...Adam Smith should be our guide

For a sound, self-sustaining and truly inclusive system, Graham Hills argues...

The business of student fees is about to be bungled again - by the Government, by the political parties in their manifestos, by the universities now beaten into servitude, and by the student body whose only concern is cash. Everyone will vie to be the most generous with other people's money. They know but will not admit that Paul can be paid only by robbing Peter.

Of course, this sorry business is no business at all. Any other business with a budget of billions would worry about the costs and benefits of what they do. If Adam Smith were here, and not just on the £20 note, he would remind us that the only people to meet those costs are the customers.

And who are the customers? The students, of course.

To thrive like any other enterprise, universities must rely on their customers to pay their way. That way lies the economic fee they must charge to proffer the best education.

Everyone knows, though, that few students could ever meet those fees unaided. Worldwide, they do so by scholarships or bursaries. The reform that I would advocate is that the economic fee of every student should be and can be met in full by means of one lifetime entitlement to a three-year undergraduate course in the university of their choice.

There is nothing new in the money following the student. It just got lost in the determination of successive governments to rule the roost of higher education. Somewhere along the road we overlooked the fact that the government that governs best is the government that governs least. With devolution behind us, we could honour the Robbins proposal that promised higher education for everyone who could benefit from it. That is the ultimate in inclusivity and it is affordable. The Govern-ment invests large sums of money in education. The plea here is for it to do so moresensibly.

The undergraduate bursary becomes, in effect, a cheque for, say, £5,000 a year for three years. This would be payable in advance and could be cashed by the university of choice. It serves the following purposes:

• It meets the basic fee
• It supplements, rather than blunts, the pleasure felt by parents at the achievement of university entrance
• It establishes in the mind of governments and industry the true cost of university education.

But is this financially feasible? The answer is yes. The money exists in the Chancellor's budget. We are not asking for more. We are asking for it to be re-routed to satisfy Adam Smith.

In that way, everybody wins. The universities pay their way. The students pay their way. The Government meets its targets. If it wants to be re-elected, it had better not be ungenerous in the value of the bursary.

The key to success is agreeing to the value of the bursary to meet the real costs of a foundation degree, which by implication and the Bologna Accord, becomes the first rung on the ladder of higher education.

The idea that the first degree be general rather than specialised, that professional and other disciplines can wait, is also not new. It is the staple of other countries, not least of the US. It will become the global norm.

The ethos of the new proposals is simple and is driven by student choice.

For equity's sake, the playing field should be level. It will then be up to the individual university to decide how best to serve their students. Such freedom might not be for the faint-hearted, but it is a tonic for those who care for the independence of the universities.

There are rules attached to the direct funding of universities by central government and that demand it be reformed. The first is never to subsidise the supplier, otherwise its incentive to improve evaporates. It follows that only the student customer need be subsidised. The student's purchasing power will then encourage institutions to insist on the best.

Under these conditions, universities would be free to manage their own affairs, provided that they listen to their student customers. They could pay their professors more, or less, depending on their performances. All is possible once we let go of the Government's hand. Of course, choice demands forethought and judgment. It was also ever the engine of diversity and evolution. It is the only way of ensuring quality and equity.

The fact is that the present arrangements please nobody. The students grumble, the professors complain and the universities feel unloved. All must grow up and take responsibility for their futures. Those futures could be wonderfully new. Universities do not need conservatives to hold them back, to dictate what and how they should teach. Only their customers can decide that.

Sir Graham Hills is former vice-chancellor of Strathclyde University.