Clarke hints top-up fees may be replaced by tax system

Up-front fees for students could be phased out under the Government's long-awaited higher education blueprint to be published this month, Charles Clarke indicated yesterday.

The Secretary of State for Education told Jeremy Vine on BBC Radio 2: "I think we're pretty clear that we would be charging fees – unlike now – after university so you pay through the tax system later on in your life.''

His remarks appear to indicate the introduction of an Australian-style graduate tax system, where the amount students repay depends on how much they earn. It would not rule out universities being allowed to set top-up fees, but they would be repaid after students had graduated and loans would be available to meet the cost of courses.

Students who paid the money up-front could be offered a discount, ensuring money started rolling into Treasury coffers long before any graduate tax. Mr Clarke has indicated the Treasury would take 17 or 18 years to recover the full graduate tax from a former student.

The Department for Education insisted Mr Clarke had said nothing new in his radio broadcast. "What he was saying is entirely consistent with what the Prime Minister said before Christmas," a spokes-man said. "We are ruling out large up-front top-up fees.''

But sources said Mr Clarke's comments would be consistent with a 10-year strategy to move from up-front fees and even abolish tuition fees of £1,100 a year once graduates started repaying the cost of their courses.

Mr Clarke also told the radio programme: "If you're doing a very low-paid job, you will not have to pay a substantial amount." He confirmed a government U-turn on grants for students from the poorest homes was on the way.

They were abolished by Labour in 1998 but this month's higher education blueprint is to recommend that education maintenance allowances, worth up to £1,500 a year, to those aged 16 to 19 from the poorest homes in schools and colleges should be extended to students at universities.