University regulation inadequate, says report
A lack of regulation of England's universities means students are at risk of attending failing institutions, the Higher Education Commission (HEC) says.
The HEC says current checks are not adequate for a sector that has a new funding system in the wake of higher tuition fees introduced last year.
It says the situation could threaten the UK's higher education reputation.
The government says a "robust but proportionate" regulatory system is needed.
The HEC - an independent body made up of leaders from the education sector, business and the three main political parties - conducted its research over an eight-month period and concludes that current regulation is too "piecemeal".
The commission says that the Higher Education Funding Council for England (Hefce), which distributes the teaching grant to universities, was previously able to attach regulatory conditions to the grant.
But now that the teaching grant has been reduced and is being replaced with increased student tuition fees since 2012, the ability to regulate universities through Hefce has been reduced in turn.
Its report - Regulating Higher Education - says all degree providers in England should be "captured" by proper regulation.
It says: "It [higher education] is a valuable part of our national infrastructure and we must therefore ensure that students investing thousands of pounds in their futures are receiving top quality provision, and that the institutions they are attending are financially viable."
The HEC study expresses particular concern about newly established higher education providers, saying "more providers are entering the market... and online providers gaining traction".
"Regulation as it sits is not adequately prepared for the diversity of these current and future developments.
"New market entrants are not facing the scrutiny they should, takeovers and complex corporate structures are being used to evade fundamental protections for students, and institutions are facing more pressure than ever to recruit students and crucially, therefore, bring in funding."
The report continues: "In this new, reformed higher education landscape, the chances of an institution failing are increased. An institution failing would damage both students and the highly-valued brand of UK higher education."
The HEC calls on the government for urgent legislation to tackle the problems.
It suggests an overarching regulatory body - the Council for Higher Education (CHE) - should be created, incorporating the current body Hefce, the Office for Fair Access (Offa), the Student Loans Company and a new body called the Office for Competition and Institutional Diversity.
The commission also calls for better information about the various degree providers now operating in the UK and says all of these should be subject to a new regulatory framework, with kitemarks for those meeting approved standards.
It also proposes an insurance scheme, paid into by every institution, to safeguard students should an institution or course fail.
Professor of government at Hull University and HEC inquiry co-chairman Lord Norton of Louth said: "Regulation is fundamental to the health and success of our HE sector and will make or break the effectiveness of the institutions that have made the UK a world leader in higher education.
"In the context of current reforms, the absence of legislation to provide a coherent regulatory architecture for the rapidly changing and increasingly dynamic sector is creating major headaches for its players.
"It is a situation crying out for urgent rectification by government, a refrain that was a constant throughout the course of the inquiry from those who gave evidence."
Fellow co-chairman and former vice chancellor of Lincoln University Prof Roger King said: "Our proposals seek to build upon the existing regulatory strengths displayed by the sector and to ensure that more external and formalised external regulatory arrangements work with these.
"Above all, however, we need to urgently address the outstanding requirement for a more systematic and less piecemeal approach to the external regulation of the sector. This can only be achieved by early legislation by government."
A spokeswoman for the Department of Business, Innovation and Skills said: "It is essential that there is a robust but proportionate regulatory system in place to protect students and the reputation of the wider sector.
"At the same time though a balance must be struck to protect institutional autonomy and academic freedom. These elements are key to the success of our university system.
"When the time comes for legislation we want to get it absolutely right."
Prof Les Ebdon, director of Offa, said: "I believe that fair access is too important to be rolled up within the wider concerns of a multi-focused regulatory body.
"An independent director, with a sole focus on access, can challenge institutions to set themselves stretching widening participation targets and ensure that fair access remains high on the agenda, both for institutions and policy-makers."