Plans to allow prestigious universities to charge up to £3,000 a year for courses are justified by their students' higher future earnings, a study suggests.
By Justin Parkinson
BBC News Online education staff
Students are angry at higher fees proposed for some courses
Graduates from the Russell Group - which represents 19 of the UK's leading universities - can expect to make between £9,000 and £22,000 more over a lifetime than their counterparts from newer institutions, researchers at the London School of Economics (LSE) found.
The government is planning to allow higher fees to be charged for some courses from 2006.
Opponents say this will create a "two-tier system", increasing student debt and deterring young people from poorer backgrounds from applying.
Last week, the Conservative Party said it would abolish fees altogether if it regained power.
But higher education minister Margaret Hodge backed the report's findings, saying: "The wool has been pulled over people's eyes for too long.
"By asking everyone to pay the same tuition fee regardless of the university they go to we have been implying the benefits of every university are the same. They are not.
"By enabling universities to charge differential fees, we are lifting the wool from people's eyes, recognising difference, diversity and the premium that some universities can give you over others.
"This is an economic justification for allowing some universities to charge more than others.
"If potential students thought and acted rationally, then they would be willing to invest more in universities that offered them a better return on their investment."
The earnings of groups of graduates from 1985, 1990 and 1995 were evaluated for the study.
They had all previously achieved similar results at A-level and had come from similar social backgrounds.
Researchers found those who had attended a Russell Group institution could expect to earn 6% more than graduates of newer universities.
If the difference in fees was decided by labour market values, prestigious universities could charge up to £7,250 a year more, they added.
Currently, all higher education students in England pay a flat fee of £1,100 a year for tuition.
Dr Gavan Conlon of the LSE said: "By allowing charges of up to £3,000, the government is effectively keeping a cap on charges for students doing prestigious and more lucrative courses.
"The problem is that higher prices reduce demand for courses from those who feel unable to afford them.
"The government is reintroducing grants and encouraging bursaries. The real question is, does this go far enough?"
Dr Conlon added: "The reason for different earnings might be that the employer is looking at the job candidate's university degree as a good indicator of his or her worth.
"Universities are good at screening pupils for brightness."
But Dr Conlon dismissed the idea of an "old boys' network" having a cumulative effect on earnings after leaving university.
The difference in wages remained constant, not increasing over time.
The National Union of Students has campaigned against the idea of differential tuition fees since the government announced the idea in a white paper in January.
It estimates that graduates could be left with debts of up to £30,000, when lifestyle costs are taken into account.
Vice-president Chris Weavers said: "We believe that if graduates earn considerable salaries then they automatically pay more tax to pay for the education they received.
"By charging fees - at whatever level - the government is essentially making students pay twice for their learning.
"What's next? Charging road accident victims for treatment depending on the reputation of the NHS hospital they end up at?"
The government says fees are necessary to achieve its aim of getting 50% of young people to take part in higher education by 2010.
The Conservatives have advocated reducing the number of people studying for degrees. This, they say, will mean no more need for fees.
Shadow education secretary Damian Green said: "What Margaret Hodge fails to recognise is that students from poorer backgrounds are likely to more worried about getting into debt, and will therefore shy away from the high-priced universities she is planning.
"This is unfair to the individual, and denies the country the chance of benefiting from the potential of that individual.
"It is clear that the government regards £3,000 as just the starting point, and wants to push tuition fees much higher, They should come clean and tell us how far they want them to go, and how fast."
Paul Mackney, general secretary of the lecturers' union Natfhe, added: "Ministers should be trying to raise the potential of all UK universities and students, not encouraging a downward spiral into haves and have-nots.
"Differential fees would lead to a 'Brideshead Revisited' elite receiving more resources, privilege and income while most families would struggle to gain fair university opportunities for their children. That does not serve a modern society or a modern economy."
Sally Hunt, general secretary of the Association of University Teachers, said: "The government will no doubt try to use this report to justify its universally reviled proposals for top-up fees. But no-one will be conned by such an approach."
The English universities in the Russell Group are Birmingham, Bristol, Cambridge, Imperial College, Kings College London, Leeds, Liverpool, London School of Economics, Manchester, Newcastle, Nottingham, Oxford, Sheffield, Southampton, University College London and Warwick.
The other members are Cardiff, Edinburgh and Glasgow.