New higher education legislation being put before Parliament could put students and the reputations of UK universities at risk, even encouraging “scam” universities, independent experts have warned.

An extensive report released by the Higher Education Policy Institute (Hepi) suggests nearly three quarters of new higher education providers opening in the next two years will remain unregulated after the Government’s controversial new Higher Education and Research Bill comes into effect.

Of 760 new alternative higher education providers, 553 are expected to remain outside of the new regulatory system, prompting concerns that taxpayer money will be used to fund unaccountable private companies marketing poor-quality courses for profit.

Government ministers say the bill is designed to widen choice for students and deliver value for money in line with increasingly high tuition fees.

Labour, Liberal Democrats and crossbench peers in the House of Lords have reacted against the new bill, however, stressing the move could lower standards and damage the reputation of British education altogether.

The Hepi report, Alternative providers of higher education: Issues for policymakers, claims the new bill risks missing the Government’s own declared objective of encouraging a “vibrant and high-quality range” of alternatives to traditional universities and private institutions offering degrees and other qualifications.

Speaking to The Independent, Hepi Director Nick Hillman said while the 553 unregulated providers are not registered with the government, they are not deemed illegal.

These companies are not obliged to provide any information as to how they are run, however, causing potential problems with “scam universities” offering low standard degrees.

He said: “The Government’s rhetoric implies the bill is going to sort out the regulation of higher education in the UK.

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“The Government’s position is that since tuition fees have tripled in 2012, higher education has needed to be reviewed. It certainly does not give the impression that there are going to be more than 500 higher education providers going unregulated.”

Almost 300,000 students currently attend 732 of the alternative institutions open in England. At many of them (122), students are authorised to draw tuition and maintenance loans from the Student Loans Company.

Both parliamentary peers and academic leaders have raised concerns that the new Government reforms will make it easier for new institutions to be awarded university status, encouraging private companies to use institutions for a profit.

Mr Hillman added: “All higher education institutions were new entrants once, and many alternative providers are providing flexible and innovative provision to under-represented groups.

“But, as the higher education market continues to change shape, we must be vigilant in ensuring bad apples do not contaminate the sector as a whole.”

University and College Union (UCU) said the Hepi forecast “should sound alarm bells” in government.

UCU general secretary Sally Hunt said: “If we are to protect our students and the global reputation enjoyed by UK universities, the new legislation must protect taxpayers’ money from being handed over to a potential pool of unscrupulous providers.

“We must have more rigorous quality measures applied before any new provider is allowed to access either degree awarding powers or state funding via the student loans system.”

Robin Middlehurst, another of the paper’s authors, said: “Better protection of the public purse is overdue, especially given the growth in the number of for-profit providers.

“Experience in the USA and Australia shows overly generous rules for alternative providers are a magnet for questionable business practices.

“The end results can include stranded students, a bill for taxpayers and regulatory intervention.”

A Department for Education spokesperson said: “More alternative providers than ever will be regulated thanks to the reforms being introduced through our Higher Education and Research Bill. As well as regulating all those receiving public funding, the Office for Students will have the ability to regulate alternative providers outside of public funding.