The proposed ‘graduate tax’ on university alumni could have a devastating impact on the growing philanthropic movement at universities, according to the sector’s leading body.

The proposal would see graduates pay for their tuition via taxation and is being advocated by the Liberal Democrats during the review of higher education funding, led by Lord Browne, which is expected to release findings in October.

Joanna Motion, vice-president of international relations for the Council for the Advancement and Support of Education (CASE), said that the tax could undo the progress made by development departments around the UK, a growth which resulted in more than £500m donated to universities in 2008-2009.

“It would be a disaster for philanthropic support of universities,” she told Civil Society. “It would be very frustrating for good staff doing a god job in development offices.”

Motion said that the sector had been working to combat the idea that university funding was “government’s job” for years, “but you impose a tax and it immediately becomes government’s business again”.

But, the tax is not a certain fate for the sector, nor does it enjoy consensus within government. Motion pointed out that it sent out mixed signals that minister for culture Jeremy Hunt and the DCMS are now encouraging arts and culture organisations to investigate ‘American-style’ philanthropy at the same time as business secretary Vince Cable is proposing to stymie it.