Universities must take action to reduce student dropout rates, which have not changed for five years despite the investment of £800 million to tackle the problem.
A report by the Public Accounts Committee published this week says there has been no decrease in the proportion of students who do not complete their course at their original institution in England since 2002. The figure remains at 22 per cent.
The report says retention-improvement schemes have had "little overall effect" despite £800 million being spent on the problem. The report urges the Higher Education Funding Council for England to "systematically evaluate" the worth and impact of such initiatives.
Russell Group universities have the best retention rates for full-time first-year students. The 12 worst-performing institutions have continuation rates of below 87 per cent - this relates to the proportion of students continuing from year one to two in the same institution.
The report suggests that universities should adopt market-research techniques such as "customer segmentation" to tailor teaching and support, including flexible lecture timetables, to a changing student population.
Hefce is instructed to agree specific plans with poorly performing institutions, and the prospect of financial penalties is raised with the warning that universities may not mask low retention by recruiting more students to maintain numbers.
The report identifies a need for public data on part-timers. It also notes the lower-than-average continuation rate in subjects such as maths, computing and engineering, which it says may be improved through outreach links with schools.
Bolton and Chester are among the worst performing, according to data for 2004-05.