analysis
income from overseas students is projected to rise by £1.7 billion (38%), suggesting an increase in the average fee charged to overseas students Higher education is currently a challenging and uncertain environment, with providers in England operating in a highly uncertain policy and economic environment. The future of higher education funding is currently uncertain. The Review of Post-18 Education and Funding, commissioned by the government in February 2018, has been considering ways to ensure that the education system for those aged 18 years and over: is accessible to all; is supported by a funding system that provides value for money and works for students and taxpayers; incentivises choice and competition across the sector; and encourages the development of the skills that we need as a country. The post-18 review is due to report later this year. Higher education providers will need to respond to any policy or funding changes that result from the review. The UK’s likely exit from the EU is widely anticipated to have a major impact on higher education providers. Large numbers of students and staff from EU countries study and work in UK universities and colleges, and the UK benefits from tuition
fee and research income from EU sources. Arrangements for the movement of students and staff between the UK, the EU and non-EU countries, and the UK’s future involvement in EU regional and research funding programmes and partnerships, are yet to be resolved. More generally, the consequences for higher education providers of any changes in the wider UK economy, and any challenges for maintaining international competitiveness, are not well understood. Other developments can be predicted with more confidence, but also present potentially sizeable financial challenges. Most higher education providers will experience significant additional cost pressures arising from recent valuation exercises of a number of pension schemes. The outcome of the 2017 valuation of the USS, one of the largest sector pension schemes, resulted in a proposal to increase costs to both members and employers pending the outcome of the 2018 valuation. As part of a cost sharing agreement, providers’ contributions to the scheme are currently expected to increase in three steps, from 18% cent of pensionable pay to 24% by April 2020. Employer contributions to the Teachers’ Pension Scheme will also rise significantly, from 16% cent to 24% of members’
pensionable pay from September 2019. Individual providers are responsible for continued compliance with the OfS’s requirements for financial viability and sustainability. We have written to the chair of the governing body for each registered provider to emphasise the need for rigorous and independent scenario and contingency planning, throughout and beyond the period of this report, to ensure that sustainable levels of cashflow and investment are maintained. We have also reminded them that providers are required to report to the OfS any material changes in current or future financial position or performance as a formal reportable event. We will continue to monitor individual providers for early signs of financial difficulties and will intervene where we consider there to be increased risk that a provider may not be viable or sustainable in the future. Intervention may be required, for example, when a provider is not able to demonstrate that it is taking reasonable steps to mitigate any significant risks it has identified. We want providers with financial concerns to approach us early so that we can understand the emerging risks, the actions being taken to mitigate these, and to ensure that students continue to be protected.
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