English universities could face hefty financial penalties if they over-recruit students rushing to avoid paying top-up fees, funding chiefs warned this week.
The Higher Education Funding Council for England, which unveiled more than £6 billion in allocations, told university heads that it was expecting them to "recruit responsibly in 2005-06".
But the council might take further action if individual institutions or the sector as a whole significantly over-recruit in 2005-06 and the Department for Education and Skills reduces Hefce's grant to meet the additional support costs for the extra students.
Howard Newby, Hefce chief executive, said: "We cannot touch universities'
fee income by law so we've had to be creative in thinking of disincentives to keep the sector within planning limits."
Options include deducting money from any university that takes more than the agreed number of students. Institutions would be forced to repay not only the public subsidy for teaching these students but the cost of providing maintenance grants and loans.
The council adds that if it is unable to identify individual institutions, the whole sector could be penalised.
Sir Howard said students would face increasing competition for university places this year. "Higher A-level attainment and demographic growth of 18 to 21-year-olds will increase pressures on the sector."
Hefce announced total funding of £6.332 billion, up 3.1 per cent in real terms compared with last year.
Of this, £4.004 billion is for teaching, including £282 million for widening participation and £64 million for rewarding and developing staff. The cash per student is up 0.4 per cent in real terms.
Some £86 million is for an extra 26,000 full-time students. This slightly exceeded the demographic growth, Sir Howard said.
"Participation will rise slightly up to 45.5 per cent by the end of this three-year funding round in 2008," he said. But a significant increase in student numbers would be required to reach the Government's target of 50 per cent participation in 2010.
A select number of universities will share a higher-than-average increase in research funding totalling £1.251 billion. This is a 10.8 per cent increase on last year and will see the average unit of funding for departments rated 5 and 5* in the last research assessment exercise rise by 4.6 per cent.
Sir Howard added: "As always some institutions are doing better out of this than others and, on the whole, those faring better are research-intensive universities because of the backloaded (2002) spending review."