If any Lib Dem tells you that they are happy about where we are with university tuition fees, they are either so pathologically ‘on-message’ that they’ve forgotten who they are, or they just haven’t been paying attention for the last two months.

On the day George Osborne announced the results of the Comprehensive Spending Review, Nick Clegg did a phone conference with about 200 parliamentary candidates. The main item was tuition fees: Nick Clegg was also not happy.

However.

Not being happy is not a resolution to a problem — except when you are in opposition.

To recap: back twenty-two years ago when I was finishing university, there were no tuition fees, no student loans, and full grants for those (such as me) from low-income families. These were bright days, though only for a few: people from nominally higher income families — even when for various reasons the families were unable to contribute — did not receive full grants. And most people did not get to go to university at all.

Shortly afterwards, Margaret Thatcher’s government introduced student loans. Initially these were a financially good deal, and far better than the bank-rate loans that most students had already taken out. But they opened the door for a funding system which led to students mortgaging their futures to pay for their education. This was in keeping with the spirit of the times: from the mid-80s onwards, we became increasingly happy to fund our private lives from debt.

In 1997, Tony Blair came to power, with the stated ambition that 50% of people would be able to go to university. The funding mechanism for this was obvious: even with the massive investment into the public sector that the new government was planning, students would be expected to contribute to their cost of tuition by paying tuition fees, something that even Margaret Thatcher’s government had not introduced. Naturally, students would be able to pay for these fees in a variety of ways, but the availability of student loans meant that most students would pay for their tuition, alongside their maintenance, by borrowing money.

Liberal Democrats opposed this from the beginning, and one of their key pledges in the first government of the Scottish Parliament was the abolition of tuition fees in Scotland.

Times moved on, and Lib Dems reiterated this pledge at each Westminster election, including most prominently at the 2010 election.

Did Nick Clegg and the team really expect to be in government? And did they expect to be in government with the Tories? The answer is — some of them did. If that’s the case, why didn’t they spot what was coming?

The genuine answer — though it now seems such an accepted fact that it’s easy to forget where we were in May — is that the public finances were drastically worse than anybody (except perhaps Alistair Darling and Liam Byrne) was prepared to believe. In the words of Byrne’s famous note “There’s no money left.” Lib Dem minister later characterised this as “Labour made the biggest trolley dash in history, and left it at the counter leaving others to pay on election night.”

The problem left for Vince Cable and Nick Clegg was how to construct a fair funding mechanism for university students within the limitations of public finances.

Cable’s original solution was a graduate tax. I have to say, I’m not necessarily any more comfortable about a graduate tax than about loans for tuition fees. However, this was the solution on the table. Regrettably, as Nick Clegg discovered, this simple solution was neither simple, nor a solution. It wasn’t simple because it failed to take account of how international students would pay their tuition fees. There is naturally no possibility of taxing international students unless they stay in the UK. The obvious (and only) solution to that is to allow, and, indeed, require, international students to pay their fees up front — as they have always done. However, this in itself creates a very serious complication: legally, if international students are allowed to pay up front, then indigenous students must be allowed to pay up front as well. Clearly, if tuition fees are rising to as much as £9,000 a year, only students from particularly wealthy backgrounds will be able to afford to pay up front. But if other students would then go on to pay a graduate tax, the result is that we would be offering the wealthiest an opt-out on taxation later in life. Given that those from wealthy backgrounds typically have the best prospects of being high earners later in life, we would be introducing the most regressive possible form of funding higher education.

To choose this option would have meant honouring an election pledge, but violating the most fundamental principles of Liberal Democracy.

But that still leaves with the problem: Lib Dems still believe that tuition fees are regressive, they put off the brightest students from the poorest backgrounds (for whom the concept of such a fee is far more worrying), and they put a price on an education which ought to be free.

