Ministers must trade grants for top-up fees

The phoney war is over. This week, the real battle over top-up fees - and with them the future shape of higher education - began in earnest.

Higher education minister Alan Johnson was predictably resolute in his first speech to Universities UK, and the Trades Union Congress was predictably just as hostile. Next week, MPs will have their say and then go on to the party conferences, all of which will see more flak flying the way of the fees proposals.

Those who hoped for further delay or a radical recasting of the government's plans must know by now that they are going to be disappointed.

Tony Blair has thrown down the gauntlet by associating higher fees with social justice, while Charles Clarke followed up with a warning to universities that there was no alternative source of extra funding. The talk could hardly be tougher but, like the formidable trade union negotiator he was, Mr Johnson knows the importance of a strong opening position.

Everyone expects there to be concessions eventually to buy off the requisite number of Labour critics, but they will have to be affordable, both financially and politically. Simply to double the flat-rate fee, as some vice-chancellors and MPs suggest, would appear to be a non-starter, for example, because the model would not conform to the government's rationale that some courses are more valuable than others.

Nevertheless, there appears to be gradual acceptance in Whitehall that most, if not all, universities will charge the full £3,000 if the bill gets through. Some universities may come to grief if they misjudge the market, but the initial cost to the Treasury will be huge - and far more than initially envisaged. The assumptions underlying the chancellor's reluctant acceptance of top-up fees remain shrouded in secrecy, but it is thought that the plans assumed that half of all courses would attract the full fee. If, as seems likely, the proportion is closer to 90 per cent, the overrun will amount to hundreds of millions of pounds, leaving much less scope for sweeteners.

Mr Johnson has rightly identified the plight of students from poor homes, who will be faced with a £2,000 fee despite qualifying for continuing remission of the current charges, as the first subject for negotiation. For the state to pick up the entire bill would be extremely expensive, but to refuse to do so would play into the hands of those who see fees as an unreasonable burden on the poor.

If the prospect of £1,000 fees was deemed sufficiently off-putting to warrant full public subsidy, how can ministers argue that such students will take twice that amount in their stride? If the government gets its way and a market operates, the state would be agreeing to meet the full cost of poor students going to second-tier universities but not to the "top" institutions. If there is no market, rich and poor alike end up paying the premium rate.

The proposed "solution" is hardly that. Ministers would simply rebrand maintenance grants and add a further loan element to bring the total to £3,000. Never mind that fee payments will not begin until an indeterminate point after graduation, so students would naturally use the extra money to cope with immediate living costs. The actual addition to students' budgets would be minimal and would add to the debts that are assumed to be the problem in the first place.

It is difficult to imagine that student leaders or Labour rebels will be impressed by such sleight of hand. In the end, Mr Johnson will surely have to come back to the grant increases that he ruled out yesterday - if the Treasury will let him.