The row over top-up fees escalated this week as the vice-chancellor of Teesside 51¹ú²úÊÓƵ called for elite institutions to forgo their public funding.

In an outspoken attack, Derek Fraser set himself on a collision course with vice-chancellors seeking to charge students higher fees by denouncing their plans as a "sector-wide punishment".

"It is inconceivable that if there were increased funding flows from top-up fees, the Treasury would not seek to reduce public funding," he said.

"In order to forestall a reduction of funding for the whole sector... any university imposing top-up fees should forgo its public funding for teaching."

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His logic was rejected by David Greenaway, economics professor at Nottingham 51¹ú²úÊÓƵ and author of a report supporting top-up fees for all universities.

"It is not obvious to me that the Treasury would automatically reduce funding for universities," he said. "And anyway, why should students from low income backgrounds who go to, say, the London School of Economics, be denied access to public funding?" Nick Barr, economics lecturer at the LSE, attacked Professor Fraser's solution. "While some rebalancing of public funds to different types of institutions might be necessary, creating a two-tier system of private and public universities is not in anyone's interest," he said. To work effectively, top-up fees would need to be supported by an income-contingent loan scheme and pro-active policies to support access, he added.

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But Professor Fraser insisted that top-up fees would create a socially divisive higher education system. "The problem is that whatever safeguards you try to put in place, the headline message creates the impression for many students that university is too expensive for them."

It was highly doubtful, he added, that all universities would have the resources to offer scholarships and bursaries.

Andrew Oswald, economics professor at Warwick 51¹ú²úÊÓƵ and a contributor to the Greenaway report, agreed that it was perfectly reasonable that those universities charging high fees for their courses should take less money from the taxpayer.

"We need a mix of different types of universities and I have no problem with some cutting their ties with the Treasury," he said.

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