Higher education spokesman Bryan Davies this week confirmed that a graduate tax is one option under consideration to enable the sort of major shake-up in higher education suggested by last autumn’s Borrie Commission on Social Justice.

Mr Davies said that Labour is now looking to the abolition of the current loans system, the expansion of higher education beyond the present one-school-leaver-in-three limit, and a more equitable funding system for part-time and FE students who currently meet their own living costs.

But he denied that the party has settled on any firm proposals, insisting that a full range of options is still open, including an increase in general taxation, hypothecated taxes and national insurance surcharges. Labour’s chief education spokesman David Blunkett said this week that he would prefer any future tax to be progressive - related to the ability to pay.

“What we do have is a very clear perspective on what’s wrong with the present system,” said Mr Davies. “Students are living in comparative poverty and are under-resourced; the Student Loans Company is a failure; and the Government appears to have frozen expansion with a limit on places for only three in 10.

“We aim to expand the system. We also want to address the inequity of the way that students on part-time and further education courses are treated. We’re seeking a strategy for expansion and for more generous financial support. We’re also looking at how additional resources can be brought into the system. ”

His stance appears to mark a significant change from the policy pursued under the previous leader, John Smith, who last year refused to publish a discussion document outlining exactly the same goals and the likely requirement for a major increase in spending.

The author of the paper, higher education spokesman Jeff Rooker, lost his job despite the backing of Ann Taylor, then leader of Labour’s education team.

But the ideas were revived by Labour’s Social Justice Commission in the autumn which listed as priorities the expansion of higher education and the search for a fairer funding system. The new leadership has now adopted these goals as its own.

Mr Davies said that the starting point of Labour’s formal policy will be that the current system is unfair. Under the loans system, he said, students are expected to pay back their living costs over a short timescale when they are likely to be earning the lowest salary of their lives. Any future plan to recoup money from graduates will therefore attempt to spread the burden over a longer period: possibly over the course of a working lifetime.

Talk of graduate taxation has already angered some figures on Labour’s Left, including Ken Livingstone. They fear it marks a step back from the party’s historical commitment to universal, free education, and that the prospect of long-term debt will deter working-class entrants.

Higher education minister Tim Boswell said this week that the Government is willing to consider lengthening the five-year repayment period for student loans, but that it remains opposed to graduate taxes. As things stand, students must start paying back the loans when their income reaches 85 per cent of the national average - about Pounds 14,500.