Oxford Students have reacted angrily to a report which says universities should be allowed to charge fees of up to 4,500 a year.

The policy would make the University more elitist and create a two-tier education system, the Student Union claimed.

Written by Prof David Greenaway, of Nottingham University, the report said there should be a simple, free market solution to higher education's economic and social problems. Students from rich backgrounds could be charged extra fees instead of the flat-rate 1,025. Money raised would fund scholarships for poorer students.

OUSU president Kirsty McNeill said: "With UK drop-out rates as high as one in four, mostly for financial reasons, we cannot rely upon donors and scholarships to fund students if top-up fees are introduced.

If Oxford University is genuine about its commitment to access and after the Laura Spence affair it certainly claimed to be then it must immediately and openly declare its opposition to top-up fees." Dr Colin Lucas, Oxford University's vice-chancellor, said: "It is essential that higher education be funded to the highest international standards. At the same time we believe that the only acceptable system is one that guarantees access to higher education for all the students who could benefit from the opportunity, regardless of their circumstances."

Prof Graham Upton, Oxford Brookes' Vice-Chancellor, said: "Something has to be done about funding for higher education. Unfortunately the present focus seems to concentrate on the issue of fees."