Will £9,000 become the going rate for a degree?

The strength of student demand is likely to affect how universities set their fees

One of the big questions from the proposed increase in fees is whether there will now be a genuine market in university fees in England or whether the great majority will simply go straight to the maximum of £9,000 a year.

The government wants a more diverse university system and hopes that almost tripling the current cap will achieve a real range of fees charged.

But that may not happen. Certainly the precedents suggest otherwise.

When the Labour government brought in the so-called "top-up" fees in 2006 - also tripling the fees cap from about £1,000 to £3,000 a year - many in authority predicted this would create a market in fees.

'Exceptional circumstances'

But it did not. The handful of universities that set "cut-price" fees soon regretted their decisions and the cap became the norm.

In theory there is more potential for variety with a £9,000 limit, and Universities Minister David Willetts did emphasise in his Commons statement that the £9,000 limit should apply in "exceptional circumstances".

However that looks like a triumph of hope over experience and in reality the scope for variation in fees appears to be very limited.

Pam Tatlow, chief executive of the Million+ think tank, says there "will be no race to the bottom" on fees.

She says the reality of the funding cuts to university teaching grants is "so rapid and so sharp" that universities will be left with little option but to charge very close to, or even, the limit.

Indeed Lord Browne's review made it quite clear that it would take a fee of at least £7,000 for universities just to "maintain investment at current levels", assuming that government funding would be cut.

That assumption proved to be correct when, shortly after Browne published his review, the Spending Review sliced the non-research budget for universities by 40% or £2.9bn by 2014-15, effectively removing funding for teaching in most subjects.

Rising demand

Bahram Bekhradnia, from the Higher Education Policy Institute, believes there could be a short period when there will be an element of a market in fees, as some universities will still find it "very hard to charge £9,000 for some of their humanities courses".

However he also believes that "over time £9,000 will become the going rate".

For him, the key is whether or not the Treasury will lift the current limit on student recruitment.

He argues that, after a one-off dip in applications in 2012, student demand will remain strong as young people continue to see "the penalty of not being a graduate" in the employment market.

This combination of rising demand for places and a cap on expansion will, he believes, mean that even less prestigious universities will be able to charge the maximum fee and students will simply have to pay it if they want a place.

For universities at the top end - Oxford, Cambridge and others in the Russell Group - the question is slightly different.

They will go to the £9,000 limit for most courses, but will they regard that as enough or will they go private in order to charge more?

Opinion is divided on whether leading universities were bluffing with their talk of going private if the fee cap was limited to £7,000, as the Business Secretary, Vince Cable, had initially suggested.

But at £9,000 it looks much less likely that any university will take the risk of giving up all state funding for the freedom to charge what they like.

Overall, the deal announced by the government looks like a compromise that will not fully satisfy anyone.

On the one hand, the newer universities are angry that they are being forced to fund courses entirely from fees.

They see this as the abandonment of the key principle of state funding for teaching.

They believe the withdrawal of funding for subjects other than science, technology, engineering and maths amounts to the "privatisation" of university teaching.

On the other hand, the elite universities believe that the funding cuts mean that, even when they charge fees of £9,000, they will still not be able to compete with leading universities in the USA.

Private universities 'bonanza'?

Not everyone agrees with that, however, as while private universities like Harvard and Yale charge very high tuition fees to non-scholarship students, the best public universities in the USA charge considerably less than £9,000 for in-state undergraduates.

There will be other implications of today's announcement. Some experts, like Bahram Bekhradnia, think this could be a bonanza for private universities as some of them can afford to charge less than £7,000 for their courses.

They could see a big rise in applications, particularly if all students at private universities are eligible for student loans.

Overall, then, it looks as likely that future students could well, before too long, end up paying very close to £9,000 for most courses at most public universities in England - with ramifications for the rest of the UK.

Mike Baker is a freelance journalist specialising in education issues.