Students at private colleges will be given access to government loans and grants and the most popular universities will be allowed to expand under plans announced today.
In a speech at the Universities UK spring conference, David Willetts, the universities and science minister, also announced that the forthcoming White Paper on higher education would be delayed because the government needed more time to develop its proposals.
With the cap on tuition fees rising to £9,000 in 2012, ministers have been struggling to find ways to limit the number of universities setting charges near the upper limit. They have even threatened to legislate to ensure that there is differentiation in charges.
But today Mr Willetts said the government would prefer to keep down fees by allowing more competition from private providers and by loosening caps on student numbers.
“We need to keep prices under control but would rather do so by greater transparency, by freeing up student number controls and by encouraging new entrants. Greater competition is surely preferable to further regulation or funding changes,” he said.
However, the minister reiterated warnings that if average tuition fees were too high, the government would be likely to impose further cuts on the sector.
In 2010-11, universities received £4.95 billion in teaching funding from the Higher Education Funding Council for England.
Mr Willetts said that if universities charged average fees of £7,500, the Hefce teaching grant would fall to £2 billion by 2014-15 – a cut of 60 per cent.
“If the average of charges comes out higher than the £7,500 which we have used as a modelling assumption, we will have to consider the option of meeting that increased cost to the student finance budget by making offsetting reductions in the remaining Hefce grant. So your own actions further increase your risk – and none of us wants to see that happen,” Mr Willetts told vice-chancellors.
Arguing that the most powerful driver of reform was to unleash new providers, he said: “We will…allow alternative providers to access the generous system of student loans and grants, so their students will also be able to benefit from not having to pay upfront fees.”
He also announced that the government would allow organisations that did not teach to offer degrees.
“The combination of a local further education college, regional employers and an awarding body could be an important embodiment of the Big Society,” he said.
Meanwhile, freeing up student numbers would also increase competition – and the government wanted to introduce this as quickly as possible, he said.
“We would like to make rapid progress in this area, including in 2012-13. We are determined to make more progress so that the most impressive traditional and alternative providers are encouraged – rather than punished – for delivering more places.”
One option was a “core and margin” model, which would allow a proportion of student places to be reallocated.
“There are also other potential options for freeing up the controls on numbers, which we want to debate with you and through the White Paper. What are the pros and cons of universities being able to recruit additional students off quota, at no cost to public funds, and can that be done in a needs-blind, socially progressive way? What about tariff-based systems? The initial response to the model proposed in the Browne Report was not favourable, but could there be some categories of students for whom a tariff approach could work?” Mr Willetts asked.
On the delay to the White Paper, he said that the decision had been taken “in part to test proposals more thoroughly” and “in part to learn from how price-setting works this spring”.
He also announced another review of postgraduate study, an issue that received little attention in the Browne Review.
Sir Adrian Smith, director general for knowledge and innovation at the Department for Business, Innovation and Skills, has been asked to reconvene his review panel and “consider this issue in the light of the new funding environment”.