Sir Roy Anderson, Rector of Imperial College London, said the top UK universities, including Oxford and Cambridge, should be freed from state control and allowed to charge students more than the current £3,145 capped fees, and to attract more international students to boost their income.

Why stop there? Before 1919, all UK universities were independent. They should be again. Britain has four universities in the world's top ten, but the league tables are dominated by America's independent universities like Harvard, Yale, CalTech, Chicago, MIT and Columbia. And while we are slipping, America's colleges are rising. They are taking the best brains, and the best students, and are pulling in more cash to fund their teaching and their research. Thirty US universities have endowment funds of over £1bn. Only Oxford and Cambridge come close, but Harvard has five times more cash in the bank than either of them.

But that's how the US system works. The real cost of a university education is not £3,145. It's more like £40,000. And some US universities do indeed charge that amount of money. But they use their endowment funds to make sure that bright students who can't afford fees on that scale are given scholarships so they can get the education anyway. Students are admitted on merit, but supported according to their needs.

As Professor Terence Kealey, head of the (largely) independent Buckingham University, says in an Adam Smith Institute Briefing, that is what should happen in the UK. Instead of subsidizing universities, we should subsidize needy students, so that anyone who is capable of doing well at university has the opportunity to go. I would tell Sir Roy and his colleagues to charge whatever they like – £40,000 if that it what their product actually costs – provided that they make sure no needy student is turned away. Yes, some of the money that is currently doled out to the universities by the Higher Education Funding Councils could be used for those scholarships. Otherwise, the universities will have to go out and raise the money for scholarship funds themselves.