The higher education bill will not work - it is time for plan B, where funding adapts to the reality of our three-tier system

I have said often enough that anyone who minds about higher education should pray that the rebels beat the higher education bill in committee.

Not for their reasons, of course: they haven¡¯t a decent argument between them. Opposition to variable fees penalises the underqualified; and the National Union of Students¡¯ bleating about debt simply reflects the ignorance of those who don¡¯t remember that free higher education went along with income tax that started at 33 per cent rather than 22.

But mocking the opposition is like shooting fish in a barrel. What we need is plan B. Charles Clarke and Alan Johnson maintain with a straight face that there is no plan B, while the Department for Education and Skills maintains with an equally straight face that no fewer than 40 options were considered before the peculiarly unsatisfactory compromises of the higher education bill were presented to the public. You¡¯d have thought that plan B was somewhere among them. It was. Here it is.

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The present system is structurally unsound; it should be pulled down and something sensible erected in its place. We have already created the three-tier system we need - if you read universities¡¯ published accounts, you can easily work out which of them belong in which tier - but we have been reluctant to recognise it and adapt funding to the reality. Because of that, we have too many students doing the wrong thing in the wrong place, and it is all made worse by a hierarchy of esteem that owes more to research-rankings envy than to common sense.

There aren¡¯t too many students, but there are too many of the wrong kind. Our philistine government thinks the argument for higher education is economic, and so do two-thirds of students; but Alison Wolf has shown pretty conclusively that the expansion of higher education has done nothing for productivity, while employers complain that there are too many graduates already: that is, too many students doing degrees spread over a leisurely three years, doing them far from home and running up debts of ?5,000 a year to pay for their living costs.

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So, start again. Do we need lots of post-secondary education? We do. What do we need? It is unclear, but it certainly isn¡¯t more three-year degree courses. We badly need some academic transition courses so that students who got a bad deal in their secondary schools have a chance to discover how clever they really are - and if they have academic inclinations. Obsessing about moving the 450 working-class 18-year-olds who have three As at A level from one university to another is a dead loss; but creating more ladders of the kind that Thames Valley University has created through its deal with Imperial College London Medical School makes sense. A greater use of the world-class Open University would make even more sense, allowing more people to learn while they work and work while they learn.

Half of all degrees should be two-year associate degrees (or up to eight years part time) such as half the students in US public higher education are taking. The fees for these courses should be very low. The leaders of the so-called modern - or tier three - universities have been particularly silly about this. Vice-chancellorial posturing about maintaining their brand is a crime against underqualified students who are rightly frightened at the thought of wasting tuition fees and maintenance loans - they are the most likely to drop out and see their money go down the drain. It is not that less should be spent on their education but less should be asked directly of them.

The so-called research elite should be treated as flagship national institutions, be funded accordingly and be liberated from the ³ÉÈËVRÊÓƵ Funding Council for England. The Irish are about to do it, so the English might as well learn a few tricks from their neighbours. It would be good not to have the flagships clustered in the south-east, and a government that knew what it wanted could turn Manchester and Leeds universities into the Berkeleys of the north and Bristol University into the University of California, Los Angeles of the far west, and give the Golden Triangle a run for its money. If California can create ten flagships - a big if, since the tenth at Merced is in mothballs until the economy picks up - Britain could manage eight, of which half should be in the global top 20. Then the tier-two institutions could get on with being the well-run and sensible institutions that they largely are at present, freed from the fear that their research efforts are going to be suppressed for the benefit of Cambridge University and their teaching budgets gutted for the benefit of the University of Central Lancashire. That¡¯s plan B. Who¡¯s got plan C?

Alan Ryan is warden of New College, Oxford.