Universities will start the new academic year with thousands of unfilled places, despite turning record numbers of youngsters away because fear of swingeing fines for over-recruitment will prompt universities to cut back on offers to students.

This comes at a time when the lack of job prospects has led to a record 660,953 applications – almost 200,000 more than there are places. One lecturers' leader described the situation as "tragic".

Vice-chancellors are fearful of recruiting too many students through the clearing system in case they incur massive government fines. Last year those that went above the target number of students set by the Government faced fines totalling £4m – which would be crippling when coupled with public-spending cuts.

Experts believe there is unlikely to be an increase on the 481,854 places on offer last year despite the Government providing 10,000 emergency places. That means that around 180,000 applicants are set to be disappointed in their search for university – although some university vice-chancellors predict the eventual figure will be as high as 250,000.

The situation will compound the problem of youth unemployment. Some 923,000 16- to 24-year-olds (one in five) are jobless, with many hundreds of thousands more in "hidden" unemployment, classifying themselves as "students" even though they have no confirmed places in colleges.

The unemployment rate for 16 and 17-year-olds is especially high – 35.9 per cent, more than one in three of those not in education – in part because graduates are taking school leavers' jobs. Those leaving school face the worst labour market since the Second World War, fuelling fears of a "lost generation" consigned to the dole queue.

Deirdre Hughes, of the Institute of Careers Guidance, said: "Out of the last 25 years, this is the worst our most experienced higher education advisers have experienced for young people. The difficulty is that with the cuts in public services there is not going to be the same number of jobs available either. It's a double whammy for them.

"Students have to think carefully about their motivation for wanting to go to university and other options available to them. It may be that higher education isn't the best route for them."

Writing for The Independent, the vice-chancellor of Liverpool John Moores University, Michael Brown, explains: "In normal times... university admissions tutors offer more places to candidates than actually exist in the same way as airlines overbook to be sure of filling their planes. This year, however, they won't be able to do that because risks cannot be taken."

His comments are backed up by other vice-chancellors. Mike Thorne, of Anglia Ruskin University, said: "People are very cautious about not going over their target number. The attitude is to make it a bit under rather than over."

One of the reasons for the universities' dilemma is a change over the funding system. In past years, they have escaped fines if they were 5 per cent above or below the Government's target figure. Now they are just given the target and fined £3,700 per student if they exceeded it – and docked the same amount for every student below it.

Dr Phil Cardew, pro vice-chancellor of London South Bank University, which has been given 300 extra places, added: "I would rather err on the side of caution than not."

Professor David Green, vice-chancellor of the University of Worcester, said: "£1bn of cuts already mean that universities simply cannot afford to pay fines for 'over-recruiting' above the control number which government has imposed."

Student leaders demanded an immediate relaxation of the fines system. "The Government has made a mistake in slashing funding to universities but there is still time this year to drop these ill-advised fines and to make sure that at the very least universities are able to offer places to all the students that they can receive funding for," said Aaron Porter, president of the National Union of Students.

"It is a solution that will not involve spending funds that have not already been budgeted for and will ensure that as many students as possible can start their university courses this year."

Sally Hunt, the general secretary of the University and College Union, added: "The fact that there are likely to be empty chairs in lecture halls and seminar rooms because universities cannot risk recruiting students is tragic when we consider that 200,000 students are still likely to miss out on a university place this year.

"The situation exposes the folly of the decision to cut student places and to impose such heavy penalties for universities who over-recruit."

A spokesman for the Department for Business, Innovation and Skills, which has responsibility for university education, said: "There is increased demand this year which is why the Government has funded an additional 10,000 student places. But it is for individual universities to manage their own admissions. We believe clearing can work to match students with places and this year there will be more students at university than ever before."

Source: Independent.co.uk