Cable warns that Tories could raise tuition fees 'significantly'

The business secretary also said that calls from the universities of Oxford and Cambridge to raise fees to around £15,000 are something the next government “will have to face”.

Ranging widely across higher education topics during his appearance at a fringe meeting at the Liberal Democrat conference in Glasgow today, Mr Cable said that there were three universities “on the brink of bankruptcy” when the coalition came to power in 2010 and that some UK higher education institutions are “pretty poor”.

Asked about concerns over the rising estimates of the amount of money the government must write off on the new student loans system, he replied: “I don’t worry about it, because in a sense these losses crystallise in 30 to 40 years’ time when I’ll be well over 100.”

Mr Cable started his appearance at the fringe meeting, co-hosted by the Social Market Foundation thinktank and Sutton Trust, by looking back to 2010 and the budget situation in the Department for Business, Innovation and Skills.

He said that things would have been worse for universities if, rather than raising fees, the coalition had “just applied cuts across the board, which my predecessor had already penned in. I’ve got a piece of paper from Peter Mandelson’s team indicating that BIS was going to take 25 per cent cuts. If you’d just taken the status quo and cut 25 per cent off the teaching grant and another 25 per cent off student finance…that’s the world you could be living in now.”

Mr Cable continued that “when David Willetts [the former universities and science minister] and I came in we had three universities on the brink of bankruptcy and a sector that was clearly not sustainable in its then form”.

The Browne review was “recommending fees of up to £15,000” at the time the coalition came to power, he added.

Asked whether he would ever countenance another rise in fees, Mr Cable said: “Well I’d be very reluctant, given what we’ve been through. The people who are asking for this, it’s really Oxbridge.

“Because providing the full Oxbridge package with one-to-one tutorials is quite an expensive form of education. They would say they need £15,000 a year to provide it. We would be reluctant to operate that system, but it is a choice the next government will have to face.”

Discussing possible Tory policy on universities, Mr Cable said that “if the Osborne policy were to prevail” in terms of the wider public finances after 2015, “which is fairly drastic cuts combined with no taxes, you would see, without doubt…that there would be a significant increase in fees, a reduction in the [student loan repayment] threshold, and the thing which would save money would be really taking a lot of money out of student support: effectively by stopping grants and turning them to loans, something of that kind.

“That’s how they would probably save money in the university sector. And it would be quite painful. I think we should begin to point that out a bit more explicitly.”

The Labour Party is currently considering whether or not to announce a policy to lower fees to £6,000, a policy believed to be favoured by Ed Miliband, the party leader, but viewed sceptically by Ed Balls, the shadow chancellor.

Mr Cable said: “Miliband does have the problem, as he knows perfectly well, that if they offer a reduction in headline fees it costs them £2 billion. They’ve no idea how on earth they would provide it. Probably they wouldn’t and they would let universities take the hit. It’s potentially a very damaging policy.

“He [Mr Miliband] may not persist with it.”

Critics of the coalition’s £9,000 fee system have pointed to the government’s rising estimate of the portion of loans that will never be repaid by graduates – the Resource Accounting and Budgeting charge – which is now at 45 per cent.

The total value of all outstanding student loans is projected to rise to £330 billion by the 2040s, according to government figures.

He said the rising RAB charge was down to the wider economic situation and the fact that graduate salaries have not risen as predicted, leading to lower predicted graduate repayments.

But he said: “There’s a lot of things I lie awake at night worrying about. This is not one of them. We really shouldn’t get exercised about it.”

The business secretary also said that “what we have needed has been legislation to establish fixed institutions which embed quality. We haven’t had a higher education bill…There is an issue about quality.”

He said: “We have world-class universities – on some rankings the best in the world. And some are pretty poor.”

john.morgan@tesglobal.com