Some ways to keep the melting pot full of talent

In the third of our series on universities in the 21st century, Rowan Boyson argues for paying Child Benefit into individual learning accounts, private funding and closer community links

"Stick to the facts, sir." Mr Gradgrind's philosophy of education is sometimes more pertinent than Dickens would have us believe. The "facts" of the current crisis in higher education, now well known, are worth reiterating. Funding per student in real terms has dropped to half its level 20 years ago; student poverty is rising sharply; university resources are being stretched to breaking point; British universities are losing their world-class status; and their social make up - dominated by socioeconomic groups I and II - has barely changed since the 1960s.

Tony Blair claims his philosophy of public spending, the 1997 slogan "Education, education, education" was realised in July with Pounds 10 billion earmarked for teaching the nation. But while this injection of cash is gladly welcomed, more fundamental changes are required to safeguard our institutions, and there remains fierce disagreement among government ministers, economists, academics, students and voters over ways of reconciling two key objectives: increasing access and increasing funding.

The student generation of a decade hence - today's eight-year-olds - will have expectations of higher education very different from their predecessors. Indeed, many of them will not be 18-year-olds. Funding and access initiatives will have to pay close attention to the needs of mature students, whose applications have suffered a recent drop.

As more and more adults decide on mid-life career changes, "lifelong learning" will be a reality to which higher education institutions must adapt. More computer-literate, more consumer-aware, both young and mature learners will no longer conceive of university education as a right and privilege, but rather a serious financial commitment that may or may not reap rewards.

Unless prospective students, and particularly those from low socioeconomic backgrounds, feel that the benefits of higher education will be tangible relative to the cost, they will not sign up.

While the high lifetime earnings of graduates have been heavily emphasised in the argument for differential fees, graduates from low socioeconomic backgrounds often go on to earn less than their middle-class counterparts. Social inequalities run deep. So students will seek courses and institutions that promise excellent teaching and have strong links with business and industry, while giving them the freedom to pursue their own interests, academic and otherwise. Universities will have to provide information on the strengths of departments and the financial and careers services they provide so that individuals can make an informed choice.

Mr Blair's target of 50 per cent participation by mid-decade is laudable. But we must seriously consider whether limited resources might be more appropriately targeted elsewhere. It may be more profitable - in terms of social outcomes for individuals and the future needs of the labour market - to direct efforts into evening GCSE achievement than to encourage more students to enter degree courses that may not suit them and for which there are not nearly adequate resources. Expansion in these circumstances risks high failure-to-complete rates.

The key to providing all of the next generation with educational opportunities, as well as solving the problem of student support, may be found in various asset-building schemes. Plans for individual learning accounts could be extended to cover children from infancy.

A small proportion of Child Benefit directed into the account each month would form a substantial sum when the subject came of age. Parents and relatives could make tax-efficient contributions, employers would direct a percentage of payroll into the account, and the state would add funds on a means-tested basis. The accumulated assets could be used for specified purposes including higher education costs, or smaller objectives such as evening classes or buying a computer.

Ownership of assets deals effectively with the problem of debt aversion in the low socioeconomic groups, and it would encourage a shift in perception of the social role of students from burdensome dependants to that of a young citizen. ILAs, or another system of development accounts, would bring an end to the hardship funds system.

Hardship loans and access funds, awarded in a piecemeal manner to the poorest students, cap-in-hand, form a system more akin to Dickensian philanthropy than an efficient means of targeting need without humiliation and financial insecurity.

The argument for differential fees is seemingly compelling. The Greenaway-Hayne report rightly emphasises the regressive bias of the funding system. Plumbers and secretaries are subsidising the university education of the middle classes. It is right and proper that representation of lower socioeconomic groups in higher education must improve dramatically, as is the principle that beneficiaries must make some contribution to its costs. But high differential fees have the potential to devastate access - not only in terms of numbers admitted from poor backgrounds and the risk for middle-income families with several children - but in student choice.

Despite the claims that bursaries and scholarships will enable all to participate, for some students, the cheapest course on offer might be the only serious option. Such restrictions are already apparent: since the introduction of tuition fees, many more students have had to attend their local university so that they can continue living at home.

Are differential fees inevitable? Alternative solutions lie in a range of policy options, incl-uding perhaps the continuation of low-level tuition fees for those who can afford them.

The exemption of poorer students (some 45 per cent) must continue, and a grant must be reintroduced for living costs. The offer of top-up debt (the means-tested element of the student loan) is not an adequate means of support. To pay for this, private funding of universities must be encouraged, perhaps with tax incentives. Along with introducing a system of graduate contributions to an endowment, as in Australia and now Scotland, and giving all children and mature learners some form of development account, these measures would do the most to protect student choice, the integrity of institutions and access.

But access is not solely a question of finance. Cultural resistance must account for much of the failure to attract students from low socioeconomic backgrounds. Summer schools and similar initiatives perform useful work but have a limited effect. More effort must go into improving GCSE and A-level attainment for children from families of low educational achievement. More equitable means of assessing potential, particularly at elite institutions, must be developed.

One approach to improve access as well as benefit communities would be for universities to forge much stronger local links. Such interaction - including public lectures, dynamic relationships with schools and adult education courses - would serve to convince young people and mature learners that university is for them and not just others. Whole-hearted integration of "town and gown" is one positive direction higher education institutions should take. While universities should build on their strengths, it is vital to maintain a wide mix in the undergraduate population of each institution. Creating management training universities, or colleges for the brightest computer scientists, may mean economies of scale. But it would also damage the unique cultural and intellectual melting-pot that makes university such an important experience for young and mature citizens, and it would threaten Britain's creative and innovative potential, the free-ranging minds of the new knowledge economy.

Rowan Boyson, a researcher with the Centre for Reform, the Liberal Democrat think-tank, is reading English at Queen's College, Cambridge.