New Zealand's eight universities have reluctantly accepted a deal to keep tuition fees at current levels in return for a 4.5 per cent funding increase next year.
Universities had refused to accept the deal by the initial deadline in protest at the government's plans for legislation to limit their power to set fees.
The New Zealand Vice-Chancellors' Committee opposed what it saw as an infringement on university autonomy. It was concerned that the government would have total control over the main sources of funding but would have no responsibility for meeting increased costs, particularly salary demands.
Steve Maharey, associate minister for tertiary education, delayed the deadline for accepting the fees-freeze deal. Universities, faced with the alternative of significant fee increases next year to make up the shortfall, have accepted the offer.
But the contested power remains in the Tertiary Education Reform Bill, despite the NZVCC's intensive lobbying over past weeks and opposition to the bill by the government's junior coalition partner, United Future. The government expects sufficient support from other minor parties to pass the legislation.
Mr Maharey also rejected a proposal for an annual increase in government funding to cover inflation and the rate of economic growth. But he has agreed to include a clause requiring the minister to set indicative funding rates annually and to allow public submissions on them.
It is also government policy to move to triennial funding from 2004 to provide institutions with more certainty over funding.
Dame Phyllis Guthardt, chancellor of the University of Canterbury, said universities were "most unhappy" about accepting the fees-freeze deal.
She said: "The government now controls the purse strings while requiring universities to responsibly manage their financial affairs within budget. The main losers will be staff, whose expectations in relation to an increase in salaries cannot now be met."
Otago University vice-chancellor Graeme Fogelberg said the 4.5 per cent rise translated into 3 per cent in the context of government funding and domestic student tuition fees. The university faced increased costs across the board, including salary negotiations, where the latest offer of 3 per cent had been rejected.