How much of tax payers' money should be spent helping students at university?

Last week's recommendations from the CBI on student funding have aroused fierce passions because they suggest that students should be the ones to bear the brunt of cuts that are now seen as inevitable. The CBI task force, which included several university vice chancellors, including Rick Trainor, the principal of King's College London, and Madeleine Atkins, the vice chancellor of Coventry University, proposed a triple whammy of cuts in maintenance grants, higher fees and increased loan repayments.

The National Union of Students has described the cuts as "offensive" but other commentators are approving. Both the Russell Group of leading research universities and the 1994 Group of small but elite institutions have welcomed the report. Certainly, the received wisdom among a number of respected university finance experts is that higher fees are needed to ensure that universities are properly funded and to encourage a marketplace. Raising the fees' cap to £5,000 a year from the current £3,145 is regarded as the minimum necessary.

Moreover, turning the clock back on maintenance grants to the pre-2007 situation, when Gordon Brown surprised everyone by announcing more generous grants, is not regarded by experts as particularly draconian. And introducing a market interest rate for student loans is also seen as a sensible way of raising more money for higher education. As it is, students are able to borrow money extremely cheaply on their student loans.

The reason that those who run Britain's most prestigious universities favour this kind of solution is that they don't want to see cuts to their teaching or research budgets because such cuts would affect the quality of what goes on our higher education institutions. They are keen to protect that quality so that the international prestige of British higher education remains unaffected and so that the UK is more easily able to escape from recession.

But it would be wrong to dismiss the complaints of the NUS and the new universities. Public opinion is a powerful force as Tony Blair found to his cost when the top-up fees legislation was going through Parliament. Students are politically important, certainly in some constituencies, and they need to be listened to. The activists among the Liberal Democrats who have the students' interests at heart have managed to call the shots and ensure that the party adopted a policy of scapping fees - until now.

Now their leader, Nick Clegg, is insisting that this policy can’t be implemented because the public finances are so bad. It is a wise move and may persuade some voters that the Lib Dems are embracing reality - and that Clegg is showing some welcome leadership.

These debates are important. Taxpayers need to decide where scarce public money should be spent. Can we afford to continue to spend so much of it on helping students at university? For years development experts have pointed out how much more bang for their buck governments get by spending money on younger rather than older children.

Primary school education, for example, yields immense benefits to countries both economically and socially. Secondary and university education brings rewards too but they are not so impressive. And university education also gives individuals a great deal of private benefit - they earn more and have better jobs than people without degrees. How much help do non-graduate taxpayers want to give such people?

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