Leader: Creating a new elite will damage whole sector

It is (at last) universally acknowledged that higher education needs more money - for research, pay, students and infrastructure. If extra cash is not forthcoming, disappointment will compound the damage already being done by penury. There is little higher education can do about this. Responsibility rests squarely with the government since it decided four years ago to curtail institutions' ability to act independently. Savings were made by axeing grants and imposing set fees, and the savings were filched for other areas of education. Now the chickens are coming home to roost. Higher education has done its bit. Teaching assessments have, with few exceptions, shown teaching to be satisfactory and improving. In a few weeks, the research assessment exercise will demonstrate substantial research improvement. It is payback time.

The government does not want to pay. It has some ideas about what it wants to achieve: excellence and diversity; closer links to the economy; and greater participation by poorer students. But it cannot see how to square the circle within existing spending. This is leading to flirtation with the idea of ring-fencing a small group of research universities and diverting the others into socially useful activities. This may seem an easy option but it is not a good idea. The winners would grow complacent over time and the losers will be demoralised and angry - and have the capacity to cause trouble in many marginal constituencies.

There is no escaping the arithmetic: poorer students need more help. That will cost. Incentives for alternative missions would have to be unprecedentedly generous to be attractive. Ways would have to be found, whatever changes are made, to ensure that top-class research, wherever it is done, is rewarded. Cutting off the majority of the academic community from research would be bad for universities, bad for students and bad for research. The job cannot be done on the cheap. Higher education will be watching next week's pre-budget statement to see if the penny has finally dropped.