The biggest issue facing higher education is not actually, directly, financial. It is how to connect student education with student outcomes via there retrospective universities and course choices. This is a very complex way of saying something very simple. The funding any university receive should reflect the income of its ex-students.
I am very unhappy with the idea that the government should use the higher education system as some proxy for economic planning. I.e. funding only those courses which it perceives will be required far into the future. I am also unhappy with the current system where the whim of the student is the sole economic force in degree choices and there is utterly no connection between employability and course take up.
Therefore I suggest a new system: Allow universities to charge whatever they wish all of which must be totally funded by post-employment paid loans but base the funding the universities then receives on the money recouped by their ex-student on these loans. Ideally the universities would hold the loans (regulated by the government) themselves and directly survive at least in part from the income garnished from these loans.
Of course the government will provide the bases funding to all universities / technical institutes keeping the loan amounts within a reasonable level and also paying the entire loaned amounts of disabled and poorer students on their successful and only upon there successful graduation. It may even wish to guarantee payment of some per cent of some favoured courses loan.
Universities can always sell or partner with business in providing research or it can partner with government for the same purpose. Indeed universities would be wise to partner with business to link directly into their recruitment schemes and provided training to their employees and thus build an additional source of income and a possible avenue for their graduates. So whilst research would remain unaffected universities can offer more training and better integration with business.
The benefit of my system is it makes the university financially responsible for the courses it offers and also the quality and applicability of the teaching they offer and of course the student is finically responsible for their course via the loan. It also offers government some leeway to focus recourses on its favoured course and of course it will lead to better educated / trained post graduate students. It would also encourage a greater synergy between business and university and also pays for the research and development which university provides.
There is one further alteration we need, we need to stop saying all course are equal to students and start telling students the employability resulting from different courses at different universities. We must explain to them the financial implications and possibilities of university and teach them of the possible outcomes of their course choice or their lack of choice.