The Dearing response, especially over funding and quality, set institutions against each other to the sector's cost, says David Watson.
In 1985 Keith Joseph, the Conservative Secretary of State for Education, lost his job over the proposal that "home" undergraduate students should pay fees. Twelve years later, almost the first act of David Blunkett, the Labour Secretary of State, was to announce full-time fees of £1,000. This seismic shift had been enabled by the report of the National Committee of Inquiry into Higher Education - the Dearing Committee - commissioned by the Conservatives before and delivered to Labour after the 1997 election.
On the detail, Labour did not exactly take Dearing's advice. Essentially, the Government was too greedy. Ministers took the recommendation of a student contribution to course costs and ignored what the report said about living costs, especially for poorer students. Simultaneously, they completed a Conservative project of turning all student grants into loans. This precipitate decision has become the Achilles' heel of subsequent Labour policy for higher education. Almost every discussion of how the system should be funded has morphed, fuelled by a middle-class sense of entitlement, into a row about student support.
The new Government was, of course, almost immediately forced to trim: the student fee became means-tested but at the expense of immense bureaucracy and transaction costs; hardship funds were distributed and "specific" grants were progressively added to the mix. Meanwhile, post-devolution Scotland decided to go a different way and Wales would like to.
Beneath this public radar, much of the rest of the Dearing report was sympathetically received by the Government. Labour initially recognised that the achievements of the sector as a whole depended on the nurturing of different types of institution with different missions, but fundamentally within sector-wide arrangements: for quality assurance, funding and fair competition (including for research support). They resisted strong calls to "put the polytechnics back in their box".
However, the funding problem remained - in particular, the unit of funding for teaching continued to decline. Blunkett promised the sector "a new deal". Variable fees were soon seen as a solution, as Dearing had foreseen, although the committee had stressed that they should not be allowed to compromise the "wellbeing of the whole sector".
The Government was apparently clear: the 2001 Labour Manifesto stated: "We will not introduce top-up fees and have legislated to prevent them."
But in the aftermath of Labour's second electoral victory, higher education policy moved from the department to No 10. The outcome was the 2003 White Paper, The Future of Higher Education , and, following a fierce House of Commons battle, the 2004 Higher Education Act.
Collectively these measures replaced the flat-rate system of student fees with a "variable" or "top-up" regime, heralded even greater concentration of public funding of research, began to categorise institutions (as, for example, "research-intensive") and lowered the bar for university title by admitting new entrants, including a "for-profit" sector.
In practice, the new "maximum" fee of £3,000 has turned out to be a revised flat-rate fee, with very few institutions charging less. Indeed, by setting a low limit and a very high parliamentary hurdle for its upwards revision, it is hard to see that much has changed: except for the Exchequer, which now pays the institutions in advance of recovering the "graduate contribution" through the tax system (across the European Union). This long term public spending commitment alone (including compensating for default) will make simply removing the cap following a review in 2009/10 highly unlikely. In the meantime, we have yet more regulation, notably by the Office for Fair Access.
What does this mean for the sector? From an historical point of view, it is precisely the concept of the "sector" that has made UK higher education exceptional.
Through various waves of peer review, the UK system has taken academic responsibility for its own enlargement: through London external degrees, "validating" universities, academic advisory committees for the post-Robbins foundations, the Council for National Academic Awards and the Quality Assurance Agency.
What lies behind the collective commitment to quality assurance is the concept of a controlled reputational range: it is important that institutions at each end of the reputational pecking order can recognise each other, and have something tied up in each other's success. Instead, institutions and the gangs into which they organise themselves are now encouraged to focus on relative competitive advantage, at whatever cost.
It is the historical achievements of our collaborative gene that the Government has put under threat. It may mean that in our desperation to ensure the international competitiveness of a very few institutions we have lost sight of what it is to be a world-class sector.
Sir David Watson is professor of higher education management at the Institute of Education, University of London. In 1997, he was a member of the Dearing Committee. His book, The Dearing Report: Ten Years On , co-edited with Michael Amoah, is published by Bedford Way Papers (£18.99).