New measures set out by Jo Johnson, Minister of State for Universities and Science, will seek to curb escalating rates of pay for university vice-chancellors.
After it emerged recently that many university heads were earning £300,000 a year, with some topping £400,000, Mr Johnson urged institutions to show restraint.
He has asked for universities to justify pay rates above £150,000 to new higher education regulator, the Office for Students.
“I do not want to read about VC [vice chancellor] pay in the newspapers,” he said.
“These headlines raise fears that students’ fees are not being used efficiently.”
Universities have argued that higher salaries are justified by their heads as they have enormous responsibility in managing large institutions and big budgets.
Mr Johnson called for universities to show “greater restraint” in salaries for vice-chancellor and senior level positions and for “transparency and openness” in the way pay is set out.
“We [need to] put an end to the spate of damaging headlines we’ve seen over recent weeks,” he said.
Under new plans, which will be consulted on, the Office for Students could use its powers to impose fines if institutions do not provide viable reasons for high pay.
The new regulator, headed by Nicola Dandridge, former chief executive of Universities UK, will also issue new guidance on the role and independence of pay committees.
In a move that Mr Johnson called “out of the spirit of public service”, Ms Dandridge herself volunteered for a pay cut going from £200,000 a year to £165,000.
Professor Janet Beer, president of Universities UK, said the public was right to question high salaries.
“It is right to expect that the process for determining pay for senior staff is rigorous and the decision-making process is transparent,” she said.
“It is also reasonable to expect that decisions are explained and justified.”
The overall cost of salary and benefits for vice-chancellors rose by 2.5% to an average remuneration of £257,904 in 2015-16 compared to the previous year.
Some of the more high-profile cases of pay levels include Alice Gast, Imperial College London vice-chancellor, who is paid £430,000, Sir David Eastwood of University of Birmingham, on £426,000, and University of Exeter vice-chancellor Sir Steve Smith, who is also paid £426,000 a year.