Vice-chancellors have expressed concern about detailed proposals for the teaching excellence framework, which could see universities forced to reduce their tuition fees if their performance falters.

The higher education White Paper, published on 16 May, confirms plans for providers taking part in the TEF to be divided into three tiers after being assessed: meets expectations, excellent, and outstanding.

Following two years of piloting, institutions that met expectations would be permitted to increase their fees at a rate equivalent to 50 per cent of inflation; while those in the top two categories would be eligible for a full inflationary rise.

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The Department for Business, Innovation and Skills estimates that these uplifts could be worth £10 billion to the sector in the first decade of the TEF’s operation.

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But the White Paper also reveals that fee caps will be based solely on institutions’ current performance in the TEF, meaning that providers will not be able to “bank” positive performance in previous years, and new or improving providers would not be disadvantaged by being unable to catch up.

If a provider’s TEF level dropped, they would be required to lower the fees they charged, including for existing students.

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Simon Gaskell, principal of Queen Mary University of London, warned that dividing universities into tiers “might inadvertently give an impression of mixed quality”.

While he said that he could “accept the logic” of forcing universities to reduce their tuition fees in a performance-based system, he said that this would be likely to add to reputational damage to the sector.

“We are dealing with a high quality system here,” said Professor Gaskell, who leads on quality issues for Universities UK. “We should be focused on making that quality even better, rather than contemplating steps which could seen as reflecting an apparent reduction in quality.”

Bill Rammell, vice-chancellor of the University of Bedfordshire, warned that such an “exclusive focus on the market” could be a “block" to the government being able to count on university support for the reforms.

“It really risks the commoditisation of higher education, where fees go up and down,” said Mr Rammell, a higher education minister under the last Labour government. “The higher education experience is one of mutual rights and experiences on the part of the university and the student and I think that kind of approach almost acts as though you are buying goods in a supermarket.”

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Sector leaders have welcomed the government’s decision to phase in the introduction of the TEF more slowly, allowing institutions that have met expectations in a recent Quality Assurance Agency review to increase their fees in line with inflation in 2017-18, and again in 2018-19 if they meet expectations in a piloting of the full TEF.

As a result, any widespread variation in fees is unlikely to emerge until September 2019.

The White Paper proposes that assessments would be made at subject level from 2019-20 onwards, and that taught postgraduate courses would be included in the TEF at that point also.

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But questions remain over whether the government’s preferred TEF metrics – student satisfaction, retention and graduate employment – are an accurate reflection of teaching quality.

The government says that it will develop a graduate employment and earnings metric based on data from tax records, and that it is considering creating an additional metric based on the proportion of an institution’s graduates who are in jobs judged as “highly skilled”.

Tom Ward, pro vice-chancellor (education) at Durham University, said that careful discussions were required to ensure that metrics drove behaviour that was in the best interest of students and did not create “perverse incentives”.

“I think having more time to build up a better understanding and wider buy-in is definitely good news,” Professor Ward said.

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chris.havergal@tesglobal.com