c /o Olga
Lewis, Deputy Clerk
Children and
Young People Committee
Legislation
Office
National
Assembly for Wales
Cardiff Bay,
CF99 1NA.
24 June 2013
Dear Olga
Consultation – Further and Higher Education
(Governance and Information) (Wales) Bill
Thank you for your invitation to provide evidence to the Children
and Young People Committee on 13 June 2013. I am writing to
clarify our views on what the potential impact of a
reclassification by the Office for National Statistics (ONS) from
Non-Profit Institutions Serving Households (NPISH) to central
government would be for the higher education sector, which was an
area which we felt needed better explanation than I was able to
give in immediate response to questions in the
Committee.
We should be clear from the outset that it is for others to comment
on how a change in ONS classification would apply to further
education. In common with our university partners across the UK,
however, it is our view that loss of NPISH status for universities
would have very serious and detrimental impact on the higher
education sector, for the following reasons in
particular:
-
The Further and Higher Education Act 1992 is widely regarded as
preserving the necessary public safeguards against autonomy of
corporate policy and academic independence, which have been a
cornerstone of the UK’s international reputation for having
the best system of higher education in the world.
An actual or apparent erosion of these safeguards and/or resulting
loss of NPISH status could give rise to perceptions of a
fundamental divergence of higher education in the UK and have a
very damaging impact on the international reputation of the sector
in this respect.
-
As the Welsh Government make clear, reclassification would have
significant consequences for the DfES budget, as detailed in the
Explanatory Memorandum which accompanies these proposals, which in
turn would have serious implications for the higher education
sector.
This would include the potentially negative impact on the
Welsh Government capital budget in particular and requirement for
additional accounting and annual return arrangements. Any
surpluses or deficits would become Welsh Government funds and would
need to be managed within the overall Main Expenditure Group (MEG),
and the ability of institutions to carry forward surpluses and
build reserves for future capital projects would be lost. We also
understand that, more generally, the reclassification of the sector
as central government would impact in particular on the Public
Sector Net Debt (PSND) and to a lesser extent the Public Sector
Current Budget (PSCB) and Public Sector Net
Investment.
-
There would also be significant ramifications arising from the
specific provisions which contributed to a change in status.
HEW has considered the potential impact of a change in status for
the higher education in its responses in relation to proposals for
direct grant in the FE HE (Wales) Bill consultation in September
2012 and in relation to the Welsh Government’s Public Service
Workforce consultation in July 2012. In addition to the above
points, the HEW responses identified a potential impact on
contractual agreements with partners, collective agreements
incorporated into the contracts of employment, or general statutory
duties relating to higher education. Implications for tax and
charitable status would also be issues which would need to be
considered further in any potential reclassification.
As indicated in the meeting, the ONS decisions and stated reasons
for them are live issues to be considered in future regulatory
developments relating to the HE sector and we will give this
further consideration as part of the HE (Wales) Bill technical
consultation. The ONS classification reflects degree of
public sector control over general corporate policy and any
reclassification would mean a significant shift in this respect.
The key areas which caused reclassification of the FE sector to
central government were, according to the ONS: borrowing
restrictions, governance arrangements, and the public sector
ability to close or merge institutions. When, in England, these
powers were limited to situations where the institution is being
mismanaged or performing poorly, the ONS took the view that these
remaining powers acted as reserve or step in powers. It noted,
however, that if such powers were to be exercised this would result
in the public sector taking control of the institution in
question.
We hope that our clarification is of help to your
inquiry.
Yours sincerely
Ben Arnold
Policy Adviser