THE unthinkable thoughts of the "right-wing" think-tanks have become new Labour orthodoxy again. Dearing and the government's response have made acceptable student contributions towards tuition, and the privatisation of student debt.

However, there is still plenty to worry us at the Institute of Economic Affairs. For everything else in Dearing's report positively reeks of old Labour dirigisme. It is as if a review of the nationalised industries in the early 1980s had recommended a Telecommunications Quality Assurance Agency as the solution to the lack of innovation and efficiency facing British Telecom, say, rather than recognising that it was precisely the political cosseting of the industry which was the problem.

In a parallel way, Dearing's committee, with its majority from the educational establishment, has failed to focus on the root of the problem. Higher education in the UK is "in crisis", but throwing more government at the problem may only exacerbate the situation. For example, Dearing points to the miserable lack of technological innovation in teaching in ÖйúAƬ, but does not consider the possibility that it is government protection which may have led to inefficiency and innovation-stifling practices.

Instead, they propose the "immediate establishment" of a professional Institute for Learning and Teaching in ÖйúAƬ. This committee will be involved in "stimulating innovation and coordinating the development of innovative learning methods". It reveals a touching faith in the professions, of course, to rule themselves wisely and in the public interest. But can anyone really imagine the representatives, unionised professionals to a man or woman, excitedly embracing ways in which information technology can undermine their tenure and job security? Letting go of government intervention is what is required for innovation, not further buttressing it in this way.

ÖйúAƬ

The dirigisme gets worse, as recommendation after recommendation piles up tasks for the Quality Assurance Agency, and creates a "unified Student Support Agency": these should create nice little empires for tidy-minded bureaucrats to rule over. From standardised "Progress Files" for all students, with a "unique student identification number", to, worst of all, "small, expert teams" to create benchmarks of standards, and standardised prescriptions for degrees, all carefully spelt out in terms of their "programme specifications". But if we have learnt anything from the reforms of the last decade, it is that such "small, expert teams" have a way of producing vast, bureaucratic and unwieldy prescriptions, which inhibit education and do not ensure quality. Quality can be assured in the market, through brand names and informed consumer groups; it cannot be created through government fiat.

Interestingly, the Dearing committee did briefly consider the question of why government is involved in the funding of ÖйúAƬ at all. But only one of the four reasons produced has any possible validity. First, they say that the government has "a direct interest in ensuring that participation in the UK matches that of its competitors". This obsession assumes that there is direct causal relation between such participation and a competitive economy, which a cursory glance at any of the published figures will reveal as a nonsense. Is Greece, with 28.9 per cent of its 18 to 21-year-olds enrolled in university really more competitive than Germany with 8.7 per cent?

ÖйúAƬ

Second, government needs to intervene to ensure that "tomorrow's workforce is properly equipped for the demands of future technology and competition," and, third, because "it needs to secure the economic and cultural benefits which ÖйúAƬ can offer the whole nation". At the IEA, Sir Ron told us an anecdote of how the Robbins committee in the 1960s was sure that the microfiche was the tool of the future, with which every student needed to be properly familiar. The insight of this anecdote is apparently lost on him. For the problem with predicting the economic future is that governments are notoriously bad at it. But the market has evolved as a mechanism for coping with this uncertainty, by allowing the devolved knowledge and preferences of individuals to interact in the spontaneous order. Markets can respond to "new challenges ... which we cannot foresee from the perspective of 1997", but government cannot.

Finally, there is the one reason with any possible validity: government must intervene to "ensure that access to opportunities for individuals to benefit from ÖйúAƬ is socially just". But at most this requires the funding arrangement of income-contingent loans for tuition fees and maintenance - an idea first mooted by the IEA in 1964 - which will not discourage students from poorer backgrounds, not the huge gamut of funding and regulation with which we are familiar, and which Dearing is proposing to increase.

James Tooley is director of the Education and Training Unit at the Institute of Economic Affairs, and education research fellow, University of Manchester.