If I were you, Mr Willetts...

How do ministers want the English university system to operate in a world of higher tuition fees, cut-throat competition and huge cuts to the teaching grant? The government's higher education White Paper will finally map out these crucial details.

Unusually in policymaking, the White Paper will come out several months after some monumental changes have already been unleashed on the sector - namely Parliament's assent to the raising of the cap on undergraduate tuition fees to £9,000 a year and the funding cuts announced in the Comprehensive Spending Review. Now the government must create the conditions necessary for these changes to benefit, not hinder, the sector.

But the White Paper does mark a beginning of its own. Only a statement of policy, it will lead to a period of wrangling over its detail before legislation is finally brought before Parliament in 2012. Changes will not be implemented until at least the 2013-14 academic year, 12 months after higher fees come in.

Yet nobody should doubt that this White Paper will rank among the most important turning points in the history of England's publicly funded universities. It will aim to shift the fundamental drivers of higher education towards student choice, loan funding and alternative providers in a shake-up that is likely to leave casualties in its wake.

How will this be achieved - and will the outcomes be desirable? To get a better idea, Times Higher Education spoke to several people who dealt with higher education policy when they were in government. Former education secretaries and ministers were asked what they would recommend to David Willetts, the current universities and science minister.

As might be expected, there are fundamental disagreements over basic principles, such as the purpose of the nation's universities. Are they meant to train the workforce of the future? To drive innovation and growth? To promote social cohesion? Or just to hand out degrees? The answer to this question largely determines where one thinks money should be spent.

One former education secretary firmly believes that the current direction of travel is misguided.

"They are moving dangerously towards vocational training institutions on the one hand and commercial research outlets on the other," asserts David Blunkett, who served as education secretary in Tony Blair's first Cabinet after Labour's 1997 landslide election victory.

"That leaves very little room for the broader value of university education on the one hand and social responsibility through commitment to the community on the other."

He yearns for society to display the same kind of dedication to higher education that led to the University of Sheffield's formal foundation in 1905 via penny donations from local citizens, which Blunkett pronounces "a fantastic example of the community coming together, believing in and wanting a university".

Blunkett's view is not dissimilar to that of some Conservative politicians, especially given the current push for a Big Society of local groups running services.

Under Margaret Thatcher, Peter Brooke (now Baron Brooke of Sutton Mandeville) was a higher education minister. He notes that the idea behind the establishment of the great civic universities of Britain's major cities was a "sense of responsibility for their hinterland rather than to the nation".

Of course, this was not necessarily true for subsequent universities. And there is little agreement over whether community and regional needs should be universities' primary focus today.

Brooke says that where resources are limited, they should be spent on helping research-intensive institutions compete internationally.

"I believed it was better to put more money into the Russell [Group] institutions to enable them to compete worldwide, which is what they are very effectively doing, instead of trying to increase the take-up of university places," he says.

But another former secretary of state - who has viewed higher education from within more than one political party - believes that universities in the UK cater for too small a segment of society.

"I think the great tragedy was that the polytechnics were swept into universities. I think it was a huge mistake," says Shirley Williams (now Baroness Williams of Crosby), who was education secretary under Labour in the late 1970s before she left the party and helped found the Social Democratic Party.

That view is shared by many traditionalists, who argue that the greatest cost of ending the binary divide - the last major structural shake-up of the higher education sector - was that the definition of a "university" was watered down while a useful focus on the teaching of vocational and technical skills at other institutions was lost.

Williams, now a Liberal Democrat peer, believes the UK needs a separate strand of vocational institution - similar to the German institutions formerly known as Technische Hochschulen and now called Technische Universitaten - alongside a credit-transfer system that would allow students to move easily between different levels and modes of study.

The idea is being carried forward in one form by one of Thatcher's education secretaries, Kenneth Baker (now Lord Baker of Dorking). He is leading a government-backed project to create a new breed of technical schools that will provide vocational education to 14- to 19-year-olds.

While in office in the late 1980s, he freed polytechnics from local authority control before their transformation into universities was facilitated under John Major's government.

Maintaining that he was the last secretary of state to defend polytechnics' distinctive status, Baker argues that alternative vocational pathways will become increasingly vital as the number of places at universities stalls or even contracts.

