John McTernan: Graduates earn £400,000 more in lifetime - students must pay up

SOMETHING'S got to give. Scottish universities cannot go on as they are. Already uncompetitive globally, they are about to fall permanently behind English universities in resourcing.

There is little doubt that the coalition government at Westminster will decide to increase students' contributions to the cost of their university education - in England.

And, for all the moaning of the National Union of Students, that will be accepted for two reasons. First, universities need more money. And second, graduates earn far more in a lifetime than non-graduates do, so that the cost of tuition fees are dwarfed.

The heart of the matter is simply stated. Universities are expensive - if they are good.

They generate immense benefit to a national economy as a service, as an investment in skills and as incubators for leading-edge business. But they also give a lifelong economic advantage to graduates - 400,000 across a lifetime according to some studies.

In the old days it was simple. If 5 per cent of the population went to university, the taxpayer could pay. The rising tide of prosperity would pay for this, and raise all boats.

When, in the 1970s, that figure doubled to 10 per cent, that was just about sustainable. Now in Scotland we are at 4 or 5 times that level and in pure cash terms it is unsustainable. Particularly with cuts of at least 25 per cent coming to Scottish Government budgets. A subsidy for middle-class students versus universal primary education - not a hard choice.

So, if not the taxpayer then who should pay? The user (the student, that is). But how? In all policy choices there is an option that is simple, obvious but wrong.

Ladies and gentlemen, I give you the graduate tax. Madness because it says to Treasury: "Don't worry about spending money now, in the long term money will come back to you through tax." (So it doesn't meet the immediate fiscal challenge.)

The alternative? Tuition fees - because they give universities an immediate financial boost.

And they forge a direct relationship between students and the services they receive.

Both are important in principle and in practice.

Money today, not a postdated cheque, is what universities desperately need. While ensuring it comes from students exposes universities to the choice of undergraduates, to questions of quality of teaching.

Unlike a philosophy degree final, this is a no-brainer.

John McTernan was a special adviser to former Scotland Secretary Jim Murphy.