The Daily Telegraph reported on 23 January that the bill, which was to be introduced in the Queen's Speech expected in May, has been "indefinitely delayed" and is unlikely to be published before 2015.
The delay has reportedly been caused by coalition concerns about increasing the role of for-profit providers and Prime Minister David Cameron's unwillingness to tackle further radical reforms while facing battles on the NHS and welfare. The Liberal Democrats have also been lobbying for more parliamentary time to be devoted to House of Lords reform (see below).
The higher education White Paper, on which the bill was to be based, included moves to expand private provision by making it easier for such institutions to attain degree-awarding powers and university title - as well as to ease the partial or complete buyouts of universities.
The White Paper also included plans to establish the Higher Education Funding Council for England as a regulator.
Aldwyn Cooper, chief executive of not-for-profit private institution Regent's College, said he was "really happy" about the latest developments on the bill. Maintaining the "gold standard" of degree-awarding powers under the government's revised stance could "quite possibly encourage the expansion of good-quality private provision", he added.
Carl Lygo, chief executive of BPP University College, a for-profit body that already has degree-awarding powers, said: "I think it's very likely that reforms will continue because many of them do not require primary legislation. I suspect that's the discussion taking place within the government at the moment - can [it] achieve most of [its] policies without legislative change?"
Dropping the bill may allow students at some designated private providers to access state-backed loans, but with the institutions remaining exempt from number controls - as at present.
However, Mr Lygo said: "I know [the Department for Business, Innovation and Skills] takes the view that it can control private sector numbers by designation."
Mr Lygo said that BPP had always argued that the government should not undermine degree-awarding powers by allowing reforms such as examination-only degree-awarding bodies.
If the plans were dropped, it would affect education giant Pearson, which has been lobbying the coalition to become a non-teaching body with such powers.
The government's exact policy on private provision will be tested by the takeover of the not-for-profit College of Law by a for-profit company. Some believe ministers can theoretically veto such a move as the college has degree-awarding powers - although the Quality Assurance Agency says that is not the case.
Glynne Stanfield, a partner at law firm Eversheds, said: "It is really a question of whether this is a policy change on the part of the government, which [it] will exercise through BIS. Because a lot of the things that the public sector may want to do with the private sector can be done under current law."
Pearson, pursuing another route that may now become more attractive, is competing to buy the college and its degree-awarding powers in a field otherwise made up of private equity companies - with scope for rapid expansion into areas beyond law.
Meanwhile, Liam Burns, president of the National Union of Students, said that shelving the bill was "not a U-turn - it's a way to avoid parliamentary scrutiny".
Howard Hotson, professor of early modern intellectual history at the University of Oxford, said the latest developments represented "a huge climbdown for the coalition in general, and for David Willetts in particular", as well as "evidence that opposition to radical reform...is having an impact in Westminster".
But, he added, it "does not mean that the proposed reforms will not be driven forward. It only means that they will be discussed and decided not on the open, transparent platform of Parliament, but through private and undemocratic negotiations with special interests."
Martin Hall, vice-chancellor of the University of Salford, said: "This isn't a victory over the coalition or over Willetts or Cameron. It is a sensible outcome on a dialogue about these issues, which has been moving through the public domain."
The "unintended consequences" of increased for-profit provision would include reduced student support at institutions seeking to cut costs to maximise shareholder value, along with a movement away from high-cost science and technology subjects, Professor Hall said.
On regulation, he added, "there is no need to make Hefce into a regulator. We've got the QAA."
Apologies for the hold-up: Lib Dems on the track
There are a number of reasons why the government might want to delay the bill.
The first is that the Liberal Democrats are understood to have lobbied hard against it, fearing a battering like the one they received over the tuition-fee hike.
A second, related factor is that the Lib Dems want the maximum time possible for House of Lords reform in the next parliamentary session. With this in mind, they are keen for other contentious and time-consuming bills to be cleared out of the way.
A third point is that there were already worries about getting the bill passed in time to introduce the changes for 2013-14. A fourth factor may be that most of the big changes - the fee hike plus the AAB and core-and-margin plans - are already in place.
