Leading Article: Time for a graduate tax

JOHN ASHWORTH, vice-chancellor of the London School of Economics, thrives on controversy. In floating the idea of charging tuition fees to British students, rejected by the academic board last night, he probably wanted to stir up the debate over higher education funding. So far as his own institution is concerned, unilaterally imposing tuition fees on students would have been of doubtful value. It would have raised some more funds, but not enough to justify the furore. Few others would have followed his lead, so the LSE would have found itself in less than splendid isolation. But if Dr Ashworth succeeds in provoking the Government into rethinking how we should pay for higher education, he will have achieved something.

Despite yesterday's decision by the LSE, cherished assumptions about higher education funding must be challenged. The left - in the form of Jeff Rooker, Labour's higher education spokesman, and Baroness Blackstone, Labour's education spokesman in the Lords - has argued convincingly that the present system was designed for the past. The number of students in higher education has more than doubled in the past decade, to nearly 30 per cent of each generation. Universities have delivered this huge increase while having their spending per student cut.

The benefits of a better educated population are self-evident. But so are the costs. With public borrowing touching pounds 50bn, it is no longer possible to justify making the taxpayer contribute such huge sums. We are already dangerously close to the point where quality in some institutions will suffer. Besides, should the whole population pay for the one in three who will get a degree - an education which costs, per head, more than three times the amount spent on the average secondary school pupil?

Even though unemployment among new graduates has been high during the recent recession, research shows that higher education is an excellent investment. Earnings, promotion and job satisfaction prospects are all significantly higher for graduates. Those who benefit most should pay more. At present, university expansion is on hold for two years. But at that time, a fresh tranche of well-qualified candidates will emerge from sixth form and further education colleges demanding university places. By then, a way of funding that next phase of growth must be found.

The answer lies in some form of graduate tax, which covers both tuition fees and the cost of student living, and which incorporates parental incentives to have their teenagers stay at home and study at their local university. Graduates would start to pay back the cost of their tuition and/or maintenance as soon as they start to earn a more than average salary, and continue paying back for, say, five or 10 years. The scheme should be supported by a wide range of Government-funded bursaries for less well-off students.

All the other options - raising more private revenue, encouraging students to work while they study, inviting the banks to lend more - have achieved only limited success. A graduate tax would end a system that offers a substantial subsidy to the middle classes, and is therefore politically risky for a Conservative government. Ministers now know, however, that this problem will not go away.