Education: Fees fail to bridge universities' growing funding gap

Universities are facing a funding gap of half a billion pounds by the millennium despite the Government's plans to charge students more, MPs say today. Although the report backs pounds 1,000-a-year bills for fees, Fran Abrams writes, it will fuel the campaign against them.

The reforms would be "all pain and no gain" in the short term, said the chair of the Commons Education and Employment Select Committee, Margaret Hodge.

Without more resources, student poverty would continue and a cap on student numbers would remain in place, she said.

She supported the Government's decision to impose a pounds 1,000-per-year fee on students and to phase out maintenance grants.

"But the money will not be on stream soon enough. It will not protect provision over the next two years," she said.

The committee heard that pounds 165m extra given to universities for 1998-99 would not help in the longer term. By 1999-2000 an additional pounds 565m would be needed, only pounds 100m of which could be met through fee payments.

The committee recommended two solutions to the problem. First, it said, universities could take over the running of the student loans scheme themselves. By establishing a not-for-profit trust and borrowing money on the markets with the Government as a guarantor, they could get good rates of interest and would channel repayments into their own funds. This would free up government expenditure for other things, including extra funding for universities.

Second, the Treasury could change its accounting system so that loan payments to students could be removed from the public spending totals. Thus, the fact that they would eventually be repaid would be taken into account, and extra money could be freed up. However, this would not create a "pot of gold", the committee said.

The report on Sir Ron Dearing's recommendations on higher education and the Government's response to it led to a split among Labour members of the committee.

Two Labour members, Gerry Steinberg and Joe Benton, argued that the Government had been wrong to introduce tuition fee charges.

An amendment to the report, proposed by Mr Steinberg and backed by Mr Benton as well as by Liberal Democrat and Conservative members, said the charge would deter young people from lower income backgrounds from going to university. It was defeated by the Labour majority on the committee.