Research and analysis

RPC opinion: oversight of higher education delivery partners

Published 12 June 2026

Lead department: Department for Education

Summary of proposal: following concerns raised by the National Audit Office (NAO) and Public Accounts Committee (PAC) regarding the value for money of higher education franchised provision for both students and taxpayers, the department proposes changes to the regulatory framework of higher education (HE) to strengthen oversight of franchised provision in HE.

Submission type: options assessment – 26 November 2024

Legislation type: primary legislation

RPC reference: RPC-DfE-24021-OA(1)

Date of issue: 27 January 2025

RPC opinion rating

Fit for purpose:

• the department identifies two key problems: fraud and asymmetric information with franchised delivery of higher education
• the department has considered 6 options to address the identified problems, taking into consideration concerns raised by the NAO, Public Accounts Committee, review of available evidence, and stakeholder engagement
• a detailed appraisal of the shortlisted options is included in the OA and the appraisal monetises costs and benefits for the preferred option relative to the do-nothing option
• the proposed monitoring and evaluation plan provides sufficient detail and includes questions that the department would use to evaluate the policy and associated data

RPC opinion summary

Rationale: Green

The assessment uses NAO’s findings from the 2022/23 academic year to establish the problem under consideration, highlighting that 44.9% of all detected fraud cases were at franchised providers, whilst only 6.5% of Student Loan Company (SLC) funded learners were attending franchised providers. The department also identifies asymmetric information as a problem.

The need to protect public money from fraud, misuse and ensure franchised provision delivers positive outcomes for students are presented as the argument for intervention. It seems plausible that direct oversight of franchised partners by the Office for Students (OfS) could deter malpractice and fraud within franchised delivery partners of higher education (HE) courses.

Identification of options: Green

The department has considered 6 options to address the identified problems, taking into consideration concerns raised by the NAO, Public Accounts Committee, review of available evidence and stakeholder engagement. The department has provided sufficient justification for the shortlisted options by assessing each policy against critical success factors alongside discussion on the department’s reasoning for carrying options forward to the short list.

The small and micro business assessment is sufficient as the department makes the case that most of the policy objectives can still be achieved by exempting providers with less than 300 students from the requirement to register with the OfS.

Justification for preferred way forward: Green

A detailed appraisal of the preferred option is included in the OA. The appraisal monetises costs and benefits for the preferred option relative to the do-nothing option. The department appears to have explored the full range of impacts relevant to the proposal and the different groups affected seem to have been fully identified. The analysis presented in the assessment is sufficient to support the department’s option preference.

Regulatory scorecard: Satisfactory

Although not presented in the scorecard section, the main body of the assessment has identified the number of businesses that would be impacted by the regulation, and a reasonable assessment of the impacts faced by the two main groups of HE providers have been discussed in the scorecard, with more detail provided in the main body of the OA. The assessment states that there will be no direct monetary impact on students associated with the reform.

Monitoring and evaluation: Good

The department has committed to reviewing the regulatory change five years after the legislation comes into force. The proposed plan provides sufficient detail and includes questions that the department would use to evaluate the policy and associated data.

Summary of proposal

Following concerns raised by the National Audit Office (NAO) and Public Accounts Committee (PAC) regarding the value for money of higher education franchised provision for both students and taxpayers, the department proposes changes to the regulatory framework of higher education (HE) to strengthen oversight of franchised provision in HE.

The aim of the proposal is to protect public money and ensure the quality of franchised provision for students. The impact assessment estimates a business NPV of -£34.6 million (2025/26 price and base year and an EANDCB of £4 million (2025/26 price and base year) for the central scenario.

Rationale

Problem under consideration

The assessment uses evidence from the National Audit Office (NAO) to establish the problem under consideration, referencing the NAO’s findings that in the 2022/23 academic year, 44.9% of all detected fraud cases were at franchised providers, whilst only 6.5% of Student Loan Company (SLC) funded learners were attending franchised providers. This clearly illustrates the prevalence of HE related fraud amongst the student population attending higher education at franchised providers.

Although the department does present ‘inaccurate attendance monitoring resulting in some students receiving student finance despite not engaging with the course’ as an example of HE related fraud in a later section of the options assessment (OA), the rational section could be improved through a detailed discussion on what constitutes as HE related fraud and explicit reasons why they are more prevalent in franchised HE providers.

However, from the rationale section, it can be inferred that the prevalence of fraud could be attributed to franchised HE providers not being directly regulated by the Office for Students (OfS) or other appropriate regulatory bodies, raising concerns around student outcomes and value for money for taxpayers.

The department also identifies asymmetric information as a problem. Under this market failure, the OA asserts that poor student outcomes do not currently serve as a signal to future students as student outcomes are not published at a level that can be attributed to a specific delivery partner. Therefore, franchised delivery partners can continue to rely on the reputation of the lead provider to recruit new students whilst making choices that increase profits at the expense of students’ experiences and outcomes, resulting in misallocation of public resources.