"That is going to lead to a great deal of frustration and disappointment among young people," he says. "What we have got to do is provide high-quality alternative pathways to success - that is what my university technical colleges aim to do."

However, Baker also recognises that some former polytechnics do a "very good job" of offering vocational courses of a wide variety and nature - "I welcome that thoroughly," he says.

Others are happy with the polytechnics' change of status. Estelle Morris (now Baroness Morris of Yardley), education secretary under Blair in 2001-02, praises their focus on teaching, which she says yields social dividends through wider participation that are simply not achievable by investing in research-intensive institutions. She laments what she sees as too strong an emphasis on research funding, at the expense of other priorities.

Despite the differences in approach, a common thread can be discerned. It appears that all these former education policymakers would like to see the same result - a higher education system that is inclusive but that still offers a variety of routes to success, thereby ensuring that a range of aptitudes, skills and learning methods are catered for.

But how this goal is reached, they would argue, is critical. Not all paths will lead to the same destination, nor are all equally effective.

Here we enter the ancient ideological battleground of the market versus the state. Are wider provision and greater diversity best encouraged through competition and student choice or through government intervention?

John Denham, who had responsibility for universities in the first two years of Gordon Brown's administration, says that markets have a role to play in the delivery of publicly funded services but that their efficacy has its limits.

New Labour was well known for championing the ability of the quasi-market to extend choice and efficiency in public services such as the NHS, but Denham says the lesson of the party's experience is that market failure always throws a spanner in the works.

The lack of clear and relevant information for students about the quality of different universities can impede the market in higher education, he says, so some sort of government intervention is crucial.

"It is very important that students have a choice, just as it's very important that patients have choice in the NHS, but these consumer markets just aren't powerful enough or effective enough to bring about the changes that you want to see."

The coalition government clearly views things differently. The White Paper will seek to address two problems that prevent a market from flourishing in higher education: appropriate, useful and easily available information, advice and guidance for students, and a flexible supply of places from a range of providers.

Willetts believes that if these twin targets are met, higher education provision will evolve in such a way as to make the sector diverse and multifaceted enough to meet the needs of any student, regardless of background, aspiration and eventual career goal.

Improving information for students is not often a topic that inspires fierce political debate - everyone agrees that it is a worthy aim - but this should not disguise its crucial importance in fostering a market. Without complete information, consumers make the wrong choices and resources are allocated inefficiently.

Divergences of opinion start with the question of whether there is a limit to the reliability of information that can be provided on higher education.

Denham is clear about the inadequacy of the current data available on graduate employment, which shows prospective students only where their predecessors ended up soon after leaving university.

"We've been for years now in a labour market where fewer and fewer students go into their lifetime degree job within the first six months of leaving university. It is much more common now for students to work at a number of different occupations before they settle on their career," he points out.

"Really, there is no point giving duff information to 14- and 16-year-olds and asking them to base their choice on it. I am in favour of information for students and student choice, but we are asking the market to produce change that it can't do."

Morris believes that the universities made a mistake by not taking the opportunity sooner to agree on benchmark data that would give students a comparative view of their qualities and values, leaving it instead to media organisations to decide how to rank them.

"I can't think that is better than a proper national discussion and consultation about what factors matter." Such a discussion should be initiated now, she adds.

The other side of the equation that needs to be tackled to enable market success is the removal of the constraints on supply.

Willetts wants "new entrants" to the higher education sector to offer the student population a more varied menu of (often cheaper) options for university.

Whenever this debate crops up, the spotlight is often directed at the for-profit sector and the issue of whether the regulatory conditions necessary for them to flourish will be instituted. But the government is just as keen to see further education colleges picking up the baton.

Many former ministers are sanguine about this development, but the increasingly broad remit of the further education sector worries some who wonder where the funding needed to prop up the system will come from.

"There is a similarity now between some of the new universities and some of the bigger further education colleges," says Morris. "I suspect over the coming years that further education colleges will try to keep those students who do a foundation year with them, and get them to take the whole of their degree courses with them. That will mean that post-92 universities are squeezed from both ends.

"I'm not opposed to [further education colleges providing more degrees], but it needs sorting out. I'd like the White Paper to acknowledge that this shift is going on and to look closely at funding."

Funding is, of course, the key issue - and the crucial point about diversifying supply, both through further education colleges and private providers, is that in order to really take off, institutions need students with access to state loans.

