Terence Kealey: Time for Britain to grow its own Ivy League

Of the 100 best universities in the world, more than 50 are American, British or Australian. Clearly there is something in the Anglo-Saxon university culture that allows the Anglophones to outstrip the French, Germans, Italians and Japanese. That "something" is, of course, the Anglo-Saxon tradition of university independence. Even state-funded universities in the United States, UK and Australia are, formally, private institutions, and use their independence to foster excellence in ways that Adam Smith would have predicted.

But the very best universities in the world are those of the American Ivy League and they are the most independent of all. Yet they enjoy the best of all worlds because they have access also to vast government research funds. But we could also have an Ivy League, here in Britain.

Consider the finances at Oxford, our oldest university. Oxford's income in 2005 was £530m. Of that, £183m came from the research councils and other research bodies, to pay the direct costs of research projects. In 2005, Oxford also received £161m from the Higher Education Funding Council (Hefce). Most people assume that Hefce pays solely for teaching but of that £161m, only £59m was for undergraduate teaching. Most of the rest - £90m - came from the Research Assessment Exercise and is for research.

Ideally, Oxford would break away from the Higher Education Funding Council, because taking money from that body surrenders too much freedom. Hefce sets Oxford's fees, determines how many students it admits, and tells it how it should be run.

Moreover, leaving Hefce would provide Oxford with more money for teaching. Oxford receives about £5,000 a year from the funding council for each undergraduate, which is absurdly low. If Oxford went independent and charged full fees, say £15,000 a year, it would greatly increase its teaching income while still providing a surplus for undergraduate bursaries. But, at the moment, Oxford cannot afford to do that because leaving Hefce would rob it of £90m from the Research Assessment Exercise.

If we want to create an Ivy League, therefore, the solution is simple. We need to split the RAE away from the funding council.

At present we are living through an unhelpful debate over the RAE. Gordon Brown, having undermined the NHS by a regime of targets, now wants to undermine the universities with a regime of metrics. He should be opposed. The real debate should be: when will we split the Research Assessment Exercise from Hefce? Only then will leading universities have the incentive to abandon the Funding Councils for England, Scotland and Wales (thus to greatly augment their teaching incomes) while still - as independent universities on the US Ivy League model - accessing RAE and research council money.

The RAE is an over-looked gem. It is the UK's equivalent of a national endowment fund. The British universities claim they want independence but that, without endowments, they cannot afford it. But the Research Assessment Exercise compensates for not having endowments.

So, let us create a uniquely British Ivy League. Let Oxford, Cambridge, Imperial, UCL and the LSE lead a negotiation with government to split off the RAE as an independent government-funded agency, to which they - as independent universities - will have full access. Let them then leave Hefce, charge full fees, expand to admit the numbers of students they really want, (the LSE has more than 15 qualified applicants for every place, but Hefce will not allow it to admit them) and flourish, to knock Harvard off its No 1 position.

At present, only one university financed with funding council money has an appetite for independence, namely the LSE. It was the LSE that, in 2001, faced down the Quality Assurance Agency (QAA) when the QAA had (in the LSE's words) "infringed academic freedom and imposed its own bureaucratic and pedagogic agenda". The LSE threatened to leave the funding council and RAE and the Government surrendered. The QAA introduced a light touch.

This story reveals that when important universities are serious about independence, they hold the whip hand. People fear that the Government will punish newly independent universities by withholding research money, but no government would oversee damage to the UK's research base. Parliament would not allow it. Whitehall would acquiesce in university independence. So, let us have an Ivy League. We will all benefit from it. And among the beneficiaries will be the universities that remain with the Funding Councils. They will have more money to share.

The writer is vice-chancellor of the University of Buckingham

education@independent.co.uk