Andrew Oswald: Why students should pay fees of £7,000 a year

The sun was shining, then I heard the news: the review of student finance was being put back to October. I decided I had better go and have an ice cream to recover. What a hash the last few governments have made of higher education, I thought, as I ordered my red drizzle topping, which I privately call E-Numbers Surprise (though I have never mentioned this fact, which probably would not be a particularly welcome one, to the genial ice-cream man).

The sun was shining. Then I heard the news: the review of student finance was being put back to October. I decided I had better go and have an ice cream to recover. What a hash the last few governments have made of higher education, I thought, as I ordered my red drizzle topping, which I privately call E-Numbers Surprise (though I have never mentioned this fact, which probably would not be a particularly welcome one, to the genial ice-cream man).

So I sat in the sun, on Warwick's piazza, and I thought, and I ate. This country has no idea how to run a world-class education system, and even more frustratingly it cannot even make a decision, I thought disconsolately to myself. What a shambles. Please make a decision, Mr Blair. Any decision. Prosperous parents milled around, chatting. Students in turquoise graduation gowns munched next to me, chirruping. I could not blame them for not wondering about how a university actually functions, partly because they have simply never thought that part of their costs have been paid for by decent regular taxpayers who work in supermarkets.

And yet we in Britain charge students coming from some of the poorest nations on the planet nearly £10,000 a year. Where is the justice in that?

Opposite us I notice a large sign: "Super luxury en suite student apartments for sale, close to campus". So much for poverty-stricken youngsters and parents, I think. It is, of course, emotion, not just the self-interest of the middle class, that makes life hard for those of us who cough up for fees. The National Union of Students tells us endlessly that we should worry about student debt.

But why should we? Do students worry about taxpayer debt? We know from the Student Income and Expenditure Survey run by the Department of Education and Skills that one third of student expenditure in a year is on "entertainment". This figure is only a little less, according to the government statisticians who tabulated the survey numbers, than students' entire spending on accommodation, plus food, plus household bills.

A typical student's entire spend is £5,400 per annum. Of this, he or she blows £1,800 a year on having fun. Such big expenditure by British undergraduates on enjoyment means that sad claims about debt do not have a particularly convincing ring to them. In total, according to the survey data, £2,700 a year of student spending is on inessential items. Over three years, that makes £8,100.

If students from low-income homes were put off going to university by the prospect of debt, then that would worry me a lot. Yet I know nobody on the side of high university fees who wishes to ignore this hazard. All those in my corner of the ring want to see scholarship funds for the disadvantaged. Investing in your future is rational. Young people routinely take out a mortgage on a house, for instance. Human capital is even more useful than housing capital. Sensible folk borrow early in life and then pay back the cash in later years when their incomes become high. Debt pays off – in both senses.

At least the rumour is that the Government accepts it was muddle-headed to try to review student finance without facing up to the big issue of how higher education should itself be funded. Barry Sheerman told Radio 4 that "we have to put serious money into salaries and continuing research. At the moment there is a large subsidy paid to middle-class professionals in this country." Slowly, painfully, maybe we are moving to an acceptance that students must pay for their education and that high university fees (my favoured figure is £7,000 a year) will soon be with us.

We need fees. Without them, I cannot get out of my mind a picture of UK universities like a Western movie. You know the sort – where, with the desert sun beating down, a lone outstretched arm is just visible, sticking out of a quicksand bog, fingers stretching, and then there is a glug and a bubble, and we are down to fingertips, and then, gurgle, we all know that the hero had better be quick, or there will be just a gentle silence.

The writer is professor of economics at Warwick University

education@independent.co.uk