A discrepancy in the current system is that home students on some courses at alternative providers - such as BPP University College and the University of Buckingham - are entitled to government-backed loans, but the institutions are not subject to the cap on places that hampers publicly funded universities. The amount of money that the taxpayer might have to spend on tuition fees channelled to those institutions is therefore potentially limitless.

At the moment, the numbers of students outside the public university system are relatively small, but if the government wants further education and private providers to expand, this contradiction will have to be addressed, and the government will be obliged to restrict places to limit the cost of the loans to the taxpayer.

If it allows countless new providers to tap into loan money, the sustainability of the system will be tested very quickly.

But even without this conundrum, a dark cloud still hangs over the issue of sustainability. Analysis carried out in the past few months, including work by the Higher Education Policy Institute, questions whether the government has underestimated how much it will cost to fund loans to students who are paying vastly higher tuition fees. There are also question marks over how easy it will be to recover loans from European Union students.

Also drawing critical attention is the set of public-sector accounting rules that allow the UK government to borrow such vast sums of money without it appearing in the deficit that it is pledged to reducing.

Blunkett argues that instead of this "off balance sheet" treatment, student loan debts should be properly accounted for to enable due diligence in policymaking because the implications will come back to haunt a future government, if not this one.

"Other countries consider whether the debt is affordable and the repayment system to go alongside it," he says. "They do that for house-building, they do that for student finance and for public sector borrowing. We've historically had two quite separate elements, and it creates a nonsense of logical decision-making.

"Because they've gone off balance sheet, they're pretending it doesn't matter, as though borrowing for this purpose - with enormous consequences of having to wait for the repayment - is different to investing in, say, a company like Sheffield Forgemasters and getting the money back," he says, referring to the controversial case of the steel firm that had its £80 million government loan cancelled by the Conservative-Liberal Democrat coalition.

He argues that Labour's first stab at a tuition fee system - involving an upfront fee being charged to students according to a means test of family income - was more sustainable and less likely to put off those from poorer backgrounds than top-up fees, which he opposes.

Charles Clarke, who took over as education secretary after Morris and oversaw the introduction of top-up fees, has defended the merits of the system that forms the basis for the current plans for graduate contributions.

But he argues that the real break with Labour's policy - and as a consequence, the risk to sustainability - was the decision to cut so much direct investment from the teaching grant.

"The whole point of the changes we made when I was secretary of state was that there should be a fairer balance in the funding of undergraduate education between the state - which benefits from undergraduate education - and the student," he says.

His view is that the present government has shifted the burden too far on to the shoulders of students by planning an 80 per cent cut to the direct teaching grant.

"I think the state has a direct benefit from educating people at undergraduate level, and it should be making a contribution," he says.

Baker, who paved the way for the current system by first introducing student loans, says he long ago reached the conclusion "that no government of any complexion would ever give the universities the money they need or deserve and so therefore alternative sources of revenue had to be found".

On the argument over cuts to teaching funding, Willetts contends that the state is still making a contribution through loan subsidies. But the issue of which is the more efficient use of resources is where the battle lines are drawn, and unfortunately the evidence needed to provide an answer may be years away.

Paradoxically, much will depend on the success of the supply side in opening up the market so that fees are driven down, in turn reducing the cost to the taxpayer. But as noted, such reform requires access to loans to be extended to new entrants. Willetts confirmed in a speech last week that this will happen, but exactly how it will be done is less certain.

The government also hopes that new entrants - however they are funded - will widen access to higher education by offering cheaper courses. On this Clarke, currently a visiting professor in politics at the University of East Anglia, is hopeful.

"I certainly don't see any reason to think that access would be reduced by this and in fact some reasons to think that it might be increased," he says.

He said there should be "nothing in principle" against allowing more organisations, publicly funded or not, to award degrees.

"The single most important thing is the quality of the degree and assuring that academic standards are absolutely fulfilled," he says.

As with the wider issues about higher education, there is general consensus about what politicians want to achieve on access - greater participation by students from poor backgrounds - but getting there without one's methods being labelled "social engineering" is the tricky part.

As a Liberal Democrat, Williams is passionate about access. She notes that she proposed the idea for a national scholarship scheme to Nick Clegg, the deputy prime minister.

She accepts that the £150 million currently pledged to the project is small, but argues that it could be built into a successful method of funding by targeting those who show promise at an early age.

