The Labour Party launched a fresh assault on Oxbridge funding this week as details emerged of how new arrangements for setting controversial college fees were worked out.

Bryan Davies, Labour's higher education spokesman, called for a review of the collegiate system and state funding of Oxford and Cambridge universities to reflect cross-sector efforts for greater efficiency and wider access.

His comments followed an admission from Government officials that the new formula for deciding on college fees - which are an additional source of income for Oxbridge - was designed to cut bureaucracy rather than to promote equity.

Spokesmen for Oxford and Cambridge said it was unlikely the agreement reached between colleges and the Department for Education last summer, by which annual increases in college fees are pegged to changes in funding at ten top research universities, would leave Oxbridge worse off.

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George Reid, chairman of the Cambridge college fees committee, said changes in the arrangements date back to 1991, when the DFE signalled its wish to move away from annual negotiations to a formula basis for setting fees. Increases were originally set against changes in the average unit of resource across the whole university sector, but this formula was considered to be too general.

Dr Reid said the arrangements could force some colleges to consider introducing top-up fees. The new system will be administered by the Higher Education Funding Council for England, but Dr Reid hoped the DFE would remain "the final arbiter in any issues of controversy".

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Mr Davies described the choice of ten institutions as "quite inexplicable", but a DFE spokes-man said they were the top ten research institutions in England: Oxford, Cambridge, Lancaster, Sussex, Warwick, York universities, LSE, UMIST, Imperial and UCL. DFE figures show the average Oxbridge student costs the state Pounds 4,900 a year compared with a national average of Pounds 2,800, before 43 per cent of the college fee element of about Pounds 1,000 is clawed back by HEFCE.