English universities could face fines of millions of pounds for breaching the conditions of their registration with the new higher education regulator.

The Department for Education is consulting on proposals to allow the Office for Students to impose a maximum penalty equivalent to 2 per cent or 5 per cent of an institution¡¯s ¡°qualifying income¡±, which comprises their tuition fee revenue plus any OfS grants.

For a university with 20,000 students and a qualifying income of ?400 million, this would amount fines of ?8 million or ?20 million, the says ¨C although many English universities are larger than this.

A regulatory expert said the extent of the proposed fines should give universities a ¡°wake-up call¡± regarding the environment that lies ahead.

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Under the Higher Education and Research Act universities must register with the OfS, which has power to fine universities that do not meet required conditions covering a broad range of areas such as student outcomes, financial sustainability, governance or even protection of free speech.

The 2 per cent figure should be high enough to ¡°deter¡± large and wealthy universities from simply paying the fine instead of complying with the conditions of the regulator, the consultation says, while a ¡°ceiling¡± of ?500,000 in cases where the qualifying income is lower means that smaller institutions do not have a disproportionately lower penalty, it adds.

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The document adds that the OfS is considering whether a 5 per cent fine would help to encourage compliance but it has ruled out a 10 per cent fine, which is used by regulators in other fields.

Smita Jamdar, head of education at law firm Shakespeare Martineau, said of the maximum fines: ¡°In absolute terms they are eye-watering."

¡°These are big sums,¡± she said. ¡°They are very hefty powers so for the sector it is another bit of a wake-up call that this is a very different world that they are entering into.¡±?

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Ms Jamdar added that the list of what could qualify as a potential breach of registration conditions and trigger a fine is ¡°quite instructive¡±. ¡°There really is no limit to how far they think their tentacles can reach,¡± she said.

Nick Hillman, director of the Higher Education Policy Institute, said that it was important the OfS ¡°tread[s] very carefully¡± when setting penalties in its early years as this would set a precedent for the future.

He added that if a university was landed with a hefty and disproportionate fine it would leave them with less money available to educate students.

Pam Tatlow, chief executive of the MillionPlus group of universities, said that the extent of the fines was ¡°unlikely to be the festive present that universities might have wanted¡±.

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¡°It looks as if the DfE wants to tie up the workings of what is supposed to be an independent regulator even before it exists,¡± she added.

holly.else@timeshighereducation.com