Tom Husband urges the Labour party to grasp the funding nettle and back loans for tuition fees.

Gordon Brown wrote in the last edition of Fabian Review that "the defining characteristic of the new economy is, increasingly, not an individual's ability to gain access to capital, but their ability to gain access to knowledge and to use it creatively".

Tony Blair captured the public mood when he declared that "education will be the passion of my Government". A Labour government led by Messrs Blair and Brown will focus, we are told, on equality of opportunity through the best possible educational and employment opportunities.

Much has been written about the crisis in our schools. But tens of thousands of those school-leavers hoping for a university place will be unaware of the equally acute crisis in our universities, a crisis with consequences for themselves, tomorrow's students, and for the United Kingdom's competitiveness.

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In June, the Government published a White Paper on UK competitiveness, which concluded that we need a significant increase in investment in education and training. Herein lies the problem. It is easy for politicians to wax lyrical about education and training being key to our economic success and global competitiveness. But words need to be matched with action.

In his 1995 Budget, Kenneth Clarke announced huge cuts to the funding of higher education: a 32 per cent cut in capital funding for English universities. Funding per student has decreased by 28 per cent in real terms in the past six years, while student numbers have risen by about 70 per cent. Our system may be among the best in the world, but its resources are being squeezed to crisis point.

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Universities are big business. They help business to compete globally, directly employ over a quarter of a million people and anchor many local and regional economies. Yet the funding crisis is biting.

Companies are relocating their university links abroad. Students are dropping out because there are insufficient books, workstations and even seats. With larger classes but insufficient funding, staff are limited to teaching and administration rather than research and development. Scientific researchers are going abroad because one-fifth of university research equipment here is over five years old.

The Dearing inquiry must be allowed to do its work without the long-term impact of the cuts announced in the 1995 Budget. It has been said that Dearing is simply a smokescreen behind which the Conservative and Labour parties can hide, rather than develop forward-thinking policy before the next election. However, the next government will have to deal with the consequences of its findings, and set the course for the future.

A Labour government of the late 1990s will have to be far more innovative in its higher education policy than previous Labour governments have been. New Labour's current discussions are promising. The University of Industry and Learning Bank, if realised, would transform the higher education sector and increase its contribution to the UK's global competitiveness.

But the Labour party has traditionally subscribed to the view that access to higher education must be free to be fair. One would imagine that Labour would have enough informed opinions to realise the fallacy of such an argument. But those at the grassroots and in the parliamentary Labour party who have benefited from the higher education system are, perhaps unsurprisingly, more conservative.

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Labour is slowly but surely coming to terms with the reality that if higher education remains "free" to a few, its access is limited among the rest of the population. It has already advocated the introduction of maintenance loans, with a fair system of repayment, to ease the problem of student hardship. But it needs to go further. Only by introducing a system of loans for tuition itself can future students be assured of a quality higher education.

The overall cost of higher education to the taxpayer is around Pounds 8.5 billion. This level of public spending on higher education is simply not sustainable. The choice is between a system in which only a few can participate, or an expanded system which retains its quality by having participants contribute towards the experience.

Clearly, students who are financially less well off must not be deterred from entering higher education. And students need to know how, when and what they will be required to contribute. Nevertheless, universities are not prepared to see the quality of education fall.

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I believe that a national system of graduate contributions to tuition fees, backed up by a fairer loans scheme, is necessary and inevitable. Securing this income stream for universities represents the best way of alleviating their funding crisis, at little extra cost to the taxpayer.

Labour must acknowledge that our universities are in a crisis brought about by, first, the Government's expansion of higher education without providing supporting funds; second, the lack of a workable partnership on long-term funding frameworks between government, universities and students; and the social changes resulting from rising expectations of educational success, changing patterns of employment and increasing global competition.

The Learning Bank is the right direction to go if we are to achieve a new deal between individuals, employers and the state, as well as a higher education system which is genuinely open to all. Universities are looking to the next government to implement innovative solutions to a crisis which will affect generations of individuals and our global competitiveness. Labour will have to face up to harsh realities, and seize the opportunity for change.

Tom Husband is vice chancellor, Salford University.

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