British universities have been urged not to engage in the same kind of "arms race" that has caused massive increases in the cost of higher education in the US without improving the country's graduation rate.

The warning follows the publication of statistics by the Organisation for Economic Cooperation and Development, which suggest that higher tuition fees in the US may be pricing out sections of the population.

Despite the US system being by far the most expensive per student, the figures published this week show that it has been overtaken by more than a dozen countries over the past 15 years in terms of the percentage of the population completing degrees.

Although a lack of student support is thought to be one factor in the decline, some have pointed to the increasing sums of money being spent - especially at elite universities - on extras such as sports facilities and merit-based scholarships that bolster institutions' prestige but do not widen participation.

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The trend may spell a warning to universities in England as they embark on a new system of increased competition for students, especially for applicants with A-level grades of AAB and above.

It has already been suggested that some institutions may try to "buy" such students through scholarships regardless of financial need.

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According to the OECD's Education at a Glance report, spending per higher education student in the US, excluding research, was $26,908 in 2008, significantly ahead of its nearest rivals, including the UK, which spent $8,399.

However, graduation rates in the US lagged behind most other industrialised nations at 37 per cent.

Arms race trajectory

Andreas Schleicher, head of the Indicators and Analysis Division at the OECD's Directorate for Education, said the US trend could be jointly attributed to "quite exorbitant" fees and the restricted supply of applicants due to poor school performance and difficulties in accessing affordable loans.

He said that although the UK should be able to guard against the final problem through its "well-developed" system of government-backed loans, the US trend was noteworthy "because that is a trajectory that the UK seems to be following in some respects closely".

Roger Brown, professor of higher education policy at Liverpool Hope University, said the US figures provided evidence that the decline in public investment in state universities and rising private fees were having a detrimental effect.

"The basic issue that the OECD figures demonstrate is that if you have too much market competition you get reduced value for money," he said.

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Bahram Bekhradnia, director of the Higher Education Policy Institute, said the US had been putting more money into its higher education system for some time. If numbers were stagnant, this must mean more funding per student.

"More expenditure on higher education is good, but we must be careful not to create the sort of arms race here as in the US, where they are spending increasing amounts per student, sometimes on items of doubtful benefit, to gain competitive advantage," he said.

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Meanwhile, Libby Hackett, director of the University Alliance group, said the UK sector would face future problems owing to the limits the government was placing on participation in order to keep a lid on student-support costs.

"At some point we are going to have to come back to this quandary," she said.

UK spending falls, China rises

Elsewhere, the OECD report reveals that investment in higher education in the UK as a share of national wealth fell from 1.3 per cent to 1.2 per cent, below the OECD average of 1.5 per cent.

This was due to a 0.1 percentage-point decline in public expenditure from 2007 to 2008.

The report also provides evidence of China's increasing importance to global higher education.

Mr Schleicher presented figures showing that the country took a 36.6 per cent share of new entrants to global tertiary education in 2009, well ahead of the US, its nearest rival (12.9 per cent).

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simon.baker@tsleducation.com.