Students, she says, have "to get the sense of being encouraged by being rewarded - it is no good leaving it to 18, when it is already too late. The boy or girl has to take into the first year of sixth form the feeling that this is their goal, and they don't get the feeling it's their goal unless their own hard work earlier has been recognised."

This publicly funded work should also be supplemented with closer examination, through the education watchdog Ofsted, of how well schools are encouraging talented youngsters to consider a future in higher education.

Williams, who is also professor emeritus of electoral politics at Harvard University's John F. Kennedy School of Government, says that too many state schools tell bright youngsters that they will not get into the top universities.

"Quite a lot of teachers reflect what they regard as the prejudice of Russell Group universities in their own discouraging of youngsters, who they don't want to see rejected," she says.

In addition, the universities' outreach activities need to be much better integrated into school timetables and programmes.

"Instead of prospective students thinking, 'Oh my God, I can't possibly get into Cambridge', [outreach] means that they have actually met someone from that university."

But for other former ministers, these activities are less significant than the shape of the university system itself and the effect that tuition fees - even when paid for by income-contingent loans - have on the decisions of debt-averse groups.

The hierarchy of universities, says Blunkett, will not be "based on the quality of their departments or the appropriateness of their courses but on the kind of students they can afford to attract in financial terms".

Morris highlights the research funding bias as a problem. "We bemoan the fact that children on free school meals struggle to get to university but the institutions that are cracking that nut are very often the least well funded."

Others think that universities are socially responsible enough to boost the numbers of disadvantaged students without interference from the government.

"I think we should trust the universities much more to run their own affairs. Over the past 50 years, they have been one of the great movers of social mobility," Baker points out.

"There are vast numbers of youngsters whose families never went to university and now it is almost accepted as the thing to do. That has happened. Let it go on happening,"

His contention touches on the issue that vexes any politician wanting to tinker with higher education: university autonomy.

It is a core principle that will underscore everything the White Paper attempts to reform - and could be an issue that bubbles to the surface quite readily if some proposals for the reform of statutory bodies are put forward.

Central to this is the fact that the nature of the Higher Education Funding Council for England's role will inevitably change if it is no longer dishing out billions in teaching grants. Although it is also responsible for the allocation of some research money, this function could be moved elsewhere easily if the government so wished.

For Blunkett this has major implications: by delivering such a large proportion of universities' income, Hefce gave the government influence on universities - it could always threaten to withdraw funding if institutions misbehaved in some way.

"With Hefce there is a clear government lever to pull. That relationship is based on taxation providing a substantial amount of the investment. But when you've removed that, where do you say its role lies with these independent universities?"

"Universities quite rightly in the end say, well, why should we obey - what is your lever? You've effectively cut the umbilical cord."

The logical conclusion might be that more statutory regulation will be necessary, both to protect the investment the government is making through students and to safeguard quality.

Despite Conservatives' and Liberal Democrats' aversion to red tape, this possibility has already been mooted as a consequence of too many universities "clustering" near the £9,000 fee level.

Clegg, for his part, invited the wrath of vice-chancellors by warning universities planning to charge the maximum fee level that it was "not up to them".

Baker labels those comments "very unwise". Such an approach risks pushing some universities to think seriously about going private, he says. "I see no reason why the London School of Economics or Imperial College London should not charge £9,000 or indeed more if they wish to.

"I am just uncomfortable about any government lecturing universities on what to do," Baker adds, pointing out that in the US institutions have not suffered the same interference from politicians.

Denham says his experience in government taught him that autonomy can never be underestimated.

"Part of the strength of our system is that we have by and large over the years trusted the professional academic leadership of universities. Autonomy has delivered us a lot.

"You can't always say that autonomy trumps everything else, but if you can't recognise the role it has played in developing a strong and diverse university sector then I think you misunderstand how our universities have developed."

It is an impasse that has long frustrated policymakers and will remain a main sticking point. Politicians may have the vision of a perfect university sector, but their power over higher education is more limited than in the realm of public services, over which they have much more direct control.

Instead, all they can do is tweak, incentivise, threaten or cajole. Or they can take the view that if it is left relatively alone, the sector always comes around to reflecting and serving the society in which it sits. And for Willetts, finding ways to create greater freedom for universities, not less, is more likely to sit well with his political instincts.