'Give poor students £5,000 grants'

MPs today called for the re-introduction of grants of up to £5,000 to help poorer students in a report which will be seized on by critics of government proposals for higher education tuition fees.

The Commons education select committee backed plans to allow universities to charge higher fees, saying the principle of asking students to contribute to the cost of their degree was "correct and should be supported".

In fact, MPs added, if the Government aimed to create a market in higher education, fees should be allowed to rise above the proposed £3,000 limit to at least £5,000.

Most, if not all, universities will raise fees to the maximum proposed when allowed to do so in 2006 because of their serious financial problems, the report said.

But MPs acknowledged the prospect of higher debts - up to £20,000 a year on a three-year course - could deter poorer students from going to university.

They called for more targeted assistance to help these students meet living costs, with new maintenance grants of at least £5,000 - five times what would be introduced next year under the Government's plans.

The recommendation could prove critical this autumn, when the Government will face opposition to its legislative proposals, with many Labour MPs opposed on principle to tuition fees.

Ministers have said they are prepared to consider increasing the maintenance grants proposed in their higher education White Paper and grants of up to £5,000 could act as an olive branch for angry backbenchers.

The committee says bigger grants should be funded by charging higher interest rates on student loans, which are presently offered at zero real-terms rates.

It said that maintaining the present rate costs £800 in hidden subsidy - which goes equally to better-off students - while raising it could also generate cash for bigger loans.

MPs supported the abolition of advance fees, with the cost of tuition being repaid by graduates when their earnings reach a threshold. But they said this limit should be raised to the level of average earnings, £24,500, rather than the £15,000 proposed.

The committee urged the Government to abandon plans for an access regulator which would have the power to block higher fees if institutions did not do enough to broaden their intake of students.

Improving state school exam results would be a better approach, MPs said.