Universities should not assume they can all charge high fees and must be careful not to ¡°underestimate¡± the competition they will face from new providers such as further education colleges, David Willetts has said.

Speaking in London on 25 November at a debate on higher education funding hosted by Universities UK, the universities and science minister said he had met a ¡°stream¡± of new providers that claim they can offer a viable alternative to universities.

He added that the competitive pressure they would bring to bear would force institutions to ¡°think carefully¡± about their charges.

¡°People should not just assume that they can [charge] whatever they like, heading north of ?6,000 towards ?9,000,¡± he said.

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¡°First, there is a very serious requirement indeed on widening access. Second, universities should not underestimate the competitive challenge they will face. I have a stream of new providers coming to see me that believe that with the way they can run higher education, there is now the potential to come in and offer an alternative.¡±

He added: ¡°It is very important that universities get a grip on their costs. It is not just pressure from ministers, it is also competitive pressure, not least from further education colleges.¡±

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Mr Willetts also said there would be ¡°no going back¡± to current levels of teaching grant if the reforms as proposed by the government are implemented.

However, John Denham, Labour shadow business secretary, said the coalition was taking a huge ¡°ideological gamble¡± by shifting the funding of higher education to students and government-backed loans.

¡°Not a shred of evidence has been produced that creating a student market will drive change in the right direction. It is a big gamble with one of the best university systems in the world,¡± he said.

Mr Denham added that the government¡¯s plans for the threshold to trigger loan repayments would mean that graduates paid the minimum wage would be forced to make contributions by 2022.

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Earlier at the UUK event, Mr Willetts announced that funding for the widening-participation programme Aimhigher will cease next year.

He also revealed that it would be difficult for the coalition to continue ¡°in its current form¡± the matched-funding scheme for alumni donations that was introduced by the previous government.

simon.baker@tsleducation.com