Universities could now face fines of £500,000 as regulator given more powers

Universities could face fines of up to £500,000 after the regulator has its powers strengthened, the government has warned.

The Office for Students will now be able to impose financial penalties of up to two per cent of a university’s income, or half a million, for grade inflation, high vice chancellor pay and rising unconditional offers.

Universities that fail to admit enough poor students could be forced to lower their fees under the plans.

Jo Johnson, the new universities minister and brother of the new prime minister, has urged the higher education regulator to use its “full range of powers” – which come into effect today – to ensure students “receive value for money.”

It comes after figures revealed that the proportion of university applicants being offered a place on a course regardless of grades has risen to nearly two in five despite a government crackdown.

Ministers have also criticised universities for handing out a rising number of first class degrees.

In his first comments since taking up the ministerial post under his brother, Mr Johnson said: “Our vision for the Office for Students (OfS) was for it to be a regulator with teeth and it has already made a significant impact on the sector. Now I expect it to use its full range of powers to ensure students up and down the country are at the heart of the system and receive value for money from our universities.

“For the thousands of young people collecting their A-level results this month and starting university in September, they can be confident that the OfS will be a champion for students which is able to take strong action. Our universities are world-leading and this reputation must be protected.”

Universities found to be damaging students’ interests also face extra conditions on their registration, or – in the most serious cases – the removal of the right to award degrees.

From today, the regulator also has the power to reject a university’s plan for widening access among disadvantaged groups if they do not believe it goes far enough.

Sir Michael Barber, chair of the OfS, said: “We are now able to impose substantial financial penalties where universities are evidently not acting in the best interests of students and taxpayers short, medium and long-term.

“We have been clear from the outset that we would much prefer to resolve problems such as grade inflation or unconditional offers without using our formal powers; but also that we will not hesitate to use them if necessary. Our world-class higher education system is immensely important to our economy and society and we will do whatever it takes to ensure its success in the future.”

A Universities UK spokesperson said: "Universities in the UK have a world-leading reputation for quality and we are committed to working with the OfS to ensure effective regulation which allows universities to continue to deliver the levels of teaching, research and overall experience that students have rightly come to expect.”