It's time to pay up for fairness and quality

If universities can't set their own fees, they will sink. David Greenaway and Michelle Haynes, and (below) David Blanchflower and Andrew Oswald, make the case for charging students up to Pounds 4,000

These are difficult days for UK universities. The Greenaway report, in which we had a hand, begins to face up to the harsh facts of life. This will be a difficult intellectual process for university teachers and students. But it is essential that the report's lessons be grasped and put into practice.

Fact number one is that the UK system has expanded too quickly and cheaply. When we went to university in Britain, only one in 15 people did so. Now more than a quarter of the population do. Yet public funding per student has collapsed. It is down nearly 50 per cent in real terms since 1980. This is unsustainable.

Fact number two is that, largely in consequence, British universities are no longer world leaders. We do not pay remotely competitive salaries or provide comparable laboratory funding. This is an unpalatable thing to face. But Britain is not full of people who Stanford and Harvard universities would be delighted to hire. And Stanford and Harvard are full of people our universities would love to have. We used to be top of the league, now we are merely pretty good. Until we accept this, we will get nowhere.

Fact number three is perhaps the worst. The taxpayer does not care. Imagine you said to a group of British people: if you could allocate an extra Pounds 1 billion, would you give it to hospitals, primary schools or universities? The result would be a walkover for schools and hospitals. And those hypothetical taxpayer voters would be right. Universities are not an especially deserving cause. The reason is that their beneficiaries are students themselves.

Having good primary schools and hospitals helps everyone in society. That is not true of higher education. The people who get degrees are the ones who benefit. Yet they are massively subsidised by the rest of society. It is simply not reasonable to ask plumbers and secretaries to pay. Students should pay for themselves.

One of us recently took part in a student debate where two common mistakes of logic became apparent. One is the argument that degree-holders eventually pay high taxes and therefore the current system is fine. It is not. At the very least, there should be a lower tax rate on the high earnings of people who educated themselves at their own expense (as, say, a plumber's apprentice), rather than at state expense in a university. Moreover, the refrain that "education should continue to be free" is silly. It has never been free. What is meant by the middle-class students who say this is: someone else should pay for me. But what could possibly be fair about that?

So the question is what we do next? The Greenaway report considers the options. It is particularly keen to find a way to get clever children from poor backgrounds into higher education. The report points out that Britain is very bad at that at the moment.

One option is a graduate tax. There are lots of good things to be said for this - especially that it would avoid the need for students to borrow. The big problems with a graduate tax are that we would all have to wait years for the money, while the universities crumble further into mediocrity, and that the government would take it and not spend it on universities. Another option is vouchers. But this does not increase the amount of funding per se.

The obvious option is to make the beneficiaries pay, and this takes us to the introduction of so-called differential fees. We do not see that there are strong objections to annual fees as high as Pounds 10,000 for top university courses in highly marketable disciplines. This would still be a lot cheaper than in the top US universities. But we do not believe that such fee levels should be brought in immediately. That would be unfair. They should be phased in.

It is time for Britain to face facts and change the way it funds higher education. Otherwise we are sunk.

David Blanchflower is professor of economics, Dartmouth College, US; Andrew Oswald is professor of economics at Warwick University. Both advised on the Greenaway report.

* Should students be asked to pay tuition fees as high as Pounds 10,000 to take top university courses? Email us on soapbox@thes.co.uk