A university leader says fees-free doesn't encourage people to take up study.

This follows an announcement from the Finance Minister that $200 million of fees-free funding would be reallocated.

Universities New Zealand executive director, Chris Whelan, told Mike Hosking the Government was projecting a 6 per cent increase in enrolments - but it actually declined.

"For young people, you are either on universities path or you're not and $4000 to $6000 of free fees is not going to generally change your life decisions."

The reallocation is a part of Finance Minister Grant Robertson's push to cull one-billion-dollars of low-priority spending.