Speech by David Willetts, stoked expectations that the costs of studying will soon rise again

There was a blatant conspiracy during the recent general election campaign. Whenever the blues or the reds were asked whether they would hike university fees, they sheltered behind Lord Browne's review, and granted each other safe haven. The same thing has happened before – and on the same subject. In 1997, John Major and Tony Blair huddled together under the half-written Dearing report; once polling day was out of the way it entrenched the pay-as-you-learn principle. Yesterday's speech by the new universities minister, David Willetts, stoked expectations that the costs of studying will soon rise again, while maintaining the fiction that nothing is settled until former BP boss Lord Browne has his say.

At the election, the Liberal Democrats differentiated themselves by pledging to steadily scrap top-up fees. The policy provided a decisive advantage in particular seats, but it was a policy devised at a great distance from power. It leaves them in a difficult bind now that they are jointly running the country. Their new deputy leader, the left-leaning Simon Hughes, stuck more or less to the coalition agreement yesterday, but its terms could shred the party's credibility on the university question. Lib Dem MPs will have to sit on their hands instead of using their votes to veto the measure. With all three parties acquiescing in rising fees, students may feel they have nowhere left to turn.

The reality, however, is that this is an issue on which it is easier to protest than propose. Places are already being cut back at a time when jobless youngsters need them more than ever. It is to Mr Willetts's great credit that he is trying to think laterally, asking whether encouraging more students to study at home might contain the financial strains, both on them and the wider community. He is, however, wrong to suggests that debt-saddled students should consider their debt as akin to a tax rise.

The fee and loan system is a quite different thing, in both its appearance and in its structure. Anything that looks like a great clunking debt will scare off youngsters from families who have been stung by debt collectors, even if the repayments are in fact manageable. More fundamentally, those repayments will drag on for longer for those with degrees that do not translate into a high salary. A real graduate tax would challenge this market logic – everyone would contribute, but investment bankers would repay more than social workers.

Get the design right, and it could boost the public finances, by taxing the high-paid for longer. It is welcome that the Labour leadership contender Ed Balls is floating the idea. He should now turn his own highly educated brain to showing he can make the sums add up.

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