SOARING tuition fees are set to create a massive black hole in public finances and could put some universities at risk of financial collapse, a report warns today.
MPs have called for contingency plans to be created to support students in case a university suffers an “unexpected failure” under a new market-based system.
From next year, universities will be hit by major funding cuts of almost £3bn and will become more dependent on income through tuition fees which will rise to £9,000 a year.
A report by the influential Public Accounts Committee says that the Government’s failure to predict how many universities would charge top-level fees from next year is leaving the higher education sector facing a shortfall of hundreds of millions of pounds which could result in student places being cut.
The warnings come as university professors were urged to hold votes of no confidence in David Willetts today over the major uncertainty the sector faces.
Oxford University dons are preparing to debate a no-confidence vote on the universities Minister this afternoon and the University and College Union (UCU) is calling on its members across universities in England to follow suit.
UCU general secretary Sally Hunt said: “The Government has lost the plot when it comes to higher education and unless they pause, like they did with the NHS, they will do lasting damage to the sector. It is clear they have got their sums completely wrong and that their entire funding model is in disarray. By introducing a market and cutting institutions’ budgets, the Government is at risk of gambling away the future of our universities and our children’s education.”
Tuition fees are set to increase from £3,375 to between £6,000 and £9,000 a year from 2012, while state funding for university teaching budgets is being cut by 80 per cent – meaning some institutions may receive no teaching grants at all.
Under the new system, the up-front cost of the fee is paid for by the Government as a loan with graduates starting to pay back their debt once they earn more than £21,000.
Ministers had expected universities to charge an average of £7,500 a year. However the majority of institutions, including four in Yorkshire: Bradford, Hull, Leeds and Sheffield, plan to charge £9,000.
The hard-hitting report said by “significantly” underestimating the number of universities planning to charge maximum fees, Ministers had created a substantial funding gap.
It also calls for a new system to be created to monitor universities’ finances as they faced increasing risks. MPs warn that higher fees could lead to falling numbers of degree and post-degree students and that demand from international students could also drop.
The report says: “A market-based environment is designed to provide opportunities for existing institutions to expand and for new providers to enter the market.
“At the same time some institutions may shrink and possibly close or even fail.”
Public Accounts Committee chairman Labour’s Margaret Hodge said the universities’ regulatory body, the Higher Education Funding Council for England (HEFCE), would need beefed-up powers once higher tuition fees were introduced and its role in awarding cash to institutions was cut back.
The report calls for Ministers to give potential students more information on paying for higher education at universities so they can choose the course and destination which best suits them. MPs also want HEFCE to announce details of any universities at financial risk immediately rather than wait three years as it does currently.