11/03/2015 13:29 GMT | Updated 11/05/2015 06:59 BST

Three Tests for the Tuition Fee Cut

Ed Miliband has faced down internal and external criticism for his proposal to cut undergraduate tuition fees. Now we need a funding formula which also pays for postgraduates and research.

Miliband's determination to force through the cut makes sense, given the symbolic value of fees to a Labour manifesto with a core appeal to young people. But Miliband is also a policy wonk, and higher education is notably unresolved as a policy area. When he has settled the price undergraduates pay, he is likely to turn to the overall funding model for universities.

Does that mean a return to free education? The political mood doesn't appear to be right, although many mourn its passing. In any event, few would argue that the current state of the economy makes free education economically viable.

Let's not forget that the Labour Party itself introduced tuition fees in 1998. When in 2010 the Browne Review recommended an increase in fees, the Labour response was that "it is right that students make some contribution towards to cost of their Higher Education."

Just before the issue came to the Commons later that year Miliband himself set three tests for an effective policy on higher education: "In tough financial times, universities would have had to face some cuts, with students making some greater contribution. But we must have a system that promotes equal opportunity, avoids disincentives for students to apply to the universities and courses of their choice, and provides fair and sustainable funding for universities."

An unspoken benefit of the existing fees regime is that a predictable income stream permits universities to be run in a more sustainable, businesslike way, even if the resulting autonomy clearly irks some politicians. This autonomy may be an early victim of the cut.

The real dilemma is therefore, in Miliband's phrase, the problem of fair and sustainable funding for universities. This cannot be achieved solely through a focus on UK undergraduates. While some universities continue to make a margin on course fees, which can cross-subsidise their other activities, many are absolutely reliant on income from international students to make ends meet.

Given other pressing demands on public funding - including the ringfence on NHS funding - the promise to fund the tuition fee cut is likely to come at the cost of public investment in other higher education priorities.

These priorities include research, innovation, and social mobility. As many have pointed out with surprise, equal opportunity has improved a lot since the introduction of tuition fees. This is partly due to a hefty top slice on any student fees above £6,000, to a tariff set by the Office of Fair Access: effectively, universities are compelled to spend a proportion of the fees above £6,000 on recruiting and supporting students from less advantaged backgrounds. This top slice will, of course, no longer exist once fees are cut back to £6,000.

The situation is doubly precarious because, as Labour recognises, the current undergraduate fees regime is substantially underwritten by the State. If up to 45% of students will default on their loan, it merely defers State investment to future taxpayers. So pressure on public funding to higher education will continue to rise significantly, perhaps uncontrollably, over the next years.

One way round this is to fund strategic priorities. However, the coalition government rightly met considerable opposition when it put its money behind science, technology, engineering and mathematics: the STEM subjects. There is nothing wrong in itself with strategic investment in STEM. The problem is that this was consciously achieved at the expense of other subjects, notably creative subjects. It cannot be good in any higher education system for the government to have entire discretion over what should be taught, even by omission or neglect.

The cost of UK undergraduate education is likely always to be a political judgement. Somehow, we need to achieve a balance between political interest and institutional autonomy in a way that meets the Miliband tests: equally available, no hidden disincentives, at properly funded universities.