Top-up fees: a battle rages

Ministers are at war over universities charging more for tuition. The issue is thought to have led in part to Estelle Morris resigning. Now, reveals Lucy Hodges, Number 10 and the dons are arguing about bursaries for poorer students. Will the Government come unstuck?

A couple of days before Estelle Morris, the former Education Secretary, fell on her sword, she went to see Tony Blair to tell him that she didn't see how she would be able to sell top-up fees to the British electorate. The Prime Minister, according to a well-informed source, told her that she would have to, and that she should get on with it. Is that another reason why she decided to throw in the towel?

Top-up fees are suddenly on the agenda with a vengeance, and are expected to be included as an option in the delayed White Paper on higher education to be published now on 16 January 2003. Ms Morris's successor, Charles Clarke, has asked for more time to get his head around the issue, and will be busying himself over Christmas with the pros and cons, and with how to sell the idea to parents who have been used to paying little until now.

This is an extremely hot political potato. Giving universities the freedom to charge more than the flat-rate £1,100 could mean middle-class parents having to find several thousand pounds more a year to pay for their offspring to get a degree. Imperial College, London may be planning to charge up to £10,500 for their most expensive courses, but most universities envisage charging much less – £2,000-£3000, and that includes the flat-rate fee already being paid.

It will, arguably, be an electoral vote-loser, which is one reason why ministers are at loggerheads over it. The Chancellor of the Exchequer, Gordon Brown, is thought to be particularly worried about the electoral consequences. If Labour goes into the next election arguing for top-up fees, it is bound to find the Conservatives and Lib Dems committed to no extra charges. And that could swing substantial numbers of voters against the Government. Is it worth the risk?

This is one of the political problems that Charles Clarke will be pondering; another is the idea that people from poorer families will be put off applying to university on the grounds that it is expensive. The Government intends to put in place a system of bursaries to fund disadvantaged students (about which, more later). Nevertheless, the notion that it costs serious money to go to university could deter those who come from families who have no savings and are debt-averse. "I don't believe the sums stack up," says Tim O'Shea, vice-chancellor of Edinburgh University and a strong opponent of top-up fees. "Even if you charged better-off parents the sort of sum being mooted by Imperial College – £10,500 – you would still not get enough money to pay all those who need it from more disadvantaged homes."

The opposition parties will, of course, make maximum hay from such arguments. So, ministers are going to have to be extremely clear about how they are going to sell such a potentially unpopular policy. First, they will make the point that university education brings a huge private benefit to individuals, enabling them to earn considerably more than non-graduates. Why should taxpayers who don't go to university subsidise those who do, as has been happening for the past half-century, particularly when undergraduates tend to come from well-heeled families anyway? So, it is, first and foremost, a matter of equity.

Second, it is a question of what is pragmatic. Taxpayers are probably not prepared to dig ever deeper into their pockets for higher education. But universities' bills keep going up. And higher education has now become a global business, with the top universities pitted against one another for postgraduate students, research money and staff. How can we compete with Harvard or Princeton when our universities are run on a shoestring?

Tony Blair said last week that universities desperately need the freedom to charge more. "We cannot go on with a situation in which our top universities are not able to compete in what is effectively a world market today," he told MPs. What the Prime Minister didn't say, but should have done, is that whatever the new system of student funding, it should not and would not discriminate against poorer applicants. He needs to repeat that promise whenever the subject arises, say his friends. The Government is deadly serious about ensuring that poorer students are not deterred from going to university, and should get that message across.

The majority of vice-chancellors from old universities say they would charge if free to do so. Among their number are the heads of big civic universities belonging to the Russell group and the 1994 group, the small- but-beautiful institutions such as Essex and Sussex. "My view is that the market would bear higher tuition fees for a substantial number of universities, not just the Russell group, and for most subjects," says Professor Ivor Crewe, vice-chancellor of Essex University. Only two or three universities would be able to charge the high fees mentioned by Imperial. In that group one might find Oxford, Cambridge, and maybe a university such as Bristol. But Sir Colin Lucas, vice-chancellor of Oxford University, says that Oxford would charge the difference between the cost of teaching and the amount it received from the Government for teaching. That amounts to £2,500 a student. So, expect Oxford to charge that, plus the £1,100 flat-rate, making a total fee of £3,600 a year. Neither Cambridge nor Bristol are going to want to charge big sums either.

Scottish universities, which operate a different funding system from that in England and Wales, are not expected to charge top-up fees – though if their competitors south of the border do, they will come under pressure to do so. Nor are most new universities. "I don't think we would charge," says Mike Brown, vice-chancellor of Liverpool John Moores. "We would not want to do so. Our whole ethos is about providing opportunities for everybody from all quarters of society, no matter what their means."

To overcome allegations that top-up fees will deter people from disadvantaged backgrounds, the Government is committed to putting in place a system of bursaries. But there is a big quarrel about how to do this. Andrew Adonis, head of the Downing Street Policy Unit, wants the bursaries to be provided by the universities themselves. Thus, Oxford would collect extra money in top-up fees from families who can afford them and recycle that money to those who can't. The Department for Education and Skills wants a national bursary scheme to be established into which the universities put the extra money that they are able to collect from better-off families. That cash would then be recycled from a national pot by central bureaucrats to universities. Universities UK, the umbrella group for higher education, is behind the DfES's position on the grounds that a lot of universities, notably the new universities, have so few better-off students that they would be able to collect only a small sum from them to recycle to the less well-off. Thus a two-tier system of universities would become even more entrenched, with the new universities being funded at an even lower level than they are now.

The Adonis camp counters that the whole point of the reforms is to ensure that Britain's top universities can compete internationally. We need to create a marketplace in education, they argue, and to reward those institutions that are world players. Doling out the extra top-up fee money from a central pot would hardly be setting the universities free to decide their own destinies. Rather, it would just continue with the same old equality of misery.

We are likely to see a patchwork quilt of differing policies when and if fees are deregulated, much more like the system in America. Most of the old universities are likely to charge more, but it won't be the huge sums mooted; most of the new universities won't charge extra, though some might charge for certain courses. Most higher-education colleges will probably not charge either, though some, such as the Royal College of Music and the London Institute, which incorporates five colleges including Central St Martins and the London College of Fashion, might do so.

If the Government were clever, and able to find the money, it would introduce a funding system on the Scottish model whereby students pay no upfront fees, say many vice-chancellors. Instead, students pay back the cost of their education once their earnings have reached a certain level after graduation. That is loosely called a graduate tax. It puts the onus of payment on to the student rather than the parent, and does so at a point when the student is earning a reasonable sum. It therefore spikes the political objections to charging for higher education.

The problem is that it is opposed by the Treasury on the grounds that it would take 20 years for a decent income stream to start coming in. Vice-chancellors such as Drummond Bone, of Liverpool University, believe, however, that the Treasury may be overdoing its pessimism, and that making higher education free at the point of access is so attractive that every effort should be made to do so.

Another way the Government could sweeten top-up fees is to introduce a cap on them to prevent institutions overstepping the mark. It could also bring in a savings scheme with tax breaks for parents as happens in the United States. Changes would need to be phased in and would not be introduced before the date of the next election, which would take place in 2006 at the latest. Smart parents with offspring hoping to go to university after that are advised to start saving now.

l.hodges@independent.co.uk