Dearing backs tax breaks for students

The first clear picture of how Sir Ron Dearing's inquiry will reshape higher education emerged this week.

A bold shift of power away from institutions and quangos to the student is the basis of Sir Ron's grand plan. But most students will be expected to contribute towards tuition fees, possibly 20 per cent, as well as covering their own living costs. Those who cannot afford it will be subsidised.

Sir Ron is expected to recommend a radical new package to support higher level lifelong learning for everyone.

The package would include: * Learning accounts containing contributions from employers and employees for everyone in work

* Tax-free savings accountsfor everyone else above a means-tested threshold

* Scholarship grants for people below the threshold

* A loan scheme with income-contingent repayments to help students top up their maintenance and cover any additional fees.

Some institutions may be allowed to charge students more than others on the basis of higher quality, but their claims will be tested by the new Quality Assurance Agency for higher education.

A savings account, offering tax-free benefits only when used to pay for higher education, could attract investments from parents, relatives and prospective students themselves. It is expected such accounts could easily cover fees and maintenance costs if regular payments were made into them over several years.

Students who did not qualify for a scholarship grant and who had not saved enough could make up the difference by taking out a loan. Repayments would begin when earnings reached a certain level.

Anyone in employment would be able to open a learning account which would attract contributions from their employer and could also benefit from tax breaks. But proposals to introduce learning accounts for everyone have been put on hold. Learning accounts for employees may be piloted.

A national system which will award "credits" for defined periods of learning, linked to a qualifications framework, may also be used to determine course charges.

Fees could be based on the number of credits which make up a course, or which a student proposes to take. The financial value of some kinds of credits may vary, and some might be free.

But such a system would require institutions to provide much clearer and more detailed information on what is on offer. They are already under pressure from funding councils and quality watchdogs to define learning aims, or what students are meant to achieve and be able to do after a course.

A spokesman for the National Union of Students said it would be important to ensure there were no hidden charges, such as additional costs for using library and computer facilities.

Institutions could also be paid by funding councils on the basis of the number of credits students are attempting, and/or the number of credits they actually gain.

Funding councils could attach greater financial value to some credits, such as those leading to the award of a qualification - a form of output-related funding.