Incredible, I know, but there seems to be a genuine debate over top-up fees

Tony Blair has asked a sensible question: what the heck do we do to meet the funding crisis in the universities? Here is the Government's answer so far, although perhaps you should take a deep breath before reading the rest of this paragraph: Blair supports a top-up fee, but not one that involves up-front payments by students, and not as high as the £15,000 demanded by some universities. Reports suggesting that he has backed down on the idea altogether were overblown. Gordon Brown is wary of top-up fees, but not quite as vehemently as reports suggest, for he is opposed to much of the additional cash coming from general taxation. Charles Clarke has held never-ending meetings with alarmed Labour MPs, and has warned Blair of a big revolt if such a scheme wereintroduced in any form. Estelle Morris resigned partly because she was opposed to top-up fees, but did not want to challenge Blair over it. Remarkably for a Cabinet terrified of challenging Downing Street, six Cabinet ministers have indicated their opposition to this method of financing higher education. And students – including Jack Straw's son William, who has been turned into something of a media heart-throb – are demonstrating on the streets. The outcome of the review is due next month. It's all rather like Basil in Fawlty Towers, after the public health inspector has read out a long list of complaints, asking: "Apart from that, is everything else all right?"

This review has caused more of an internal storm than any other instigated by this government. Part of the reason for this is that it is a genuine review. We are not used to this. A more common pattern is for Blair or Brown to hail a review of a policy and reveal the outcome around half a second later. This is what happened in their "review" of NHS funding. Brown proclaimed the start of a major debate and then he ended it by declaring that higher taxes were the solution. An alternative pattern is for the Government to instigate a review of a controversial policy, and at the end of it all proceed to announce another review. This has happened with fox-hunting, the subject of at least two detailed investigations. Now we have the outcome: hunting is to be banned and not banned, at the same time. It has also happened with electoral reform for the Commons. Another pretend review is due soon.

The problem with a genuine review is that the media cannot really cope with the excitement of it all. To take one example: Brown has breakfast with a national newspaper, in which he explores the difficulties of top-up fees. All hell breaks loose. There is a wider difficulty here. Some in the media spend 90 per cent of their time bemoaning the culture of control freakery, while the other 10 per cent scream about splits whenever there is any hint of an open debate. It is now pretty clear that the Chancellor did not go through a metamorphosis over his second croissant when he is supposed to have launched vitriolic attacks on Blair in front of journalists. But he did highlight the complexities of university funding in a way that differed from Blair. Presumably this is what happens in a genuine review.

A more serious problem is the Government's continuing timidity over the dreaded three-letter word, tax. Any issue that relates to tax-and-spend causes a neurotic explosion in this supposedly "best when we're boldest" administration. The one partial exception was its "review" of NHS funding, but that was such an exhausting, cathartic experience for Blair and Brown that they're still getting over it. Occasionally they have to lie down in a darkened room as they reflect on the deed. Did we really make the case for putting up taxes, they ask. Now they're almost too exhausted to make the case again.

Not for the first time the Government is facing the consequences of decades of under-investment, without knowing quite what to do about it. Ministers are in the curious position of recognising belatedly that under-investment in Britain's infrastructure was the greatest failing of the Thatcher years, while more or less accepting her views on taxation levels. In this particular case the problem is exacerbated by their laudable desire to encourage more of those on low incomes to attend university. On this, No 10 and the Treasury sing from the same hymn-sheet. Before becoming an Education minister, David Miliband, who was head of Blair's policy unit, wrote several articles on inequality, partly based on his constituents' experience in South Shields. He argued that much wider access to higher education was part of the solution. In the Treasury some of Mr Brown's advisers were reaching the same conclusion. So here is the position: funding per student is now 36 per cent less than it was 20 years ago; there is an £8bn backlog of repairs and investment; and ministers want to encourage more students to attend. Yet the Government remains terrified of the word tax.

The long-forgotten Social Justice Commission, set up by the late John Smith after the 1992 election proposed a graduate tax. Members included Mr Miliband who acquired the grand title of secretary to the commission. This was where he came to the Tony Blair's notice, although Mr Blair was not especially keen on the commission's findings. Patricia Hewitt, now in the Cabinet, was also a member. If Blair and Brown had dared to follow its advice and had introduced such a tax at the start of the first term, they would by now be collecting the additional cash from those who had graduated since 1997. Would such a proposal have finished them off in that year's election and brought about the return of John Major, or the elevation of William Hague in his baseball cap, to Downing Street? There was too much imprudent prudence in that first term, and now the Government is being forced to act in a less rosy political context.

Even so, it is better to have the rows in advance of a policy announcement. The problem with the poll tax in the late 1980s was that the internal rows took place after the fatal policy had been implemented. The package the Government will come up with in January will by no means be perfect, and is being announced five years too late. But I predict it will not be its poll tax.

In spite of the turbulence-the surreal images of Brown exploding over his croissant and of William Straw becoming a sultry star – there are benefits to be had from a review, in which there is a whiff of a Cabinet asserting itself. There should be more of this, and the media should play its part by not affecting outrage if there is a clash of ministerial opinions. How can there be a fruitful review if everyone agrees with each other at the beginning?