By Aisha Labi

Graduates in Britain could be charged for the cost of their university education through a tax that would vary depending on their income, private universities could become a feature of the British higher-education landscape, and Cambridge and Oxford universities might be required to set quotas for students from state schools, the cabinet minister who oversees higher education said on Thursday. In his first speech on higher education, at London South Bank University, Vince Cable, the secretary of state for business, innovation, and skills, who in April had promised to vote against any tuition increases, urged a fundamental rethinking of how universities are financed and what they are expected to deliver for the public money they receive. Institutions, he said, need to work with the government to think "creatively about fairer mechanisms" for financing higher education.

The current system, in which tuition at universities in England, Northern Ireland, and Wales is capped at just more than £3,000, or $4,570 a year, has been in place since 2006, but is likely to change soon. An independent evaluation of the financing structure for higher education is due this autumn, and is widely expected to recommend raising or even removing the current limit on tuition. The review is taking place during an economic crisis that Mr. Cable called "without doubt the most serious in living memory." Mr. Cable's speech was greeted with responses that ranged from cautious optimism from the main student union to undisguised skepticism from the leading faculty union. The Guardian newspaper said that the measures Mr. Cable outlined amounted to "the biggest shakeup of Britain's universities in a generation."

In the face of sweeping public-sector cuts, the government has pledged to guard certain areas, such as primary and secondary education and health-care spending, against the fiscal knife, but universities are not within that zone of protection. In 2007, a government reorganization moved responsibility for higher education from the department of education to the predecessor of the department that Mr. Cable now leads. Universities represent the department's biggest spending obligation and, while the extent of the budget reduction it will face is not yet clear, Mr. Cable left no doubt that it would be severe, saying "no one should be under any illusion that there will be any other than deep cuts in government spending on universities."

The impact on an institution like University College London, one of Britain's leading universities, could be severe, said its provost, Malcolm Grant, and austerity measures could impair the country's overall research competitiveness.

Elite universities like University College London rely more heavily on competitive research grants for their income than on teaching allocations, which are not awarded competitively, making them more vulnerable to reductions, Mr. Grant said.

Linking Repayment to Earnings

In his speech, Mr. Cable pointed out that despite a widespread perception that students pay tuition up front once a year, most students take out loans that they must repay only once they have graduated and are earning at least a minimum income.

"In this sense, we already have a form of graduate tax," he said. He added that he did "not want to see a complicated new system or one that creates uncertainty over the future funding of universities," but that he wanted to explore the "feasibility of changing the system of financing student tuition" so that the amount of repayment was tied to the earnings of graduates.

Mr. Grant said that Mr. Cable's remarks were interesting "for the idea that he is testing," but said that he viewed the address more as a political statement than as a fully articulated vision of policy.

Mr. Cable, a Liberal Democrat and a former university lecturer, signed a pre-election pledge circulated by Britain's national student union to "vote against any increase in fees in the next Parliament and to pressure the government to introduce a fairer alternative."

Now, Mr. Grant said, the minister "finds himself in an intensely embarrassing position," as he tries to articulate a way for students to shoulder more of the financial burden of their education without presenting the measure as an increase in tuition.

The approach seemed to have worked in the short term. The student union issued a statement in which Aaron Porter, its president, welcomed Mr. Cable's "support for the principle of a graduate tax" as well as "his recognition that those who earn most after university should contribute more back as and when they do so." However, Mr. Porter emphasized that more details were needed to ensure that the proposal was "not simply tuition fees by another name."

Universities UK, the umbrella organization for British vice chancellors, issued a statement urging "against reducing investment in higher education, which would be economically self-defeating." But the statement says the group "shares the view that since graduates benefit personally from their degrees, it is right that they make a direct contribution to the costs of study."

The main faculty union was less welcoming, saying in a statement that the government needed to "clarify if students would be picking up the bill, through a graduate tax or other funding models, for its cuts agenda."

In his speech, Mr. Cable said that Lord John Browne, the former BP chief executive who is leading the independent higher-education review, had "assured" him that he was exploring the graduate-tax option, prompting the union to question what the review had spent the past several months doing if it had only begun to consider that option at the new government's urging.

In his speech, Mr. Cable also distanced the new government from the view of its predecessors that the number of students in higher education should increase each year, saying that "there could be a law of diminishing returns in pushing more and more students through university." Instead, he said, the "bias" in government financing against vocational education needs to be removed, and more support also given for two-year intensive degree programs rather than the customary three-year format. Mr. Cable also indicated that he foresaw a greater role for private institutions in the future (there is currently just one private university in Britain).