State threats over fee levels may backfire
Universities may impose maximum fees to pre-empt expected reductions, writes John Morgan
The government's threat to withdraw funding from England's universities if they set tuition fees too high is actually pushing charges up, it has been claimed.
Senior sector figures have warned that universities are calculating their fee levels to make up for possible punitive withdrawals of funding in the future, rendering the pressure from the government counterproductive.
Government warnings are now thought to include the possibility of cutting student numbers by up to 10 per cent if the average fee level is too high.
To accommodate higher fees, the cost to the taxpayer of the heavily subsidised loans system will rise sharply, from £3 billion this year to £7 billion by 2014-15, according to the government's latest grant letter to the Higher Education Funding Council for England.
The government has budgeted for an average fee of £7,500, but the majority of universities that have announced their fees so far have opted for £9,000 or just below (see box below).
David Willetts, the universities and science minister, said last month that "if graduate contributions end up higher than £7,500, we would reluctantly be forced to find savings from elsewhere" in the higher education budget.
But Times Higher Education understands that the ring-fenced science and research budget would be safe from any such clawback.
A potential target for savings would be the teaching grant, but that is already being axed for arts, humanities and social science subjects.
On indicative figures, the teaching grant will fall from £4.9 billion this year to £3.8 billion in 2012-13 (the year that higher fees are introduced) and to £2 billion in 2014-15.
An alternative would be for the government to enforce a reduction in student numbers to bring down costs.
However, this threat may already be backfiring.
Les Ebdon, chair of the Million+ group of new universities, said: "If it becomes clear that the government is going to withdraw up to 10 per cent of student numbers because of the estimated cost of the loans system, then it would be prudent to factor this into the calculation of the fee level.
"Many universities will be thinking it is better to be hung for a sheep than a lamb."
Some universities already see a risk that student numbers will fall under the new fee regime.
They may decide there is less financial risk from a fall in volume than from setting a lower price, which would be a blow to the government.
Waiving, not drowning? Government counts costs as academy aims for maximum
Ministers are desperately analysing the detail of universities' proposals on tuition-fee waivers to calculate their effect on average charges as fears intensify about the cost of the student-loan system.
This week, Leeds Metropolitan University, which two years ago was the only English institution to offer a large discount on fees under the current system, became the first post-1992 university to announce plans to charge above £8,000 from 2012-13.
The move will be a worrying sign for the government, which has based its policy of raising the fee cap to £9,000 on the assumption that the average price would be £7,500 a year.
Figures released by Labour reveal that an average just above £8,000 could cost the Treasury about £300 million a year more than planned.
The final average will be influenced by the number of students offered fee waivers under proposed access agreements, which all institutions planning to charge above £6,000 must submit to the Office for Fair Access by 19 April.
Besides Leeds Met, other institutions to declare their headline fee plans this week included Bishop Grosseteste University College Lincoln (£7,500), St Mary's University College (£8,000) and Coventry University (from £7,500 to £9,000 depending on the course).
As Times Higher Education went to press, about a sixth of all institutions had announced their plans, with most intending to set the maximum.
These include Aston University (led by Julia King, a member of the Browne Review panel), plus Birmingham, Lancaster, Reading and Warwick universities.
A Department for Business, Innovation and Skills spokesman reiterated that "no university can know for certain" what it will charge in 2012-13, given that plans were subject to access agreements being approved.
He added that fee waivers also meant that "many students will pay less than the published price and will subsequently borrow less".
• For fee announcements as they happen: www.timeshighereducation.co.uk/feescounter