Leader: A market in higher education would be calamitous

Lord Browne's proposals would create a two-tier system and deter the poorest from applying.

When New Labour introduced top-up fees in 2006, critics warned that they would open the way for a US-style market in higher education, as the top universities became the preserve of the wealthy. With the publication of the Browne review, which calls for an unlimited rise in tuition fees, this divisive model is close to becoming a reality in England.

If accepted, Lord Browne's proposals would, in effect, create a two-tier system, with Oxbridge and the other elite Russell Group universities charging fees as high as £12,000 a year, while the former polytechnics charge less than half this amount. The prospect of debts as high as £40,000 will inevitably deter the poorest students from applying to the top-rated universities. With government spending on the higher education sector expected to be cut by up to 35 per cent in the forthcoming Comprehensive Spending Review, the coalition will surrender much of the state's historic responsibility for university funding. The crude utilitarianism of the Browne report, which singles out "priority subjects" such as medicine and engineering as worthy of state support, leaves the humanities to sink or swim according to the whims of the market.

The review has been erroneously described as "progressive" by some ministers, including the Business Secretary, Vince Cable, who argue that the repayment threshold would be raised from £15,000 to £21,000 and that top earners would pay a higher rate of interest on their debt. But, as research by the Social Market Foundation has shown, it is graduates with an average income of £27,000 who will pay back more than any of their contemporaries because, under the slower repayment process, they will accumulate more interest than those on higher incomes.

The coalition, which inherited the Browne report from the last Labour government, is not obliged to accept all, or any, of its recommendations. Speaking for the government in the House of Commons, Mr Cable said that he was pushing for a cap of £7,000 on fees. This would represent an improvement on the Browne plan, but an increase on this scale would still deter many of the poorest from applying. Indeed, a survey this year by the National Union of Students (NUS) found that 70 per cent of current students would have avoided university if fees had been set at £7,000, with those from low-income households most put off. Moreover, Mr Cable, like every other Liberal Democrat MP, including Nick Clegg, signed a pre-election NUS pledge to vote against any rise in tuition fees. Their decision to break this promise less than six months later will further corrode trust in politicians.

Mr Cable's conversion to higher tuition fees would be more acceptable if there were no progressive alternative. But there is: a graduate tax, which operates retrospectively, avoids an open market in fees and ensures that the burden of payment falls on those most able to pay. Care workers and primary school teachers would no longer pay the same rate as those who go on to become City bankers. The pragmatic objection that a graduate tax would give foreign students a free ride ignores the possibility of a hybrid system in which overseas students continue to pay fees upfront. Nor does the claim that a graduate tax represents an indefinite commitment bear scrutiny - proponents have variously suggested a cut-off point of 25 years or a maximum total contribution.

The coalition is undoubtedly sincere in its desire to put university funding on a sustainable footing but, in threatening to let the market rip, it once again gives the impression of knowing the price of everything and the value of nothing.