The hub and spokes of UK economic take-off

Top-up fees are not necessary with so much extra money going to higher education, argues David Blunkett.

It is a year since my speech at the University of Greenwich. Some commentators described it as utilitarian in its insistence that higher education should make a critical contribution to the United Kingdom's economic success. In fact, the speech made explicit reference to the role of higher education in sustaining democratic values and the broader cultural vitality of the community.

I make no apology for placing higher education at the heart of the productive capacity of the knowledge-driven economy. Universities and colleges are powerful drivers of innovation and change and it is critical that their potential to act as hubs for growth is fully realised.

That is why, this week, trade and industry secretary Stephen Byers and I announced plans for the development of university innovation centres and new technology institutes. Innovation centres will be long-term research partnerships between business and universities. They will act as drivers of innovation in the regions and foster cooperation between academics and industry.

The first five involve universities with leading companies such as BAe, Proctor & Gamble and Hewlett Packard. Funding for further centres will come from the Higher Education Innovation Fund, European Investment Bank loans and other sources.

We aim also to establish up to two new technology institutes in each region. These will offer teaching and knowledge transfer in high-technology areas and be based on partnerships between colleges and universities, particularly the new universities. Some Pounds 25 million will be available to pump-prime the institutes and universities, and colleges will be asked to bid with the private sector for funding.

These programmes build on extra investment in higher education that totals £1.7 billion in the six years up to 2003-04 - a real terms increase of 18 per cent. This adds to significant new capital and research resources. Funding per student will rise in real terms for the first time in 15 years in 2001-02 and the expansion of places will be fully funded thereafter. This investment is considerable. It contrasts sharply with our predecessors' record of cutting funding per student by 36 per cent between 1989 and 1997.

It is also why top-up fees are not necessary. The government has consistently opposed differential top-up fees and legislated to prevent them. That position has not changed. The government will continue to rule out top-up fees in the next Parliament. We are committed to maintaining a world-class higher education system, and we recognise that it takes money. We are not prepared to sacrifice standards to expansion. Our aim is that half the under-30s participate in higher education by 2010. Crucial will be opportunities to mature students in their 20s, many of whom will be particularly attracted to vocationally oriented foundation degrees.

Our drive to widen access will continue and all universities will benefit from the funding we have announced to support the Excellence Challenge programme. We are determined that more able young people from disadvantaged areas enter higher education, including those institutions that take fewer than 80 per cent of their students from the state sector. There will be no quotas or lowering of entry standards; this is strictly about access on merit, underpinned by bursaries providing equality of opportunity for youngsters whose family and community have no history of higher education.

What about those of our opponents? Tory policy is barely taken seriously by anyone in our universities or colleges. To endow all universities with a capital asset sufficient to cover their current funding council grant would cost at the very least £80 billion, and probably more - about twice what is spent on the whole education system in England. This is nonsense, as is the Tories' claim that they would prevent top-up fees. The government's ability to prevent top-up fees depends on making public grants to universities. Give up that public funding and the legal restraint on a free-for-all in fees disappears. Tory plans are uncosted and unworkable. The price would fall on students and parents.

Likewise, there is a credibility gap in Liberal Democrat policy as if funding requires no hard choices about priorities or any concern for social equity. Previously, they supported the government on income-contingent loans and voted against the restoration of maintenance grants. They even argued for a 20 per cent increase in the value of the loan. Now they want general taxpayers to subsidise the better-off by abolishing a contribution to fees. In Northern Ireland, the devolved administration ruled out this option because it violated progressive principles in public expenditure. Universities and colleges are high on the political agenda in recognition of their centrality to economic and social prosperity. Long may it continue.

David Blunkett is secretary of state for education and employment.