Universities must improve the experience they offer students and make a more explicit contribution to the economy if they are to charge higher fees, the Government suggested yesterday.

Students should be entitled to full details about the quality of teaching, time with tutors, academic support, and the work expected of them.

Vice-chancellors would be given responsibility for filling skills gaps in the economy, particularly in science and technology, collaborating with businesses on more practical research and focusing on “employability”, under a ten-year plan announced by Lord Mandelson, the Business Secretary, whose remit includes higher education.

This month he will initiate a review that is expected to lead to the lifting of the cap on variable tuition fees, which have risen only in line with inflation since they were set at £3,000 a year in 2004. Many vice-chancellors want the upper limit to be £5,000 to £7,000.

Lord Mandelson is still negotiating with David Willetts, the Conservatives’ spokesman on universities, over a choice of chairman and precise terms for the review, which would report after the election.

But the Labour peer said that public spending on higher education faced “constraints”, leaving business and students to make a higher contribution, supplemented by universities seeking philanthropic support and more earnings from overseas students.

Under his proposals students would be offered more information on what they receive if fees rise in 2011. Details would include past graduates’ salaries and drop-out rates. The standard of teaching is also to be subjected to greater scrutiny. The Quality Assurance Agency, the standards watchdog for higher education, is placing greater emphasis on collating data on the calibre of lecturers and tutors, and will ensure that complaints are investigated.

Taxpayer funding of research will be concentrated on fewer universities that can demonstrate world-class capability. The success of a faculty’s research programmes in having an impact “on the economy and society” will be taken into account. Similarly, funds will be diverted to institutions and courses that produce graduates with “strategic skills”, notably in science, technology, engineering and maths.

Universities also face renewed demands to admit more students from poor or unconventional backgrounds. The Business Secretary accused the most selective institutions of achieving “modest” increases in this area. He has commissioned a review of access programmes, to be headed by Sir Martin Harris, the head of the Office of Fair Access, which monitors admissions. This will consider whether the focus on offering bursaries to poor students should be replaced. Government sources said that Sir Martin would concentrate on the 16 English universities in the Russell Group of research-intensive institutions, which includes Oxford, Cambridge, the London School of Economics and University College London.

When offering places, universities will be encouraged to place greater emphasis on a candidate’s potential rather than A-level results and take into account factors such as whether applicants have problems in their personal life or are the first in their family to want to go to university.

The Government’s aim that half of those aged 18 to 30 should enter higher education will remain, even though only 43 per cent currently do so. However, its terms will be broadened, with an increasing emphasis on those studying part-time for work-based, shorter foundation degrees or studying at home and for higher education level apprenticeships.

Most university bodies welcomed aspects of the policy, but the Russell Group said that new information for students must not become “overly simplistic ‘food labelling-style’ systems”.

The lecturers’ union warned against trying too hard to justify the cost of a degree. Sally Hunt, the general secretary of the University and College Union, said: “Universities are supposed to be about challenging perceived wisdom, not just ensuring a consumer is happy.”

Higher education makes billions for the economy and should receive more public funding, according to Universities UK, the body that represents vice-chancellors. In a report published today, it says universities generated £59 billion in 2007-08 and every £1 million of public investment brought a return of £1.35 million. Professor Steve Smith, the group’s president, said: “I am sure the Government will take note.”

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