Just a couple of hurdles before the final furlong

Margaret Sharp anticipates an easy ride for the higher education bill in the Lords - but Offa remains a sticking point

With Easter past, the higher education bill comes to the Lords for its second reading on the first day back after the recess.

In the Lords, a second reading debate is seldom a voting matter, more a chance for a broad discussion of the general principles of a bill. Two weeks later we will move into detailed consideration of amendments in the committee and report stages, with the third reading likely in early July to allow time for the "ping pong" on any disagreements between Lords and Commons before the summer recess.

How is the bill likely to fare in the Lords where, without an overall majority, the government cannot rely on getting its way? Ironically, it is likely to get an easier ride on the central issues of fees and variability.

Not only will the government have much support from the crossbenchers, many of whom have close links with universities, but even on other benches there are sufficient numbers who are, or have been, chancellors, vice-chancellors, fellows, visiting fellows or members of council of one university or another for party loyalties to be under strain.

On fees, there is acceptance on all sides that "those who benefit should pay". The disagreement comes on how to achieve this, with Liberal Democrats arguing that a progressive income tax, rather than a complicated system of loans and repayments, is the best way of recouping costs. Of those earning more than £100,000, 83 per cent are graduates, so our proposed 50 per cent tax band for this group is close to being a graduate tax.

There are considerable worries about variability, but for different reasons. Some peers will be arguing that the cap at £3,000 unnecessarily constrains universities and that more, not less, variation is required; others fear the divisiveness of differential fees, both within and between institutions. Many, however, being only too well aware of the dire state of university finances, will be prepared to accept the government's line that there is no alternative - if they do not accept the compromise implicit in the bill, there will be no extra money for anyone.

The big issue in the Lords will be the role of the Office of Fair Access, which is seen on all sides to be an unnecessary piece of interventionist bureaucracy. The Higher Education Funding Council for England already sets targets, monitors success and rewards or punishes as appropriate. Why a separate quango? More generally, Offa is seen as symptomatic of the government's tendency to interfere and micromanage. There is a feeling that universities over the past two decades have responded well to government wishes - trebling student intake, improving international research ratings and responding to calls to become more entrepreneurial. The access message has been taken on board but takes time to implement. Why can't the government learn the lesson that institutions (and not just universities) perform better when set general targets and then trusted to get on with the job?

Two other issues are likely to play a prominent part in the debate. First, the need to ensure that universities get the extra resources and do not find, as happened with the £1,000 "Dearing" fee in 1999, that the Treasury just adjusts other income streams. There are particular worries on this score because the annual cost to the Treasury of the package now on offer - Pounds 2,700 maintenance grants to students from poor homes plus upfront loans for all students to cover fees and maintenance - will, in the early years, amount to about £1.3 billion, whereas the net fee income collected by universities will, even in 2009 when all students will be paying up, probably amount to little more than £1 billion. This raises questions about the cost-effectiveness of the whole scheme.

Second, there is the question of part-time and older students who do not benefit from the generous grants/loans package now on offer to full-time students. The Open University has many supporters in the Upper House, not least its chancellor, Baroness Boothroyd, as does Birkbeck College, London.

More generally, there is recognition that expansion in numbers and reluctance to take on heavy debts, not to mention the advent of e-learning, are likely to mean more students wishing to combine "earning and learning", and that opportunities for part-time study must be expanded. To this way of thinking (central to the Lib Dem alternative), the government's proposals lack any forward vision, instead harking back to the old framework of A levels and three-year full-time degrees. Voices from all sides of the House will be arguing for a more flexible future.

Baroness Sharp is the Liberal Democrat spokesman on education in the House of Lords.