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Higher-education students in the UK could end up with a surcharge on their fees if proposals to establish an education insurance system are adopted.

The proposal to protect students from the risk of a failed institution is contained in a report published on October 9 by the Higher Education Commission, an independent body made up of academics, members of the business community and representatives of all three of UK’s major political parties.

The report, Regulating Higher Education, notes that current policy to encourage more competition in the education sector increases the risk that a weak provider might fail. The proposed insurance levy would fall on all higher-education institutions even if they were only providing graduate-level degrees.

“The proposal to introduce an insurance system is interesting,” said Paul Marshall, chief executive of The Association of Business Schools, a body whose members include over 100 British business schools.

“We strongly agree that protection of the interests of students and institutions . . . is a highly important aspect of any future regulatory framework,” Mr Marshall said.

“However, at a time of continued fiscal constraint, we would be highly cautious of any additional financial restrictions on institutions that the introduction of such an insurance scheme would impose,” he added.

The burden could fall particularly hard on the business education sector in the UK, simply because business courses account for such a large proportion of all courses on offer.

The ABS estimates that one in eight undergraduates in the UK is on a business education course of some kind. That proportion jumps to one in five if you examine postgraduate courses and one in four if you look only at which degrees international students choose to study.

During the course of its research the commission consulted with higher-education institutions and reported that there was enthusiasm for more discussion about the insurance idea, although there were misgivings.

“HE providers said this [the insurance levy] would place unfair costs on traditional universities, which are least likely to fail, but which would have to pay for the privilege of assisting new, dubious providers,” the report noted.

But, speaking after the launch of the report, Lord Norton of Louth, co-chair of the Higher Education Commission, said: “We fully understand that elite institutions might be reluctant to participate in such a scheme. But they must not be in denial about the realities of the situation. The failure of any HE institution in the UK would gravely undermine the global reputation of our HE system.”

The Higher Education Commission said it had not come across any other country that had introduced an insurance scheme for higher education students. Instead, it based its proposal on a scheme set up in the UK to protect customers of failed airlines and air travel companies. The Air Travel Organisers’ Licensing scheme sees travel companies pay £2.50 into a fund for each passenger who books through them. This then pays out in the event of a failure of a participating airline or travel company.

The Higher Education Commission did not try to describe what sorts of sums might be necessary to help students stranded midway through a degree course.

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