality of opportunity. 

That’s about ensuring that all students – regardless of their background – can benefit from higher education.  

Those two things – quality and equality – go hand-in-hand. We’re not doing our job if students from disadvantaged backgrounds are recruited onto poor courses with weak outcomes. That’s why we’re so focused on these two areas. 

And having learned lessons from the first period of the OfS’s life, we’ve started to use our regulatory tools in an active, targeted, way to deliver our ambitions on quality for students. 

That’s a real step change in our work. 

I expect you’ll have seen the first quality assessment reports that we’ve published recently – I thought I might say a few words about that process. 

I expect you’ll have questions and thoughts about it. 

The first cases have focused on business and management courses. 

You may be wondering: why business and management? 

First, I want to reassure you that we’re not singling out any particular subject for arbitrary reasons. We need to prioritise our regulatory activities and we think hard about where risk might sit in the sector. 

When you look at the data for the sector as a whole, business and management courses have the widest range of performance in our key student outcomes measures – some really excellent performance, some that seems much less so. 

So, the patterns of performance in the sector in this subject area are raising regulatory questions for us. 

Business and management courses also tend to have large student populations. And the numbers have continued to rise. So, we need to ask: 

• Isn’t it right that we should want to make sure those large cohorts of students are getting the right support? 
• That their courses are up-to-date. And that they’re developing the skills they need for future success? 

I think so. I expect most people in the room think so too. 

But whatever we all think – these things matter to students. And that’s why it’s right that the regulator focuses on them. 

We would be doing a disservice to your students if we didn’t identify and address concerns about quality. And we would be doing a disservice to institutions too. Reputation matters and is best protected when everybody can be confident that the regulator will step in where needed. 

I’ve talked about why we’re doing this work. But I also want to say a few words about the process. 

We understand the concerns that any kind of external scrutiny can bring. 

And I know that those institutions that were the first through the new process will have feedback about how it went and how it felt. We’re committed to reflecting on this as we conclude the first group of cases. My aim is to provide as much information as we can about the approach we take and how a typical case might unfold. 

And I hope that as we develop and embed the process, it’s going to start to feel more familiar and comfortable to us all. 

One of the things we’ve been stressing is the importance of independent academic judgement. We’ve recruited a large pool of academic assessors. They’re subject experts drawn from a wide range of institutions. We told them that this was an opportunity for them to shape the development of learning and teaching in their discipline. 

And I think you can see them doing that in the reports we’ve published – these are credible and incredibly thoughtful judgements from independent experts. That should give you confidence in the process and the judgements that the assessment teams are reaching. 

And we hope that the findings in those reports are helpful to colleagues in institutions – as they think about their own students and courses. There are opportunities for learning here and we’re keen that they’re taken up. 

Financial sustainability  

The second area I want to talk about is financial sustainability. 

I know institutions were hoping for future spending commitments for higher education from the Chancellor in yesterday’s Autumn Statement. I suspect the sector will feel disappointed, but perhaps not surprised, that didn’t happen. 

So institutions will need to continue to find ways to operate in a challenging financial landscape. 

We’re pleased that the sector has generally managed to weather the financial storms over recent years, but we know that crossing fingers that the next storm will pass is not a sustainable business model.  

Yes, most institutions do remain in good financial health. Our most recent report on financial sustainability reflects the sector’s own forecast that, in aggregate, income will continue to grow. 

But we understand that institutions continue to face significant financial challenges. 

Indeed, I understand why, in response to one of our financial sustainability reports, some governors suggested that the current context provides few opportunities to address these challenges or pursue other courses of action. 

So, we understand what a hard job it is to run a university at the moment. 

And like you, we can see a range of risks: 

• Rising costs as a result of inflation 
• Challenges in maintaining and improving facilities and buildings 
• Competitive pressures for UK students 
• Reliance on income from international students. 

The OfS’s role is to make sure we know what’s happening across the sector and to individual institutions. We analyse data. We collect intelligence. We engage with stakeholders. We talk to finance directors about the risks facing different parts of the sector. 

So, thinking about financial sustainability is a significant priority for us, and I know that’s also the case for governing bodies and executive teams across the sector. I expect that includes many of you here today. And I fear that this issue is going to stay with us in terms of its significance. 

And so, I want to touch on a slightly sensitive area: trust. It should go without saying that we want – we expect – we need – you to report financial issues and concerns to us quickly and openly. 

Effective dialogue on these issues will mean we can focus our attention on cases where there are significant risks. I completely understand that some universities may be hesitant about contacting the regulator. Worried that we’ll get out our regulatory sticks. That we’ll make the situation worse. The recent report from the House of Lords inquiry suggested this may be the case. 

