Universities: Can Europe rise to the US challenge?

European universities are second-rate compared to their American counterparts. Lucy Hodges finds out why

The best universities in the world are in the USA, according to global league tables. Top of the pops comes Harvard, followed by Cambridge in the United Kingdom, seven other American universities and in 10th position, Oxford. This top 10 ranking has been calculated by Shanghai's Jiao Tong University, the first of the global league tables.

It is controversial because the criteria used are inevitably subjective. The Shanghai people rank according to Nobel prizes, researcher citations, articles published and academics' performance. Who is to say that other criteria are not just as important in judging the success of a university? However, the stark message in the published rankings is that they are dominated by America, says a new pamphlet published by the Centre for European Reform. Most of the big European countries are hardly represented at the top of the tables.

The 2005 ranking has 36 universities in the top 50, and just nine are from Europe, of which five are in the UK and one each from Switzerland, Sweden, France and the Netherlands. The authors of the pamphlet, Richard Lambert, former editor of The Financial Times and the next director general of the CBI, and Nick Butler, of BP, throw in many more statistics to show that Europe lags behind America in many subjects - computer science, high technology and economics, to name three.

Its share of Nobel prizes has declined dramatically in the last century. "These figures tell a grim story for Europe," they say. "How can it hope to become 'the most competitive and dynamic knowledge-based economy in the world' - when most of its best universities are so clearly in the second division?" One of the problems is that European universities are seriously underfunded. Another is that they have been run by the dead hand of the state for many decades and therefore have little autonomy and poor systems of governance.

"There is a drab uniformity across the sector: many institutions are struggling to cope with growing numbers of students and inadequate resources, delivering uninspiring teaching in dilapidated buildings," say Lambert and Butler. By comparison, the USA has fewer than 100 recognised research-intensive institutions. To be successful European universities are going to have to undertake more world-class research, which means that more money will have to be concentrated in the best places.

This is controversial stuff for many Europeans who, unlike the British, have not had to learn to live with a Research Assessment Exercise that rates university departments against one another. Lambert and Butler have a raft of recommendations. To increase funding for higher education they make another politically controversial proposal - tuition fees should be introduced across the Continent.

Some European countries have begun to introduce fees, notably the UK. And some German Länder are preparing to charge 500 Euros a semester (1,000 Euros a year). But these have caused huge political ructions. The three biggest EU countries, France, Germany and the UK, invest the least in higher education, around 1.1 per cent of GDP. The pamphlet would like to see European governments committing themselves to spending two per cent of GDP on their universities.

Chancellor Gordon Brown appeared to make the first tentative step towards doing this at the launch of the report in Downing Street last week when he said that he was ready "to enter the debate" on how funding in England could be increased from private and public sources.

But the most important reform that universities can make is in governance, Richard Lambert says. The case of the Netherlands illustrates this. "Forty years ago, Dutch universities had no institutional personality," he says.

"They were parts of the state. They had no capacity to run themselves or set institutional priorities or develop comparative advantage." But since being given autonomy by the government they have flourished. The universities of Groningen, Leiden and Utrecht are now among the most dynamic in Europe.

Denmark is also making reforms, but other countries have made much less progress. In Spain, the government devolved certain powers from the state to regional authorities. But there was trouble when it proposed that Spanish academics should take on more research and teaching. In Germany, some Länder micromanage their universities to the extent of insisting that bureaucrats have to approve trivial payments such as trade union dues. In Italy, the finance ministry's writ runs wide. That means, for example, that the appointment of professors can be delayed until Rome dispenses the cash.

In France, academics and students in public universities tend to be very conservative and strongly opposed to change, says the pamphlet. In 2003, tentative plans to give universities a degree of autonomy were halted by academic and student protests. If European universities are to argue for more funding, they must show they can manage their existing resources properly, say Lambert and Butler. Their pamphlet recognises the important reforms that are taking place in European universities as a result of the Bologna process.

This is setting up a system whereby degrees across the Continent can be compared with one another and is leading to many countries to rethink completely the curricula and length of their courses. But Lambert and Butler have their critics. "They underestimate the extent and nature of the changes that have taken place," says Professor Sir Roderick Floud, vice president of the European University Association.

"It's not overstretching it to say that there has been a revolution in higher education in Europe in the last seven years which gives the lie to their remarks about universities being slow to change. I think universities have changed more in the last seven years than in the 150 years before that."

Stephen Adam, a principal lecturer in politics at the University of Westminster and an expert on the Bologna accord, agrees. "The pace and nature of change under Bologna is absolutely unbelievable," he says. "The whole thing is reforming antiquated education systems."

According to Anne Corbett, a visiting fellow at the London School of Economics and an expert on France, many European countries would not recognise the picture that is painted of them in the pamphlet. There has been major reform of degree structures in France, for example, she says. The critics also complain about the emphasis that the pamphlet puts on selective funding of research - concentrating money in strong institutions rather than spreading it across all. Sir Roderick does not believe that selectivity will enable Europe to compete with the USA. "We need enormous increases in funding," he says. "And our universities are simply not big enough to compete with American ones. You can have whatever selectivity you like but it won't make up that gap."

The pamphlet was, however, welcomed for being thoughtful and provocative. According to Richard Yelland, of the OECD's directorate for education, Lambert and Butler are right to make funding and governance key issues in university reform.

'The future of European Universities, Renaissance or decay' is available from the Centre for European Reform, 29 Tufton Street, London SW1P 3QL; 020-7233 1199