You can visit streets in my constituency where no one has been to university:estates where going into higher education doesn't even register as an option.This has got to change - and it will only do so with major reforms.

The forthcoming review of higher education must reach out to these communities byopening up access, as well as ensuring that our universities are funded at alevel which allows them to compete with the best in the world.

Out of 10 industrialised countries committed to widening participation, Britainis the only one that does not provide any grant towards a student's livingcosts. In the light of experience we must now reconsider the decision to replacethe grant with loans. To open up access and remove the deterrence of debt, ahigher education maintenance allowance set at £2,000 a year should beintroduced. Targeted at those on low incomes, it would be means tested onparents' income. On top of this allowance, all students would still be entitledto take out a student loan and present repayment arrangements would apply.

Now that record amounts of money are going into schools, we need to consider thelevel of funding going into our universities and in particular the issue oftop-up fees.

We face a worldwide battle for talent. If we are to succeed, wemust have world-class university departments that can attract the leadingplayers in their field: the Ronaldos and Beckhams of the academic world.Despite the fact that university funding has increased by more than a billionpounds a year and there has been a considerable increase in investment inresearch, we are falling behind universities in other countries, particularlythe US.

Salaries are uncompetitive, especially for younger academics and thosein highly competitive disciplines. It is this that has led a number ofuniversities to lobby for the introduction of top-up fees.

Under the present system all universities charge the same flat rate: the presentlevel is £1,075 a year. Sir Richard Sykes at Imperial College has led the packwanting to charge some of his students £10,500. I have no doubt that ifuniversities were simply given the unconditional power to set their own fees,then this would be – in the words of Frank Dobson - "an elitist solution".

A new approach is needed - one which marries the need to open up access to ourbest universities with a regime that secures additional funding. Tuition shouldbe free for any student whose family income is less than the present averagegross earnings for an individual of just less than £25,000 a year. The costswould be met between the government and the university. Free tuition, coupledwith an annual allowance of £2,000, would provide a ladder of opportunity intohigher education for those from less well off families.

Above £25,000, there would be a contribution to the cost of tuition on a slidingscale, with the full fee being paid by those on more than double averageearnings (presently around £50,000). The present single flat fee covering alluniversities and courses simply isn't fair. It fails to take into account thecost of putting on a course - veterinary science is more expensive than law - orthe value to the student in term of future benefits.

Universities should be given the freedom to charge differential fees. Thesewould vary between universities and within universities, with departments ableto set fees at a level which reflect cost and benefit. Because students fromfamilies with an income of less than £25,000 would get free tuition, this shouldovercome concerns about elitism.

In addition, safeguards would be necessary to protect those on above-averageearnings required to make a contribution. The maximum fee should be capped at£3,000. Those required to make a contribution should have a choice of paymentmethods - either at the time of the course, in which case no interest would becharged, or as a repayable fee which would be collected at a later date throughthe tax system once a particular level of earnings is reached. This option wouldbe subject to a market rate of interest. But it has the advantage that theintroduction of differential fees should not see any student liable to pay thefee deterred by debt, since repayment would be linked to subsequent earnings. Ifthe earnings level is not reached, then no repayment.

Higher education funding and student support is one of the most difficult issueson the domestic political agenda. But it also gives the Labour government thechance to deliver on its commitment to provide opportunity for the many and notthe few. The government needs to have the courage of its convictions.

Stephen Byers is Labour MP for Tyneside North. He is a former education ministerand was a member of the cabinet from 1998 to 2002.