Universities to decide on new ways of funding: Report will offer vice-chancellors range of options on charging for higher education

University vice-chancellors will be asked to back one of four ways of charging university and college students for the cost of their education. The move could lead to vice-chancellors campaigning for a graduate tax, an obligatory loan repayment scheme, or top-up tuition fees.

A report by London Economics, a private consultancy, commissioned by the Committee of Vice-Chancellors and Principals, is due to be published in four weeks. It says that fresh finance is needed to enable universities to re-invest after a decade of cuts, ease student hardship, and relieve the pressures caused by rapid expansion of student numbers.

Vice-chancellors recognise that the Government is unlikely to find significant extra funds. This week, Kenneth Clarke, Chancellor of the Exchequer, picked out the growing numbers of university students as a key pressure on public spending - a clear signal that the Government is looking at alternative ways of funding future growth. Ministers have set a target of one in three young people entering higher education by 2000.

The report's options will be considered by the vice-chancellors of all 100 universities at their annual meeting in September. The committee hopes to reach agreement on one option, so that it can campaign as a single voice for that preference.

The least likely option is the one recently promoted by John Ashworth, director of the London School of Economics. His colleagues at the LSE rejected a proposal to start charging students an additional pounds 500 a year in tuition fees, over and above the fees automatically paid through local authorities.

Although top-up fees have the advantage of not needing government backing for their introduction - universities are autonomous institutions - many academics believe that approach would enable the most sought-after universities to charge higher fees, and give an unjust advantage to the children of well-off parents.

The committee's report offers two variants on a repayable loan scheme. The first, similar to a scheme that is working in Australia, would require graduates to start repaying the cost of their tuition as soon as they start to earn a reasonable salary. The other applies the same principle, but uses the payments to re-imburse student's living costs. Both proposals differ from the present student loan scheme.

Finally, the report looks at the possibility of introducing a graduate tax - which could last a lifetime or be limited to a specific period. It would mean graduates paying a higher rate of tax than other employees once they reach a certain earnings level. Some advocates suggest it could be raised in a similar way to national insurance contributions, and possibly placed in a special funding pool for universities.