The case for a private sector loans scheme is that it will promote the autonomy of the universities and reduce the extent of their financial dependence on the state. The Government inadvertently laid the basis for the nationalisation of higher education when it provided a measure of temporary financial support for the universities after the first world war, administered by a temporary University Grants Committee. We have now reached a position where higher education costs the taxpayer some Pounds 8.5 billion a year - 2.2 per cent of total public expenditure.

In legal form our universities continue to be private corporations, but the reality of power in higher education is that the balance between the autonomy of universities and their role as the agents of Government policy has shifted steadily and, in recent years, dramatically, against the principle of university autonomy.

The whole relationship between Government and the universities has become more impersonal, less flexible and less supportive of the idea of university self-government and self-direction. The growth of state spending and the development in Whitehall of a less discriminating and more unsympathetic approach to accountability have simply made the old cosy relationships unviable. The only way for university autonomy to be secured is for the universities to acquire a substantial flow of income that is essentially independent of the state. As with the public university system in the United States, there should be a partnership between public and private funding, with private funding at a level sufficient to give the universities the critical extra margin of financial manoeuvre necessary to safeguard autonomy: 20 per cent of total income from private sources would probably suffice. One of the most serious social trends in society over the past 20 years has been the relative pauperisation of the academic profession, which has profound implications for the future. I believe that one of the causes has been the nationalised bureaucratic system. Academics in Britain would have got a better deal, as in the US, from individual contracts negotiated with independent employers.

One of the great themes in the constitutional debate is the desirability of greater decentralisation. If the Government and the Opposition are serious about decentralisation, we have to think about how to restore powers not only to local government but to institutions such as universities. But greater independence for universities cannot be secured by constitutional and legal devices alone. Fee income from students, supported by loans financed against their future incomes, is the only way to provide such significant independent financial resources.

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The existing loans legislation must be amended to enable loans to be advanced to students to pay the fees charged by universities. Nevertheless, the Education (Student Loans) Bill, which opens the door to loans being advanced to students with private money and by the private sector, is a significant development.

If the loans to pay fees were to come from the private sector, there could be no justification for the Government determining the fees policy of the universities, which would be private institutions deciding for themselves the terms and conditions on which they admit their students.

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If we are to reduce the burden of taxation and the level of public expenditure and bring them even part of the way towards the levels in the US and Japan, it would be disastrous to do so merely by spending less on the public sector in its present shape. The result would be an unacceptable degradation in the quality of all collectively-provided goods. Instead, we in Europe have to reconsider which goods are collectively provided in the public sector as compared with the US and Japan. On such a comparative list, higher education bulks large.

The US and Japan both operate the kind of partnership system between private and public interests in higher education that I am advocating. Both have large private universities where full-cost fees are paid by students, and they include, in the US, some of the best universities in the world. In addition, both have a huge network of public higher education institutions that are partly funded by private student fees.

We cannot continue with the present policy of maintaining higher education as a state responsibility while seeking to reduce the burden of taxation and public borrowing in the direction of USand Japanese levels. Under the present policy, the only way to square the circle is systematically to degrade the quality of a university system that is exclusively dependent on public funds. That would be a profound mistake, which could lead only to the progressive dismantling of one of our greatest achievements as a country.

Robert Jackson is MP for Wantage and was parliamentary under secretary for higher education from 1987 to 1990. His article is based on his Commons speech on the Education (Student Loans) Bill.

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