Universities may form top-up fee 'cartel'

Far-reaching powers to stop universities operating as a "cartel" by charging the maximum-permitted student tuition fees are being considered by the Government.

University vice-chancellors have predicted that most institutions will raise annual student fees to the maximum level of £3,000 proposed in a government White Paper.

Charles Clarke, the Secretary of State for Education, told MPs yesterday that ministers would want to consider action to stop them coming to any sort of agreement to introduce a common £3,000 fee. One way to do that would be to refer their decision to the Office for Fair Trading or similar body set up to ensure competition.

But he added: "I don't think that everybody is going to simply put up their fees to £3,000. I think there is a certain amount of sabre-rattling going on amongst universities."

He also rejected demands from vice-chancellors to raise the £3,000 cap on tuition fees. Earlier this week, Sir Richard Sykes, vice-chancellor of Imperial College, London, called for it to be increased to £5,000.

Mr Clarke gave a pledge to the Commons select committee on education that the next Labour manifesto would commit a new Government to pegging the ceiling to "£3,000 in real terms" over the lifetime of the next Parliament, allowing only inflationary rises until 2010-11.

"If you had a fee of £5,000, you would certainly get more variation in fees than with £3,000," Mr Clarke said. "However, I don't think that would be acceptable to people who are concerned about variable fees."

Sir Howard Newby, chief executive of the Higher Education Funding Council for England, predicts that "two thirds to three quarters" of universities would go for the full fees option.

Mr Clarke said he hoped that universities would not see the level of fee they charged as an indication of the merit of the course they were offering. He also predicted that some universities would take advantage of the Government's recommendation that they be allowed to cut the present all-round tuition fee of £1,250 – and reduce it to zero for some courses. He disclosed for the first time that the Russell Group of the older universities had wanted the Government to introduce a ceiling of at least £4,000 a year from 2006. Mr Clarke also indicated that student loans could be increased.

He said his officials would take seriously the findings of a student spending survey that the Department for Education and Skills was carrying out with the National Union of Students. At present, students can apply for a loan worth up to £3,950 a year outside London and will be eligible next year for reintroduced means-tested grants of £1,000 a year.

"Most people believe the maintenance loan is very tight, let's put it like that," Mr Clarke said. "I hope we end up in a position where everybody can get enough money on which to live. That's the way it should be."

He said the Government's decision not to increase the interest rate on student debt – repayments rise in line with inflation – would reinforce the policy that student loans were not viewed in the same way as bank loans or mortgages.