Someone once said that the difference between life and death is change. The person probably had the United Kingdom's system of ÖйúAƬ in mind. Nothing is ever quite settled or taken for granted any more. Which is just as well, as we need urgently to re-think our funding policies and consider whether they are delivering what the system requires.

The introduction of private tuition charges for full-time students should not end a debate, but start it. We should be asking: "What are the key objectives for university policy and what system of funding best ensures that they have a reasonable chance of being realised?" Instead we have responses to short-term problems, such as how to fund expansion in the face of competing claims on expenditure when higher taxation is regarded as a vote loser. Politicians have to evaluate how much the consumer can be asked to share the funding burden.

This is fine as a government agenda, but not necessarily for ÖйúAƬ. Restrictions on institutional autonomy charging different fees could prove antithetical to the desired outcome.

There are at least four central objectives for ÖйúAƬ. First, to achieve a diversity of provision that encourages student choice and produces educated personnel appropriate for complex economies. Second, to ensure that institutions are responsive to the needs of their customers and clients, and that they are given incentives to be so. Third, for institutions to achieve financial health, including the ability to invest for growth and quality. Finally, to ensure that institutions are regulated sensitively to distinguish between their different missions.

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To achieve these objectives a greater level of tuition fee differentiation is needed. Institutions will need more, not less, autonomy to play to their strengths, particularly in the global context. The notion that "one size fits all" looks increasingly tenuous. There are many ways to teach a course, ranging from the least expensive using the Internet and distance learning, to the high-cost method, taught by senior staff, using expensive equipment, and on a campus well endowed with social and cultural facilities.

Geography is no protection for national systems of academic awards any more. Universities face overseas competition, especially from the United States, which is using communication and information technologies to provide high-volume, good-quality and low-price courses. Without the ability to lower or to raise fees, universities in Britain are likely to be at a competitive disadvantage.

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These global dynamics are likely to require institutions to consider the balance between price and volume. Labelling a more deregulated fee regime as concerned solely with "top-up" fees ignores the possibility that some institutions may wish to adopt volume and cost-reducing strategies that can result in lower charges to students. At the moment there is no real incentive for universities to do this or to consider seriously low-cost delivery options.

It would be far better if we moved to a system where funding council grants provide essential continuity and stability to the system, but where fuller fee differentiation provides the basis for diversity, additional income and responsiveness. In this way the grant element could really be based on a common unit of funding, rather than proposals (plus or minus 5 per cent) that are politically expedient.

The government need not de-regulate with a "big bang", but in stages. This would be less disruptive but would also allow the chance to extend gradually the availability of income-contingent loan repayment schemes to all students (including part-time), for all fees, including "top-up", but to an agreed individual level.

Roger King is vice-chancellor of the University of Lincolnshire and Humberside.

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