John Denham, former secretary of state in the Department for Innovation, Universities and Skills, made the comments at a fringe meeting at the Labour Party Conference in Manchester last night.

Carl Lygo, vice-chancellor of for-profit-owned BPP University, also told the meeting: ¡°It does not cost ?9,000 a year to teach a degree. Something else is going on with that money.¡±

Mr Denham told the event, hosted by the right-of-centre thinktank Policy Exchange: ¡°We run a system that wastes money hand over fist. And it is poorly designed to get value for money and deliver what the country needs.¡±

He said such waste was ¡°intrinsic in a high-fee, high-loan system¡±, and discussed plans he has previously set out to lower the cost of university to students and taxpayers.

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Mr Denham criticised the current level of spending by the government on loan write-offs. This money should be ¡°put into tuition fees and teaching¡±, he told the event, titled ¡°Why on earth does going to university cost so much money? Achieving financial sustainability in the English HE system¡±.

There was also ¡°political inefficiency¡± in spending on maintenance grants and access that he put at ?600 million. Such access spending was needed because the government is ¡°so worried [it] screwed up access by putting the high fees up¡±.

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Mr Denham argued that costs were also high because the higher education system is ¡°more and more a three-year residential system¡±, which ¡°assumes that it¡¯s not a proper university education unless you live away from home, which is extraordinarily expensive¡±.

The former minister also said that a culture of ¡°fee envy¡± among vice-chancellors, where higher fees were seen to equate to institutional prestige, had helped to push up prices. ¡°We need to break that culture,¡± he added.

Mr Lygo said he ¡°couldn¡¯t agree more¡± with Mr Denham¡¯s comments on costs in the ?9,000 system. BPP had introduced a two-year law degree in 2009 which he said produced graduates ¡°going into magic circle law firms¡±. The total course fee was ?12,000 (now ?14,000) ¡°for a private, profit-making provider to be able to provide a higher education that¡¯s accepted by the best employers in the field in the country¡±.

He criticised the notion that students must leave home, live in expensive halls of residence and take courses with ¡°long summer holidays¡±.

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Mr Lygo continued: ¡°We¡¯re from the private sector. It¡¯s taken somebody who¡¯s not in ¡®the club¡¯ to come along and say: ¡®You¡¯re absolutely right, there is a different model that lower cost that can be respectable for employers and delivers high quality.¡¯¡±

Jonathan Simons, head of education at Policy Exchange, told the meeting: ¡°I do like the students-as-consumers movement that is beginning to emerge. It is wildly unpopular¡­in most universities. There is definitely a sense of, let¡¯s face it, sniffiness that students should start to be coming to people and saying: ¡®Hold on a minute, what am I getting for my ?9,000 a year?¡¯¡±

But Mr Simons said that culture was ¡°a fantastic development¡±, adding: ¡°That¡¯s the way you continue to drive quality.¡±

john.morgan@tesglobal.com