Some of Britain's leading universities could consider going private if the Government decides to retain a cap on tuition fees – potentially pricing students out of the market.
Lord Browne's inquiry into student finance recommended lifting the cap altogether, but ministers are understood to be thinking of merely raising it from its present level of £3,290 a year to around £7,000 a year.
The Russell Group, which represents 20 of the country's leading higher education research institutions, has already said that retaining a cap would be a retrograde step.
Wendy Piatt, its director general, said: "Rowing back from Browne and reimposing a cap would be a real waste of an opportunity to allow our leading universities to provide the high-quality education that their students deserve."
The dilemma facing universities is that the cut in funding for teaching – only science, engineering, technology, maths and possibly some language teaching would be paid for by the state – puts more pressure on them to put up fees to maintain high standards of teaching.
Some institutions say that fees of £7,000 a year will not raise enough money to meet students' expectations about the quality of their education, and that they will need to charge more.
Many of the country's leading universities are set to commission studies on going private in the coming months. So far the only one to have drawn up a paper on the subject is the London School of Economics, after a board member asked for one to be prepared.
The move was greeted with horror by students and lecturers. Charlotte Gerada, general secretary of the LSE students' union, warned that such a move would "entrench elitism".
Howard Davies, the LSE's director, immediately dismissed the idea, saying that such a move would not be in the interest of students or the university.
If a university did go down the private route, it would be able to charge unlimited fees and would also be released from ministerial pressures to take in more students from disadvantaged communities.
Sally Hunt, general secretary of the University and College Union, said: "If the Browne reforms result in some of the UK's most prestigious universities breaking away to form a separate tier, that will be a disaster for this country.
"The whole landscape of higher education in this country would change. What a university is and what its purpose is would be completely different."
University insiders say lifting the cap on fees would prompt some institutions to charge as much as £12,000 a year for more popular courses.
In his report, Lord Browne argued that universities which want to charge more than £7,000 a year should be landed with an increasing levy for every extra £1,000 they charge.
But David Willetts, the Universities Secretary, is against this as he believes it could lead some universities to charge more than they had originally intended to maximise the income they retain from student fees.
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