LAST week Ed Miliband committed the next Labour government to charging university students in England tuition fees of £6,000 per annum – exactly double the price under that wild-eyed socialist Tony Blair. Miliband presented his education tax as an example of how “progressive” Labour has become under his leadership. After all, he intends to reduce the current tuition bill by £3,000 per annum, paid for (he claims) by cutting tax relief on middle-class pension savings.

There is certainly an argument for reducing tax relief for millionaire bankers salting their cash away for a gilded retirement, but it remains to be seen if the small print of this “back of a fag packet” proposal will stand up to closer scrutiny.

Those with long memories will remember that it was Labour who first introduced a basic tuition fee, in 1998. The argument for this attack on social mobility was purely financial: the need (supposedly) to raise extra income to keep UK universities funded at world-class levels. Curiously, at this time Chancellor G Brown was running a record budget surplus, partly funded by selling off Britain’s gold reserves.

After the 2003 General Election, Tony Blair announced that individual universities would be allowed to set even higher fees, though capped initially at £3,000 per annum. Strangely enough, this move had not been mentioned in Labour’s manifesto. A scant six years later, with G Brown now in Number 10, Labour announced it was “reviewing” university funding again. To do the “reviewing”, Business Secretary Peter Mandelson appointed John Browne, ex-boss of BP, who could be relied on to recommend the removal of the fee cap.

The claims for the English fee-based system are straightforward in theory: it gives the individual university control over its own finances and it frees the ordinary taxpayer from subsidising middle-class students whose families are better able to pay for their off-spring’s education – a point Labour likes to stress.

Here’s the rub: the fee-model does not work like that in practice. Rather, it is a short-term fix designed to relieve the UK Treasury of paying for our university system by passing the burden on to individuals. Unfortunately, with the job market flooded with graduates and the competitive forces unleashed by globalisation reducing real earnings, the university fee-model is creating a massive debt burden on society. And as we have seen with other debt-financed economic fantasies, the taxpayer will end up picking up the pieces.

If you need proof, look at the US, where the university fee-model is reaching crunch time. About 60 per cent of American university students get a federal government loan to cover their university courses. Introduced in the affluent 1950s, the system works in a similar model to the UK, with the money supposedly paid back from future earnings. But today, the system is in crisis.

To compete with Asia, US firms are demanding more graduate workers. Result: at $1.2 trillion, total US student debt is now greater than US consumer credit card and home equity debt combined. It will hit $4 trillion by 2024. That’s a cool 14 per cent of US GDP. Meanwhile, American universities, like good capitalists, have taken advantage of the surging demand for places, by upping fees.

However, US graduate salary levels have flatlined since the millennium, as global competition kept prices low. The result is that more than seven million former students are in loan default. By 2024 the delinquent balance could exceed half a trillion dollars. That, folks, will require a federal bailout roughly double the $245bn that American banks got in 2008. The student debt crisis has now become a focal point of American politics. Indebted American graduates have started suing their former universities on the grounds they were misled about likely job prospects or graduation rates. Just wait till that starts to happen in the UK.

Continuing with the present, fee-based model of funding higher education in England will produce exactly the same financial disaster as America is facing. For starters, lowering the fee cap to “only” £6,000 is no socialist reform. It still leaves students owing too much, especially when a third of graduates can’t find traditional graduate jobs. If you are taking comfort in thinking US students borrow more for their education than do Brits, think again. Students at US public universities (who are the majority) pay an average of £5,440 annually for in-state tuition.

But can we afford free university education? The current situation in Scotland, where the SNP Government does not charge fees, is sustainable for a time. How? In fact, the UK Treasury is still funding the fees nominally paid by each student in England, while it accumulates long-term loan repayments from graduates. In the interim, the Scottish Government gets the Barnett consequential from English university funding. Any sensible person would ask why the UK Treasury does not just admit it is still funding universities and abolish fees altogether. Alas, free market ideology has us in its grip.

As US experience shows, the fee model of funding higher education will inevitably result in an unsustainable private debt mountain, especially if we move into an era of price deflation, where the real burden of tuition repayments continually outstrips earnings. So adopting the English approach is no solution for Scotland.

As a university lecturer for 25 years, I am convinced that the Scottish model of publicly funded, free tuition is the correct one. It avoids destabilising the economy through private debt and it prevents universities from turning into commercial operations. But where to find the money?

The truth is that university funding faces the same kind of financial squeeze as the NHS, and for the same reason. For a generation since Thatcher we have bought into the myth that we need to cut public spending and taxation as a share of GDP, in order to boost private investment and productivity. But endlessly cutting the public realm has not boosted productive investment or raised standards of living. Meanwhile, our ability to educate our young, or look after our elderly, is being eroded by the day.

The solution requires a dramatic social change towards re-embracing the need for public investment, funded from general taxation. Business is the main beneficiary of our graduates and of university research, so business should pay for them.

So why not introduce a wealth tax – they have one in Holland – and dedicate it to help fund free university education throughout the British Isles.