An independent analysis has returned a damning verdict on the higher education White Paper, depicting it as a deeply flawed strategy that will fail to achieve many of the government's aims and that will make a number of problems worse.

The report by the Higher Education Policy Institute, published on 18 August, says the course set by the coalition is likely to result in the emergence of a "bipolar" system that exacerbates inequality between institutions.

It says the sector will be split into a small but well resourced elite that charges undergraduate tuition fees of ?9,000 a year and hoovers up top students at the expense of social mobility, and a majority that charges average fees, after waivers, of less than ?7,500, often unwillingly.

The Hepi analysis also warns of:

? Less new higher education provision than is forecast, limiting student choice

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? High future costs to the taxpayer as a result of questionable financial modelling

? A scholarships "arms race", largely benefiting those least in need of financial support

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? Institutions struggling "simply because they misjudge how to 'play' the new game".

The report by John Thompson, a former senior analyst at the Higher Education Funding Council for England, and Bahram Bekhradnia, director of Hepi, is the most comprehensive independent critique of the White Paper to date.

It says the government's "clear ideological preference" for relying on market forces and student choice to hold down fees has been "emasculated" in favour of direct control.

The two mechanisms devised for this purpose - allowing unfettered competition for students achieving AAB or better at A level and reserving a proportion of remaining places for institutions with fees below ?7,500 - may keep down costs, "but the price is a heavy one in terms of the sacrifice of an approach based on the market, choice and competition in favour of state control".

Struggle to compete

The analysis warns that those forced to reduce their average fees to below ?7,500 could include Russell and 1994 group universities who struggle to compete for AAB students.

But even with fees reduced, they will be able to maintain or increase per-student funding if they are "careful with pledges in their access agreements". The losers, it says, "will be students or graduates...and possibly future taxpayers".

Taxpayers are in danger because of questionable assumptions about the long-run cost of the new arrangements, Mr Bekhradnia told Times Higher Education.

While the White Paper says that the percentage of the student-loan cost borne by the taxpayer - known as the research accounting and budgeting (RAB) cost - will amount to 30 per cent of its total value, the government's own calculation, revealed in an impact assessment published alongside the paper, is 32 per cent.

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Another supplementary report, produced by London Economics, estimates that it will be higher still, suggesting a figure of 37 per cent.

Mr Bekhradnia said the latter figure would add a further ?490 million a year to the long-run cost of the new arrangements, and that the Office for Budget Responsibility or Public Accounts Committee should scrutinise the calculations.

"If they were to fail to (justify the 30 per cent RAB charge cited in the White Paper), which would be quite likely, then they would have to make other savings in order to meet their budget. That could be quite serious. One option would be to cut student numbers; another would be to increase the cost to students."

The report echoes the concern raised by Sir Steve Smith, former president of Universities UK, that some institutions just outside the elite will resort to "buying" AAB students with bursaries allocated without regard to family income.

This "arms race of merit-based scholarships" will be crucial for some institutions in the battle to maintain numbers, and those that fail will have to cut fees to below ?7,500 to gain access to the additional biddable places - or face becoming "unviable", it says.

With the government pledging to increase the proportion of places reserved for cheaper providers in future, Hepi warns of the potential for "a great deal of disruption".

This "will impact on the viability of some institutions - which may be good institutions in high demand - simply because they misjudge how to 'play' the new game or fail to thrive in the competition to persuade (Hefce) to give them margin pool places". Furthermore, while the government has previously said that it would not take on a regulatory role over admissions, "establishing a threshold defining high achievement (AAB at A level) is, in effect, introducing government regulation to admissions."

Reducing competition

On one of the government's principal aims, to drive up teaching quality by increasing competition, Hepi says the White Paper has also erred.

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The impact of the AAB and sub-?7,500 mechanisms will be to amplify differences between institutions and courses, providing more resources to those at the top end, further reinforcing their advantage and reducing competition.

"What competition there is will not be anything like as effective in driving excellence in teaching as the White Paper expects," Hepi says.

The fact that demand is likely to continue to exceed supply will compound this problem. Other issues raised by the analysis include the provision of additional information for students, something that David Willetts, the universities minister, has long said was essential to enable students to exercise choice.

Hepi says the government has "ducked its responsibility" by choosing not to provide adequate funding for something it says is "fundamental" to the new system.

By relying on the private sector, the government could see a proliferation of sensationalist or overly populist websites, such as RateMyProfessors.com.

Hepi also echoes the frequently raised concern that the reforms will damage widening participation, limiting choice for those without top grades at A level by earmarking places for cheaper institutions, including further education colleges.

Criticism is also reserved for the scrapping of Aimhigher, and the Office for Fair Access' heavy focus on financial support. "The main achievement of an increasingly elaborate system will be to provide student support in an inefficient and inequitable way," Hepi says.

Responding to the report, Mr Willetts said the government was "putting students at the heart of the system with a financing system that is fairer and affordable for the nation".

"While we expect universities to offer good value for money, students will have the information to decide what course and institution is right for them. Institutions will need to work much harder to attract students and be explicit about the quality of their teaching and the type of experience they offer."

john.gill@tsleducation.com