How higher fees could help everyone

Leading universities are proposing to charge extra for popular courses. But this need not lead to a two-tier system

The Russell Group, a self-selected band of successful, popular and politically influential universities, has made the unsurprising observation that British universities and colleges are chronically short of cash.

The Russell Group, a self-selected band of successful, popular and politically influential universities, has made the unsurprising observation that British universities and colleges are chronically short of cash.

As student numbers go up to meet Government targets and income per student goes down, they are required to improve their already internationally respected teaching and research to meet national assessment demands. They are also expected to generate additional income, often in ways only remotely connected with their central functions as universities.

The Government accepted, when it passed the Teaching and Higher Education Act in 1998, that the only realistic way of obtaining additional income for teaching is from the students. This is not unfair. Most graduates earn much more during their life than non-graduates - some very much more. Students finance their fees through loans, but because these are privatised, they need not place additional burdens on taxpayers. Therefore, there is no reason why the Treasury should oppose further loan-based student expansion.

The Russell Group's proposals to charge "top-up" or premium fees for their highly sought-after courses could certainly bring substantial additional income into higher education.

Financial institutions would be willing to lend large sums at a very low-risk premium to Oxford and Cambridge, the London School of Economics or Imperial College London to enable these institutions to offer higher loans to their students than those presently permitted.

However, premium fees would benefit the university that received them but would do nothing for everybody else. The privileged universities and departments would become ever more privileged. Social class divisions between high-fee institutions and the rest would become as acute in higher education as they already are in secondary schools.

More important, the money would go to the universities that need it least. Able students who have benefited from a good secondary education are easier and less expensive to teach than those who need more help in finding material in the library or on the internet, whose essays need revising several times before they are comprehensible, or those who have to undertake paid work to maintain themselves.

If popular universities are tobring extra cash into the system by charging students more for the very considerable benefits they receive, a way must be found to ensure that some of that extra money finds its way to the universities and colleges that really need it.

Sometimes it is suggested that the solution is for Russell Group universities to leave the public system altogether, and make their own way, like private secondary schools or hospitals. But there is a third way, between equal misery for all at the public expense and a two-tier system. Premium fees could benefit everybody with no adverse equity effects with the following easily administered modifications to the present scheme.

Firstly, the Government must accept that differential fees form part of a state-backed, though privately provided, loan scheme in which repayments are dependent on subsequent income. It would be intolerable if able young people were unable to have the benefits of a Cambridge education because their families could not afford it or they were unwilling to incur a fixed debt against an uncertain future income.

Secondly, any premium fee charged should be calculated as a percentage of the national minimum means-tested fee. The relative effects on all students would be the same. Those who pay no fees to go to Oxford today would still pay nothing if fees were doubled.

Finally, the formula by which the Higher Education Funding Councils allocate money to universities, and which takes account of such differences as subject of study and course length, should include another weighting factor - the average A-level score of students. These would attract less funding, the rationale being that groups of students with good A-levels are cheaper to teach and therefore need less public-sector cash. However, because A-level scores are in effect the currency with which students today buy places in popular universities, those which recruit students with high A-level scores are the ones that would be most able to boost their income through top-up or premium fees.

This scheme would not penalise universities for charging premium fees. It may well be that some universities, accepting that the most able students are the least expensive to teach, would set out to fill a market niche for able students who wanted to incur minimum debts.

It is more likely, however, that most of the popular universities - the ones that demand high A-level grades for entry - would seek, by charging premium fees, to increase the services they were able to offer. Their students would incur higher debts but would anticipate higher income to enable them to meet the commitments. For the very few such graduates who failed to meet their income aspirations, the cost of loan repayments would need to be borne by the taxpayer.

It is also possible that some top universities might decide to get out of undergraduate teaching altogether and become entirely postgraduate institutions. They would lose their undergraduate teaching grant, but as they get the bulk of their money for research, their major source of funds would not be affected. It could even be more effective to link their extensive research resources to postgraduate, rather than undergraduate, teaching. If the Government teaching grant to these top dozen universities were cut by half, this would release about £250m. This could be distributed to other universities and colleges, which would benefit from a 10 per cent rise in their teaching income at no expense to the taxpayer.

A degree from a leading British university is a gilt-edged investment for any graduate. Increasing numbers of students from abroad are spending up to £50,000 for one. What public money there is should be concentrated on research certainly, but also on improving access and teaching resources at the other end of the league tables.

The writer is professor at the Centre for Higher Education Studies, Lifelong Learning Academic Group, Institute of Education, Bedford Way, London WC1H 0AL