The UK's universities say they need either a greater share of public spending or higher fees from students.

One of the possibilities they are considering is to opt out of public funding and charge students as much as they like for degree courses.

The privatisation idea is one of five options in a review group report presented to the annual conference of university heads, the Committee of Vice Chancellors and Principals (CVCP).

The report makes no recommendation as to which is the best model.

The committee's president, Sir Howard Newby, said it was not yet clear whether one method of funding would suit all institutions and this was an issue that would have to be considered in the coming months.

He said delegates at the conference had shown a "willingness to talk across the system and to build up knowledge of the needs of other institutions".

Sir William Taylor, chairman of the review group, said: "The criteria that will drive the choice of options are that they deliver to the sector more money, more access and more quality."

A similar report prepared in July for the Russell Group of Britain's top 19 universities recommended allowing universities to charge "top-up" fees, above the current maximum of �1,050 in England, Wales and Northern Ireland, up to �4,500 a year.

This has met with fierce opposition from the National Union of Students, which condemns the idea as "socially divisive".

National debate

The CVCP's chief executive, Diana Warwick, said that what was taking place was "a nationally significant debate."

"Higher education must be adequately and appropriately funded if we are to live up to the levels of excellence and inclusivity that students, the government and society in general quite rightly deserve," she said.

The issue of funding is one on which all the vice-chancellors had to come to a common conclusion, said the rector of the University of Surrey Roehampton, Dr Bernadette Porter.

"We're considering the whole range of ways to further fund higher education.

"Inevitably this has got to be a mixture of government, student and tax payers' contribution," she said.

The five options are:

• building on existing, mostly public, funding policies
• increased tuition fees
• "graduate tax" - deferred payment of fees, as in Scotland
• "top-up fees" - up to the full cost of courses, with scholarships for poorer students
• institutional opt-out - all fees deregulated.

The Liberal Democrats' higher education spokesman, Evan Harris, said the "opt out" idea could lead to a "super-league" wealthy private institutions catering for the rich, with state-funded ones taking everybody else.

If that happened, or if universities were allowed to charge higher fees, efforts to get more students from low income families into higher education would be seriously damaged, he said.

A spokeswoman for the Department for Education said there was nothing to stop universities opting out of the state funding system, but even US universities still took some government money.

"I would be very surprised if any university chose to cut itself off completely from public funding.

"Privatisation is bound to mean top-up fees, which the government is opposed to."

Dr Harris said his party preferred another option - restoring student grants and funding an expanded higher education sector through the tax system - and would present costed proposals in October.

The Conservatives have proposed moving universities out of state funding by gradually endowing them with money from government "windfalls".