OfS subjective fines proposal could cause legal disputes for the sector

The UK’s Office for Students (OfS) recently launched a consultation on financial penalties for universities that breach its conditions of registration. This can cover everything from teaching quality and student experience, to fiscal health.

The trouble is, the proposed approach is far too opaque. What fines will be given for and how they will be calculated is open to subjective interpretation. The consultation is now on hold owing to Covid-19, but when the process is live again, respondents must understand that if a system of financial penalties isn’t prescriptive, it opens the door to protracted legal disputes.

The OfS plans to use fines for “serious breaches” of its registration conditions and when non-financial sanctions, such as enhanced monitoring and the revoking of degree-awarding powers, have not been effective. What “serious” means in practice, and at what point other sanctions will be judged to be ineffective, is not clear. This very basic point highlights the fundamental problems of the OfS’ approach. 

For example, a breach that is “negligent” is cited as serious enough to warrant a monetary penalty, yet the definition of what counts as negligent is notable by its absence. In law, there is a big difference between poor service delivery and negligence, and any registered provider that receives a fine for this reason could well challenge the OfS’ definition. Deliberate or frequent breaches and dishonesty are some of the other reasons given. Each is as vague as the next. Without more detail, most penalties will be disputed out of hand.

The problem is exacerbated by the fact that every university’s conditions of registration with the OfS are unique. This renders a truly prescriptive system, which levies set fines for specific breaches, impossible. The OfS intends to calculate fines as a percentage of a provider’s “qualifying income”. This is meant to ensure that fines are proportionate. 

In reality, it would only muddy the water further. What constitutes income is, again, up for debate, and this methodology could lead to a situation where institutions are fined different amounts for similar, if not identical, breaches – which is a recipe for more protracted disputes.

The OfS must remove subjectivity from the equation. When it decides a fine is appropriate, it plans to assign a “baseline” penalty. If expressing fines as a series of fixed rates isn’t possible, a tariff of monetary penalties must be used to determine that baseline. The tariff will need to be as prescriptive as possible, overcoming the current lack of detail over what warrants a fine and institutions’ varying conditions of registration. 

If this isn’t possible, a wholesale re-evaluation of this stage of the process is the only way the OfS will avoid institutions disputing financial penalties as a matter of course.  

Now, determining whether a fine is appropriate and the baseline penalty is only the first step. To land on the final fine amount, the OfS will consider mitigating or aggravating circumstances, the registered provider’s track record and any other “relevant” factors. 

These considerations are, again, far too vague, but they have an even more problematic dimension when viewed alongside the OfS’ commitment to take a university’s financial position into account before imposing a fine.

Considering the impact of any fine on a registered provider’s finances and the experience and attainment of its students is, on the surface, a responsible step. However, the danger is that only universities in good financial health, which can actually afford to pay fines, will be the ones to receive them. A system that disproportionately penalises otherwise well-run, financially secure institutions could breed acrimony, as well as being fundamentally unfair.

The OfS also plans to offer settlement discounts to providers who agree they have breached a condition of their registration and accept a monetary penalty at an early stage. This is meant to incentivise cooperation and avoid lengthy disputes, but in practice it could have the opposite effect. Over and above the issues I’ve already outlined, institutions aren’t going to lie down and take a penalty if they feel they are only being fined because of their relative size or stronger financial position. 

Finally, taking a step back, the OfS needs to review how its proposals will be received in the round. It should exercise its power to impose penalties when appropriate. However, universities are currently operating in a challenging and unpredictable environment. As a part of their conditions of registration, institutions need to file a detailed student protection plan with the OfS containing, among other things, contingencies for disrupted teaching. If, for example, they do not account for exceptional circumstances, such as needing to close campuses in response to Covid-19, does this qualify as a “serious” breach?

When the OfS consultation is live again, fundamental considerations like this and the vagaries of the penalty process need to be ironed out. It is the only way to establish an approach to fines that is fair, doesn’t lend itself to protracted disputes and ultimately benefits providers and students in the long term.

Martin Vincent is a partner and head of education at national law firm Weightmans LLP.