Argument for intervention

The need to protect public money from fraud, misuse and ensure franchised provision delivers positive outcomes for students are presented as the argument for intervention. The department uses data from the OfS on franchising arrangements to illustrate the size of the student population (including characteristics of students) that could be affected by unregulated franchised HE providers. However, the argument for intervention could be improved through discussion on consequences if government does not intervene, covering possible harms to public sector funds and student outcomes that could occur.

The department proposes that for courses to be designated for student finance, delivery partner with 300 or more franchised students should be registered with the OfS. The measure appears to address the problem under consideration, making courses delivered by franchise partners subject to direct regulation the OfS. It seems plausible that direct oversight of franchised partners by the OfS could deter malpractice and fraud within franchised delivery partners of HE courses.

Objectives and theory of change

The OA has provided objectives for the proposed intervention, with the measure aiming to protect public money and ensure that franchised provision delivers positive outcomes for students, including methods for measuring success. However, the department does not directly follow the SMART objectives framework. A logical change process has been discussed in sufficient detail and a theory of change diagram included.

Identification of options

Identification of the ‘long-list’ of options

The department has considered 6 options to address the identified problem, taking into consideration concerns raised by the NAO, Public Accounts Committee, review of available evidence and stakeholder engagement. The following options were considered against critical success factors from the Green Book (strategic fit, value for money proportionality and potential achievability):

1. Do nothing where the status quo remains unchanged.

2. Requiring all delivery partners above a certain size to be registered with the OfS or an appropriate regulatory body for courses for new franchised students to be designated for student finance. (preferred option)

3. Increased monitoring of franchised provision through the existing regulatory framework (no changes to current regulatory framework).

4. Publish guidance on what good franchising is (alternative to regulation)

5. Prohibition of all franchising

6. Restriction of all franchised provision to only OfS registered providers

However, the long list of options would benefit from consideration of various types of registration obligations that could achieve the policy objective in different ways and with varying costs to businesses. Further appraisal of the options not taken forward (options to prohibit and restrict franchising) would also strengthen the long-list section.

Justification for the short-listed options

The department has provided sufficient justification for the shortlisted options by assessing each policy against critical success factors alongside discussion on the department’s reasoning for carrying options forward to the short list. The discussion on individual measures underscores that Option 5, which proposed prohibiting all franchising, was rejected because franchised provision can enhance access and participation for mature students, individuals from deprived areas, and those who are less willing or able to relocate.

Option 6 was discarded because it would be potentially prohibitive for smaller providers who lack the resources and incomes to be able to register, which doesn’t strake the right balance between protecting public money and the cost of tighter regulation. These comments were reflected in the RAG rating of each option against the four critical success factors mentioned above, where option 5 was red rated for value for money and proportionality and option 6 was red rated for value for money, proportionality and potential achievability.

Small and micro business assessment (SaMBA) and medium-sized business (MSB) assessment

The OA incorporates a de minimis threshold of 299 students into the preferred option, exempting providers with less than 300 students from the requirement to register with the OfS. The department has provided sufficient justification for the chosen threshold, referring to data from the 2023/24 school year which suggests that providers with 300 or more undergraduate franchised students accounted for 92% of undergraduate student finance relating to unregistered franchised provision, suggesting that most of the policy benefits could still be achieved whilst exempting smaller providers.

The department’s approach is in line with the Better Regulation Framework and RPC guidance where the default position is that SMBs should be exempted from new requirements, particularly where most of the policy objectives can still be achieved when an exemption is applied. An assessment of disproportionate impacts and consideration of mitigations is not required if an exemption is applied.

Justification for preferred way forward

Appraisal of the shortlisted options

A detailed appraisal of the preferred option is included in the OA. The appraisal monetises costs and benefits for the preferred option relative to the do-nothing option. A qualitative approach was taken when appraising the do-nothing option and includes discussion on impacts on lead HE providers, students, government and other public bodies. Under the do-nothing option, the assessment states that franchised provision could continue to grow with a level of oversight that is not commensurate with the risk to public money and franchised students may not receive high-quality provision and outcomes that HE providers are expected to deliver.

However, options 3 and 4 that are expected to go ahead regardless of the final policy position could mitigate some of the risks highlighted in the OA’s rationale. The qualitative assessment of the do-nothing approach appears to cover the full range of first order impacts. The assessment of the preferred option contains detailed analysis of impacts to lead HE providers, registered delivery partners, unregistered delivery partners, students, DfE, the Exchequer, Office for Students, Student Loans Company and Jisc (HESA). The estimated business NPV includes:

• familiarisation and application preparation costs
• initial and ongoing costs of registration
• registration and subscription fees

Amongst the 3 categories of costs presented, the initial and ongoings costs of registration appears to have the most significant impact on business, accounting for over 50% of estimated costs. This is largely influenced by the costs of meeting financial sustainability conditions set by the OfS (estimated at a discounted value of £16.6 million over the appraisal period). The familiarisation and application preparation costs have the smallest impact on businesses, with applying for OfS registration estimated to have a discounted cost of £0.7 million to businesses over the appraisal period.

