Privatised universities and a graduate levy are two of the favoured options for higher education funding over the next decade, according to a report published today.
The report, carried out for Universities UK by Sir William Taylor, recommends four main funding options for the future. Vice-chancellors will discuss them at today's UUK meeting in Newcastle.
Sir William's report, New Directions for Higher Education Funding , concludes that higher education cannot meet society's aspirations without more money. UUK puts the annual funding gap at up to £1 billion.
The report examines the strengths and weaknesses of four money-raising options:
- Increased public funding raised through taxation
- Upfront differential tuition fees set at market rates and backed up by scholarships for students from the poorest backgrounds
- Income-contingent contributions paid by graduates after the completion of their courses
- Institutional endowment, which could be combined with market fees or graduate contributions. University endowments are Conservative Party policy.
The funding debate has been sharpened by education secretary David Blunkett, who ruled out differential tuition fees two weeks ago. He said there would be no top-up fees for the duration of the next parliament, should Labour win another term.
The education secretary is entitled to withhold public funding from any university that charges more than the maximum fee.
Mr Blunkett's announcement pulled the rug from under the feet of vice-chancellors, some of whom favour charging undergraduates more for tuition, and partly pre-empted Sir William's report.
The report points to a bleak future for higher education in the absence of significant extra money. Funding per student has fallen by 38 per cent in real terms since 1989, leading to a deterioration of staff:student ratios, run-down laboratory and library facilities and demoralised lecturers and researchers.
The report estimates that an extra £620 million is needed for teaching and learning. Adding the cost of equal pay for equal work pushes the total requirement to £900 million.
Vice-chancellors realise that higher education is unlikely to benefit significantly from any decision to increase public spending. Schools and the health service are higher priorities.
This leaves vice-chancellors considering an income-contingent graduate contribution and the public endowment of universities.
Tony Bruce, policy director at UUK, said: "We hope the discussion will lead to conclusions that we can present to ministers in the administration that comes after the general election. It looks like there will be another spending review in 2002.
"There is some attraction in particular to the endowment but there is a question mark about whether it is for the whole sector or not. The Conservative proposal is to continue to control fees and, while that does not increase the flexibility of universities, it is clearly of interest to some of our members."
Mr Bruce said that an income-contingent graduate contribution "would be a radical change, moving away from a means-tested situation to one where everybody has liability for paying tuition fees. Replacement public funding would also have to be found to replace the upfront tuition fee. There is no clear-cut answer. Each option has its advantages and disadvantages."
Major changes to the funding of higher education could take more than five years. This could put differential fees back on the agenda, as Mr Blunkett ruled them out only for the duration of the next parliament.
Vice-chancellors are split on the way forward. Some had already welcomed both endowments and graduate contributions.
Gillian Slater, vice-chancellor of Bournemouth University, said: "The Conservative proposal for public endowments is an interesting idea that should be explored further. However, it would not be acceptable for ten institutions to be endowed and 90 not. It would have to be a sensible cross-section of universities. We need to have a long, close look at the funding of higher education, involving another Dearing-style review after the general election."