"Can we have world-class universities as well as social justice in education ?", par Timothy Garton Ash,

Europe resists US-style college fees but, as Oxford fundraisers know, we need to find that kind of money to compete

I divide my academic life between two universities, Oxford and Stanford. In 2006, Stanford announced a fundraising "challenge" with a target of $4.3bn, or about £2.2bn at today’s exchange rates. This week, Oxford launched a campaign to raise at least £1.25bn, the largest ever by a European university.

Behind Oxford’s bid to play in the US-style university funding superleague there hovers a larger question : will Europe, the cradle of the modern university, have any truly world-class research universities in 10 years’ time ? That is itself part of a still bigger conundrum : how can Europe hold its own in an increasingly non-European world ? At the moment, Europe is represented in the top 10 of the Times Higher Education Supplement ranking of world universities by four institutions, all of them British : Oxford, Cambridge, Imperial College, London and University College, London. In the rival rankings produced by China’s Shanghai Jiao Tong University, only Oxford and Cambridge make the top 10. The other eight are American, but China intends to have one up there soon.

Oxford cites as the context of its campaign "a world of uncertain state funding and growing global competition". I see that fierce competition for the best academics and students every week, whether I’m in Oxford or Stanford. This is as much a global market as that for computers, oil or financial services. Oxford is hanging in there but, frankly, only just. For the best and brightest younger academics from all over the world, honeystone quadrangles, high table and an incomparably rich intellectual tradition will go only so far to compensate for lower salaries, higher house prices and heavier teaching burdens than you would find at, say, Stanford.

Money is by no means the only key asset in this globalised market, but it helps. Public funding of higher education has increased under New Labour, after a terrible decline under Margaret Thatcher, but it can’t do the whole job for a greatly expanded university sector. It brings with it bureaucratic and political strings, and will probably fare badly in the current public expenditure squeeze. Anyway, financial and intellectual independence march together, as Oxford’s campaign brochure notes in a paragraph pithily entitled Freedom.

Defeatists look at Harvard’s $35bn endowment and say "we can’t possibly match that". But Harvard is in a league of its own. Stanford has just over $17bn, Princeton nearly $15bn. If you add together the endowments of the Oxford colleges, the university and its associated trusts and funds, and capitalise the average annual transfer from the profitable Oxford University Press, you can reach a figure of around $11bn. And that estimate ignores the fact that the holdings of land in some Oxford endowments are valued at 15th- or 16th-century prices (a surreal wrinkle worthy of that Oxford classic, Alice in Wonderland). Add a successful campaign that nets another $2.5bn, and you’re running Princeton close.

Yet endowments, together with public and private research funding and commercial partnerships and spin-offs, are only part of the story. America’s top universities also have more fee income. Although Oxford can be pricey for students from outside the EU, its fees for British undergraduates are capped by the government, along with those of all other British universities, at a maximum of just over £3,000 a year - already a nearly threefold increase on the pre-2006 figure, and higher than in most continental European countries. Even allowing for special government funding flows which help support its unique, college-based tutorial system, the University of Oxford reckons that it subsidises the cost of educating a British undergraduate to the tune of some £7,000 to £8,000 a year. If it were really to "go American" in its funding model, Oxford would have to quadruple - at least - its fees and then, to maintain "means-blind" admission, provide bursaries from an expanded endowment for students from poorer families.

That may well be, arguably should be, Oxford’s direction of travel over the next decade, but it won’t happen fast, completely, or without a series of complex arguments and negotiations - for Oxford is in Europe, not America. Its scholars and students do not merely operate in a European political context which is both liberal and broadly social democratic ; they are themselves part of it, sharing many of the same values. They recognise that even to go some of the way down, so to speak, the Stanford road, throws up difficult issues of access, equity and social justice.

I can’t begin to cover all those issues, but here’s a taste. The capped fee-level of £3,000 and the student loan system that accompanies it will be the subject of a government review that should start next year but may not report until after the next election since neither Labour nor the Tories want this to become an election hot potato. Government links the fee/loan issue to improved access for university applicants from state schools and less advantaged backgrounds. Oxford is scrupulously meritocratic at the point of admission (far more so than some leading American universities, which give privileged access to the dimmer kids of generous alumni, hence Yalie George Bush) but too many such pupils are deterred from applying to Oxford by unfamiliarity, downbeat teachers and the university’s hard-to-shake-off image of Brideshead Revisited privilege. If, to mix our metaphors in the way no undergraduate should, this hot potato lands in the court of David Cameron, if and when he becomes the country’s 26th Oxford-educated prime minister, it will be doubly explosive. Bullingdon Club favours Brideshead is not a headline the new Tories will want.

But beyond the image politics, there are real policy dilemmas. If the fee cap were lifted, would government increase the student loans to match ? That would mean both more graduate debt and more public expenditure. Or would government foot the bill directly - taking the money from hospitals, state schools and social spending ? Or would it ask universities to make up the difference themselves ? If Oxford’s campaign is successful it could probably fund this from its enhanced endowment, giving those bursaries to less well-off students, as Harvard and Stanford do. But Oxford and Cambridge are the only two major universities in Europe who could even dream of doing such a thing.

The endowments of Imperial and University Colleges in London are nowhere near that point, let alone those of other leading British universities. So if the fee cap were lifted, and those universities charged higher fees - which their outstanding academic records would certainly enable them to do, even in a very competitive market - who would make up the difference for their students from poorer homes ? Or would these non-Oxbridge elite universities become finishing schools for well-heeled and increasingly foreign students ?

I don’t know the answers. I haven’t even spelled out half the questions. But I do know that this is the debate we must have over the next couple of years, not just in Britain but in Europe as a whole. The fundamental question - call it the Oxford Question - underlying all the others is this : can we, in Europe, have social justice in higher education and world-class research universities ? Or must we choose ?