Smaller universities and colleges could follow courses set by more prestigious institutions, which would then award degrees

Universities and colleges could stop teaching their own degree programmes and instead follow nationally recognised courses, the higher education minister proposed today.

David Willetts called for chains of universities and colleges to teach the same course, externally set by the University of London or another well-regarded institution.

In a speech at Oxford Brookes University, Willetts said his proposals would allow students to take prestigious courses, but save on the expense of living away from home by studying at a local university or college. He added that if institutions were freed from having to set their own degree programmes, they could focus on giving students excellent teaching.

The elite Russell Group of research-intensive universities said the proposals would need to be analysed to see whether they would preserve their high standards.

The previous government failed to demand enough of universities, Willetts said.

He criticised universities for not keeping their costs down. The overall number of staff employed in universities in England grew by 7.7% between 2005-06 and 2008-09. University heads were paid an average of £219,000 last year and salaries and benefits increased by nearly 11%.

Willetts said: "It has generally been assumed that any home-grown institution offering higher education must award its own degrees. But I am interested in looking at whether some could benefit from linking themselves to an established exam brand with global recognition."

These brands were valued by employers "because they know where they are with them", he said.

Willetts' proposals would turn the higher education back decades: all English and Welsh universities founded between 1849 and 1949 offered University of London degrees. Later they received charters to award their own degrees.

Willetts said: "I am not suggesting the removal of anyone's degree-awarding powers … but institutions that chose to offer external exams could deliver robust standards in which employers already have confidence from day one. It's a way in which they could expand straight away, without having to establish from scratch a reputation for their own degrees."

Willetts said studying near home was not always the best choice, but "if local providers opted for teaching existing highly-regarded degrees, it could improve students' employability".

Wendy Piatt, director general of the Russell Group, said her universities were constantly seeking ways to respond to the changing needs and expectations of students. She said: "Many Russell Group universities offer distance learning programmes and some offer courses where the students take their first year or two in a local further education college with subsequent years taken at the university itself," she said.

"However, any new ways of providing and assessing higher education courses – like the idea put forward by David Willetts – must be carefully analysed to ensure that the high quality teaching and research-intensive learning experience we offer is preserved."

Yesterday, Willetts gave his clearest indication yet that students could soon be forced to pay higher fees. In an interview with the Guardian, he warned that the cost of hundreds of thousands of students' degree courses was a "burden on the taxpayer that had to be tackled".

On Sunday, it emerged that the government is considering cutting the number of students going to university as part of a radical shake-up of further and higher education ordered by the new business secretary, Vince Cable.

David Lammy, the shadow higher education minister, said the coalition had "descended into farce" over university fees.

He said: "Willetts hints fees should rise, his boss Vince Cable wants to cut student numbers instead. Meanwhile the new deputy leader of the Liberal Democrats is touring the TV studios saying he will accept neither," he said.

"Students and universities need a government with one position, not three."

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