Student cash 'should be on merit'

The report calls for all students to be graded on ability

Only the brightest third or so of young people should be given government help to go to university, a think-tank says.

The Bow Group recommends that the top 10 to 12% of 18 year olds, chosen by exam, should receive a full scholarship to cover tuition and costs.

The next 23 to 25% cleverest should be given loans to cover these expenses.

Those below this level - regardless of background - would have to pay all their costs, via family help, working or bank loans, the report adds.

'Opportunity for the gifted'

Its author, Andrew Lilico, said scholarships would mean greater access to higher education for gifted working-class pupils.

Young people would be graded on their intellectual ability through exams taken at A-level time.

FUNDING POLICIES Labour Variable tuition fees of up to £3,000 a year, covered by loans. Grants for poorer students of up to £2,700. Student loans at inflation-only interest rate. Loans repayable from graduate earnings. Conservatives Scrap all tuition fees. Retain grants for poorer students. Bigger student loans at commercial interest rate. Repayable from graduate earnings. Liberal Democrats Scrap all tuition fees. Grants of up to £2,000 a year for poorer students. Treat full-time and part-time students equally. Student loans at inflation-only interest rate. New 50% income tax for earnings over £100,000.

Dr Lilico told BBC News Online: "The system needs a rebalancing of funding. This gives the most gifted an opportunity to study in more comfort than at present.

"It gives a strong signal about the quality of the people who show ability."

Dr Lilico said some institutions, such as Oxford and Cambridge, would be almost entirely full of "scholarship" students.

This, he added, would help to create an "elite" based on merit alone, rather than background. Such a group would not suffer financial worries while studying.

In England, the government has set a target of getting 50% of young people into higher education by 2010. The figure is currently 44%.

Dr Lilico suggested the 50% figure was arbitrary and too high.

The 35% figure more accurately reflected the market need for students, as having too many would reduce the value of a degree.

Of the rest of the population, who would get no state help regardless of family income, Dr Lilico said: "It could be that they shouldn't be there [university]."

If it were "really true" that higher education was a good investment for those outside this group, banks would be "more than willing to help out".

It could be they shouldn't be there Andrew Lilico, report author

Dr Lilico said there was room for some "flexibility" within the system.

Scholarship students might be examined every year at university to decide whether they should keep their status and income.

Also, universities would be allowed to make scholars of some students who did not make the required grade, if they had come from poorer backgrounds or had other reasons for their exam performance.

'Status'

For those given loans, students taking some subjects, like chemistry, could be given precedence over others studying subjects deemed "less useful".

For instance, a student taking media studies who came within the top 32% sitting the exam might not get a loan.

In contrast, a chemistry student who only came within the top 38% might get one.

Dr Lilico said he thought future employers would look at whether graduates had received a scholarship, as it would confer "a sort of status".

This, he said, could be judged alongside students' final degrees.

Under the scheme, higher education would cost the taxpayer only the same as at present, the report adds, while universities would not be capped in setting tuition expenses.

From 2006, institutions will be able to charge annual tuition fees of up to £3,000. The government says this will help its expansion plans.

In contrast, the Conservative Party recommends abolishing fees and admissions targets, and replacing the current loans system with one which charges borrowers at close to commercial rates.

The Bow Group, which aims to provoke debate within the Conservative Party, insists that only its own proposals will bring universities true independence from government.