Treasury planning charge on students: Vice-chancellors want Government to bring in tax for graduates to offset university costs

PROPOSALS to make wealthier students pay their university tuition fees are expected to emerge from the public spending review being conducted by the Treasury this summer.

Many vice-chancellors, however, are hoping that the Government can be persuaded instead to consider levying an extra tax or additional National Insurance charge on all graduates. The Committee of Vice- Chancellors and Principals is preparing proposals, but its approach has always been opposed by the Treasury, on the grounds that it takes several years to recoup the Government's outlay.

The Department for Education has traditionally resisted charging students tuition fees, either because it would represent a tax on the middle classes, or because it might deter poorer students from going to university. The Prime Minister has opposed the proposal for similar reasons.

The Independent on Sunday yesterday disclosed that the London School of Economics is floating the possibility of charging its students for tuition - a move which Government officials see as the first step in a mounting campaign by university vice-chancellors to find alternative ways of increasing their funds.

Universities say they have come under increasing financial pressure during recent years, because student numbers have doubled since the mid- Eighties. The Committee of Vice- Chancellors and Principals, in their spending bid this year, said they needed more than pounds 3bn to pay for new buildings and equipment to cater for taking in nearly one-third of school- leavers.

The Government has intensified the pressure next year by cutting the tuition fees it pays for arts and social sciences students from pounds 1,855 to pounds 1,300. That move is designed to restrain the very rapid expansion in the most popular subjects, in the hope of diverting more A-level leavers towards courses such as science and engineering, which are easier to get into, and where more graduates are needed. Next year, those kinds of courses will attract tuition fees of between pounds 2,770 and pounds 4,985 for each student.

John Ashworth, the LSE's vice- chancellor, who is considering levying a charge of pounds 500 on his students, sparked an extraordinary vote at a recent meeting in Birmingham by touting the introduction of a system similar to that which operates in Australia. John Patten, Secretary of State for Education, asked the audience of about 100 vice-chancellors and administrators for a straw poll on whether they favoured such a scheme, and virtually all raised their hands in favour.

It is not clear, however, that all of them realised what they were voting for: many probably thought they were supporting a graduate tax to recover students' living costs, rather than a tax to repay tuition fees. Baroness Perry of Southwark, the Tory peer and vice- chancellor the University of the South Bank, recently argued in a House of Lords debate that a graduate tax would be the most effective way of relieving student hardship while continuing to increase the number of university entrants.

In the Australian scheme, graduates repay the cost of their tuition by starting to pay 2 per cent more tax when they earn more than pounds 13,000 a year.

Proponents of a similar scheme in Britain argue that graduates can expect much higher lifetime earnings and the burden of paying for a university education should not fall entirely on the general taxpayer.