Call for universities to be able to charge unlimited tuition fees

Graduate employers want current annual ceiling of £3,240 to be lifted

Universities should be given the freedom to charge students whatever tuition fee they like, the body representing the country's 750 largest employers of graduates will say today.

The Association of Graduate Recruiters (AGR) says that lifting the cap – currently £3,240 a year – is needed if standards are to be maintained in the wake of £518m of cuts being made by the Government.

A free-for-all, which could see fees rise to £20,000 a year for some popular courses, immediately sparked protests from student groups, who said that the idea was "offensive".

The AGR's call, made in a "manifesto" published to promote debate during the impending election campaign, coincides with a government inquiry into the funding of higher education, which is expected to report after the election and is under pressure to recommend an increase in tuition fees.

A survey of university vice-chancellors in March 2009 found that the majority would like to see a rise, to £6,500 a year, on average. Sir Richard Sykes, the former rector of Imperial College, London, said he wanted to be able to charge full cost fees – which could be as high as £20,000 – for some courses.

The AGR's manifesto makes it plain that it would like to see a gradual lifting of the cap, so that universities would be able to set their own fees by the end of the decade.

Carl Gilleard, chief executive of the AGR, said: "These proposals reflect the views of 750 major employers, which collectively recruit around 30,000 graduates a year in the UK."

He added: "We know that some of these calls to action – which relate to funding and finance – are unlikely to receive a universal welcome.

"After careful consideration, however, we have concluded that this package of measures is the best way to drive up standards in higher education, provide a better return on investment for students and parents, and ensure the UK remains competitive in a global economy."

The proposals state that parents should be encouraged to start saving for the cost of university while their children are young through a national savings scheme.

The AGR makes it clear that the lifting of the cap would have to coincide with measures to ensure there was no financial barrier preventing those from poorer homes seeking a university place.

Its manifesto also calls on the Government to scrap what it calls "the artificial 50 per cent target for [entry into] higher education".

"Growing numbers of students are studying degree courses in below average institutions," it adds. "This does not help people's life chances or represent a good financial investment. It also creates problems for graduate employers who can no longer be sure what the value of certain degree courses and institutions is. The focus must shift back to quality rather than quantity."

In addition, the manifesto calls for the current degree classification to be scrapped and be replaced by an achievement report card listing a range of students' achievements.

The AGR's manifesto was criticised last night by student and university lecturers' leaders.

Sally Hunt, general secretary of the University and College Union, said: "The future for the UK is at the forefront of a high-skilled knowledge economy and we won't get there with less graduates.

"It is time that business started to make a proper contribution to university funding, instead of parroting its siren calls to increase the debt of students and the burden on hard-working families struggling in tough economic times."

Wes Streeting, president of the National Union of Students, added: "At a time when students are leaving university with record levels of debt, and graduate job prospects are at an all-time low, it is offensive to argue that the cap on fees should be raised, let alone lifted entirely."