Cap student growth to curb ‘risky behaviour’, ministers told

New caps should be imposed on the number of students English universities can enrol each year and on how much money they make from franchise arrangements to help curtail “excessive” risk-taking by institutions, according to a new report.

In a paper published by the Higher Education Policy Institute on 9 April, education policy analyst Tom Richmond argues that several universities have taken too many financial risks in recent years, threatening not just their own survival but that of the sector as a whole.

He says there has been unchecked growth in student numbers since controls were lifted in 2015, with examples including BPP University increasing its enrolments by 421 per cent from 2015-16 to 2024-25, the University of Law increasing by 1,811 per cent and Arden University increasing by 3,217 per cent.

Non-private providers have also seen huge growth, such as Canterbury Christ Church University, Buckinghamshire New University and Bath Spa University, all of which have expanded primarily because of franchising agreements.

Richmond notes that some providers have grown student numbers without ensuring there is enough accommodation available, and that the number of teaching staff has not kept pace with growth.

Other risks highlighted include the reliance on international students, with 10 universities accepting at least 5,000 students from China in 2024-25 and five accepting at least 5,000 from India. 

In the report, Richmond, former ministerial adviser in the Department for Education, urges the government “to set new boundaries that aim to curtail excessive risk-taking” by universities.

Among the measures he suggests is a constraint on provider growth, limiting universities to a 5 per cent annual increase in student numbers. 

“This approach would not ‘cap’ the size of providers or the higher education sector because some growth is still permitted, but it would significantly reduce the risk of a provider putting itself under financial strain by prioritising rapid growth over sustainability,” the report says. 

He also argues that the international student levy, set to come into force in 2028, currently favours institutions “that treat international students as ‘cash cows’ by recruiting more of them and by charging them higher fees” because of its flat-rate model. 

The government should instead switch to a percentage-based levy that only applies to fees charged over and above the loan cap on tuition fees for domestic students, he suggests. 

Richmond also recommends further curbs on franchising, following widespread concerns about provider fraud in recent years. He notes that several universities have historically had more students enrolled on their franchise courses than at the university itself, because of the income it can generate.

“The powerful financial incentives that underpin franchising (for the lead partner and delivery partner) have led to too many unintended and undesirable consequences,” the report says. 

He says the government’s plan to require more franchise providers to register with the Office for Students “may prevent some abuses of the current model, but a more direct approach is required to stamp out any bad actors”.

His suggestions include banning all franchise operations unless approved by the DfE or the OfS, and introducing a 50 per cent cap on franchising income as a proportion of all income, gradually falling to 20 per cent. 

“Some of the measures, such as restrictions on franchising, would have an impact on individual providers, but the goal would be that the sector as a whole would end up better off and in a more financially sustainable position,” Richmond told Times Higher Education. 

He added that introducing some “relatively simple regulatory measures now” could prevent the government having to spend “the next five to 10 years worrying about more providers getting themselves into financial difficulty and…potentially needing some financial intervention”. 

“The idea with the measures in this report is to put some certainty around what is and is not permissible from the government’s perspective in terms of making sure that providers don’t inadvertently tip themselves – or indeed another provider – over the edge,” he continued.

“With that extra certainty, [institutions will] be able to do some long-term planning, which I don’t think is really possible at the moment because the government hasn’t set out that strategy for what they want the sector to look like in terms of its sustainability, and what practices they consider to be acceptable and not.”

helen.packer@timeshighereducation.com