Worse-off students may be given £5,000 'grants'

An inquiry set up by Tony Blair into student finance is expected to recommend an expanded system of bursaries – grants in a new guise – to encourage youngsters from poor families to apply to university.

The inquiry, being overseen by Andrew Adonis, the Prime Minister's education adviser, includes Treasury and education ministers, and is a result of voter discontent about tuition fees and student debt that surfaced during the general election campaign in May.

Pressure has been mounting on the Government to review the arrangements for student support, with critics arguing that debt is putting young people off going to university.

The Government is looking at a number of ways to meet Mr Blair's target of 50 per cent of people signing up for degrees by 2010. Ministers believe that, without extra cash to support them, people from families with no history of higher education will continue to shun university. Tuition fees are likely to remain, with the real problem seen as student living costs which amount to £5,000 to £6,000 a year. Since maintenance grants were abolished, students have been building up large debts through loans.

The inquiry is considering charging market interest rates on loans, as recommended this summer by the Institute for Public Policy Research (IPPR), a centre-left think-tank. At present, the interest rate is subsidised. Economists argue that this gives a big, untargeted subsidy to the better-off.

If the subsidy was abolished, a large sum – estimated at £300m – could be released for an improved bursary scheme for students from disadvantaged homes. It would cover living costs and fees and would be the closest thing to restoring maintenance grants.

According to the authors of the IPPR report, Richard Brown and Wendy Piatt, £300m would be enough to give bursaries of £5,000 to as many as 40,000 students in the first year and 20,000 of those students in the second year of study.

The Government has introduced "opportunity bursaries" for students from disadvantaged families but so far these amount to only £2,000 over three years of study and cover only 25,000 people.

The inquiry is also considering streamlining methods of helping students from different groups – mature students, part-timers and those with children. At the last count, there were 21 different bursary schemes.

Vice-chancellors, who meet today for their annual meeting in Southampton, said they were pleased the message was getting through. Professor Alastair Smith, the vice-chancellor of Sussex University, said: "One of the barriers to higher education is that there are all these pots of money. Rationalising them would be a good start."

* The former head of the Government's exams watchdog urges ministers today to consider scrapping the GCSE.

Writing exclusively for The Independent, Dr Nick Tate, who was the chief executive of the Qualifications and Curriculum Authority (QCA) until last September, says: "It is about time we considered whether we still need a system of national examinations at the age of 16 when virtually no one now finishes their formal education at that stage." Dr Tate, who is headmaster of Winchester College, a leading independent school for boys, is the most senior voice to lend his weight to the clamour for a reform of the exam.

The National Association of Head Teachers has called for its abolition – to be replaced with more rigorous tests at 14 to help pupils decide whether to opt for an academic or more vocational route in education.

Dr Tate, whose school has reduced the number of subjects taken by pupils at GCSE, says the introduction of AS-levels means "most people will be taking three different qualifications in each of three successive years" – GCSEs then AS-levels followed by A-levels. He says this has "given us possibly the most examined education system in the world".

Meanwhile, the majority of first-year sixth-formers will find their exam burden eased next summer, the QCA said yesterday. A review of AS levels will mean 95 per cent of pupils will benefit, sitting a single exam of up to three hours instead of three separate papers.