Universities get record fines for recruiting too many students

Institutions set for £90m penalties as student applicants rush to avoid £9,000 fees next year

Universities have suffered record fines for over-recruiting students last September, as applicants rushed to avoid tuition fees of up to £9,000 a year.

Between 20 and 25 universities have been fined by the Government's Higher Education Funding Council for England (Hefce). Next year the penalty for every unauthorised extra student will triple to around £10,000 a year, reflecting the fees rise.

One estimate suggests that universities recruited 25,000 students above their target numbers – which could lead to fines totalling more than £90m.

Yesterday it emerged that London Metropolitan University had been fined £5.9m for recruiting 1,550 students above the Government's target figure. Last year, the total fines for over-recruitment across the country amounted to only £8.5m.

Some universities deliberately over-recruited this year despite a clear warning from Universities Secretary David Willetts that they would be fined £3,700 for every student above the target figure.

The universities believed that the financial penalty would gradually be lessened by students dropping out, and that over-recruitment would make it easier to balance the books once fees rise and the number of applicants falls.

Professor Malcolm Gillies, vice-chancellor of London Met, argued in an email to staff that the impact of the fine was not as severe as it first appeared. He pointed out that the university received £3,000 from the Government to cover each extra student's fees, meaning that the hefty fine was reduced to just £700,000.

However, he acknowledged that the university's planning assumptions had been "flawed and our decision-making sometimes based on incomplete information". Part of the problem was the recruitment of too many students through clearing – a problem it shared with other universities.

"In consequence of the volatility of admissions for 2011-12 during clearing many English universities over-recruited," he added. London Met exceeded its target of 4,873 by 1,550.

Ministers have warned Hefce to crack down even harder on over-recruitment this year. In a letter to its chairman, Tim Melville-Ross, Mr Willetts said: "With the progressive implementation of our funding reforms, the costs of over-recruitment rise, significantly. As a result, the grant adjustments which we will authorise you to make for over-recruitment will increase accordingly."

He added that the new level of fines would include "avoiding unanticipated pressures on government budgets, removing any financial incentives for institutions to recruit above their permitted level, recognising the different fees charged by institutions and recouping an element to cover the cost of maintenance support."

Thus an institution charging £9,000 for all courses is likely to face a fine of around £10,000 per student next year, while one keeping fees below £7,500 would face a penalty of around £8,000.

The rigid controls on student numbers imposed by élite institutions such as Oxford and Cambridge mean they are never likely to face a fine. It is the newer universities – including many of the former polytechnics – and middle-ranking institutions that are likely to bear the brunt.

Hefce refused to comment on the penalties. Last September saw an unprecedented number of applications for university places as would-be students sought to beat the fees rise. Around 170,000 did not obtain a university place.