University Vice-Chancellors: Pay

Lord Johnson of Marylebone Excerpts

Wednesday 11th October 2017 Commons Chamber

[The Minister for Universities, Science, Research and Innovation (Joseph Johnson)]

I congratulate my hon. Friend the Member for South West Wiltshire (Dr Murrison) on securing this important debate on university vice-chancellors’ pay. I am grateful for the opportunity to set out how the Government have prioritised value for money in the higher education sector, and to touch on our plans to address the issue of senior staff pay.

With students and taxpayers heavily invested in our world-class higher education system, the Government are determined that value for money should be a key priority. To that end, the Higher Education and Research Act 2017 introduced reforms to increase competition between providers and to promote greater choice for students.

The Act introduced a new regulator for the higher education sector, the Office for Students. Once it comes into being next year, the OfS will develop a new risk-based approach to regulation. For the first time, all registered higher education providers in England will be part of the same system. This new regulatory framework will promote diversity and innovation in the higher education sector in the interests of students. It will drive up quality and standards, incentivise better teaching and learning, and inspire the growth of sector-relevant skills to increase employability.

Under the Act, one of the duties of the OfS is to have regard to the need to promote value for money in the provision of higher education by English providers. It will ensure more transparency for students so that they can have greater confidence that their money is being well spent.

We introduced the Teaching Excellence Framework with the intention of raising the standard of teaching in higher education and giving students clear information about where they are likely to receive good teaching and to get great outcomes from their time at university. Almost 300 providers took part in the first trial year of the TEF, including all but two English universities and more than 100 colleges and private providers. Excluding those with provisional ratings, roughly 75% of entrants received either a gold or silver award.

We are making it a priority for students to know their rights and to have fair contracts that enable them to take action if the reality of their experience does not match what was advertised. With a view to ensuring students obtain value for money, the OfS will use its powers, including setting a regulatory condition for providers to create an environment in which providers fully meet their obligations to students as consumers, and students will be able to build an understanding of their corresponding rights.

If a student is not satisfied with their course or provider, they may wish to switch to a different one. That has been difficult for many students up until now. The Act places a duty on the OfS to monitor and report on arrangements for students to transfer, and empowers the OfS to facilitate, encourage and promote such arrangements.

The Department for Education will shortly be launching a consultation on behalf of the OfS. That will include a proposed condition of registration requiring providers to publish information on their student transfer arrangements.

Many universities are large and complex organisations. Highly skilled and talented individuals are needed to run these organisations effectively. In some cases, universities may be competing internationally to secure the right managerial expertise. Higher education providers are rightly private, autonomous and independent institutions—they are not in the public sector and they are not really in the quasi-public sector—and they are solely responsible for setting the salaries of their staff. Nevertheless, these providers also have a public service mission, as my hon. Friend mentioned. With public funding providing the sector’s most significant single source of income, there is a legitimate public interest in promoting the efficiency of providers. This must include senior staff pay.

There is a risk that increasing salaries diverts money away from a provider’s core mission of teaching and research. Exceptional pay can only be justified by exceptional performance. The Government have consistently used their annual grant letter to HEFCE to call on universities and their remuneration committees to exercise restraint on senior staff pay. In my most recent letter, I made it clear that efficiency must include demonstrating restraint in setting senior pay. The Department’s consultation will contain proposals reflecting my requests that the OfS introduces a new condition of registration requiring the governing bodies of providers with access to student support to publish the number of staff paid more than £100,000 a year. For staff paid more than £150,000, providers will be required to publish their justification for these salaries. In the event that a provider fails to meet the requirements of this condition of registration, the OfS will be able to use its powers, which include monetary penalties, to take action.

The OfS will also issue guidance to help providers to meet the requirements of the condition of registration, and use its power to investigate the governance of an institution through assessments of management effectiveness, economy and efficiency where there are substantiated concerns.

[Robert Halfon]

I thank my hon. Friend for his work on this. Will the consultation also look at potential gender-related pay disparities?

[Joseph Johnson]

I am grateful to my right hon. Friend for mentioning that because we do indeed plan to ensure that such issues are considered by the OfS.

Arrangements will also be made to compile and publish data on the levels of HE senior staff remuneration beyond what is required by the registration condition, with a particular focus on protected characteristics such as gender and ethnicity. Further to this, I have called on the sector to work through the Committee of University Chairs to develop and introduce its own remuneration code. Such a code should encourage greater independence of remuneration committees, the publication of the pay ratio of top to median staff pay and explanations of top pay increases that are greater than increases in average pay in an institution as a whole. I am pleased that the CUC has confirmed that it plans to take forward the development of this code.

I am confident that these actions, in addition to our wider reforms to the higher education sector as a whole, will deliver much greater transparency and accountability, as well as improved value for money for taxpayers and for students. We have legislated to facilitate greater competition within the sector and choice for students. We have successfully promoted measures such as the TEF to help to students to make better informed decisions that affect their futures and enhance teaching quality, and we have acted to address escalating senior staff pay.

Let me be absolutely clear, for the avoidance of all doubt, that I want to see the relentless upwards ratchet in senior staff pay come to a halt, and I am confident that the measures the Government have put forward through the OfS will achieve that. I hope that my hon. Friend the Member for South West Wiltshire is reassured by the Government’s strong action and, once again, I congratulate him on securing this important debate.

Question put and agreed to.