College grants available

As universities eagerly await the outcome of the government's review of student funding -- amid talk of restoring the maintenance grant and partly modifying the present fee-paying regime--one group of students, as always, is not invited to the party: those who attend further education colleges. They are excluded from the review.

For the chattering classes, on their unfettered journey from school to university, further education (FE) colleges are largely uncharted territory, associated mainly with courses in basket-weaving. In fact, they are the chief source of technical and vocational training and adult education. Traditionally, they have catered for the disadvantaged and for those disaffected from mainstream education. Yet more A-level courses are undertaken in colleges than in all the schools put together. Although most of their work is below degree level, the colleges now have more students taking degrees (or equivalent courses) than the whole of the university sector in the 1960s.

So while we have virulent protests about university students being charged fees, it is rarely mentioned that adult FE students have been paying fees for years. While undergraduates lament the loss of grants -- and grumble about the burden of paying off cheap loans that cost the taxpayer at least [pounds sterling]400m a year in interest subsidies and are often invested by affluent parents in high-interest accounts -- FE students receive negligible maintenance support, and would more than welcome loans on such favourable terms.

Labour inherited a highly regressive system. FE students -- disproportionately working class -- struggled to fund themselves on courses that generally led to modestly paid jobs. Meanwhile, taxpayers with few prospects of going to university subsidised mainly middle-class undergraduates to obtain a passport to the upper echelons of the labour market. The social hierarchy remained intact.

The Tories' neglect of FE was hardly surprising. When Sir Keith Joseph, as education secretary in the mid-1980s, dared to suggest that university students pay fees, he received short shrift from cabinet colleagues. The expansion of universities under the Tories is often cited as proof of their meritocratic credentials, but the middle classes were the chief beneficiaries.

FE should be at the heart of new Labour's reforming agenda, because it is central to social inclusion and economic competitiveness. Even the PM's pledge to widen participation in higher education depends on improving the performance of students in FE.

Ministers have expressed a determination to champion the FE cause, but the rhetoric has run ahead of the reality. The exclusion of FE from the funding review is just one example of the continued dominance of universities. The government's aim of getting 50 per cent of all young people to university may be well-intentioned, but it threatens to eclipse all other concerns in post-16 education. The amount of money spent on each student, for teaching as well as maintenance, is still considerably lower in FE colleges than in universities. Amazingly, it is forecast to decline in the next few years.

Even modest financial support can help. The government has experimented with education maintenance allowances for young people who continue their education after school, in selected areas. It should extend the scheme nationally. Ideally, the allowance should be extended to all adults who have not yet attained the crucial level 2 benchmark -- the equivalent to a decent batch of GCSEs -- but the 19- to 24-year-olds should be targeted first.

Students who take qualifications at level 3 (equivalent to A levels) and above should be eligible for loans. Some critics may baulk at the prospect of more indebted students, particularly on the lower rungs of the education ladder. But level 3 qualifications attract a healthy wage premium--and loans are better than nothing.

Moreover, the crucial thing about student loans is that they are not like mortgages, where you are compelled to repay a fixed proportion each year. After completing their courses, people repay the loans according to their income -- no contribution is expected during periods of unemployment or childcare. Think of a college education as an investment: in effect, the state puts up the capital and then bears the costs if the investment fails. In that sense, it is more like an insurance scheme than a loan. This point is enormously important, but rarely understood.

All this could be funded by removing some of the regressive subsidies in the present system. Child benefit should be abolished for the parents of over-16s (poorer families would not lose out if their entitlement was added to the student's maintenance allowance). Graduates should pay the full market rate of interest on their loans (though there should be a range of exemptions). University students' fees should cover 50 per cent of the true costs of their courses, instead of the present 25 per cent.

Defending the principle of free university education may be an attractive stance. But when there are competing demands on limited public funds, it is an extravagance. Colleges, together with hospitals and schools, have a more convincing case than universities for receiving a bigger share from the Exchequer. The wrath of the middle classes when deprived of their subsidies incurs a political cost. But that price is worth paying to improve the life chances of the disadvantaged.

Wendy Piatt is preparing a report on student funding for the Institute for Public Policy Research