'£200m to end fee deadlock'

Just over £200 million could end the deadlock between government and universities over who pays for top-up fee bursaries for students from poor homes, vice-chancellors said this week.

They argued that the money would be a small price to pay to buy universities' support for the higher education bill, which will set out plans to charge up to £3,000 a year from 2006, due to be announced in the Queen's speech later this month.

Michael Sterling, chair of the Russell Group and vice-chancellor of Birmingham University, said: "If this is the sticking point, then surely it is worth doing."

Negotiations between ministers and vice-chancellors have so far failed to produce an acceptable solution. Ministers want universities to commit a flat-rate third of their fee income to supporting bursaries for the poorest students.

Vice-chancellors say this is too prescriptive. They have dubbed it "Offa tax" after the proposed Office for Fair Access, which has the final say on whether universities can charge top-up fees, depending on whether they have adequate support mechanisms for poor students such as bursaries.

But bursary concessions are seen by ministers as critical if they are to avoid a rebellion by Labour backbenchers concerned that top-ups will deter the poor. It is understood that the latest proposal from vice-chancellors is being considered by the department.

Under the proposal, it would cost an estimated £225 million to offer maintenance grants of £1,750 to all poor students and so do away with the prescriptive bursaries proposal.

Michael Driscoll, chair of the Coalition of Modern Universities and vice-chancellor of Middlesex University, said that £200 million was not a lot of money for the Treasury to raise. He suggested it could be found in the next comprehensive spending review, due in 2004.

Professor Driscoll also proposed scrapping "the highly unpopular" proposals to introduce centres for excellence in teaching, which he said would free enough cash to pay for £1,750 grants for at least one year.

Discussions are now focused on how best to shift this £200 million towards poor students.

One idea is to deduct the money from the teaching grant that goes to universities via the Higher Education Funding Council for England and then to distribute this money to poorer students. It is understood that this would involve a pro-rata cut on the teaching grant to all universities.

But Malcolm Grant, provost of University College London, said, "This will again have a differential impact. I am completely opposed to any sort of top-slicing from universities."

The nub of the problem is who will meet the shortfall likely to be faced by the poorest students wishing to study the most expensive courses.

The government will cover about £2,250 of the £3,000 fees through means-tested fee waivers and a maintenance grant. But that still leaves a shortfall of some £750. The government argues that universities should put aside a third of their total fee incomes to cover this sum.

But Professor Driscoll said that new universities, which have higher numbers of poor students and potentially less fee income, would be particularly burdened under this scheme.

Another proposal for a central bursary scheme, where all universities would pay into a central pot that could then be redistributed to poorer students, has hit opposition from the Russell Group, representing the country's leading research institutions.

Alasdair Smith, vice-chancellor of Sussex University, and David Eastwood, vice-chancellor of the University of East Anglia, have been working on proposals to abolish the fee-waiver element altogether.

Fees of up to £1,150 are currently waived, on a means-tested basis, for all students. Their proposal is to end the waiver and put the money into a national pot providing grants or bursaries of up to £3,000.

Russell Group member Sir Colin Campbell, vice-chancellor of Nottingham University, described the idea as "daft" and said it would involve huge transaction costs.

Prime minister Tony Blair hosted a meeting of peers on Tuesday of this week. Working to galvanise support for the bill, Mr Blair said that it was the best deal on offer to higher education.