The education secretary Damian Hinds has branded claims of financial hardship among universities as “scaremongering”, amid speculation the government is ready to cut tuition fees.

The Conservative minister said “hyperbolic warnings” were misrepresenting the predicament of higher education institutions, claiming most of them have healthy balance sheets.

Mr Hinds made the comments after concerns were raised that cutting tuition fees could push several universities into bankruptcy. Alistair Jarvis, chief executive of Universities UK, said any reduction must be made up in full by the government.

A review of tuition fees commissioned by Theresa May, the prime minister, is reportedly set to recommend a reduction in the cap in annual costs from £9,000 to £7,500.

Mr Hinds said: “The financial sustainability of our universities is clearly important … but with the vast majority of universities in a good financial position, hyperbolic warnings from some on universities’ finances are distorting the overall picture.”

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He added that the country’s universities had enjoyed rising student numbers and increased tuition fee income since the financial crash.

Mr Hinds said: “I do understand universities are facing some challenges, but reports of financial hardship across the entire sector is scaremongering.

“Most universities have healthy balance sheets. We’ve been seeing growth in international student admissions, with much further potential. And the number of 18-year-olds in England is soon to enter a period of sustained growth.

“I will do all I can to ensure the sector is financially stable now and in the future, but of course institutions need to act responsibly and develop sustainably.”

Damian Hinds at Downing Street earlier this year (AFP/Getty)

Mr Jarvis has warned cutting fees would lead to “bigger class sizes, poorer facilities, labs and libraries, a worsening student experience, job cuts and less money to support access and retention”.

“It could damage research, reduces the number of highly-skilled employees that business needs and harm our international competitiveness,” he told FE News.

“If Theresa May’s review of post-18 education recommends a cut in tuition fees, the funding gap must be made up in full by a government teaching grant. A funding cut for universities would be a political choice which harms students, the economy and communities that benefit from universities.”

Students during a protest calling for the abolition of tuition fees (PA)

According to figures from Universities UK, £35.7bn went into UK higher education institutions in 2016-17. Less than half (46.9 per cent) came from fees related to teaching – £16.7bn – while government funding for teaching represented 9.1 per cent.

Last February Ms May launched a review of post-18 education led by finance expert and author Philip Augar. The review is “expected” to recommend a cut when it reports back next week, according to the BBC.

Students have protested about the cost of annual tuition ever since 2010, when the coalition government raised the cap on fees from just over £3,000 to up to £9,000.

Responding to the latest comments from Mr Hinds, the University and College Union (UCU) said lowering the tuition fee cap without direct investment to plug the funding gap would have “serious implications for universities, but make little or no difference to the vast majority of students”

The union pointed to modelling from London Economics which it said showed that cutting fees to £7,500 a year would reduce higher education funding by around £1.8bn a year.

UCU acting general secretary Paul Cottrell said: “It is not scaremongering to point out the huge sums of money universities would lose if the government backs a cut in fees and does not plug the gap.

“The prime minister called the funding review because the current system was so politically toxic. However, we have seen nothing that suggests the review is looking at the sort of radical alternatives that would make life easier for students and guarantee funding for our colleges and universities.”

The UCU, in its submission to the Augar Review, has suggested reversing cuts to corporation tax to fund university tuition fees.