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The two unions today published an open letter to David Willetts, the universities and science minister, urging him to push for the scrapping of the plans.

In this year's Budget, the Treasury unveiled plans to put for-profit higher education providers on a level footing with universities, which already benefit from a VAT exemption thanks to their non-profit status.

Sally Hunt, the UCU general secretary, and Liam Burns, the NUS president, say in their letter to Mr Willetts: "We do not believe that the right to exemption from paying VAT on educational services should be open to those institutions whose primary mission is to reward shareholders and we are calling on you to use your position in government to oppose this proposal."

A joint public statement by the unions accompanying the letter says: "Ministers claim to want to create a level playing field for new providers, but this measure moves in the opposite direction. It erodes the vital distinction between those institutions whose primary mission is the provision of education and those whose primary mission is to reward shareholders."

The statement says the proposed exemption "grants tax relief to for-profit companies at a time when corporate tax avoidance is a potent public concern and will rig the higher education market in favour of those providers with access to private capital, ensuring that students' fees and public subsidies are used to create corporate and individual shareholder profit".

The two unions add: "We call on the government to withdraw its proposed extension of VAT exemption to for-profit providers of higher education."

john.morgan@tsleducation.com