Universities have not had a good press run of late. Only yesterday Andrew Murrison, a Conservative MP, resigned a post at Bath University over the £451,000 salary of the new vice-chancellor.

The row over executive pay at universities isn’t new, but all that money has to come from somewhere – and according to today’s Daily Telegraph, getting hold of it may be doing great damage both to universities and students.

It reports that “unconditional offers” – by which an applicant is guaranteed a place at a university regardless of their A-Level performance – have doubled in the last five years, a development which experts believe could lead to an erosion of standards.

With the lifting of the cap on places and the lifting (although not yet abolition) of that on fees, universities now have a clear incentive to try to admit as many students as they can, as each one is worth £9,000 a year.

But not only does this risk undermining the academic environment on campus as admissions trend towards ‘comprehensive’, the erosion of standards can occur before a student even arrives at university.

According to a recent report by UCAS, the admissions service: “Applicants holding unconditional firm choices were more likely to miss their predicted attainment by two or more grades, compared to applicants holding conditional firm choices.”

Worse still, the scramble to admit whomever they can means that universities now have a financial incentive to woo potential undergraduates onto courses for which they are unprepared, or which offer a very poor return on a £30,000 investment.

This in turn exacerbates the (many, many) problems of graduate oversupply, not least of which is that employers often use degrees to filter applications for jobs which don’t really need them, thus forcing school-leavers to undertake expensive higher education just to stand still in the jobs market.

Yet whilst it may be tempting to blame greedy, increasingly-corporate institutions for this, in truth universities are following Whitehall’s lead. New Labour’s misguided quest to get 50 per cent of all school leavers into university may not be a formal target today, but the orthodoxy of mass higher education remains.

The Government needs to step back from the narrow issue of how university should be funded and take a serious look at what higher education – at least as far as state funding is concerned – is actually for. Is it a private good, or a public one?

By paying for it, the state acts as if it were a public one, and that is certainly the line of the “abolish fees” brigade. Yet by allowing students to decide where and what they study, the Government is allowing them to act as if it were a private one – justified, no doubt, by the fact that all are in theory expected to pay the cost of their education back.

Many of the problems of the current system flow from this two-minded approach: the fees cap gives vice-chancellors an easy way to cluster at the maximum rate and create a market with virtually no price signals. Applicants are not taught to behave like consumers and thus too many end up taking places on poor courses, at great cost to themselves and the public purse.

What if the Government operated a genuinely binary approach: courses which generated a clear return on investment to the nation, such as most STEM subjects at good institutions, could be free – provided that rigorous entry criteria were applied.

Courses which didn’t reach this standard would be treated more clearly as a private good: a much less generous (or non-existent) fees regime, and no cap on prices that universities could charge.

Students would be warier of laying out large sums if they were decisively on the hook for it, and become more discerning consumers as a result – especially if non-university alternatives, such as technical and in-work learning, were really built up as viable alternatives.

This would shift the balance of the higher education market away from producers and towards the consumers. Universities would have a clear incentive to invest in courses which profited the nation, to qualify for subsidy, or demonstrably benefited their graduates, to woo fee-paying students.

Courses with less to offer could cut their prices, and institutions would have more incentive to innovate: for example, by condensing the classical three-year course structure into something shorter, more intensive, and less costly.

Of course, these are just suggestions. But its clear that the Government can’t give Labour a monopoly on alternatives to the dysfunctional, producer-interest mess that is too much of the British higher education sector. If ministers have better ideas, let’s hear them.