School-leavers should be given vouchers to pay flat-rate tuition fees in higher education, a paper drawn up by a Conservative party policy group recommends.
The paper was launched at a conference in London on Wednesday addressed by Eric Forth, the Minister of State for Education. He welcomed the group's proposals as a contribution to debate, but said they raised further questions.
The group proposes replacing the present grants and loans with a privatised loans system, covering all maintenance costs as well as any top-up fees that institutions chose to levy. Loans would be repaid through the tax or national insurance system.
This mixture of Government-funded vouchers and privatised loans would, the group says, achieve the right balance between political management and market freedom: between allowing the Government to manage the higher education system to suit the needs of the economy and enabling students to use their purchasing power to influence the supply of courses.
It would also cut local education authorities out of the funding picture because they would no longer pay tuition fees or administer student grants.
The proposals were drawn up by the Conservative Political Centre's National Policy Group on Higher Education for possible inclusion in the next Tory manifesto.
The group was chaired by Sir Jeremy Elwes and included two vice-chancellors of "new" universities as well as Ruth Deech, principal of St Anne's College, Oxford, and Sir Cyril Taylor, chairman of the City Technology Colleges Trust.
The group turned its back on the idea of replacing all state funding by vouchers for students because many members felt it would place too much power in the hands of students.
"Student choice is not the most important determining factor in the design of higher education," the report says.
"Students do not necessarily choose wisely and it has to be accepted that some degree of direction from the institutions is desirable and necessary."
The paper also avoids making any recommendation about participation rates in higher education. "Student numbers should be free to find their own level with students making more rational choices about the benefits of higher education as they bear a greater proportion of the costs," it says.
The group recommends the setting up of a voluntary higher education academic transfer scheme, to be organised by the Higher Education Quality Council.
And it calls for a new interim qualification, a two-year "associate degree", to replace existing Higher National Diploma courses.
The voucher the group proposes would suffice for any arts or science course but institutions could still charge top-up fees.
Courses and students - notably part-timers - now eligible only for discretionary funding by local authorities could be included in the voucher scheme.