The Big Question: Are higher top-up fees the only way to fund our universities properly?

Why are we asking this now?

The Business Secretary, Lord Mandelson, has just announced the setting up of the long-awaited government review of student fees.

Why has it been set up?

Ironically, it was one of the "sops" granted to Labour back-benchers when then education secretary, Charles Clarke, was trying to steer legislation to introduce top-up fees for the first time through the House of Commons. The implication then was that – if the policy went drastically wrong and led to students from poorer homes abandoning the idea of going to university – the review could suggest modifying or scrapping the idea. Alternatively, if it was successful it could pave the way for the current ceiling of £3,225 a year being lifted.

What has happened since top-up fees?

There is certainly no shortage of would-be applicants for university. The number of applicants eligible for a place this year who missed out rose by 30,000 from 109,103 in 2008 to 141, 118. In all, there were record numbers of students applying with more than 600,000 seeking a place – 10 per cent more than last year. Only 13,000 extra places were provided – including 10,000 in so-called STEM subjects (science, technology, engineering and maths) considered vital for the future of the economy but for which universities were not provided extra funding to cover teaching costs.

So who is in favour of increasing top-up fees?

Most vice-chancellors are. A survey of them revealed that – on average – they would like to see the ceiling shoot up to £6,500 a year (more than double the present fee). Some, like Sir Richard Sykes, the former rector of Imperial College London, would like to see the cap lifted altogether with universities free to charge the full cost of courses (around £20,000 a year). Business leaders like the CBI believe that students should also be made to pay a greater share of the cost of providing a university education.

What about the politicians?

The review announced by Lord Mandelson on Monday will not actually report until after the next election. It has been set up in consultation with David Willetts, the Conservatives' higher education spokesman, over its scope. That gives both major parties a carte blanche not to say where they stand on the issue of raising fees until after the election. However, both Lord Mandelson and Mr Willetts have made great play of the fact students must be provided with a "quid pro quo" if fees are raised in terms of greater access to their lecturers and more information about their courses. Reading between the lines, it would be a fair bet that both parties will eventually sign up for an increase in student fees.

Is anyone opposed to increasing fees?

The National Union of Students would like to see the inquiry study other ways of raising the necessary finance to fund the higher education system – such as a graduate tax.

The University and College Union, the lecturers' union, believes an increase in fees will put off students from poorer backgrounds from applying to university. Then there is the case of the Liberal Democrats, whose leader Nick Clegg indicated at his party conference that he was preparing to scrap the party's pledge to abolish top-up fees.

It later emerged that party policy committing the Liberal Democrats to abolishing top-up fees was to remain in being – but that it was just not prudent to implement it at the moment because of the pressure on public finances due to the recession.

Can we guess the likely recommendations?

The chairman of the review committee is former BP boss Lord Browne of Madingley, who seven years ago said he could see the fee increased fourfold in time. However, his appointment has been widely welcomed and it would be wrong to read too much into that. The NUS is happy that it believes the voice of the student will be heard through Rajay Naik, a former executive member of the English School Students' Association. Others on the review body include Professor Sir Michael Barber, the architect of New Labour education policy and one-time former director of policy at 10 Downing Street under Tony Blair's era. In all honesty, it is difficult to conceive of them voicing outright rejection of an increase in student fees.

What other factors will they take into account?

Lord Mandelson has made it plain he wants to see a fair balance struck between the fee levels charged and the students' ability to pay. He is adamant – as indeed are most of those in favour of increasing fees – that any increase should not lead to any student being turned away from university as a result of their inability to afford to take up a place. One item of research that the review body will consider is a study ordered last week by Lord Mandelson into how Britain's more selective universities could increase their take-up of students from disadvantaged areas. This review is to be carried out by Sir Martin Harris, the head of the Office for Fair Admissions and will be on Lord Mandelson's desk in the spring.

What's the economic case for an increase in fees?

Since the introduction of top-up fees universities have gained an extra income of £1.3bn a year. In the coming years they will face a squeeze on central government funding (it is noticeable that, when the two main political parties talk of ring-fencing areas of public spending against the ravages of recession, schools are always at the forefront of their minds rather than higher education).

However, the Government is not dropping its target of getting 50 per cent of people into higher education, although Lord Mandelson conceded last week at the launch of his blueprint for the future that the make-up of the student body was likely to include far more adult returners to the world of education. Currently, there is about a 43 per cent participation rate in higher education amongst school leavers so it can be seen that it will take an increase in income from somewhere if the Government's target is to be met.

What if there is a change of government though?

We are unlikely to see the Conservatives call for a reduction in student numbers. Boris Johnson, when he was the party's higher education spokesman, announced the party's U-turn on curbing expansion. He eloquently pointed out that it had not gone down well on the doorstep at the last election when the party said it was in favour of children going to university – "but not your children!".

When would a new figure come into force?

The review is unlikely to report until late summer 2010 at the earliest. A time will then have to be set aside for consultation. Realistically, it is impossible to see universities being allowed to charge extra until autumn 2012 to give them time to prepare their new prospectuses for students.

Should the top-up fee ceiling be increased?

Yes...

* Universities need extra income if they are to maintain standards and increase student numbers

* Given the recession, it's unlikely that funding for higher education can come solely from government

* The introduction of top-up fees had little or no effect deterring students from applying to university

No...

* With employment prospects dwindling, students won't want to countenance any more debts

* Higher education should be available free of charge, just like primary or secondary education

* Universities have not yet delivered on "value for money" with the current ceiling of £3,225