The chancellor is considering slashing the annual tuition fee universities can charge to £7,500, saving every student at least £5,000 on the cost of a degree.

The proposals, being drawn up for Philip Hammond for this autumn’s budget, come amid frustration that some universities are not offering students value for money. Ministers believe too many have been overpaying vice-chancellors and raking in fees from cheap-to-run arts degrees whose graduates struggle to find jobs.

An official analysis approved by accountants and seen by The Sunday Times shows several universities have built up multimillion-pound surpluses from fee income.

Lowering the cost of degrees has been a priority for ministers since the election, which saw young voters swing behind the Labour leader Jeremy Corbyn after he pledged to