UK: Curb fee hikes or lose places, Cable warns

Universities that seek to charge the highest possible fees and can't fill places as a result will risk having those places withdrawn permanently, UK Business Secretary Vince Cable warned on Wednesday. Instead they should find ways to offer good value for money, he told a meeting of vice-chancellors and principles.

He stressed that a central purpose of proposed higher education reforms was to make universities more responsive to students.

"The biggest mistake a university could make is to underestimate its consumers. Students will search for value for money and compare the offers of different universities," Cable said.

"Under the new principle whereby funding follows student choices, some institutions could very well find themselves in trouble if students can't see value. That trouble would only intensify as those institutions who prove themselves capable of attracting students and keen to expand their provision are given opportunities to do so."

Speaking to vice-chancellors and principles at the Higher Education Funding Council for England 2011 annual conference, held at Aston University in Birmingham, Cable said attempts by universities to pitch their charges near the top of the allowed range of £6,000 to £9,000 (US$9,800 to $14,700) was "economically irrational on a collective basis - and it's very likely irrational in individual cases too".

But responding to the speech Nicola Dandridge, Chief Executive of Universities UK, said: "Universities are acutely aware of the need to be efficient and universities are already doing a great deal to become as cost effective as possible, as UUK's upcoming report on efficiency will testify.

"We are happy to provide the government with proof of how universities are providing the best value for money."

In Birmingham, Cable urged universities to think of the signals going out to potential students and their families.

The reforms to higher education funding - the full details of which have yet to be published - were designed to give applicants all the information they require to decide which university to go to, he said, and that included the ability to assess value for money.

"I expect to see, in a university sector faced with the onset of more competition and more demanding students, a ferment of creative thinking on how to redesign courses structures and manage more change among staff so as to promote high quality but lower-cost teaching," he said. He conceded that there had been little evidence of such thinking so far.

In a detailed defence of government plans, he accused political opponents of "wilful exaggeration".

Contrary to claims by the leader of the Opposition that 80% of universities were planning to charge the maximum £9,000 allowed, current estimates suggested 22 out of 46 universities were aiming to do so, he said. And contrary to recent political claims, there was no hole in the budget, much less the claimed £1 billion hole, he added.

The government envisaged an average fee of £7,500 because it would deliver sufficient resources for a high quality student experience, protect the financial interests of graduates and taxpayers, and would mean the government did not have to reduce university places.

This was based on the calculation set out in Lord Browne's review, that for most courses institutions would need around £7,000 per student, or £6,000 once expected cost savings were made.

"Our view on the levels at which universities can deliver high quality teaching doesn't tally with some apparent bunching of proposed charges at the higher end of the scale. I can only hope that prospective students are not deterred from higher education by the willful exaggeration of opposition politicians for whom party point-scoring is the dominant concern."

But Dandridge said universities were in a difficult position. "We do not want to see student numbers drop but we must have adequate funding to develop new and innovative teaching provision. This is in response to student requirements and demands."

She said universities had to consider the wide-ranging cuts to the higher education budget when setting fees, while also ensuring a high quality student experience for the future.

"Those wishing to charge over £6,000 will have to show how they intend to widen participation. Final amounts are still subject to approval by the Office for Fair Access and we welcome their input in this process," she said.

Gareth Thomas, shadow minister for universities, said if £9,000 proved the going rate for fees, as predicted by the respected think-tank the Higher Education Policy Institute, the government would have a hole in its budget, since it only budgeted for fees of £7,500 and has to foot the fees bill until students repay loans.

"If the institutions go higher than this, students are likely to struggle even more to pay back their loans, and in turn more of these loans will have to be written off."

The cost of the write-off would have to be found elsewhere. As a result Cable faced increasing skepticism over whether the current funding settlement for universities and student support would stay in place, Thomas said.

A survey of 111 English universities by the BBC suggests that the true figure lies between the two. Fifty-four universities responded, of which 27 said they would charge £9,000 for all their courses. About two thirds said they would charge the top rate for at least some courses.

Of the 10 prestigious Russell Group universities that took part, nine said they would charge £9,000 for all courses. The group has 15 member universities in England. Institutions that responded from the 1994 Group, which represents other leading research universities, are also largely intending to charge £9,000 across the board.

The government based its calculations on what the new system would cost the state, on an estimate that the average fee for a university course would be £7,500 a year. The average fee for 45 universities that were able to give the BBC a clear figure was £8,536.

To address concern that people from low-income households with no experience of higher education might be put off by the thought of student-related debt, the new system will include higher maintenance grants, a new National Scholarship Programme and more fee waivers. According to Cable, there is also greater employer willingness to help pay tuition costs incurred by new recruits.

The student loans are being made on concessionary terms, allowing for non-repayment when the borrower's income falls beneath £21,000.