Michael Fry: Private endowments can save our universities

David Willetts, the new man in charge of higher education south of the Border, made it clear this is going to become once again a luxury you have to pay for, rather than a right to which access is straightforward, and reasonably cheap, for anybody bright enough.

Of course, Mr Willetts has nothing directly to do with Scottish universities, but the pressures on them, already severe enough, are bound to intensify after what he said.

"Education, education, education" was a mantra of the previous age. This modern, progressive society, like its rivals elsewhere in the western world, saw nothing for it but to educate its population to the highest level it could afford. Yet those brilliant young brains also helped to deliver us the credit crunch and now, the Prime Minister hints, some return to metal-bashing would be in order.

There should be a rethink on the Left as well as on the Right. Old Labour saw in the universities an instrument of social engineering, yet enormous expansion under New Labour never brought about the expected equality.

The middle class again proved more adept than the working class at exploiting the welfare state, and access remained stubbornly narrower than the social engineers wished.

It could even be argued that inequality increased, because the poor were then paying for the children of the rich to enhance their future earning power with a degree.

Now the cackle has to be cut. The British state has been spending too much on higher education as on everything else, and in future the students will have themselves to find the money for what the taxpayers can no longer afford.

Anybody who had hoped the Scottish state might act differently would already have learned some months ago that our squeeze is to be no less painful. From now on, all the same, the paths of the English and Scottish universities will diverge. In fact I can think of English academics who rather relish the challenges ahead.

Probably, as a result of an official review now going on, they will soon be able not only to charge higher fees but also to differentiate the fees they charge. Balliol College, Oxford, and Trinity College, Cambridge, will no longer be kept on level pegging with the former Slagsville Tech, but will again become institutions for an elite, raising and spending enough money to reward the best teachers and attract the best students.

Equality then goes out the window, obviously, but in these hard times something has to give.

In contrast, Scottish universities charge no fees to undergraduates from Scotland. By the Scottish Government this was thought to be a virtuous preservation of equality, drawing a distinction with the wicked English encouragement and tolerance of inequality.

The fact that the Scottish system does not in fact produce more equality, in the sense of better proletarian access, has seemed incapable of denting the national self-congratulation.

In the real world the difference will soon yawn in a different way.

English universities will have means to make up for the money lost from the government. Scottish universities will not.

All British universities face a testing time, yet it is hard to see how the Scottish universities in particular can avoid coming off much the worse from it. Remember that two of them regularly figure in the world's top 20 for their facilities and results.

We have to fear that a great national asset is about to be squandered.

What is the answer? Nothing easy, but one thing the universities have started to think about is moving away from an arrangement which for half a century has subjected them to the vagaries of the British state's, or nowadays the Scottish state's, financial situation. It is unstable: it changes, sometimes violently, from year to year, as it did from 2007 to 2008. A university needs more stability than that, for its staff as for its students, or for keeping up with advances in knowledge.

It follows that one of the best things a university can have is a private endowment, to finance innovations and to fall back on if need be. Up to 1945 British universities relied on such endowments – the Carnegie Foundation was the prime example in Scotland.

After 1945 the universities made a terrible mistake: they threw themselves into the arms of the state and became reliant on it for their money.

Probably the academics who yielded to this temptation assumed the state would always be run by decent chaps like themselves, former students sure to respond to appeals from their old professors. How wrong they were.

Yet it remains possible to run a university on private endowments. It does not happen in Britain, or much in Europe, but it happens in the United States on a big scale.

I myself have spent two of the happiest years of my life at Brown University, an Ivy League institution in Providence, Rhode Island, which costs $5 billion (3.44bn) a year to run (twice the total budget for education in Scotland). Yet every cent is privately raised.

While the students are mainly rich kids whose daddies can afford the fees, Brown University has also raised enough money to offer what it calls "needs-blind admission".

No able student is turned away just on the grounds that he or she cannot afford the fees – and for undergraduate courses these are up to $40,000 (27,600) a year. In those cases, the university itself provides for the student.

The system works, and I have myself met young blacks from the mean streets of nearby Boston or the children of first-generation immigrants from Asia or Latin America, all benefiting from what the Ivy League institution gives them: one of the best educations in the world.

Brown and similar institutions still offer what used to be a pride of the British welfare state: free higher education to anybody who needs it. In Britain this is a forgotten dream. Yet it is still part of the American dream. It is also one difference between the public and the private sector.