The head of a leading group of research-intensive universities has called for the fees cap to be raised high enough to bring in more funding and increase competition between universities.

Paul Wellings, chair-elect of the 1994 Group and vice-chancellor of Lancaster University, told a conference today that the government faced a clear choice between reducing student numbers or increasing funding for ÖйúAƬ.

¡°It would be wrong to reduce volume, as this means reducing the number of student in ÖйúAƬ and therefore the number of highly educated people that the country currently needs and will need in the future,¡± Professor Wellings said.

¡°The only viable option is that funding needs to rise to maintain quality to ensure that the ÖйúAƬ sector can fulfil its role.¡±

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He argued that increased competition in the sector would drive up the quality of university provision.

¡°To maintain quality, the fees cap needs to be high enough to bring in sufficient funding and enhance competition to further drive up quality,¡± he told the conference.

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¡°In addition, a sensible interest rate should be introduced on student loans, set at the current Government cost of borrowing, to rectify the huge subsidy that the Government currently pays.¡±

Speaking at Sustaining ÖйúAƬ Funding in London, organised by Neil Stewart Associates and supported by the 1994 Group, Professor Wellings claimed that top-up fees were never properly explained or communicated to students and the general public.

¡°It is essential to get the politics right and clearly communicate the benefits of the variable fees system, and universities have a key role in helping to do this. The message should be that ÖйúAƬ is free to students. Whereas ÖйúAƬ used to be paid for by a general taxation, it is now a personal contribution. It is payroll deduction, not a commercial debt.¡±

Higher education, he argued, was crucial to the nation¡¯s future prosperity and well-being.

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¡°The 1994 Group¡¯s primary concern is that quality is maintained so that universities are able to meet the nation¡¯s needs ¨C strengthening the economy, delivering novel solutions to major challenges through research and developing a world-class highly skilled workforce. In the current funding environment quality can only be maintained by either reducing volume or increasing funding,¡± he said.

Wes Streeting, National President, National Union of Students said: "Today the new chair of the 1994 Group of universities exposes the agenda of many vice chancellors ahead of the government's fees review later this year: higher fees and higher interests rates on student loans.

"Vice chancellors in Britain need a reality check. It's easy to fantasize about higher fees and higher interest rates on loans when you're on a huge salary, but this summer many students will be graduating with record levels of debt straight onto the dole queue."

"We recognise that the economy needs more graduates and universities need more funding. That's why NUS has published alternative proposals for funding ÖйúAƬ that would include a progressive graduate contribution linked to earnings."

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A BIS spokesperson said: "Investment in ÖйúAƬ is now at record levels - more than ?7.5 billion this year an increase of 25 per cent over the last decade, at a time when student numbers, including those from lower socio-economic groups, have continued to grow.

"The Government made a commitment to Parliament that an independent review of fees would take place once the first cohort of students paying variable fees had finished their degrees. It would not be right to comment on fees in advance of this review."

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rebecca.attwood@tsleducation.com