That’s disappointing to hear. Especially since our work here generally happens behind the scenes. Institutions facing financial difficulties wouldn’t thank us for making them publicly visible. So providers should let us know about their financial concerns. That’s important to ensure we can work with them to understand the issues and the steps needed to protect their students. 

Because, looking at the risks in the environment just now, for a small number of institutions the financial picture is particularly worrying. So we’ll continue to focus our attention on those cases – working constructively and carefully with any institution facing financial difficulties. 

Protecting public funding 

The third area I want to talk about today is another where we’ve been focusing our regulatory attention. That’s to do with the public funding that institutions receive, particularly the funding that flows from the Student Loans Company to institutions and to students.  

That’s a lot of money. In 2021-22, the SLC paid out nearly £20 billion in student support for 1.5 million students in England with over £5 billion paid in this academic year so far. 

Our regulatory interest has been attracted by providers that have grown student numbers on courses delivered through subcontractual relationships – sometimes called franchises. And in some cases, that growth has been rapid and significant. 

We know that increasing financial pressures may prompt institutions to look for ways to diversify income streams. To look for new and innovative ways to deliver higher education to students who might not otherwise have that opportunity. 

And, of course, our role is not to unduly interfere with institutional autonomy – those business decisions are for you to make. And some of those partnerships are working really well. 

But we do have an interest in making sure that SLC funding is flowing to students who are eligible and genuinely studying on their course. I know you’ll agree that taxpayers’ money must end up in the right hands. 

So, we’re extending our regulatory work in this area. We’ve been working closely with individual providers, testing whether the data they return to the SLC is accurate, and whether their internal control arrangements are properly designed, and work as intended in practice. In some cases, we have concerns about those issues – and we’ve seen examples of significant funding being reclaimed by the SLC. 

So, we’ve also been highlighting these issues to the sector more broadly, to share our concerns about these risks, and what institutions can do about them. We were very pleased to meet a group of chairs of sector audit committees in May – it was very helpful to talk to them about how they might gain assurance over these issues.  

Because any sector that attracts such significant public investment is vulnerable to fraud, and we all need to continue to be vigilant on behalf of taxpayers. 

Good governance – why is it important? What does it look like?  

I’m going to end by returning to where I started: good governance. 

The three areas I’ve talked about – quality, financial sustainability, and protecting public funding – are all areas I would expect to see on institutional risk registers. 

And that means they’re topics I would expect to be of keen interest to governing bodies. 

To help you think about that, I’ve got some questions: 

On quality: 

• Are you properly sighted on performance on those key student outcomes measures? And asking sharp questions about the reasons for any areas of weaker performance? 
• How would you know if the students you recruit onto your business and management courses – or courses in any other subject area – are getting the support they need to succeed? And what would you do if not?  
• Is your senior team using our quality assessment reports as a catalyst for reflection and change. Thinking about the quality of courses and what you’re offering to students. Thinking about academic and student support. Thinking about whether the particular students you recruit are getting what they need to succeed. And, if necessary, making changes. 

On financial sustainability: 

• Are you confident that financial management is effective? Is your leadership team looking ahead, identifying risk, and responding proactively? Is your governing body stress testing, scenario planning and challenging optimism bias? 
• If you’re under financial pressure, are you doing early thinking about radical options for transformation, new business models and different ways of doing things? 
• And do you have the skills and experience – on your board and in the wider team – to navigate choppy financial waters. 

And, if you’re extending your work with partners drawing down SLC funding: 

• Are you clear-eyed about the risks you need your internal control arrangements to mitigate? 
• Do you have an appropriate grip on your partners’ approach to student recruitment? How would you know if students aren’t engaging in their course and being assessed in the way you would expect? 
• And when you return data to the SLC about those students, how do you know it’s accurate? 

We know many governing bodies are alive to these issues. But we fear some are not. When we see regulatory concerns about quality, or financial sustainability, or the proper use of public funding, we often suspect that stronger, more effective, governance may have averted those problems. 

The issues we can see are a manifestation of earlier, upstream, weaknesses in governance. So our aim isn’t to have good governance as an end in itself – that’s not our regulatory objective. It’s to have good governance because that’s the route to delivering the things that matter to students and society – the things that are our regulatory objectives. 

The sector needs good governance to continue to deliver high quality courses to students from all backgrounds. To weather financial storms. And to make sure that taxpayers’ money is being used as we would all expect. 

Even when the operating environment for the sector is challenging and there are few easy solutions. Especially then. 

And I know this audience, in particular, understands this very well.