The Education Secretary has branded claims of financial hardship among universities as “scaremongering” amid speculation that a review will recommend a cut in tuition fees.
Damian Hinds said “hyperbolic warnings” were misrepresenting the situation facing institutions, most of which have healthy balance sheets.
The minister made the comments after concerns were raised that cutting tuition fees would harm students and even push several universities into bankruptcy.
A review of tuition fees commissioned by Theresa May is reported to be considering whether to reduce the cap to £7,500.
Alistair Jarvis, chief executive of Universities UK, said any reduction in fees must be made up in full by the Government.
Mr Hinds said: “The financial sustainability of our universities is clearly important to the staff and students of those institutions, as well as the local economies and communities they serve.
“But with the vast majority of universities in a good financial position, hyperbolic warnings from some on universities’ finances are distorting the overall picture.”
The Education Secretary said that Britain’s universities had enjoyed rising student numbers and increased tuition fee income since the financial crash, whereas most sectors had had to reduce their expenditure.
Mr Hinds added: “I do understand universities are facing some challenges, but reports of financial hardship across the entire sector is scaremongering.
“Most universities have healthy balance sheets. We’ve been seeing growth in international student admissions, with much further potential. And the number of 18-year-olds in England is soon to enter a period of sustained growth.
“I will do all I can to ensure the sector is financially stable now and in the future, but of course institutions need to act responsibly and develop sustainably.”
Mr Jarvis warned cutting fees would lead to “bigger class sizes, poorer facilities, labs and libraries, a worsening student experience, job cuts and less money to support access and retention”.
“It could damage research, reduces the number of highly-skilled employees that business needs and harm our international competitiveness,” he told FE News.
“If Theresa May’s review of post-18 education recommends a cut in tuition fees, the funding gap must be made up in full by a government teaching grant.
“A funding cut for universities would be a political choice which harms students, the economy and communities that benefit from universities.”
According to figures from Universities UK, £35.7 billion went into UK higher education institutions in 2016-17.
Less than half (46.9%) came from fees related to teaching – £16.7 billion – while government funding for teaching represented 9.1%.
Last year, Sir Michael Barber, head of the Office for Students (OfS) watchdog, warned that universities that are not financially sustainable will not be bailed out.
He said some university bosses making misjudged financial decisions believe “ultimately it will be OK because the OfS will bail them out”.
“This is wrong, the OfS will not bail out providers in financial difficulty,” he said.
Mrs May launched a review of post-18 education led by finance expert and author Philip Augar in February last year.
The review has been focusing on four key areas; ensuring education is accessible to all, the funding system, encouraging choice and competition and providing the skills the country needs.
According to the BBC, the review is expected to report back next week.
Responding to the comments from Mr Hinds, the University and College Union (UCU) said lowering the tuition fee cap without direct investment to plug the funding gap would have “serious implications for universities, but make little or no difference to the vast majority of students”.
The union pointed to modelling from London Economics which it said showed that cutting fees to £7,500 a year would reduce higher education funding by around £1.8 billion a year.
UCU acting general secretary Paul Cottrell said: “It is not scaremongering to point out the huge sums of money universities would lose if the government backs a cut in fees and does not plug the gap.
“The Prime Minister called the funding review because the current system was so politically toxic.
“However, we have seen nothing that suggests the review is looking at the sort of radical alternatives that would make life easier for students and guarantee funding for our colleges and universities.”
The UCU, in its submission to the Augar Review, has suggested reversing cuts to corporation tax to fund university tuition fees.