Pay up to revive our universities: The Micawberish drift on funding higher education must end, but charging students holds dangers, says Peter Scott

CHILD benefit is threatened, 'hotel' charges in hospitals are not ruled out, invalidity benefit is under review. It is hardly surprising that universities - now swollen to more than 80 following the translation of the former polytechnics - have fallen low in public expenditure priorities. This is why vice-chancellors are looking for new ways of raising money. And some believe that the answer is to charge their student customers, thus ending the tradition of 'free' higher education.

For almost two decades the growth of student numbers has outstripped the increase in university budgets. The amount spent on each student has fallen 20 per cent in the past five years. To Whitehall, this is impressive evidence 'of productivity gains'; to the universities it is summed up in a four-letter word - cuts.

Inadequate revenue, year after year, has led to under-stocked libraries, ageing laboratories, outdated equipment and under-paid lecturers. This has serious consequences for research excellence - many university leaders fear Britain is about to slip out of the premier division - and for the quality of the student experience. Students - like parents, taxpayers and rail passengers - will soon have one of those vacuous government charters. But it will not compensate for crowded classes and cancelled courses.

But that is only half the story. Most university buildings date from the 1960s, and were not robustly built in the first place. Inadequate revenue has meant skimped maintenance, while the buildings are used more and more intensively by ever greater numbers of students, exacerbating the maintenance backlog. And more space is needed. Today's 1.2 million full and part-time students are accommodated in buildings designed for, at the most, two-thirds of that total.

This alarming mismatch has forced vice-chancellors to look more urgently than ever before at alternative sources of income. John Ashworth, director of the London School of Economics, has proposed that LSE students should be charged a pounds 500 annual premium on top of the standard tuition fee, normally paid on the student's behalf by his or her local authority.

It is not the first time that he, and his more radical supporters on the vice-chancellors' committee, have attempted, with a headline-grabbing initiative, to bounce their more timid peers into supporting 'top-up fees'. But each year the case is a little stronger - not necessarily for top-up fees (it is no more true of university finances than of Thatcherite economics that 'there is no alternative'), but for an end to Micawberish drift. Universities have been taking students today in the hope that they will be paid for tomorrow. The tactic has not worked. The only result has been to increase the Government's appetite for further 'productivity gains'.

Top-up fees are certainly an option. But there are powerful objections. First, student demand would be depressed, most severely among the disadvantaged social groups that are supposed to benefit from the Government's policy of widening access to higher education. Scholarships could be offered to overcome these awkward arguments about equity. But this would mean going back to the bad old days when a few bright but poor students were allowed into universities dominated by gilded youth, or, at any rate, the less poor. And generous scholarships would eat up the extra revenue produced by top-up fees.

Second, only a minority of elite universities could get away with charging top-up fees: students would probably be willing to pay a premium to attend the LSE, Oxford or Cambridge, but not the former polytechnics. And those universities would probably find that charges distorted their primary purpose - to serve the whole community - rather as the pressure to recruit financially lucrative overseas students has done.

Finally, if top-up fees generated significant income, this would further weaken the universities' claims on public expenditure. Of course, public support would not be cut pound-for-pound. Professor Graeme Davis, chief executive of the Higher Education Funding Council for England, promised last week that any top-up fee income would not be taken into account in deciding individual university budgets. But it is nave to imagine that a hard-pressed Treasury would be blind to a build-up of private income for very long.

The universities' favourite option for raising more money, however, is not that they should charge top-up fees but that the Government should impose a graduate tax - on future graduates, that is, not present ones. Advocates point to the apparent success of Australia's graduate tax. But the Australian tax is a recent imposition - so its long-term deterrent effect cannot yet be properly assessed. Nor is it really a graduate tax. Rather it is a student loan, to cover tuition as well as maintenance, which is repaid through income tax.

A graduate tax runs into the same principled objections as top-up fees, although less painfully. But again the main drawbacks are practical. Britain, compared to many of its economic competitors, is an under-educated country. Is it sensible to create further disincentives to learning? If graduates do have higher life-time earnings than non-graduates (which is by no means invariably true) they will pay more tax anyway. So why invent a new tax? Indeed, how could the Treasury be persuaded to guarantee that universities and colleges would receive the proceeds of a graduate tax?

Back to square one. Must universities continually erode their standards? Not necessarily. Both the universities and the Government need to confront the realities created by mass higher education. The universities must recognise there is no going back to the generous income naturally enjoyed by an elite system. A high-volume system must inevitably also be a low-cost one.

That, after all, is the principle on which Henry Ford launched a mass manufacturing revolution almost a century ago. This does not mean that a small number of universities should not be funded on an elite, or even super-elite, basis. Indeed the development of mass higher education strengthens the case for giving a few universities preferential treatment so that they can compete in the international super-league.

But these are decisions - about the kind of higher education system the country wants and is willing to pay for - that should be made by elected politicians, not by unelected vice-chancellors. The Government must stop playing games with universities. One minute it treats them as autonomous and virtually private institutions responsible for their own fates. The next, it treats them as public institutions whose work must be audited and assessed in fine detail - all universities, including Oxford and Cambridge, must now have their courses vetted for academic quality - and thus subject to an oppressive bureaucracy.

Britain's universities often seem to have the worst of both worlds. They are denied the billion-dollar budgets and private-sector autonomy of Harvard or Stanford. But neither do they receive the benefits of being public institutions, unlike universities in the rest of Europe, for example, or the American state universities, which exploit the division of political powers by tough lobbying for more money. Here, ministers wield power but refuse to take responsibility for the future of higher education. The universities are left struggling to exercise responsibility without power.

The author is Professor of Education at the University of Leeds.