Gordon Marsden: There are much fairer alternatives to top-up fees

The 19th-century French historian Alexis de Tocqueville wrote that the most dangerous time for any government is when it decides to reform itself. Perhaps he could usefully have added "when it decides to address head-on a major issue too long swept under the carpet" (eg the funding gap in higher education). Given the size of the problem – up to £5.4bn – it's not surprising some are touting top-up fees as the simplest and boldest solution to a problem that can no longer be ignored. Unfortunately the arguments unravel rapidly once they are analysed.

Shot through the arguments of those advocating top-up fees as a panacea is the assumption that they will put our universities on a level with top US universities. But they won't – because the comparisons are misleading. As a member of the Education Select Committee, which twice went to the US before the last election and saw how higher education was delivered across a range of private and public universities, it is quite clear to me that the histories, attitudes and structures are so different as to make easy comparisons impossible.

Fortunately, there are alternatives to top-up fees to meet the funding gap and the needs of international excellence, which the Prime Minister has rightly laid emphasis on. There isn't anything sacrosanct about the existing £1,100 per year flat fee for tuition. An immediate hike across the board to £1,500-2,000 or some modest differentiation between subjects, depending on course costs (lab-based science degrees cost more than arts ones), would produce a useful revenue increase.

The Government could consider some adaptation of the graduate loan scheme used in Scotland, which would be more equitable, with the possibility of writing off loans for people entering certain professions – teaching, nursing and possibly other public-sector ones. This would be a refined version of the arguments in favour of the graduate tax, which, despite correlating financial benefit with repayment, are flawed because of the time required to recover enough money to cover current shortfalls. And with the increasing number of graduates opting out of PAYE, self-employed or likely to work overseas for a significant portion of their careers, the potential for significant failure to recover income (as has happened with the Child Support Agency) is a real one.

Any new higher-education funding settlement must address the issue of widening participation for first-generation and working-class applicants. Restoring maintenance grants for them – perhaps at a slightly more generous rate than the £2,000-£2,500 some have suggested – would be part of this; but instead of the overly complex US "needs blind" model, we could have an embryonic UK qualification test in the educational maintenance allowance for working-class 16- to 18-year-olds. Such students could still be eligible for further top-up loans, if required. The new maintenance grants could be funded by a mechanism I have already suggested – a leisure technology levy, with 25p paid out every time a recreational video or CD-rom game is rented and 60p on every sale, raising initially upwards of £250m per year.

Universities themselves, as Charles Clarke has rightly said, are not exempt from the challenge of raising more themselves and utilising their assets better. The Treasury might reasonably not feel obliged to maintain current or planned levels of central support where there is an inrush of money and little clear evidence that it is being spent as well as possible.

Much Stateside fundraising is geared towards access or specific course requirements. What about a higher-education challenge fund – tax-exempt donations – to encourage more non-traditional entry students into your old college or university? Universities might be allowed to set up their own charitable trusts, issuing bonds that alumni and others could buy into with a decent rate of return.

Having invested (as they should) in far more extensive and professional alumni departments and fundraising, UK universities could benefit from Gordon Brown's willingness to extend tax relief for gifts of shares to charities, and from gift aid donations being widened to trusts where proceeds could flow to charities benefiting higher education. Why not initiate a £1-for-£1 tax-relief scheme, perhaps piloted with individual universities and then rolled out if successful?

This bundle of suggestions, if applied effectively, could go a long way to meeting the funding gap and giving our universities the extra £1bn a year that the Greenaway report (commissioned by a group of so-called élite universities) advocated to maintain excellence and expand participation. They are equitable and avoid some of the political and ethical pitfalls that untrammelled top-up fees would bring.

They also open out the debate towards an alternative hybrid model of funding for the Government to consider. Ministers should beware of being boxed in by a there-is-no-alternative line of argument from certain would-be UK Ivy League vice-chancellors.

The last thing we want is a "sheep and goats" solution that risks replicating in our universities a new educational apartheid of the grammar school and the secondary modern.

The writer is the Labour MP for Blackpool South