For myself, I regret Tony Blair’s decision to attempt to persuade half the population to go to university. I recognise his attempt to even up society, to make university education not merely something for the élite. But the economics of university education will always be that employers use it as a way of sifting applicants. When just 10% went to university, and employer could reasonably set ‘relevant degree required’ as an entry requirement when looking for ‘top’ 10% applicants. We can argue about whether or not this was ‘fair’, but employers had a range of measures to rule out applicants with good qualifications but no aptitude for the job, and to allow in applicants who had the aptitude but not the qualification.

I am going to sound like a Daily Telegraph reader (or, heaven help me, a writer) when I state what everyone knows: that employers began to sift applicants based on the degree they took and where they took it. This had always taken place to an extent, but became virtually universal as the numbers of graduates rose. ‘Trad-grads’ — people with traditional degrees in English, history, languages, the sciences and so on — typically from the pre-1990s universities were the graduates employers sought after. Degrees in the much-maligned Media Studies and such were largely reviled in the right-wing press, but just as frequently disregarded by employers.

Was this fair and was it right? Almost certainly not. Was it inevitable? Almost certainly so. As a way into better employment, extending university education in this way could not provide more high-paying jobs than actually existed.

While I don’t agree with the ambition of extending university education to 50% of the population, I do agree that we need an increasingly educated workforce to compete internationally, and our aspiration as society should be to create more opportunities for more people to benefit from education. But 50% was several steps beyond what we could afford.

If it were up to me, I would have only extended universities to what we could afford without charging tuition fees — because I am personally convinced that they psychologically discriminate against those from deprived backgrounds who already face substantial family pressure not to invest themselves any further in education.

And yet we cannot go back in time. We are left with four possibilities:

1. Keep tuition fees where they are or abolish them, and pay for it from the public finances
2. Introduce a graduate tax, allowing the wealthiest to escape it by paying upfront
3. Unlock tuition fees to allow universities to charge more, as the available public funding decreases, funded by student loans
4. Reduce the number of university places to a level we can afford while keeping tuition fees as they are, or abolishing them.

The first we can simply not afford. This is massively regrettable. It is unfair.  But it is where we are.

The second is the least fair of all options. It would embed inherited wealth as the principal determinant of later earning for a generation, and possibly for eer.

The third is marginally less unfair, since wealthy families can still pay the fees without taking out a loan, and Oxford, Cambridge and other universities able to command a premium fee will become substantially less attractive to students from a deprived background. It’s argued that to retain our number two status in the world for top universities we have to fund them like American universities, but, equally, we also need to attract the brightest students from all backgrounds. If Oxbridge becomes an exclusive club for the children of the wealthy, it will not remain in the top ten for undergraduate education, no matter what it does for research.

What of the fourth option? To me this is the best, but for it to be anything other than a heartbreaking dashing of hopes for tens of thousands of teenagers, it cannot be introduced quickly — certainly not with a speed that would solve the financial problem.

Where does this leave us? Do students have a right to feel betrayed by the Lib Dems? Yes, but also no. Manifesto pledges are made seeking a mandate for government. When no mandate is provided, parties must adjust their programme. Deep down almost everyone recognises that the coalition is a coalition of compromise. There is no underlying affinity between Conservatives and Lib Dems, and there never will be. But the fact that Lib Dems actually signed a pledge on this issue and no other must leave many voters — especially where Lib Dem MPs were elected — furious.

Should Lib Dems be unhappy? Yes. Absolutely definitely. We are in a coalition, not a marriage (no matter what Harriet Harman thinks). We find ourselves in a position where we cannot do that one thing we most wanted to do. We do not have to like it, and if we find ourselves justifying it, then we are beginning to lose the values that make us distinctive.

Should Lib Dem MPs support the tuition fee rises? This must be a matter for the conscience of each MP. Should an MP vote against the common good, no matter what pledge they made? Should an MP abandon their election pledge because it is expedient? Each MP will have to make their own decision.

But, with that, we are left with one final distinctive of the Lib Dems. It is a party where MPs are always allowed to make their own decisions on issues which they themselves regard as matters of conscience — whether or not the party whips define them as ‘conscience issues’.

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