Apprenticeships, Skills, Children and Learning Bill

My Lords, we need qualifications that are delivered efficiently, so the fees relating to those qualifications should represent value for money. That is particularly the case because many fees are paid from the public purse. At a time when all public sector organisations face the challenge of using their resources more efficiently, qualifications and the awarding bodies that offer them cannot be immune from those pressures. The qualifications system that we have in this country, with independent awarding bodies, promotes choice, innovation and responsiveness. Ideally, it also promotes efficiency and value for money, but we cannot be certain that it will do so in all cases. There may be market failures—for example, with small, specialised qualifications. The market may not be large enough to support competition. The Bill gives Ofqual an explicit efficiency objective and, to give teeth to that objective, it gives Ofqual the power to cap fees. This is a power that many other economic regulators have in markets where there is a potential for a significant market failure. A fee-capping power is not the only way to deliver efficiency or tackle market failures. Ofqual will need to use other levers to ensure that the market operates as efficiently as possible. However, a capping power is a critical signal of the seriousness of the efficiency objective. Under the Education Act 1997, the Qualifications and Curriculum Authority has the power to cap fees. However, it is only in the past two to three years that interim Ofqual has started to build up evidence about the efficiency of the system. To enable it to come to a view on whether fees provide value for money, work was started to build evidence to address increasing concern among schools, colleges and employers about fee levels. Ofqual must build on this work as it considers how to achieve its efficiency objective. Before taking a decision to cap fees—if that is what it decides to do—it would need to develop the intelligence to make fine judgments about how to balance the need for market stability and investment with keeping costs reasonable. The amendment puts a maximum increase in fees into the Bill and would prevent Ofqual from coming to evidence-based judgments of that kind. It could place at risk the delivery of good-quality qualifications by making it hard for awarding bodies to fund the necessary investment. That is why we cannot accept it. It might be said that an increase simply linked to inflation would be acceptable, but it might not be if we felt that reducing costs in an acceptable way was part of increasing efficiency. The Bill puts in place new safeguards around the use of the fee-capping power. If the regulator now were to impose a cap, the sole avenue of appeal to the awarding body would be to seek a judicial review. In future, there will be three extra hoops for Ofqual to leap through before it can cap fees. First, it will be required under Clause 147 to consult on and publish its fee-capping policy as part of its qualifications regulatory framework. Therefore, it is not a question of Ofqual trying to guess the market in a random way. Secondly, if on a particular occasion Ofqual does decide to impose a cap, it has to tell the awarding body of its plans. It also has to allow a period for any representations, so we are not talking about Ofqual, after having looked at evidence, saying to a body in a random or arbitrary manner, "Okay, we’ve decided you’re going to reduce your fees". There will be a process of dialogue; Ofqual will want to hear that body’s side of the story. It must also have regard to any such representations. Thirdly, if Ofqual decides that a fee cap is still appropriate, the awarding body may demand a review of that decision by a suitable independent person and Ofqual cannot do anything until that review has finished. Therefore, we argue that there are more than sufficient safeguards to ensure that this is a reasonable way to proceed. Of course, as now, an awarding body could always apply for a judicial review of a decision made by Ofqual. If it considered that the regulator had acted unlawfully in exercising this or any other of its powers, substantial protections would strike a fair balance between the rights of the awarding bodies and those of the customer and taxpayer. However, Amendments 251 and 251A assume that even those safeguards are not sufficient. They would require a market investigation by Ofqual before a fee cap was imposed and would then allow awarding bodies to appeal to the Competition Commission if they were still unsatisfied with Ofqual’s decision. That really is taking a couple of sledgehammers to crack a nut. We have gone through the process of ensuring that Ofqual’s approach is not arbitrary. If you wanted to introduce a delay in the procedure, that would be the way to go—to require a full market investigation and then an appeal to the Competition Commission. Of course, Ofqual may choose to conduct an analysis similar to a market investigation. It has the power to do so, but requiring such an investigation and requiring that investigation to come to specific conclusions would make for an unduly protracted process. If done properly, a full market investigation could take more than the six months specified in the amendment, and we do not think that that is reasonable in assessing whether the fees charged by an awarding body are reasonable in the circumstances. In practice, these amendments might make it very difficult to use the fee-capping power and therefore much harder for Ofqual to achieve its efficiency objective. The taxpayer would not thank us. Finally, Amendment 233 would change Ofqual’s efficiency objective so that it related not just to the activities of recognised awarding bodies but to the regulated qualifications system more generally. Ofqual has the power to deliver its efficiency objective as currently drafted because it relates to regulated qualifications, but it has no powers over any parts of the wider qualifications system which do not relate to regulated qualifications. Therefore, the amendment would give Ofqual responsibility without power, which is not a prerogative that we would wish to award. It would not be able to do anything to secure the efficiency of the wider system. I want to respond to some of the comments and questions that have been put. The noble Baroness, Lady Walmsley, talked about qualifications procured and the whole market. My information on the whole market is that something like four main awarding bodies account for approximately 90 per cent of the market. We will come back to the noble Baroness on the criteria for fee increases, but we have gone through the process of how Ofqual would go about imposing such increases. Reluctantly, much as I would love to give the noble Baroness, Lady Perry, the birthday present of accepting her amendment, I cannot do so. She coined the phrase a "perfect market", which I thought was a new example of an oxymoron. In today’s circumstances, I think that there is just a tad of cynicism about whether free and unfettered markets are always perfect or whether they need just a little regulation. Getting regulation right is absolutely necessary but I must admit that I was surprised at such strong advocacy for free and unfettered markets in today’s circumstances. I thought that we had learnt one or two lessons about the dangers of going too far down that road. There is a suggestion that I am being unduly cynical, but I do not mean to be. I am being serious. The qualifications market is worth hundreds of millions of pounds a year, much of which comes from the taxpayer. We do not know whether the taxpayer gets value for money for that, but we are entitled to know. Many awarding bodies have argued against these provisions and indeed are the instigators of some of the amendments. Of course, they would say that, wouldn’t they? I would do the same in their position. But that is not what the Committee should be looking at. We should be considering whether we have a perfect market—if such a thing exists, and I venture to suggest that it does not—and is it right that we should regulate accordingly and fairly? It has been adjudged that on occasion the market has acted against the interests of customers and consumers. There are absolute grounds for this, considering the sums of money involved, and for doing it in such a way that encourages efficiency. We are looking not to penalise awarding bodies but for Ofqual to work with them to ensure that they can raise their game. I see nothing wrong with that. We do not need a weaker regulator but one with the necessary powers, and the ability to work with the awarding bodies and to act when necessary on behalf of customers, consumers and taxpayers to ensure value for money. That should make us all the more determined to give the regulator the power it needs. Just in case we reach the situation where some awarding bodies might seek to take advantage of the taxpayer, the regulator should be in a position to expose and tackle that. I do not want to end on a negative note; I want to end on a positive note. For Ofqual to operate in the way that we want, it has to be a constructive body and one that works with awarding bodies to raise their standards and efficiency, to ensure that everyone benefits. I have endeavoured to answer all the questions that have been put to me, except on the criteria referred to by the noble Baroness, Lady Walmsley. In the light of the comments, I invite noble Lords not to press the amendments.