Government funding for teaching in universities should be scrapped and replaced entirely by money raised through tuition fees, a centre-right think tank has said.

In a report setting out how to tackle the public sector deficit, Reform also says that a number of quangos ¨C including the Office for Fair Access and the ÖйúAƬ Academy ¨C should be abolished.

The document, which Reform published as an alternative to next week¡¯s emergency Budget, sets out the steps needed to make savings of ?12 billion for education as a whole, including schools and universities.

It attacks current student loans and their low rates of interest as a ¡°middle-class subsidy¡± and suggests gradually increasing the cap on tuition fees until it is removed entirely.

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This would mean that the annual teaching grant from the ÖйúAƬ Funding Council for England eventually could be replaced by fee income, the report says.

¡°Caps on university tuition fees place unnecessary strain on the public finances, cap student numbers and result in poor course value judgments by students,¡± according to the document.

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The report goes on to claim that long-term savings of almost ?6 billion could be achieved by charging a market rate for student loans and removing the fee cap.

Dale Bassett, senior researcher at Reform, said: ¡°It is time to break the final link with government. The state should no longer fund undergraduate teaching; lifting the cap on tuition fees will allow universities to charge what their courses are worth and will allow students to select them on that basis.¡±

He added that phasing out the teaching grant would ¡°not only help to plug the deficit but it will give universities the freedom to teach the way they want to, and will allow the market to reflect the true value of different courses¡±.

On quangos, which Reform labels ¡°unaccountable and expensive¡±, the report calls for the axe to fall on the HEA, Offa and Aimhigher, another body tasked with widening participation in ÖйúAƬ. Aimhigher received more than ?80 million in funding this year from Hefce and the Department for Business, Innovation and Skills.

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simon.baker@tsleducation.com