Tony Tysome summarises the Conservative Political Centre's draft report on Higher Education. The Conservatives' National Policy Group on Higher Education says its recommendations to the Government are necessary if expansion of the sector is to be resumed. Its proposals cover three areas - widening participation, choice and diversity and funding.

Widening participation

The paper notes there is likely to be "considerable disappointment" if the rising demand for more higher education places cannot be satisfied, and continued dissatisfaction among employers requiring a better educated workforce. But the group has avoided making recommendations about participation rates, because "student numbers should be free to find their own level with students making more rational choices about the benefits of higher education, as they bear a greater proportion of the costs". The paper points out that recent growth in public spending on higher education has outstripped public spending in other areas and growth in the economy as a whole. The Government's moratorium on expansion was therefore justified on the grounds of cost, and also because it provided the opportunity for a public debate on who should fund further growth in the sector.

Choice and diversity

The policy group recommends that a national higher education academic credit transfer scheme should be set up by the Higher Education Quality Council, to promote student mobility and choice. The scheme would be voluntary, but all institutions, including FE colleges, would be eligible to join. The system would have to recognise academic autonomy and a variety of course arrangements, and could therefore not be imposed. But the Government could help the scheme by adopting a flexible-funding formula making both tuition fees and maintenance awards fully portable between institutions.

The involvement of the HEQC would help address any concerns about maintaining academic standards under the new credit scheme. The paper's recommendations draw on those outlined in the HEQC's report, Choosing To Change. Under the proposed scheme, the number of credits accumulated per course would depend on the number of class contact and supervised work hours per week. A three-year bachelor degree might be worth 90 credits. Universities might choose to limit credit transfer from another institution to no more than 45 credits.

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Consideration would also have to be given to the implications of semesterisation. The paper suggests that a two-year "Associate Degree", coupled with a General National Vocational Qualification at Level 4, could be introduced as a new interim qualification.This could be offered in HE, or in FE as a replacement of existing Higher National Diplomas. Such courses could be validated by universities and by the National Council for Vocational Qualifications as a GNVQ 4. Universities could then be invited to award students with associate degrees credit towards a full degree.

Funding

The policy group proposes that all student maintenance funding should come from a private sector capitalised repayable loan. The current student loan and maintenance scheme is the only feasible source of savings which could provide the kind of economies necessary to halt erosion in funding and quality while resuming expansion, the paper says. The present student loans scheme is "highly inefficient", unlikely to ever recover its original investment, and in danger of collapse. A better scheme would involve switching from the mortgage-style system with high early repayment over five years to an income-contingent loan, where repayments are based on a given percentage of income above an agreed minimum and spread over a longer period, such as 20 years.

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Repayment could be made through income tax or national insurance, cutting administration and default rates. Such a scheme could prove attractive to private lenders such as banks, particularly since it would make a positive real rate of interest "realistic", the paper says. The transfer of funding from the Treasury to the private sector would save Pounds 1.8 billion per annum - money which could benefit the public purse or be ploughed back in to the sector. It would allow the ceiling to be lifted on the amount the students could borrow, and could open up support in areas where grants are scarce, such as further education, training, part-time and postgraduate study. It would also mean that students could borrow more to attend more expensive courses or institutions charging top-up fees.

The policy group suggests that its proposals need not be politically dangerous, if "sensibly handled". The Government could emphasise that the new scheme would open up support in areas where little exists, that it would bring an end to parental contribution, raise the overall level of student support and make repayments easier, and that the resultant savings could be used to enhance quality. The scheme would need to be phased in over three years to avoid affecting current students, but could be tested immediately by a pilot for postgraduates.

