The funding of higher education remains deficient

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For all those universities given the green light by the Government's Office for Fair Access to charge students £3,000 a year from 2006, the outlook looks considerably less bleak this morning. At last they have been guaranteed the income they so urgently need, and without which they would have inevitably slipped into long-term decline.

For all those universities given the green light by the Government's Office for Fair Access to charge students £3,000 a year from 2006, the outlook looks considerably less bleak this morning. At last they have been guaranteed the income they so urgently need, and without which they would have inevitably slipped into long-term decline.

But the announcement also highlights how deficient our higher education funding mechanism remains. The primary objective of tuition fees was to guarantee more funds for our universities - all of which have been struggling financially as a result of the Government's drive to send 50 per cent of school leavers into higher education. While the money from fees will help, it is by no means enough. It is estimated that universities require some £8bn a year if standards are to be maintained. The extra revenue from the new system will only add up to £1.3bn. The £3,000 cap on fees - inserted into last year's tuition fees Bill to appease Labour backbenchers - must be raised.

Another reason for raising the cap is to ensure there is a proper market in the provision of higher education. More than 90 per cent of universities will charge the maximum fee. This means there will be almost no price differentiation among degree courses next year. At the moment, the pressure on universities to increase revenue is greater than the pressure to attract students. Only when universities are permitted to charge something approximating to the true worth of a particular course will there be real competition. And competition is the only way to guarantee the higher education standards our economy demands.

Of course, it is important that those from poorer backgrounds are not put off by the size of the fees (although it must be remembered that these will not be paid back until after graduation). For this reason, the generous bursaries and incentive schemes announced yesterday are welcome. The flourishing state of many American universities shows that such schemes are effective.

The first hurdle in reforming the funding of our higher education system has been cleared. But there is a considerable distance still to be covered.

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