He who pays the cost calls the tune

The London Economics report on higher education funding, which calculates that the sector needs an extra £1.4 billion a year from 2004, rising to £1.6 billion extra in 2009, focuses vice-chancellors' minds on the links between funding and who controls the university sector.

The issue is of major importance at a time when many in higher education feel that central government is extending its control over the sector.

Government has increasingly attached strings to the public money it disburses. Added to this, the Teaching and Higher Education Act effectively prevents universities setting their tuition fees.

At present, says the report, students are paying something towards their education but have seen little increase in their control over course provision in return. Control has been retained by the government.

The key to empowering students as consumers of higher education, and universities as suppliers, is to let more money follow the student. This can be achieved through increased tuition fees and/or income-contingent loans. In both cases, students would pay more in return for increased influence.

An extreme scenario would be a free market voucher system with full-cost fees financed by private loans or from the public purse, with universities setting course prices and student numbers. Control is maximised for students and universities. If private loans are taken out though, students pay dearly for their increased control.

A graduate tax would do little to increase student or university control since the government would decide how the money should be spent out of general taxation. The same is true of an endowment fund, the report says.