England should adopt a dual higher education system split between public-funded courses on the one side and a market-driven, employer- focused sphere of private provision on the other.

The University Alliance¡¯s Vision for Higher Education Funding report also argues that undergraduate loans should be made more sustainable by having graduates repay them within five to 10 years, generating the funds needed to reintroduce direct grants and reduce tuition fees.

Libby Hackett, chief executive of the group, said: ¡°We want to work collaboratively with people and build consensus across the sector with students, employers and in the corridors of power to build something that works and can ultimately be adopted by government.¡±

The University Alliance paper warns that England has a ¡°one-size-fits-all¡± funding system for undergraduate education, creating problems such as the ¡°unsustainable and unaffordable¡± new loans system and the cap on student numbers.

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It adds: ¡°A dual system would allow us to operate a publicly subsidised system on one side, with a much more flexible demand-led and entirely market-driven system running in parallel, designed to support alternative providers and with employers and the professions in mind.¡±

This system of private provision could be expanded at ¡°zero cost¡± to the government and would be built around those who study while in employment, the report says.

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¡°Trying to squeeze new providers into a system that is already constrained has zero-sum gain with numbers having to be taken away from high-quality, established providers to create space¡­within overall student number controls and funding limits,¡± it argues of the current system.

Ms Hackett and Steve West, the University Alliance chair, recently visited Australia, and the dual system proposal has similarities to that country¡¯s sector.

The paper also calls for ¡°the massive invisible subsidies on loans¡± to be redirected ¡°back into direct public funding for teaching in order to reduce fee levels and achieve a more visible balance of public and private investment¡± in state-funded courses.

john.morgan@tsleducation.com