Fast-track degrees proposed to cut higher education costs

The age of the traditional three-year degree could come to an end after universities were ordered yesterday to devise two-year fast-track courses to cut the cost of higher education to students and the public purse.

Lord Mandelson, the business secretary who is also responsible for universities, wrote to the funding council for universities asking them to develop proposals for more flexible degrees. "Over the next spending review period, we will want some shift away from full-time three year places and towards a wider variety of provision," he said.

His letter also announces new multimillion-pound cuts next year, including nearly £60m in fines for universities that over-recruited students this year, after record numbers applied to sit out the recession's tough jobs market by doing a degree. It comes after the chancellor ordered a further £600m in cuts in the higher education budget to be made by 2013, prompting warnings that universities are rapidly approaching a funding crisis.

Fast-track degrees were mooted by Tony Blair in 2003 and a handful have since been piloted at five universities. Today's announcement puts them at the heart of the government's strategy to reorganise higher education in more austere times. In pilots, terms were extended by 10 weeks each year, with a more intensive teaching timetable.

Two-year degrees give students the option to cut their debt by reducing fees, but critics say students also lose out on the social aspects of being at university. The research-intensive elite universities are sceptical of shortened degrees and have warned against compromising quality.

Mandelson's letter, setting out the annual budget for universities from April, warns of the "extremely challenging" economic climate and asks universities to review how they teach and conduct research.

It announces £135m in cuts to the universities' budget to pay for extra grants and loans that were paid out this year to the record number of students, more of whom qualified for student funding in the recession. Individual universities will also be fined £3,700 for each student they took above the cap the government imposed to keep costs down. Figures from the admissions service, Ucas, suggest there are 16,000 above the cap, meaning universities will have to pay back £59.2m next year.

The document makes clear that there will be no more funding for extra students, meaning the competition for a place for next year could be even tougher.

Pam Tatlow, chief executive of Million +, which represents new universities, said: "It's deeply regrettable that the government is cutting university funding to pay for extra student numbers when it's very likely that if they hadn't gone to university they would have added to the unemployment queues. Universities will do their best to deliver two-year degrees, but cost-cutting is not a justification for two-year degrees."

Wes Streeting, president of the National Union of Students, said: "The government was quick to take credit for avoiding a university student places crisis earlier this year but is now shamefully cutting teaching funding to the very universities that helped it achieve it. These come on top of new wider cuts that together represent a double whammy for some universities, and whilst we are assured they will not affect teaching and learning, we remain to be convinced. "

David Lammy, the higher education minister, said: "It is right that universities, in common with all other areas of public spending, play a part in helping manage the pressures on public finances brought about by the impact of the financial downturn. Tough choices are inevitable ... We are absolutely clear that a high-quality student experience with excellent teaching is vital to maintaining the world class higher education we enjoy in this country today."