Graduate tax gaining favour as ministers back away from fees

Opinion inside the Government is shifting towards a graduate tax rather than allowing universities to charge top-up fees, senior ministers said yesterday.

The Whitehall review of higher education funding is drawing up options on how to bridge a "cash gap" before the state would recoup money from graduates when their income reached a certain level – perhaps £30,000 a year.

Gordon Brown, the Chancellor, is believed to favour a graduate tax, arguing that it would be fairer than the top-up fees to which Tony Blair is sympathetic. Charles Clarke, the Secretary of State for Education, is understood to be opposed to top-up fees.

One minister said: "The centre of gravity in the Cabinet is moving towards a graduate tax. The main debate now is over how you would fund the universities in the interim period before it kicked in."

In a further sign of jitters over top-up fees, Peter Hain, the Secretary of State for Wales, became the latest cabinet minister to voice concerns that poorer students might be deterred from going to university.Mr Hain told The Western Mail newspaper: "A fundamental principle for me here is that students from poor backgrounds have got to be able to get access to our best universities."

His comments came after Clare Short, the Secretary of State for International Development, said top-up fees were "a really bad idea".

Allies of Mr Blair insisted that no decision on the issue had been taken. They said that the new system to be proposed in a White Paper in January would address the issue of access for low-income families as well as funding.

Mr Clarke accused university vice-chancellors yesterday of blocking the Government's attempts to increase the number of children from poor backgrounds going on to higher education. He told a conference of new headteachers that the Government would be compelled do much more to implement the policy.