In the leading independent universities in America, students are admitted solely on academic criteria. Only after they have been admitted are they asked if they can pay the fees, and if not they are supported out of the institutions' endowments. These endowments are large: Harvard's is currently around $20 billion, the other Ivy League universities around $10 billion each.

Our universities have no equivalent endowments, but the government is currently providing them with around £10 billion annually in support of teaching (the remaining £4 billion is for research). That £10 billion would make a nice needs-blind pot, so it should no longer go to the universities directly. Instead, the government should cut the universities free to set their own fees and to expand or contract at will (and as much as the market will bear). Meanwhile, the £10 billion in the needs-blind pot should be distributed to students in need on the US template. 

British universities were nationalised unintentionally. After the Industrial Revolution a market arose for educated folk, and seven new institutions were founded privately, ranging from London (1826/1836) to Sheffield in 1905. A typical foundation was Birmingham University, endowed by Josiah Mason, a local industrialist, who on laying the foundation stone in 1875 said: "I, who have never been blessed with children of my own, may yet, in these students, leave behind me an intelligent, earnest, industrious and truth-loving and truth-seeking progeny for generations to come." 

The universities were independent, receiving only limited government support, which by 1913 amounted to £150,000 annually. 

But the Great War bankrupted them. Their fee income disappeared along with the young men on the Western front, and their endowment income also collapsed because of inflation. 

So in 1919, to save all the universities including Oxbridge from bankruptcy, the University Grants Committee (UGC), was instituted with an initial annual budget of £1 million. The funds were distributed under the "Haldane Principle" (named after the prominent Liberal politician), by which its independence from government was guaranteed. But the replacement in 1992 of the UGC by the Higher Education Funding Councils (HEFCs) subordinated the UK universities to the state. 

Today, the universities view the state and not the student as their client. The result has been a cosy corporatism that has empowered vice-chancellors but weakened academic autonomy. At the heart of a university there should be a democratic senate, which should be the power-base of the institution. In the past, when fees were significant, the academics called the shots at senate because they earned the fees. But today the academics are sidelined because it is the vice-chancellor who distributes the money downwards. When all the money comes from the top, it is easy for vice-chancellors to award themselves their huge pay packets (£200,000 or more is the going rate) while ordinary academics have received smaller pay rises.