Howard Davies: Why the begging bowl has an important role

Summer is here, just about, so once again we have another higher education minister in the form of Bill Rammell, back in Parliament by the skin of his teeth, courtesy of just 97 Labour voters in Harlow.

When the appointment was announced, the press had some innocent fun at his expense, recalling his determined opposition to top-up fees when still a backbencher in Labour's first term. He described them then as "a significant step too far", which would be "enormously damaging to both universities and prospective students alike".

The criticism was a touch unfair, I thought. We want backbench MPs to speak their minds, surely, yet we know that once in government, they must toe the party line. Rammell is not the first politician to have to make a few compromises on taking office and, in any event, the policy he must now defend is by no means identical to the one he attacked in 2000. The concessions made in the course of last year's lengthy parliamentary scrutiny of the Higher Education Act have rubbed down some of the hard edges he identified. The bursary schemes now in place are far more extensive and generous than might have been envisaged five years ago.

But the speech from which his comments on top-up fees were drawn, made in a debate in the House of Commons on 28 July 2000, is worth a read. It is remarkable for two other things. First, he is surprisingly hostile to the Russell Group, accusing it of all kinds of crimes and misdemeanours, and particularly of believing "that the best in higher education is limited to a small group of élite institutions". I suppose, as a member of this dangerous sect, that I should be flattered that its pronouncements are taken so seriously. But there are clearly fences to be mended, and I imagine the carpenters are hard at work.

Second, and more worryingly, Rammell showed himself to be highly sceptical about the prospects for increased philanthropic support for universities. He was not convinced, he said, that "a system of charitable postgraduate donation [sic] would ever be fully accepted in this country" and that, in any event, "this country is light years away from achieving" the level of donations US schools receive.

For those of us paid to rattle the academic begging-bowl around the globe, this is disappointing - especially at a time when there are signs of growing willingness among alumni both here and overseas to help their Alma Maters. Of course, we have a long way to go to rival the Ivy League, or even some of the state colleges in the US that now raise big sums from alums. Kansas State has an endowment of more than $1bn (£550m), for example. But at the LSE, the introduction of top-up fees has itself caused some donors to come forward with support for students. Stelios Haji-Ioannou, of easyJet fame, is funding 10 undergraduate scholarships of £5,000 a year for the next decade, at a cost of about £2m. Our list of scholarship donors is growing rapidly.

The Department for Education and Skills (DfES) itself has promised some pump-priming funds to help universities upgrade their fundraising efforts. Universities UK is helping to work out how best to spend that money. And there was an intriguing, little-noticed reference in the Labour manifesto to possible incentives for future donations. (I'm not sad enough to have read the whole thing, honest.)

The key sentence is: "We will incentivise all universities to raise more charitable and private funding for student bursaries and endowments." There was more detail, but the implication seems clear: either there will be more generous tax breaks - perhaps as recommended by Eric Thomas of Bristol in his report last year - or the Government will provide matching funds to leverage private donations.

Either route (and the second would be best) could give a significant boost to university income across. Clearly, there would be a need to ensure that the fund was not dominated by the well, or better, endowed. But ways of achieving that, via a cap per institution, can be found. Let us hope that Rammell can overcome his doubts about philanthropy and push this aspect of government policy forward.

Perhaps if the Russell Group said it was opposed to the idea, that would get things moving. It's an idea for our next meeting.

The writer is the director of the London School of Economics