Whitehall moves to centralise funding could threaten university independence, it emerged this week. Tuition fees could turn out to be little more than a tax on students that would put more money in the hands of central government but not benefit universities.
Civil servants are understood to be recommending axing the tuition fees the state pays to universities through local education authorities. Instead fee money, except for the Pounds 1,000 from students, will be channelled through the funding councils.
Government education departments would therefore be able to earmark savings for priority projects. How much of the savings resulting from student fees goes to universities has now become a matter for negotiation in the current spending review.
Senior sources say that, effectively, the local authority tuition fees would be absorbed into the funding council grant. Civil servants believe it is pointless having the separate tier of university funding channelled through LEAs.
Education ministers are fighting to keep the money for higher and further education. Brian Wilson, Scottish education minister, said: "There is no question of contributions being siphoned off to cover administration costs. Higher education institutions will retain the fees they collect from students."
In a letter to The THES education minister Kim Howells said: "There is no truth in the suggestion that a decision has been taken to reduce public funding for universities in direct proportion to the new fees to be paid by students from next year. David Blunkett made it clear in his statement on July 23 that the Government's proposals would mean more money for universities as savings became available."
Ministers are understood to be reassuring the sector in private that any tuition fees savings would be ring-fenced for further and higher education. It is not clear, however, whether the Treasury accepts this view.
Dr Howells's letter said: "Decisions on university funding in 1998/99 and thereafter will not be taken until the review has been taken forward and any attempt to offer a view on the outcome amounts to speculation."
The Committee of Vice Chancellors and Principals is lobbying for more money in the spending review to reduce the cuts planned for universities in the next two years. Martin Harris, the CVCP chairman, said this week: "The CVCP has always said that the proposed new fees must lead to a net increase in the resources available for teaching students. We cannot pass judgement on the outcome until we see the expenditure statement."
One fear in higher education is that whatever the DFEE wins in the spending review will go to further education rather than to universities, following the recommendations of the Kennedy report.