Laws of supply and demand

Universities are now having to decide what to charge in top-up fees and what to give back in bursaries. Lucy Hodges looks at how institutions are planning to respond to the new marketplace in higher education

Now that the top-up fees Bill has survived its second reading, albeit by a whisker, universities are getting down to the serious business of deciding whether to charge fees of up to £3,000. Many were putting off the decision until they knew the legislation had legs.

Vice-chancellors are surprised that the Labour rebels were so offended by the notion of a market in higher education, because there has always been a market in university places. Students have always had a choice of where to go; some universities have been more highly rated than others. A flat-rate fee has been in place since 1998, overseas students have been charged more since the Thatcher years, postgraduate fees are unregulated and the price of a Masters in Business Administration varies from less than £10,000 to more than £30,000. So the principle of charging, and of charging variable amounts, is already with us.

"You can't prevent the market," says Professor Bob Boucher, the vice-chancellor of Sheffield University. "At the moment we charge home students whose parents can afford it a flat rate of £1,025, but there's nothing to stop us giving back sums of money in bursaries and so on. That creates a market. You can call it a Newton bursary and give it for a subject where students are in short supply, but it's still a market."

Vice-chancellors also make the point that universities are in an international market for staff. To stay competitive, they have to recruit the best staff from around the world. Professors do not come cheap. To get a good professor in a subject such as medicine, vice-chancellors have to pay a salary of at least £100,000, and they may have to come up with laboratory facilities of £500,000 as well. That is why they need extra funds.

Sheffield University intends to charge £3,000 for every subject. "Our views are still taking shape," says Professor Boucher. "The kind of thing we are looking at is a mixture of cash bursaries for poor students and residential bursaries that would meet accommodation costs. Then we might offer things in kind, such as laptops or tokens for textbooks."

Sussex is another university that will be making up its mind in the next four months. So will Brunel in west London. Its vice-chancellor, Professor Steven Schwartz, who is heading a national inquiry into university admissions, says Brunel probably will charge top-up fees. "We will probably have an array of bursaries rather than discount the fees," he says.

But it is not only the universities that are intending to charge a top-up. Colleges of higher education, which offer degrees but are not universities, will do so too. Professor David Green, the principal of University College, Worcester, says his institution will charge extra for some, but not all, courses, depending on their popularity. "We will charge for courses such as sports science, but in others we may charge less than the current fee," he says. "For instance, we find it difficult to recruit students in geography, so we may try to attract them by discounting the fees."

An Independent survey last month showed that 34 of the 89 English universities were planning to charge the full £3,000 for all courses, with 12 saying they would charge for some courses. A few of those charging the full whack have also announced generous bursaries. The universities of Cambridge and Exeter and Imperial College, London have said they would offer bursaries of £4,000 a year to disadvantaged students. That is on top of the £2,700 being given to these students by the Government in the shape of a grant and fee waiver. It is understood that other universities are also considering similar sums.

The reason behind Exeter's decision to offer a bursary of up to £4,000 is that it is known as a "green welly", or socially elite, university. It attracts well-heeled young applicants from the Home Counties and does relatively badly on the access league table, having only 13 per cent of students from the lower socio-economic groups, compared with the benchmark of 19 per cent. So, regardless of top-up fees, it has been wanting to do something to widen the participation of poorer sections of the population, according to Professor Steve Smith, its vice-chancellor.

Exeter is proposing to put £4.5m into widening participation, with the help of the income from top-up fees. One-third of that will go into trying to raise the aspirations of sixth-formers generally. The remaining £3m will go into bursaries for 1,400 disadvantaged students. "The key requirement for us is that we want to widen participation, so our number one aim is to get more working-class students into institutions like ours," Smith says. "With the Bill we can do it. This isn't spin talking. It will help us to do something that this institution needs to do."

Another sign of the developing market in higher education is last week's news that Royal Holloway, part of the University of London, is to give students bursaries for Masters degrees. It has announced that it will offer up to 150 alumni scholarships of up to £3,010 each once top-up fees are introduced in 2009. "We recognise the burden of debt that students will have at their time of graduation, and are therefore considering deferred scholarships to allow our most able students to take a one-year course to further their studies and employment prospects," says Professor Stephen Hill, the college's principal. "We believe it is important to address the problems that undergraduate debt will create for postgraduate education at the end of the decade." The scholarships will go to students with a 2.1 degree or above.

Royal Holloway is another university that has not yet decided on top-up fees for undergraduates, though it is seriously considering charging £3,000 for all courses. It is also thinking about scholarships to help disadvantaged students along the lines of those offered by Cambridge, Exeter and Imperial. At the same time, it is sympathetic to the plight of students whose parents earn slightly over the threshold preventing them from qualifying for the maximum level of public support. So it may come up with bursaries for this group as well.

The move shows how important it is for a research-intensive university such as Royal Holloway to maintain its position in the marketplace. The university claims that its science faculty was the only one in the United Kingdom where all departments scored 5 and 5-star, the top grades, in the research assessment exercise last time round. To maintain its standing, it wants to ensure that the best brains of the next generation are staying on at their Alma Mater and not going elsewhere. Bursaries of £3,100 should pay for the tuition of most Masters degrees. The current fee is £2,870 for a Masters at Royal Holloway, except for one or two subjects that charge more.

l.hodges@independent.co.uk