Written by Graeme Paton
The cap on university tuition fees should be abolished to improve the quality of higher education, according to a report.
Institutions should be free to set their own price, above the current £3,200-a-year limit, it is recommended.
The report, by the Adam Smith Institute, an independent think-tank, said the existing cap had “distorted” universities by restricting competition and artificially inflating the demand for courses.
At the moment, almost all degrees cost the same – irrespective of their perceived quality and students' chances of getting a good job.
James Stanfield, a fellow at the institute and author of the report, said: “Tuition fees ought to send out important signals about the relative value of different university courses, and help to co-ordinate the interests of students, universities and future employers.
“By dictating what fees may be charged, the Government is severely retarding the natural development of higher education.”
An independent panel, led by Lord Browne, the former head of BP, is currently reviewing the system of university fees, loans and grants.
The inquiry has already come under pressure to raise the cap – which will increase to £3,290 next year – amid claims that institutions are struggling to compete with wealthy universities in the United States.
A study last month by the think-tank Policy Exchange recommended increasing the charge to more than £5,000.
But the Adam Smith Institute said keeping fees artificially low meant degrees were devalued by students who are more inclined to “choose inappropriate courses or not work as hard”.
The study - The Broken University - called for a completely free market on fees. This would create a system similar to that in the United States where some elite institutions charge more than £20,000-a-year.
The study also called for all direct Government subsidy of universities to be phased out within 15 years – forcing institutions to be run by a combination of fees, philanthropic donations and corporate sponsorship.
In a further recommendation, the report said loans should be targeted at students most in need of support, with loans to wealthier students limited to a set percentage of their university fees.
Tom Clougherty, executive director of the Adam Smith Institute, said: “Ending the direct subsidy would empower students, because universities would be forced to treat them as paying customers.
"In the long run, it would also benefit universities since it would help them regain their independence from central government. And it would also benefit the taxpayer, by ensuring their money was used as effectively as possible."
Published on Telegraph.co.uk here.