The paper proposes that the state should continue to fund tuition, but it is careful to leave the door open for the possibility of institutions charging top-up fees. It says some elite research-based institutions are inevitably expensive to run. They have to compete internationally, and are finding it impossible to provide undergraduate courses within the funding council fee structure. The proposed new loans system would allow such institutions to charge top-up fees without excluding students from less well off families, the paper argues. "Providing that loans were funded by the private sector and that ceilings were therefore higher, students would be able to borrow a little more and thus, if academically qualified, would be able to attend elite institutions who charged fees." The policy group calls for fee bands to be scrapped, and a uniform level of fees for home students to be introduced. It says the bands play little part in the choice made by students or universities, or in Government planning. There is little sense in making certain courses cost more either in an effort to limit intake, since this would restrict entry to wealthier students; or to represent the true cost of courses, since this would be almost impossible to calculate. Central funding for research and science teaching facilities could be used to induce universities to maintain recruitment of science students rather than differential fees. The paper proposes that the fee classifications for foreign students should be rethought. It notes that at the moment "students are free to come, and do come, in large numbers from EU countries, especially France and Germany, at home low rates with no resultant advantage to us". The same system is "harsh" on refugees from war zones, and has weakened educational ties with the Commonwealth. Special rates should be considered for students from these countries, while "there seems no value in subsidising European students who come from the wealthiest countries".

Local authorities could be written out of the fee-paying arrangements with the introduction of a voucher scheme. Vouchers would represent the reimbursable cost of tuition fees at any recognised HE institution, and could be issued to all school- leavers securing a place and holding the required qualifications for entry. The voucher would be flexible - it could be used to cover full or part-time study costs, and either "cashed in" immediately or in later years by those entering as mature students. The voucher would represent a flat minimum level of fees, but this would not rule out the possibility of top-up fees, or of slightly more valuable vouchers being made available to those with better grades or whose secured admission to higher ranking institutions. The proposed new loans system would enable students to pay fees above voucher levels. Courses attracting only discretionary funding might come under the scheme. By removing local authorities from the funding process, delays in transmission of fees from local authorities to institutions would be avoided, and it is likely there would be administrative savings, the paper argues.

Voucher funding could even be extended on an EU-wide basis, with each member state deciding what proportion of its school-leavers it wished to see going through higher education. Vouchers could be redeemable in any recognised institution in the EU - a system which would benefit the UK, with its reputation for quality and standards.

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The voucher scheme would not replace central funding, which the group sees as the Government's way of managing change in universities to suit the economy. The balance between central funding and voucher funding represents "a method of adjusting political management of higher education and market freedom". Policy group members felt that total replacement of state funding by vouchers would place too much choice, and therefore planning, in the hands of students. While consumer choice would reinforce market mechanisms, this was not the most important determining factor in the design of HE. "Students do not necessarily choose wisely and it has to be accepted that some degree of direction from the institution is desirable and necessary," it adds.

The policy group wants the Government to help institutions to become more financially independent, by attracting more private investment. To raise confidence among private investors, the Government should provide greater reassurance over public sector funding; address fears of a "relentless public sector squeeze" on universities; reinforce quality regulation; clarify funding policies; reform student loans; and promote the importance of new universities.

The paper's key proposals

Replace student grants and loans with privatised incomecontingent loans scheme

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Flexible borrowing through new loans scheme available towider range of students

Uniform minimum fees paid through new voucher scheme;fee bands scrapped

Accept that elite institutions may charge top-up fees

New national HE academic credit transfer scheme

New two-year "Associate" degree linked to GNVQ 4

Portable fees and maintenance awards

Policy group members

Sir Jeremy Elwes (group chairman) chairman, the St Helier NHS Trust; Nick Hawkins MP, secretary, Conservative back bench education committee; Sir Cyril Taylor, chairman, the City Technology Colleges Trust; Professor Laing Barden, vice chancellor, the University of Northumbria; Ruth Deech, principal,St Anne's College Oxford; Professor Kenneth Barker, vice chancellor, De Montfort University; Iain Crawford, head of public relations, LSE; Maurice Hochschild, director, European Capital Trade Finance Ltd; Nevil Johnson, professorial fellow of Nuffield College Oxford; Ian Elliot, chairman of PanCredit Ltd; Professor Nicholas Bourne, dean of law, Swansea Law School; Jeremy Howard, financial analyst, Goldman Sachs; Michael Horsley, Conservative Research Department.

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