Higher tuition fees and cuts to university budgets will cost Britain's economy six times more than the government will save, a leading think tank said today.
The Treasury expects to save over £1 billion this year by introducing tuition fees of up to £9,000 per year which will replace public funding to English universities.
But the Million+ think tank has found that the policy will see the Treasury receive lower tax revenues from fewer graduates and force the government to write-off 40 per cent of student debt.
The group's calculations revealed the policy will rip £7bn out of Britain's already ailing economy in the coming years and increase the government's own borrowing costs by fueling inflation.
Con-Dem government ministers originally claimed most universities would charge each student around £6,000 per year and would only be allowed to charge £9,000 in "exceptional circumstances."
But official figures from the Office for Fair Access show a third of English institutions are already charging the full £9,000 a year and the average student is expected to graduate with £39,000 worth of debt.
A Department for Business, Innovation and Skills spokesman claimed the reforms "laid the foundations for a better funded and more responsive higher education sector" and insisted investment in teaching will rise by over £1bn by 2014/15.
But lecturers' union UCU general secretary Sally Hunt called for the government to have a "serious rethink" in light of the report.
She said: "We warned that fees close to £9,000 a year would be the norm and the government's calculations for repayment by graduates were flawed.
"We take little pleasure in being correct but it is clear that shifting the burden of paying for university education on to students was an ideological move, not a financial one."
And Dr Gavan Conlon of London Economics, which conducted the research, said "the costs appear to substantially outweigh the benefits."
Researchers believe higher fees will drive up inflation, adding over 0.20 per cent to both the Retail Price Index and Consumer Price Index.
That, they say, will contribute towards price increases in rail fares and water bills which are linked to the indexes.
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