The University of Birmingham, Aston University and Warwick University have all decided to charge tuition fees of £9,000 a year, the highest amount possible.

But this should surprise nobody, according to one vice chancellor.

Terence Kealey, VC of Buckingham University, explained why higher fees were inevitable in an article this week.

It’s partly because universities need the money. But it’s also because of the way the market works in higher education.

Most of the time, a free market will reward suppliers who offer goods and services at the lowest price, assuming that what they offer is also of equal quality.

But sometimes, the price can be part of what makes a product attractive in the first place.

Students want degrees partly, at least, because they want to impress future employers. The more prestigious a degree, the better it is.

And a degree from a university which charges the top whack may well appear more prestigious than one from a cheaper institution. After all, if it charges the full £9,000 then it must be one of the best universities, right?

So there is no incentive for universities to keep prices low. The more elitist they appear to be, the more attractive they are to students.

But this causes real problems for the Government, which had based its future funding of universities on the assumption that most institutions will charge about £7,500.

Although the charges are sometimes called student fees, they are not paid by students. The cash is provided by the Government, and graduates start repaying the money once they are earning £21,000.

If universities charge more then, in the short term, the Government will have to pay more. The fear is that the Treasury will claw the money back by cutting university block grants or ordering them to admit fewer students.

This was a topic raised by Labour leader Ed Miliband during Prime Minister’s Questions. He asked: “Can you guarantee that money will not come from university budgets or through a reduction in student numbers?”

Mr Cameron pointed out it was Labour that first introduced tuition fees, and added: “You are absolutely right – because of the system that we are introducing, we will actually be spending more overall on universities, that’s right.”

Fair enough, but he conspicuously failed to rule out further funding cuts or capping student numbers.