The annual grant letter sent to HEFCE by BIS today includes the statement:
"we are reiterating our overarching warning that we may transfer HEFCE grant for 2012-13 or future years back to the Department to meet unanticipated pressures, such as student support costs resulting from any over recruitment".
This reminds us that, for all the measures HEFCE has in place to deter over-recruitment, BIS is concerned that too many students may still end up demanding student loans and ratcheting up the national debt.
This problem of keeping total spending on undergraduates (including loans) under control may become a more pressing issue if the government does indeed scrap the promised higher education bill, for three reasons.
First, as Andrew McGettigan points out, without new legislation there is nothing to stop any suitable student demanding a loan from the government.
Second, as Andrew Fisher points out on WonkHE, the core/margin mechanism the government is using to drive down prices depends on the soon-to-expire system of teaching grants:
Third, the universities are "kept in line" in part via the financial memorandum they sign each year with HEFCE. But now that they are getting much less money from HEFCE, some are already beginning to whisper about rejecting the memorandum or demanding wholesale changes.