In a revealing speech delivered a few weeks before the publication of Browne, universities minister David Willetts implied that the intellectual justification for the new funding regime could be found in the freshly-beatified Cardinal Newman's The Idea of a University. In the book's early pages, Newman made a very sharp distinction between research and teaching. Research academies, he argued, do not need undergraduates. We could support his point by citing Cern in Geneva, the Institute for Advanced Study at Princeton or All Souls, Oxford. A university, in contrast to a research institute, is a place for teaching universal knowledge. The formation of the student mind and the creation of the moral citizen: that was Newman's idea of a university. The example of the best liberal arts colleges in America shows that great teaching doesn't necessarily require a side-dish of research.

Long before becoming minister, Willetts was arguing that the unintended consequence of the Research Assessment Exercise (RAE), in which money follows research excellence, has been to lead universities to neglect their teaching. An attempt in the 1990s to introduce a parallel Teaching Quality Assessment — a kind of Office for Standards in Education (Ofsted) inspection regime for universities — became a bureaucratic nightmare and was abandoned. Willetts is a latter-day free-market Newman. He welcomes the Browne report because it proposes radically different funding models for research and teaching: research will continue to be funded by the state, but teaching quality will be driven up by consumer choice. Since students will be paying so much more, they will demand small-group teaching and detailed feedback on their written work. They will pass back to their sixth forms information as to whether or not the University of Middle Wallop offers value for money in this regard. Departments with excellent teaching will recruit strongly, while those that give their students second-best will go to the wall.

But can a full-scale market be introduced at a single stroke?

At the moment, universities receive a teaching grant from central government as well as the student fee of just over £3,000. For the purposes of this grant, disciplines are divided into bands. The tariff for the cheapest (Band D) subjects, mainly in the humanities, is about £4,000 per student. Band C — mainly social sciences, slightly more expensive because of a fieldwork element — is £5,000. Band B, the lab-based sciences, brings in about £7,000 per head. And Band A, medicine, nearly £16,000. Browne recognises that there must not be a price disincentive stopping students from studying science and medicine, so he proposes that the marginal cost of Bands A and B will still be paid from central government, not met by the individual student.

When the Browne review was set up, universities hoped that the fee cap would be raised by at least £2,000. For a bog standard Band D humanities student they would thus receive £9,000 instead of £7,000 (£5,000 from the student and £4,000 from the state, instead of £3,000 and £4,000). The additional income would allow them to balance their books and improve student experience by reducing class sizes and increasing contact hours. 

The Russell Group of leading research-active universities argued for a rise well above this level, or even the abolition of the fee cap altogether. They figured that the prestige of their offer, together with the earnings premium their degrees bought, would allow demand to remain buoyant at £7,000 or more, and they gave assurances that there would be generous bursaries so as not to deter students from less affluent backgrounds. If Browne had been doing his work in normal times that is how his report would have turned out. But in the course of the summer it became apparent that he was going to have to take the Comprehensive Spending Review into account. When his report was published, the week before the spending review, it was confirmed that the goalposts had been completely moved. Suddenly, the higher fee was to replace rather than supplement the basic teaching grant from central government.