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Not just in New Zealand, but also throughout the OECD, governments are struggling with the burgeoning costs of tertiary education and the twin challenges of broadening tertiary education participation and properly resourcing tertiary institutions.

The trend internationally is towards more private financing of tertiary education, through such measures as increased fees and greater use of student loans. Between 1995 and 1998, for example, seven out of 17 OECD countries saw the private share of spending on tertiary education increase by more than 20%. Tertiary institutions in Canada and Australia have been given more flexibility to set fees on some courses.

The New Zealand government's solution - a cap on tertiary education fees - runs contrary to those trends. On December 3, it announced a reference group to advise it on how to set fee caps on tertiary education from 2004 in order to make tertiary education more affordable.

In the United Kingdom over recent months, there has been much public debate on resourcing institutions and broadening participation. British universities face a cash crisis - the gap between what they need and what they get is said to be £8-10 billion, and there is no way the Government can bridge this gap.

The Times summarises the British tertiary education funding issues.

Prime Minister Tony Blair has a preference for increased fees and this has engendered considerable controversy, dividing Cabinet and seeing thousands of students marching through London in early December.

In fact, on 5 December, Tony Blair, in the face of the mounting public and Cabinet opposition, was reported publicly backing down from his support for charging students top-up fees: Blair signals retreat on student top-up fees.

A government white paper, expected in January, will set out various funding options and should make clear which one the British Government favours. Options aired recently include top-up fees, a graduate tax and a loans scheme. A British Department for Education and Skills discussion paper released last month canvasses issues and funding options.

The Financial Times' chief economic commentator, Martin Wolf, argued in a speech last month that more financing was needed to keep British universities at the forefront of learning and that the "centralised, under-funded, bureaucratic university system" will fail. Download his speech: How to save the British universities.

Our OpEd, Issue 31, by The Times columnist Simon Jenkins, senses an explosion engulfing British universities. "At the end, these institutions will look like their American counterparts and be the better for it. They will charge proper fees, give proper bursaries and raise money for sensible research ... Government might even cease its meddling and confine its role to giving out research grants and scholarships. Academics will have to sell their wares to students and the public, not to civil servants. They will be properly paid as a result."