A Labour peer has called for a rise in tuition fees at English universities to help ease their financial pressures.

Peter Mandelson, who is also a candidate to be Oxford University’s next chancellor, said raising domestic undergraduate fees from £9,250 to £9,480 a year would provide stability.

He said this would need to take place before the government embarked on further reforms to higher education and student funding.

Writing in The Guardian he stated: "England’s universities have reached an inflection point. Financial pressures are severe and worsening.”

Mandelson argued for future tuition fees to rise alongside inflation, capped at a 2.5% annual increase.

However, he also suggested that universities needed more support to improve the numbers of students coming from disadvantaged backgrounds.

He continued: "I believe introducing some form of inflationary link to domestic tuition fees would be a fair approach, recognising the country’s very tight fiscal constraints and the need to steady university finances.

“It would ensure fees do not become more expensive in real terms for students while securing the value of this income for universities. This would be a stabilising move ahead of further much-needed reforms both to improve university finances and make the loans system fairer for individuals.”

In return, Mandelson said universities would need to make “more tough choices” to improve efficiency, noting that Italian state universities had one teaching staff for every 21 students while UK universities had one for every 13.

Finally, Mandelson called for a more progressive system of student loans, with repayments starting at 2% of a graduate’s income and increasing by two percentage points for each additional £10,000, up to a maximum of 8%.

He said economists found that the progressive system had similar costs to the one in place now – which takes 9% of graduates’ income over £25,000 – by reducing repayments for low and middle earners and raising repayments for higher earners.

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“This would be particularly beneficial for women, who are more likely to pursue degrees in subjects that are crucial to public services, such as nursing, but whose salaries can be comparatively low,” he said.

Jacqui Smith, the skills minister, told a meeting at the Labour conference that changes to student maintenance funding were being considered.

She said: “We totally hear the message that cost of living has impacted students almost more than any other group. And if you want to have the kinds of changes on access we’ve talked about, maintenance has to be part of it. That’s all I’m willing to say at the moment."