Leading Article: We should let universities charge more

Lord Browne's review of higher education funding and student finance is receiving some hefty and thoughtful advice, notably from the Russell Group of research-intensive universities which wants to see institutions able to charge what fees they see fit.

We would support this move, particularly at a time of severe funding cuts in higher education. A university education gives a huge benefit to individuals, opening minds, enabling them to get good jobs, earn more money and enjoy a good and fruitful life. So long as grants and bursaries are in place to support young people with the living costs of gaining a degree, we would argue that graduates earning decent money should be able to pay back the cost of their fees over time.

Higher education needs to be better funded to maintain the international reputation of British universities. The introduction of tuition fees, and later top-up fees, has not deterred young people from applying to university. It has brought money into the sector and meant that students have a greater stake in their education.

As things stand, the £3,225 annual fee charged by almost all universities to students in no way covers the cost to the taxpayer. One Russell Group university, for example, loses an estimated £3,620 a year for each chemistry undergraduate. Such figures lead the group to predict that leading universities will be in the red to the tune of £1.1 bn by 2012-13. Universities face unenviable choices in making up this shortfall: cutting staff; taking more overseas students; or increasing fees. Raising fees could well be the least worst option.

We also support the Russell Group's desire to see students paying a higher interest rate on their loans, as recommended by the LSE's Professor Nicholas Barr. Earlier this year on this page he argued that the interest rate subsidy on student loans was enormously expensive and regressive. It helps low-earning graduates only slightly and successful professionals in mid-career much more. This is the last group of people that policymakers should be helping. If a higher interest rate were paid, the loan to cover living costs could be increased, and new groups could be given loans, particularly part-time students and postgraduates.

The Russell Group is up against a lot of opposition. The National Union of Students does not like the idea of entirely removing the current government cap on what universities charge. The umbrella group Universities UK takes a similar view, although it does want to see the cap raised so that all universities can charge more. The Lib Dems want to phase out tuition fees altogether. In the current climate, that looks hopelessly unrealistic. We hope that Lord Browne will give the Russell Group vice-chancellors a fair hearing.