Regulation blog

What are HEFCE’s regulatory duties and powers?

In the higher education sector there are several regulators with potentially overlapping roles, and it is important to distinguish between specific legal roles and functions, and to clarify what HEFCE’s powers are and what it expects in the matters for which it does have responsibility.

Under section 65 of the Further and Higher Education Act 1992, we have the power to set terms and conditions to the grants we make. These terms and conditions are set out in our Memorandum of Assurance and Accountability (MAA) (HEFCE 2017/08) which, amongst other things, requires the governing bodies of higher education institutions (HEIs) to use public funds for proper purposes and to achieve value for money from public funds across teaching, research and other activities in the interest of students.

Under section 26 of the Charities Act 2011, we have the duty, as principal regulator for those HEIs which are exempt charities (that is, charities exempt from registration with the Charity Commission), to do all we reasonably can to promote compliance by governing bodies with their legal obligations in exercising control and management of the administration of the charity.

The Charity Commission directly regulates the 19 HEIs which are charities but not ‘exempt’, and also the vast majority of the not-for-profit higher education providers (HEPs) which are registered as charities in the so-called ‘alternative provider’ part of the sector.

We issue guidance on governance topics from time to time to the HEIs we regulate, and we follow up this guidance in a variety of ways to fulfil our ‘promotion’ duty.

For us to consider HEIs’ compliance with their legal obligations as charities, the most effective way is usually to look into any concerns on a case-by-case basis. Although many of the same overriding obligations apply to all charities, the precise obligations of each institution will turn on how it is constituted and on what its individual governing documents say.

Senior staff pay in higher education

For more than 20 years now, we have required higher education providers to disclose their vice-chancellors’ remuneration in their annual financial statements, together with information on the remuneration of higher-paid staff and any severance compensation payments made to them.

Earlier in 2017 our funding letter from the Government highlighted concerns about the ‘substantial upward drift’ of salaries of some top management, and urged senior leaders to exercise restraint.

In June we sent the institutions that we regulate updated guidance on the remuneration of senior staff and on severance pay. We will routinely follow this up after the next cycle of remuneration committee meetings has taken place to check whether due regard has indeed been given to the guidance in practice.

It is important to note that HEIs are autonomous institutions and also, as charities, are legally obliged to be independent of government control. So neither HEFCE nor the Charity Commission is legally empowered to set salary levels for vice-chancellors or other senior executive staff or to require changes in salaries for specific employees in specific HEIs or HEPs. A change in the law would be needed for us to do that.

However, we can and do investigate if the setting of those salaries raises governance issues about the institutions which we regulate.

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