Tuition fees will rise to between £6,000 and £9,000 from 2012, if parliament approves proposal

Students could pay up to £9,000 a year in tuition fees in changes that could be introduced as soon as 2012, ministers said today.

The universities minister, David Willetts, has announced proposals to raise the "basic threshold" for tuition fees to £6,000, with institutions able to charge up to £9,000 in "exceptional circumstances". No publicly funded university would be able to charge more.

He told MPs: "We believe a limit is desirable and are therefore proposing a basic threshold of £6,000 per annum. In exceptional circumstances there would be an absolute limit of £9,000."

If approved by parliament, the proposals could transform English universities, creating a two-tier system in which the most competitive universities charge higher fees. Students currently pay £3,290 a year.

Graduates will pay a contribution towards the cost of their degrees once their earnings have risen above £21,000 a year, repaying 9% of their income above this level, Willetts said.

A quarter of graduates will pay less overall than they do at present under the new proposals, the minister told the Commons.

There will be a penalty on early repayment for the highest earners. "It is important that those on the highest incomes are not able to buy themselves out of this system," Willetts said.

The minister said there had not been sufficient progress towards fair access to universities. All universities that wanted to charge higher fees would have to take part in a scholarship programme. This may be targeted at students who receive the government's new pupil premium when they are at school, and could mean that their first year at university is free.

Maintenance grants for the poorest students, with household incomes below £25,000, will be increased from £2,900 to £3,250 a year. Those with a family income of up to £42,000 will be allowed a partial grant. The government will retain a higher maintenance grant for students in the capital.

Gareth Thomas MP, the shadow minister for higher education, said the proposals were a "tragedy" for students and would "plunge universities into turmoil".

Thomas said the plans would make it more difficult to protect England's world-class universities and would create degrees that were the most expensive and worst-funded in Europe.

He said the proposals were necessary because the coalition had cut £3bn from universities' teaching budgets.

"Isn't the reason why fees will be so high very simple? The truth is that what motivates them is a massive cut to universities of 80% in the undergraduate teaching grant. They don't have to do this. They believe a crude, competitive market is the best way forward."

Thomas said funding higher education should be a partnership between the taxpayer and graduates, because both benefited from having people with degrees.

"Most graduates will be paying off their debts for 30 years, and some students will not choose universities that charge £9,000 because many will have to choose the cheapest courses. How unfair the system will be on middle-income students who will work just as hard as the rest!"

He said universities were already working hard on access and the government's plans to improve this was "a meaningless figleaf".

The business secretary, Vince Cable, said: "The coalition government has developed a package that is fairer than the present system of student finance and affordable for the nation.

"Access to higher education will be on the basis of ability, not ability to pay. No one will have to pay upfront tuition fees. We are extending loans for the cost of tuition to the majority of part-time students. No one will contribute until they can afford to do so – when they are in well-paid jobs."

All sitting Lib Dem MPs, including Nick Clegg and Cable, signed a pledge to oppose a rise in fees before the general election.

The government's proposals were defended by Michael Gove, the education secretary, who insisted that students would not be discouraged from applying to university.

There was "no evidence" that the introduction of tuition fees in 2006 had put off poor students, he told BBC Radio 4's Today programme. "I believe that [higher fees] won't put off students. They will make a rational decision on the benefits that accrue to them [from going to university]."

A report by the Office for Fair Access, an education watchdog, found that identifying bright but disadvantaged youngsters early and then giving them support and advice over a number of years was the key to widening access to the most competitive universities.

Participation by the poorest young people in higher education has gone up since the 1990s, the report published in May found. There is a widening gap between rich and poor when it comes to attending the most selective universities, but there is no evidence this has worsened since top-up fees were introduced in 2006.

"There is a concern that some of our best universities haven't been as imaginative about attracting students from poor backgrounds as they could be," Gove said. The government will announce a £150m bursary system to encourage the most deprived students to apply, money that will be saved by scrapping free school meals to half a million primary schoolchildren.

"We are going to ask the very best universities which want to increase their fees from £6,000 to £9,000 to come up with more imaginative ways to work with schools, but we won't impose quotas," he said.

Gove blamed schools for putting up the "real barrier" to university. "It is not cost that is preventing people from poor backgrounds, but their schools which don't provide them with the A-level passes that let them go to university," he said. "The principal problem is our schools. We still have a system which means that deprivation is destiny."

He said it was "only fair" that those who benefited from going to university should pay some of the cost. To ensure Britain's campuses stayed the second best in the world, graduates had to pay more.

"Someone who is working as a postman should not subsidise those who go on to become millionaires," he said.

• The full statement on higher education funding by David Willetts