Bill Rammell: Why top-up fees make sense for students

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In September a new fees system is being introduced, heralding a new start for English universities. It will mean a step change in funding to support world-class higher education.

It was the right thing to do, as well as the radical and socially just thing to do. And the change was made in the teeth of fierce opposition. Looking at the UCAS figures for this autumn, published today, I believe that our opponents are being proved wrong. We were told that variable fees would lead to applications plummeting, particularly from young people from less well-off backgrounds. Well, that isn't happening.

This autumn we are seeing a small decrease (3.9 per cent) in applications on the back of a larger than usual increase (9.1 per cent) at the same point last year. It's as we expected, and is what happened when tuition fees were first introduced in 1998. Then, there was a small reduction, after which applications continued upwards. The underlying trend is still up. Over the two years straddling the introduction of the 2006 variable fee system, applications from students in England are up by 4.8 per cent. Crucially, the proportion of applicants from lower socio-economic groups has not fallen.

So why, in the face of fees, are applications holding up? The new system of student financial support is better and fairer than the existing one. There are no up-front fees, and no one repays a penny until they've left university and are earning more than £15,000 a year. Then, on the average graduate starting salary of £18,000 a year, repayments are as little as £5.19 a week.

Moreover, we're re-introducing non-repayable grants worth up to £2,700 a year for students from less well-off families who will also benefit from £300m in non-repayable bursaries from universities and colleges.

Awareness of the new system has risen significantly, but we still need to do more to get the facts across. That's why the Government, supported by partners including Universities UK and the NUS, will be continuing a big communications campaign.

Students understand that investing in their own education is a good deal. The average graduate will earn well over £100,000 more during their working life than someone with just two A levels. And the recent "Class of 99" research showed that students value higher education. Graduates were asked whether, given the choice again, they would still choose to go to university. A staggering 96 per cent said yes. I can think of few activities in life which would get such a strong post experience endorsement.

I believe that students increasingly recognise the underlying fairness of the new system. Given the substantial benefits to the individual, it is only fair that the individual repays some of the cost, but on a fair and affordable basis. There is a case grounded in social justice for the new system. The former vice chancellor of Brunel University, Professor Stephen Schwartz, argued that if you fund higher education exclusively from taxation, even in these days of increased participation, you preside over a net transfer of assets from the working classes to the middle and upper classes. Karl Marx said something similar. The case for fees is not regressive.

Critics claim falsely that graduates will be crippled by debt in the new fees regime. But there is no real rate of interest; you only pay back when you're earning more than £15,000. If you're not earning that much, your repayments are frozen. And if there's still money to pay after 25 years, the amount will be written off. If this offer were available to anyone, there'd be queues along high streets to the bank.

What of Labour's political opponents? The Tories opportunistically opposed the change when the legislation was going through parliament. They now quietly support it. The Liberals still tell students they oppose the new system, yet the Government in Scotland supports a graduate repayment system no different in principle to the new English system. In the real world, their stance is called hypocrisy.

Some opponents argue that we don't need more graduates, that we should keep an elite system where the privileged few don't have to repay their fees. I wholly reject this view. A degree is still the best passport to a secure working life. We should spread this advantage as widely as possible.

And there's a real economic imperative for Britain to have more graduates. Recent research suggests that 18 million jobs will become vacant between 2004 and 2020, half of which will be in occupations likely to employ graduates. Our competitors have higher university participation rates; China and India turn out millions of graduates a year.

We need more graduates. The new funding system is the fairest way to deliver them. Access to university has never been fairer and it's the best investment a student will make.

The writer is the Minister for Higher Education