Charles Clarke: Putting a brave face on the debate raging in Cabinet over top-up fees for universities

Charles Clarke recalls an aphorism coined by Cledwyn Hughes, that wily Welsh cabinet minister in Harold Wilson's first Labour government. For any political decision, he said, "there are pros and cons for, and pros and cons against."

This has clearly struck Mr Clarke with a new force since he was plunged by the unexpected departure of Estelle Morris into what may yet prove to be the hottest political problem – replete with pros and cons – of the second Blair term: university funding. It's as well he is brimming with the self- assurance that his predecessor self-confessedly lacked. For his decision to ask Tony Blair to give him until January to take a fresh look at the issue has sparked the unprecedented debate on top-up fees raging within the Cabinet and among Labour MPs – a debate with which Mr Clarke claims bravely to be "perfectly delighted".

It's a debate behind which he sees a wider argument on the nature of universities. "Are all of them going to be world-class institutions? Which of them are going to be good at teaching? Which of them are going to really dynamise their local economies?" All that, he says, is now being discussed – with the issue raised in his Independent on Sunday article last week about whether students should be standing on their own two feet at 18.

He insists he has no problem with the views expressed by Clare Short and, less publicly, Gordon Brown. "People read all sorts of things into it, wrongly. I know what Clare and Gordon think. They don't think top-up fees are that good an idea. Fine. A lot of people don't think top-up fees are that good an idea. A lot of people don't think a graduate tax is a good idea. A lot of people don't think universities going on as they are is a good idea," he says.

He isn't, he says, ready to lay out his own line because he's still reading himself into it and "getting a debate going. If you ask, 'Do I share the concerns that people have, whether actual or political, about top-up fees' then I do. If you ask,'Do I share the concerns that people have about graduate tax, ie that we are raising a tax issue and it takes a long time to pay it back' then yes, I do. The issue is which of these not very good ideas are we going to go for. The one thing we know is that drift is not an option."

Almost casually, he brushes aside the word "crisis" used by his cabinet colleague Peter Hain and his own Higher Education minister, Margaret Hodge. "I don't think it is a crisis," he says. "I do think there's been a steady decline in units of funding. Therefore, we are fighting with one hand tied behind our backs against well financed, particularly American, competitors. There is a hell of a range of issues, also including the government's 'tough' manifesto target of 50 per cent university participation and the separate need, within that, to improve the access for lower socio-economic groups. Now all that I say is, 'It's better to address them and decide where we are. It's best to be bold'."

On growing disquiet among Labour MPs about top-up fees, he says: "The reason people are angry is they think it will constrain access to universities because people will be fearful of the debts they take on. That's a motivation I share, and the Prime Minister and the Chancellor share. How do you put in a proper funding system where people contribute to their higher education but you don't dissuade people who would benefit from higher education?"

But that wasn't, surely, the less altruistic motivation of the Conservative press or the formidable electoral forces represented by the columnist Allison Pearson, who launched a ferocious defence last week (in the London Evening Standard) of the right of better-off households to free higher education?

Well, says Mr Clarke, first is the "elementary social justice case. Say you have 25 per cent of young people leaving school at 16 and 43 per cent who get not only another two years free but another three years after that which is 90 per cent free," he says. "Worse than that, we say the person who gets nothing when they leave school, at 16 should pay through the tax system for people who get more education. Now I don't think that's very just."

Then comes the economic case, underlined by international comparative statistics showing the adverse impact on the economy of those leaving school at 16. Was it sensible to create a system where those people weren't involved in the skills agenda? "No, we should put more money into further education, into learning and skills," he says. Third is the universities' "self-interest" argument. If universities depend on the budget settlement they must first win the struggle between education and every other department. Then, within education, universities are up against primary, secondary and further education providers. "The universities will always be hobbled by looking for money from the public sector in a competitive regime so they won't be able to do what they want to do," he argues.

So, despite the political risks, "I'm not that frightened of Allison Pearson marching through the streets of London – I might be able to live with that – the fact is that we need to address this," he says.

But won't top-up fees lead to two-tier higher education – Ivy League universities and the rest? "Nonsense" and "sloppy thinking" he says. The university system already has about 100 tiers – and around three missions, to research, to teach people from undergraduates to lifelong learners, and to be intellectual drivers of their regional economies.

Wasn't the Government torn by a wider conflict about all this, though? In a recent interview, Gordon Brown's closest adviser, Ed Balls, had explicitly warned against the application of market principles in public services leading to "two-tierism" in health and education. Hadn't the Chancellor been implying the same thing in the Cabinet a fortnight ago? "I don't really accept the idea of two-tier. It's an easy soundbite which isn't true," he says. "The actual experience of life is multitier. I think even the phrase two-tier is intellectually sloppy. The only two-tier element in health is the private health insurance, Bupa situation. People who can afford [private health care] and people who can't, versus the rest. That's two-tier. Whether we do foundation hospitals or whatever, that's not two-tier. I hate the two-tier description. I think it's a wrong picture."

As in health, so in education. "The only two-tier system in Norwich or London is between the private schools and maintained schools. The idea that specialist [schools], non-specialist, and all that, is another tier, is nonsense. The question is how we fight the real two-tier system, which is dangerous. And the answer is by producing a system of secondary education which makes regular parents want to send their children to regular schools."

And while schools are his "number one priority", further education is his "number one opportunity. We have to make education at school or college 14 to 19 exciting, enjoyable and positive so people want to go to school or college rather than feeling resentful of it," he says. "That's the massive challenge for us. Much of the discipline problem of schools is young people feeling bored, alienated, not part of it, not involved, not excited with the school curriculum. That's why January will see new proposals for dealing with just that."

It would be a mistake, finally, to think Mr Clarke won't now have time to deploy his weight on the wider political stage. On all the big issues of the day – "I think the firemen haven't understood that modernisation is at the core of what we're about" – he still has plenty to say. And as a leading pro-euro figure in the Cabinet, he condemns as "unwise" suggestions that the decision on entry be put off to a third term. "We should decide according to the timetable the Prime Minister has set out, according to the economic tests. I am a member of a government and a member of a political party. I am very interested in the question. I have my responsibilities here but I shall play a full part in discussions about how we deal with that question." Cabinet eurosceptics please note.