Bahram Beckhradnia: Why the Tories' plan doesn't add up

Last week the Conservatives published their proposals for funding higher education. These represent a welcome advance on their previous policy. In particular, they have accepted the principle that there needs to be a better balance between the contributions made by those who benefit from higher education and what is provided by the taxpayer. They have also committed themselves to keeping grants for poor students. Their further proposal to transfer to universities the student loan book represents an innovative way of guaranteeing a stream of funding for capital and for increasing university endowments.

But the Conservatives have maintained their rejection of fees, and by imposing commercial interest rates on loans as the only way of securing a greater contribution by students, their new policy gives rise to some serious anomalies. The rich would be subsidised by the poor. The richer the student the smaller the loans they need, and the less they would therefore pay. European Union students, who are not eligible for maintenance loans, would pay nothing and would be subsidised by English students and taxpayers - beyond the subsidy they already receive - at a further cost of about £150m a year. Those who take the longest to repay (women taking career breaks and those in poorly-paid professions) would contribute most to the cost of higher education. Under the Labour government's policies it is these groups who get the largest subsidies.

The removal of the interest-rate subsidy could be positive. It would be good to remove a subsidy that benefits rich and poor alike and use the money to target support at those who need it most. But this is not what the Conservatives are proposing. The money would instead be used to provide for general higher education funding for all.

Whether universities would receive as much under the Conservative proposals as under the current government's is obscured rather than illuminated in the Conservative document. It claims that both students and taxpayers will pay less, but also that universities will receive the same amount. This cannot be right: there are only two sources for the money that universities need - students themselves and the taxpayer. So if students pay less then the taxpayer must pay more; or if the taxpayer pays less then students must, one way or another, pay more. Otherwise - and this is a very real fear - universities will actually receive less.

One way of going some way towards squaring the circle would be to reduce the number of students who need to be provided for. The statement that the plans do not require a reduction in the participation rate suggests that they preclude its expansion. At a time when the proportion of young people staying on in school and taking A-levels is increasing, this implies abandonment of the Robbins principle that all those with the qualifications and the wish to do so should be able to enter higher education. The consequence would be that a large number of aspiring and qualified entrants to universities and higher education colleges would be denied places.

A final concern about the policy is that, despite what is claimed, it, is in many respects, a centralising one. On the one hand the effective abolition of the Higher Education Funding Council for England, and the funding of universities entirely through a student-based capitation fee, could reduce the level of interference and top-slicing. And the transfer of the loan book would provide a source of income for capital that is guaranteed and independent of the Government. On the other hand, more functions would be adopted by central government (deciding funding rates for different subjects, for example). And there is an explicit statement that government would set the amount of funding that universities would receive through national scholarships: there would be no discretion available to universities, as there is under variable fees.

Despite the undoubted progress in Conservative thinking, therefore, and some innovative proposals, in this crucial respect this looks like a short-term solution to a long-term issue. If in the future a government were to decide it could not afford to fund universities properly from taxation it could not keep putting up interest rates. But, although politically difficult, it could allow universities to put up fees.

The writer is director of the Higher Education Policy Institute

education@independent.co.uk