These reforms have partially achieved a key coalition aim - to introduce competition in the academy and drive down fees - so additional policies are less urgent.
Delaying the bill also means that legislation could come after the general election, giving the Tories a chance to gain a mandate for more reform.
| In or out: the ramifications of stalled legislation | |
| Unaffected policies | Policies that would be shelved |
| Raising tuition-fee cap to £9,000 a year | Private providers to be brought under the same system of QAA regulation, information disclosure and dispute resolution by the Independent Adjudicator as public institutions |
| Introduction of 20,000 biddable places for institutions charging under £7,500 a year | Private providers to be allowed to access student loans of up to £9,000 within student-number controls |
| Unlimited recruitment of students achieving AAB at A level | Hefce to designate which institutions can receive student loans, rather than the Department for Business, Innovation and Skills |
| Providers with 1,000 full-time higher education students, rather than the current 4,000, to be able to earn university title | Hefce to 'promote the interests of students' and encourage sector competition |
| Introduction of a more 'risk-based' system of inspection by the QAA | Hefce to be able to fine 'failing' universities |
| Private providers to be able to access loans of up to £6,000 outside student-number controls | Granting of degree-awarding powers and university title to be overseen by Hefce |
| Non-teaching organisations, such as private company Pearson, to be allowed to apply for degree-awarding powers | |
| Universities to be able to change legal status more easily so that they can be bought by private companies | |
MPs hear of a policy caught between the Scylla of ideology and the Charybdis of compromise
A few days before speculation about the higher education bill's future began, the government's policies were being picked apart in front of MPs.
Bahram Bekhradnia, director of the Higher Education Policy Institute, was invited to address the All-Party Parliamentary University Group alongside David Willetts, the universities and science minister.
Mr Bekhradnia told the MPs that the coalition had attempted to implement an "ideology" of markets and choice "while making compromises all the way".
He said that the compromises were potentially as damaging as the ideology.
Although the government's ideological desire was to remove student number controls, the public liability on heavily subsidised student loans meant that quotas had to be maintained at the institutional level, Mr Bekhradnia argued.
He said the core-and-margin and AAB policies - which will not be affected by the shelving of the bill - were attempts to reintroduce "a measure of competition and choice", but that in reality they contradicted these concepts and would have damaging consequences.
The AAB policy allows universities unlimited recruitment of students with high A-level grades, while core and margin takes a portion of non-AAB places away from each institution and allocates them to those charging under £7,500 a year.
In combination, this meant that "for a minority of students, choice may be maintained...but at the expense of the majority", Mr Bekhradnia said.
"The larger the number of students included in the top, unconstrained category, the greater the cut that will be needed elsewhere."
He argued that this would be accentuated if the government, as it has indicated, extends AAB to ABB or beyond.
The AAB policy "asserts that you should have your choices maintained if you're clever - and by the way, clever means rich - and fewer choices if you're not", he said.
On Mr Willetts' plans to increase private provision, Mr Bekhradnia said that there was "no suggestion here that students would prefer to go to private universities", calling the move a "supply-side policy" and "hardly market-driven".
On funding and fees, Mr Bekhradnia said that the government's varying estimates on what proportion of the total value of student loans will never be repaid - 30 per cent and 32 per cent - were "hopelessly optimistic".
He highlighted the coalition's "wholly implausible" assumption that the average salary of a graduate 30 years after leaving university will be £100,000 a year at today's prices, a figure based on past increases.
Mr Bekhradnia said it was "no good taking the mean salary increase of all graduates" as this was based on a small number of "incredibly high-earning graduates" and a majority with more modest increases.
He predicted that public borrowing to fund student loans would be "far higher" than the government estimates, leaving a funding gap.
He asked where the money would come from to fill it: "From other parts of the higher education budget? From students having to pay more? From reductions in participation?"
These issues "probably won't be our concern or the concern of this government", Mr Bekhradnia said, but they were "something we should be worried about".