The department appears to have explored the full range of impacts relevant to the proposal and the different groups affected seem to have been fully identified. The assessment provides a clear explanation of the assumptions that feed into the monetised impacts presented in table 13, and the assumptions appear reasonable.

In line with Green Book guidance, the department uses a 10-year appraisal period and apply a discount rate to the business NPV. Although presented as alternative policy options, the department includes options 3 and 4 in the do-nothing approach because they intend to proceed with them as well as the preferred option to regulate. As such, options 3 and 4 should not be included in the long list but rather presented as strategic context that is part of the baseline.

Alternatively, the department could have carried options 3 and 4 through to the short list as part of a do-minimum option and also appraised a do-maximum approach which includes the regulatory proposal and options 3 and 4. However, because the assessment would result in similar monetised impact regardless of the approach, and the department discusses the merits of options 3 and 4 throughout the OA, the RPC is content that sufficient justification has been presented for the preferred way forward.

Selection of the preferred option

The analysis presented in the assessment is sufficient to support the department’s option preference. The preferred option appears to meet the department’s objectives and is influenced by engagement with relevant stakeholders.

Regulatory scorecard

Part A

Impacts on business

Although not presented in the scorecard section, the main body of the assessment has identified the number of businesses that would be impacted by the regulation, and a reasonable assessment of the impacts faced by the two main groups of HE providers have been discussed in the scorecard, with more detail provided in the main body of the OA.

The department summarises that there will be financial loss of income for lead providers due to potential limitations in the number of new franchised students they may be able to recruit. The increased oversight of the OfS could also lead to reputational risk for the lead provider. Unregistered providers who plan to have 300 franchised students or more will face costs associated with meeting the initial and ongoing costs of registration with the OfS.

Familiarisation, initial and ongoing costs of registration with the OfS inform the EANDCB, whilst impacts on lead providers are not included due to uncertainty on how lead providers may respond to the reform and the lack of data on how much profit is retained by lead providers. Potential profit losses for providers that might fail to meet the OfS registration conditions and thus be unable to register were excluded from the EANDCB. This exclusion is due to the uncertainty regarding the number of providers likely to register successfully. However, the department has provided some illustrative scenarios on potential profit loss to unsuccessful providers.

The appraisal of the business impacts and the approach to monetisation seem appropriate and proportionate, with the department estimating a business NPV of £34.6 million (central estimate) and an EANDCB of £4 million. The NPV and EANDCB figures appear to be reasonable estimates, generally based upon proportionate evidence and analysis.

Impacts on students

The assessment states that there will be no direct monetary impact on students associated with the reform. However, it was acknowledged that the measure could reduce the number of franchised places available to students, with potential implications for access and participation. However, it is stated that increased oversight by the OfS could improve quality and outcomes of courses delivered by franchised delivery partners. Although, not presented in the scorecard, the department uses data from the OfS to estimate the number of students that could be affected by the policy in the main body of the OA.

Distributional impacts

Distributional impacts have been adequately covered, with the department highlight that the de minimis threshold of 299 would mean that costs imposed by the proposal will fall primarily on large delivery partners. With regards to students, the assessment references the observed characteristics of students in franchised provision. As such, it is acknowledged that mature students (aged 31+), socioeconomically disadvantaged students, UK-domiciled students, students with no/unknown/other entry qualifications and students who are less likely to relocate for study would likely be disproportionately disadvantaged.

Total impacts

Due to difficulties with measuring and monetising the benefits of the measure to students and taxpayers, the department was unable to monetise the total impact of the measure. As such the measure was given an overall uncertain directional rating in the scorecard.

Non-monetised impacts

For impacts that could not be monetised such as impacts on lead providers and students, the department provides a reasonable justification for the lack of quantification and opts for qualitative assessment of the impacts instead.

Part B

Business environment

1. Creates a level playing field in the HE sector as all large delivery partners have to register with the OfS to retain access to student finance. As such providers already registered no longer compete with unregistered providers that are not subject to the same conditions on transparency of information.

2. The greater oversight by the OfS may have to consolidate the HE sector’s reputation for high quality provision, both in the UK and overseas.

3. The department does not expect the measure to create significant barriers to entry as new providers could enter the market through franchised provision and teach up to 299 students without needing to register.

International considerations

The assessment acknowledges that international students may be affected by any reductions in the number of students franchised delivery partners are willing to teach.

Natural capital and decarbonisation

No impacts are expected.

Monitoring and evaluation

The department has committed to reviewing the regulatory change 5 years after the legislation comes into force. The proposed timeline allows for 2 academic years in which franchised courses’ eligibility for student finance would have been affected by the requirement to register. The proposed plan provides sufficient detail and includes questions that the department would use to evaluate the policy and associated data.