University top-up fees should be raised to pay for better early-years education, says a think-tank with links to Labour.

Students should be asked to pay more than the present maximum of pound;3,000 per year because the money is needed to give children from poor families a better chance of educational success.

The report from the Social Market Foundation said too much of the education budget was spent on post-school education that does little to benefit young people whose life chances are limited by doing badly at school.

Labour’s decision to let universities charge top-up fees from September 2006 is expected to be a key issue in the election campaign: the Liberal Democrats, who oppose top-up fees, are expected to target seats with high student populations.

However, the UK spends nearly three times as much per undergraduate as it does on under-fives.

The SMF said spending on early education was insufficient to provide all families with the “accessible, affordable, high quality education and care” promised in the Government’s 10-year childcare strategy.

Increased spending on the early years would help overcome the disadvantages faced by children from poor families, it argued. The report said: “Failure to invest adequate amounts early in the life cycle means that the education system will continue to fail nearly half of all young people, particularly those from disadvantaged backgrounds.

“Young people who leave school without 5 GCSEs at grades A*-C are forced to make up for poor attainment the first time round through ‘second chance’

adult education and training programmes that have a dire track record.”

The report also demanded extra money for schools to support disadvantaged pupils.

It came as the Govermment denied accusations from MPs that it had been bounced into potentially damaging changes to school funding by reports of a crisis that did not exist.

The Government said guaranteeing budget increases for schools and removing councils’ power to divert funding would introduce “greater stability and predictability” to the system.

The comments came in the Government’s response to an MPs’ report on public spending which accused ministers of “incredible short-sightedness”.

Guaranteed per-pupil funding increases for schools would stop money from going where it was most needed, they said. The Department for Education and Skills said claims of a funding crisis in 2003-4 had been exaggerated but some schools had faced problems because too many changes were introduced too quickly.

Barry Sheerman, chair of the education select committee, said he was disappointed by the Government’s response.

“If I am back in place after the election we will pursue them on this,” he said.

Primary forum, 25 Too Much, Too Late: life chances and spending on education and training is available from Emma Carr. Email ecarr@smf.co.uk