For once, Mr Blair happens to be right

How extraordinary that Labour MPs, having swallowed five wars, innumerable privatisations, the imprisonment of refugees and the erosion of legal rights and civil liberties, should be ready at last to mount a mass revolt and threaten their leader's future over, of all things, university tuition fees. But alas, not so extraordinary when you think about it. Other new Labour actions have damaged mostly the poor and marginalised - Iraqi peasants, single mothers, asylum-seekers, public sector manual workers, and the sort of people who appear in court on charges of petty crime. This time, it's serious. Subsidised higher education is a huge middle-class perk: 81 per cent of the children of professional parents go to university as against 15 per cent of manual workers' children. No other publicly funded service except opera has anything like this social bias. Hell and political oblivion await any politician who dares tamper with it, as even the late Lord (then Sir Keith) Joseph discovered when he first tried to wring contributions to tuition fees out of well-heeled parents in the mid-1980s. MPs tremble for their seats when middle-class anger is truly aroused. Tony Blair's mission has been to secure the middle-class vote for Labour - yet on this issue, his backbenchers are more Blairite than he is.

One cabinet minister, our political editor reports (page 9), describes the Higher Education Bill as "profoundly socialist". He is right. The mechanism by which students will eventually repay fees (at zero interest) is more progressive than the income tax system, with nobody earning less than £20,000 a year required (under the latest proposals) to pay back anything at all, regardless of how much "debt" they have accumulated. Graduates, on average, enjoy better-paid jobs than non-graduates, with more perks, fewer periods of unemployment and longer working lives; their lifetime earnings will be 6 per cent higher (discounting inflation) as a result of going to university. This is a rate of return far superior to any offered by a bank or building society - and the earnings threshold removes any element of risk, as does the ruling that after 25 years all remaining debts are written off. To suggest that people from poor homes will be deterred from higher education because they cannot work this out is deeply patronising. The principle is exactly the same - and will be implemented in exactly the same way - as paying National Insurance contributions for pensions. The only difference is that one payment is for a future state-provided benefit, the other for a past one.

What bars the poor from university is not the prospect of payment, but disadvantages that start in early infancy. By all means raise taxes on incomes of more than £100,000 a year, as the Lib Dems wish - and then pour the money into pre-school schemes such as Sure Start, schools in deprived areas and allowances for 16-year-olds who stay in education.

The objections of Labour MPs centre around the proposal to allow different universities to charge different fees for different subjects. They believe the state should continue to behave as if all degrees were of equal value. This is nonsense: a law degree taken at one of the top universities is worth far more in enhanced earnings than a humanities degree taken at a former poly. Why should graduate repayments not reflect this? Why, to turn the thing on its head, should the Exchequer provide higher subsidies to the overwhelmingly middle-class student body at expensive Oxford and Cambridge?

This is not to say that the government's bill is perfect. After a parental means test, about 40 per cent of students do not pay any of the current flat-rate £1,125 fee. The top-ups (to a limit of £3,000) will carry no such exemptions. A more progressive system would allow the poorest to attend the top universities free of charge, possibly with a maintenance grant as well. Ministers suggest universities could use some of the extra money from higher fees to fund bursaries, thus providing as direct a means of redistribution from rich to poor as any true socialist could wish for, and possibly causing Daily Mail columnists and public school headmasters to implode with indignation. Labour MPs should concentrate on ensuring that this happens. They should also call for more subsidies to allow students from poor backgrounds to get the expensive professional training that now commonly follows graduation. Fees can be used as a sharp instrument of social justice - if MPs allow the government to put the mechanism in place. There is a case for replacing the PM - not least because of his incompetent handling of this policy - and the New Statesman will return to it. But he should not be forced out on the principle of top-up fees where, for once, he happens to be right.

Outsource John Prescott

Cabinet ministers take a relaxed attitude to the growing export of white-collar jobs to cheaper locations, of which the Norwich Union's decision to move 2,300 jobs is the latest example. Both Patricia Hewitt and John Prescott say we should not be tempted into protectionism. They will surely not object, therefore, to any suggestion that they should be next for outsourcing. If the taxpayer were to achieve the same savings as the Norwich Union, we could have a Deputy PM in Bangalore for less than £10,000. Ignorance of local conditions may be a handicap - but hardly more so than when we are advised from 4,000 miles away how to get by train from Hartlepool to Cheltenham. Once, Delhi was ruled from London. Why should London not now be ruled from Delhi? Mr Prescott and other ministers can then be redeployed, as economists advise, to activities of higher "added value".