Why Dearing demands a courageous response

Higher education is both privileged and under-funded, says Margaret Hodge. Making students pay their share is the only fair way to provide for its continuing expansion

Yesterday, the new Labour government faced perhaps its greatest challenge to date - how to respond to the Dearing report on the funding of higher education. Now is the time for brave and bold decisions. The Government must have the courage to take on the vested interests, so that a fair and sustainable long-term settlement can be enacted.

The status quo was never an option. Universities are short of money and academic standards are threatened. Students are poverty stricken and more are dropping out. Expansion has halted just when a consensus has developed around the importance of education and training. At the same time, the pressure is on to increase spending on schools and pre-school education. If we are to square this circle then we must share the cost of higher education with students. We have a window of opportunity. We must use it.

Sir Ron Dearing's review is the most comprehensive look at higher education since the Robbins report in the Sixties. Britain needs to adapt to the huge changes which have taken place in higher education. When I went to university in the Sixties, I was one of the lucky 5 per cent. Now one in three go. Then students lived on a grant; now they survive on a mixture of grant, loans and parental contributions.

The Conservative government adopted a scatter-gun approach to higher education. It made welcome changes, such as the growth in student numbers, but it ducked the hardest questions - how to pay for the expansion and how to ensure equity between students.

We now spend pounds 6.35bn on higher education. That represents a 40 per cent increase in real terms since 1989-90. But over the same period student numbers have almost doubled. That is why vice-chancellors shout "foul", complain about budget cuts and worry about the effect on academic standards and pay: the per capita funding has dropped by 25 per cent since 1989.

Some vice-chancellors want the freedom to charge their own top-up fees to augment their individual coffers. That would undoubtedly lead to the entrenchment of a British "Ivy League" where access would be influenced by the ability to pay, not acceptable to a government committed to greater fairness.

Meanwhile student maintenance grants have been cut - replaced by the controversial loans system. Student poverty has ballooned and the vice- chancellors reported a 10 per cent increase in students dropping out of courses prematurely in one year alone.

However, the reality is that higher education still occupies a privileged position in the education world. In 1992 - the latest year for which figures are available - Britain spent more per student, per year on higher education than any other OECD country. We spent $15,000 per student, compared with the US which spent $11,800, Germany $6,500 and France $6,000. We have to ask ourselves if this is a sensible way to achieve our stated aim of education for all.

Furthermore, unfairness exists in the tertiary sector. Full-time students in higher education pay no fees; but part-time mature students do and their number has tripled since 1980.

And for too long further education has remained the poor relation in the tertiary sector. Yet further education is vital to our future success. Two-thirds of those who continue in post-18 education do so in FE colleges. A quarter of students in FE pay their own fees and most receive no financial support from the state for maintenance.

This unfair anomaly comes into even starker focus when we see who the full-time higher education students are. Fewer than 10 per cent come from a background with parents who are unskilled or partly skilled, while nearly two out of three come from the top two socio-economic class backgrounds. So the current structure does not ensure free education for all, but does ensure free education for those who are achievers and who tend to come from better-off families. That is wrong.

At the same time, graduates do better than their non-graduate contemporaries and can pay something back. In 1996/97 unemployment among graduates stood at 4 per cent, while unemployment among non-graduates was 8.2 per cent. And while non-graduates' gross weekly earnings averaged pounds 237, graduates earned pounds 457.

All that demonstrates that the current system is a mess. We are spending a huge amount on higher education, yet it is not enough and we need to find a way to continue the expansion. Furthermore, we must shift money to other parts of the tertiary sector. And we need greater equity in the system.

That is why the Government needs to be both bold and radical. Students should repay both their maintenance and a proportion of tuition fees. That could be done with proper means testing, so that subsidies are directed at those who need them most. Students could pay when they begin to earn, through their national insurance, over a longer period than is allowed under the current loans system and the system should be related to their ability to pay. Money released by that reform should be reinvested in the tertiary sector.

There will be some instant losers, but we must put the tertiary sector on a sound footing, so that high educational standards are maintained, expansion of lifelong learning is assured and public money is directed to those who need it most. David Blunkett's statement yesterday shows that he has the courage to grasp this opportunity. This new government will avoid the short-term fix and adopt the long-term sensible solutionn

The writer is Labour MP for Barking and expected to be named chair of the House of Commons Select Committee on Education.