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Employers can plug the degree funding gap

Education Secretary Charles Clarke has started a national debate over higher education funding. Ministers are locked in battle over the best way to fund an expansion of the numbers doing degrees. Should they go for higher "top-up" tuition fees or a variation on the graduate tax?

This is not just an issue for universities. A tenth of all higher education is delivered by further education colleges, and that proportion is set to rise significantly with the growth of vocational "foundation" degrees. So when the HE strategy paper is published early in 2003, college principals should study the proposals as carefully as vice-chancellors.

Clarke delivered a relative funding bonanza at the Association of Colleges conference last month. But the accompanying Success for All strategy paper gave no indication of how much FE would be involved in delivering the Government's target of 50 per cent of under-30s experiencing higher education by 2010.

The dilemma for colleges is not unlike that faced by former polytechnics, which have been more sceptical about top-up fees than the older research universities. If increasing participation by working-class and ethnic-minority students is a priority, how can that be reconciled with higher fees?

Instinctively, principals might argue for more money from the Exchequer. But, while the Chancellor could be persuaded to subsidise the initial costs of any new scheme, HE is no more likely than fire-fighters to get extra cash without "modernisation". And for modernisation read graduates or students paying more of the cost of their degrees.

Gordon Brown is far keener on repayments after students graduate than on up-front fees. And Charles Clarke suggested to David Frost recently that his instincts lay in that direction too. If higher fees were added to the student loan, repaid on an income-related basis with low interest, it should prove less of a deterrent than up-front fees.

And there are two issues for colleges. While many FE colleges cater both for A-level and HE students, sixth-form colleges have a narrower intake. Both are part of programmes trying to persuade sixth-formers to apply to leading universities such as Oxford and Cambridge.

On the other hand, colleges charged fees long before HE tuition fees were introduced. When the pound;1,100 HE fee came in first, ministers highlighted this as an example of the inequities of the old system.

In any case, colleges will not want to lose the extra funding higher fees should provide. While no college would try to match Imperial College's rash suggestion that it might charge pound;15,000 a year, principals know all too well that providing modern equipment for vocational degree courses does not come cheaply.

But will fee funding be enough? The levels look likely to be capped. Imperial's outburst has seen to that. Reports suggest pound;3,000 or pound;4,000 might be the maximum fee. With Oxbridge charging the full whack, the market will force FE colleges to charge significantly less. That may mean that they end up with little extra money.

That is why colleges should be pushing on another front. Most new degree students in colleges will be twentysomethings on foundation degree courses seeking higher technician or associate professional grade qualifications. As they acquire more skills, they will be providing extra value for their employers as well as themselves. Employers should therefore be encouraged to contribute more to the cost of such courses. If the Government provided tax relief on firms' spending on employee degrees , it would not only help Tony Blair to reach his participation targets, it would also improve the qualifications of the workforce as a whole.

Large firms argue that they already provide substantial funds for research and development, and in-house training. And ministers have refused to restore the 1970s training levy, because it would be another burden on the private sector and would miss out small firms.

At the same time, the Government is keen to encourage employers to take foundation degrees seriously. The Department for Education and Skills website offers busy business people the following advice for help funding their employees' courses: "Small firms training loans are one way to meet the costs if you have less than 50 employees. Or you may be able to get help from your Regional Development Agency, Sector Skills Council or Learning and Skills Council." In other words, go round the houses. And don't keep your hopes up.

Tax relief would be simpler and more effective. Moreover, it should appeal to a Chancellor who dreams up new tax credits every summer after returning from his American vacation. Colleges should join in the higher education debate before it is too late. And if they win tax relief for employers funding employees' degree courses, they could end up being winners from the whole process.

Conor Ryan was David Blunkett's political adviser from 1993-2001

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