Once again, A-level marks have gone up. Evidence of rising achievement, says the government. A reflection of falling standards, says the opposition. One thing is certain: more students than ever are at least technically qualified to attend university. How many should go? The government says 50 per cent. The Conservatives, not wanting to cast pearls before swine, prefer a lower percentage (but have not revealed what it is). Neither government nor opposition seems to think it odd that politicians, who keep talking about giving people choices, should be setting targets in the first place.

There is an alternative: we could let the market decide. The number of students who study at university could be determined not by politicians but by the number of students who want to go and the number that universities want to accept. The value of an A-level mark would then be directly proportional to its ability to get a student into his or her preferred course.

A market solution would require a mechanism to balance supply and demand. That is where vouchers come in. Bill Owens, Colorado's governor, recently made his state the first in the US to issue vouchers to university students. Instead of colleges and universities receiving direct state support, each student will be entitled to a voucher worth $2,400 a year. Here, the Conservative proposal to allow more parental choice in schools follows similar lines.

It is tempting to think that the advent of vouchers is a victory for free market champions. The reality is more complex. The Colorado scheme is really a way to get around laws that limit the state's ability to raise taxes. Because they are not counted towards the state's revenue and spending limits, vouchers are an indirect way of putting more resources into universities without overtly violating spending restrictions. In addition, Colorado's vouchers apply to only a small part of the cost of higher education. The bulk of funding will still come from government grants given directly to universities.

The Conservatives' school funding scheme is similarly limited. Parents would only be able to spend their vouchers on schools that charge no more than government schools and would not be able to top up the vouchers even if they wanted to.

Although no government is likely to allow a completely free market in education, vouchers are a step in the right direction. In England, only a small number of students pay the full cost of their university education. These are mainly non-European international students and some local postgraduates studying “premium” courses. The rest have their education subsidised by the taxpayer. From 2006, home students will make an increased contribution towards the cost of their education. Because universities will set their own fees, rudimentary market forces will be introduced. But one important aspect of a real market will still be missing. Universities will not be able to respond to changes in demand. The Higher Education Funding Council will still determine each university's quota of places; popular universities will not be able to expand beyond that to meet demand.

The result of the existing system is that students are often not admitted to their preferred institution, even if they have good A-level results. Such students try their second choice, or third or even fourth, until finally they find a university that will admit them. By limiting the number of subsidised undergraduate places in any university, the government protects the less popular institutions and courses.

Quotas also provide a mechanism for achieving enrolment targets, but they distort the system. If funding followed students through the use of vouchers, universities would be cut loose from quotas and allowed to enrol as many or as few students as they wished. Equity could still be preserved through bursaries, extra subsidies for needy students and income-contingent repayments.

Without quotas, universities would be able to compete for students. Some would go for high price and restricted access and some would go for low price and high volume. Some institutions would be able to charge premium fees and provide exceptional services. At the other end of the scale, universities would offer a low-cost, no-frills, mainly vocational, education.

All universities would have to be attractive to students because that would be the only way to win resources. Using vouchers' market power, students would be able to influence what was taught, by whom and when. We would no longer need to argue about how many should go to university, or whether A-levels have any value: the market would decide.

The writer is vice-chancellor of Brunel University and is leading the independent inquiry into university admissions