Michael Brown: Institutions cannot afford to over-recruit despite the demand

This month tens of thousands of young people are expected to miss out on a university place for next year. Yet, despite this, we will see thousands of unfilled undergraduate places in English universities come the autumn. Why are we in this extraordinary situation at a time of peak demand? The answer is the system of rigid controls and penalties that the universities face.

You might think that, if central funding for higher education is based largely on per capita payments for undergraduates, more students would be recruited and universities' income would increase. But this is not the case.

The Treasury has decided, not unreasonably, that it will not bear the additional costs of students recruited by universities over and above the numbers that it had committed itself to fund. In recent years this has meant that if universities under-recruit against their targets they lose tuition fee income, while if they over-recruit they are fined.

The worst situation for universities is over-recruitment, because they are fined £3,700 per student by the Higher Education Funding Council for England and allocated no resources for educating that student for the next three years. This money has to come from the universities' own resources – and £1bn has already been removed from universities' budgets.

Universities will therefore be ultra-cautious about admitting students. It is surprisingly easy to admit too many students in such a system, as was illustrated last year when several universities accidentally over-recruited against targets and were fined up to £4m as a consequence.

So what is likely to happen this year? First, universities will only accept students holding firm offers if they meet their A-level grades as exactly specified.

They will also only take applicants holding insurance offers if they too meet their grades. This will inevitably produce fewer students than places initially. Universities will try to fill any places still available through the clearing process.

The problem is that clearing is a rather casual system, though it operates swiftly. Offers are made and firmly accepted, but some students then either don't confirm their acceptance or fail to turn up for enrolment.

In normal times, and as a result of this student behaviour, experienced university admissions tutors offer more places to candidates than actually exist, just as airlines overbook to be sure of filling their planes. This year, however, they won't be able to do that, because the risks are too great.

So, the message to students who want to go to university in 2010 is that clearing will be used by universities to meet their target numbers, but it will be more competitive than ever because demand for places will far outstrip their availability.

At Liverpool John Moores University we will certainly be using clearing to fill our vacancies as precisely as we can with the highly capable students who we know will be available.

Students going into clearing should move swiftly and decisively as the places will go very quickly to the best-qualified candidates.

The message is that the control systems put in place by the Government will certainly deliver the required result to the Treasury in restricting overall student numbers. However, ministers should be prepared for universities, overall, to under-recruit students significantly in a year of huge demand.

Universities will be wary of incurring financial penalties while using an admissions system that is imprecise, and they will not be prepared to take the normal calculated risks that have previously been used to reach their targets.

This risk aversion will produce a significant undershoot.

Professor Michael Brown is the vice-chancellor of Liverpool John Moores University