This Lib Dem hokey cokey on fees will cost us all dearly

Yes, the party is harmed by its university funding farce. But our economy needs higher education to bring us back to growth

There is a danger of laughing so hard you can't concentrate on the grim reality. Do we think, perhaps, that the farcical dance of the Liberal Democrats about how, and whether, to vote on tuition fees is a brilliant exercise in news manipulation? It's unavoidably funny: the politics of in, out, shake it all about. Vince Cable used to fancy himself shimmying around doing posher ballroom steps than these; and looks frankly humiliated to be doing the hokey cokey instead.

The Lib Dems have made themselves look ridiculous. If, on Thursday, some of them vote yes, and some no, and some abstain, is it mathematically possible they will not only cancel themselves out, but fall into a black hole of negative energy? If double the number of former Lib Dem leaders vote no than aye (I'm thinking of Menzies Campbell and Charles Kennedy) do they outrank a single Clegg? Might the party be allowed, by special Speaker's dispensation, to vote in both lobbies at the same time, running really fast in circles? Or simply be given a snow day?

Fun will be had. Yet there is nothing funny about the issue itself. Fees at these levels will put people off university, blight lives, damage economic growth and quite possibly shrink the higher education sector as a whole. This really could be a defining moment for the coalition, something so bad it remains in voters' minds when the next election comes.

One can, just about, muster some sympathy for the Liberal Democrats. They had always been an oppositionist party and their very public promises to abolish fees was meant as an oppositionist pose. They hadn't thought they might actually wield power and be called upon to take tough decisions about funding. A coalition deal was always going to involve give as well as take. In office, they have slightly ameliorated Tory thinking, and we are now seeing yet another special scheme to help the very poorest students, announced today. It's also true that Labour is divided between the pro-fees and the pro-graduate tax factions, though the scale of this furore is bound to make the second one victorious.

Yet this policy is so bad, so dangerous, that one's sympathy soon trickles away again. Fees are one thing. Fees going up to £6,000 a year, and tripled to £9,000 for some courses will stop people continuing their education. Really, it's as simple as that. Coalition ministers profess to doubt this. They say that because of the higher earnings-trigger for paybacks (£21,000) and special help for the poorest, everyone who has to repay the fees will be able to. Put to one side the perverse-incentive effect which may trap people into refusing promotions; I don't think they understand the deep-seated fear of debt in many households, particularly working class ones. It's one thing to max out the credit card ahead of Christmas; entirely another to look ahead at many years of paying back huge sums of money.

If the argument is that the public deficit is so bad universities have to swallow cuts of 80% in their budgets, and that therefore a tripling of fees is essential, then frankly two words suffice. One is "Scotland". The other, "Wales". If the devolved governments have taken the decision to protect their students and institutions, then the same must be possible in England too.

Yet what I really fear is that the timing and scale of the fees will have a far harsher effect on English universities than politicians have so far admitted. Consider this. The cuts to their budgets start pretty much right away. But the higher fees take three years to kick in, as each tranche of unhappy fee-paying students, arrive. Many will shun courses they would otherwise have taken, including the more liberal and humanities-based courses which will now get no government funding at all – courses which, though they may not have obvious jobs attached, have helped Britain remain a cultural leader. So many universities will face sharp, fast drops in their incomes. So far as I can discover these have not been modelled or prepared for by government.

Meanwhile it is no secret that the pensions black holes faced by many universities are very serious indeed – people have been warning about this for a couple of years now. Of course, they are in good company, with everyone from the Work Foundation and the BBC to many private companies facing similar problems. But many universities are financially fragile. Add it all together and we are looking at bankruptcies and closures – of courses, of departments, and, just possibly, of entire universities.

They will not, of course, be the ones which most ministers attended. The top-flight universities, Oxford, Cambridge and the rest of the Russell Group, plus the larger provincial ones, will not only survive but may thrive. Middle class parents will grumble, but dig into savings to buy their kids a proper start. A small number of the very poor, very gifted, will be given enough support to keep them in the system. It is, of course, the struggling average to twice-average income families which will be most badly hit.

To see the dangers of this, we need the fees issue to be placed firmly in a general economic narrative. Britain is not properly earning her way in the world. We have relied on service and financial services sector growth that has been far too narrow; and on an unsustainable property and spending boom which has now partly deflated – with further to go. We need far more highly educated workers, not fewer. We need more people pushed towards university, not beckoned away from it.

Nobody denies there is a funding problem, nor that somehow, more of the real value of a university education must be shouldered by those who benefit. I'd like to see more intensive two-year courses with shorter vacations; more home-based learning; indeed anything which manages to deliver real education at a lower cost. A graduate tax has to be modest, but is probably the least-worst option; if the coalition insists fees are to rise, they should be rising more gently and slowly. This feels, just now, like an over-dramatic short-term economic fix by a government desperate to be able to offer tax cuts by the next election, not like a properly considered plan for the future of higher education.

The students are right to protest. A few are going about it stupidly, not realising that for every vandalised police van or smashed window, tens of thousands of lower-income taxpayers think – well, to hell with them. But this very public back-tracking on a key election pledge is a disaster for the Lib Dems. It is also a terrible time for higher education. And no, despite the risible side of the party's plight, very few of us feel like laughing.