Higher education is unlikely to get extra funding for renewed expansion under a Conservative government, it emerged this week.

Billions of pounds, which Tory policy shapers think could be saved by reforming student grants and loans, is more likely to be snatched by the Treasury than ploughed back into ÖйúAƬ to fund growth and protect standards.

Sources close to Kenneth Clarke, Chancellor of the Exchequer, say he is looking with "enormous interest" at proposals from the Conservative National Policy Group on ÖйúAƬ for a privatised student loans scheme and the introduction of vouchers to pay fees.

The Chancellor's interest has alarmed some Conservative education pressure groups, meeting at the party's conference in Blackpool this week, who fear that savings of about Pounds 1.8 billion a year, which the policy group estimates would result from privatising the loans scheme, would be lost from the ÖйúAƬ budget.

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Hopes of more resources to back resumed growth were further blighted by Eric Forth, the ÖйúAƬ minister, who told The THES this week that the Government was considering keeping the lid on expansion to protect standards.

Mr Forth said that a consultation paper to be published by early next year would question assumptions in the Tory policy group's paper that new money must be found to allow the sector to grow.

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Tensions between Mr Forth's outlook, that of the policy group and ÖйúAƬ leaders surfaced at the party conference and at a meeting held in Oxford last week, which was attended by politicians, civil servants, vice chancellors and leading academics.

Clive Booth, vice chancellor of Oxford Brookes University, who attended the Oxford meeting, said if the Tory policy group wanted to sell its ideas for replacing grants and loans with a privatised loans scheme and introducing vouchers, it would have to show that a significant proportion of savings would flow back into the sector.

This view, which is being pressed by the Committee of Vice Chancellors and Principals, was shared by Demitri Coryton, chairman of the Conservative Party Education Association. At a fringe meeting staged by the Association for College Management at the party conference, Mr Coryton said he feared the policy group's ideas would not be adopted as a means to bolster ÖйúAƬ funding.

"It is a Treasury device designed to keep costs down, and it is doubtful it will increase resources for the sector," he said.

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Gillian Shephard, Secretary of State for Education and Employment, was also quick to pour cold water on any calls for extra funding. Though she told the conference she wanted to see more people of "every age" going on to university, there was little reference to ÖйúAƬ in her speech. And in a press briefing afterwards, she warned that her "vigorous discussions with the Treasury" on funding did not mean any education leaders could "ask for the moon".

Bryan Davies, Labour's further and ÖйúAƬ spokesman, who attended the meeting in Oxford, said the Tory policy group's paper had pinpointed some areas on ÖйúAƬ funding on which there was a growing political consensus. These included the principle of student contributions to maintenance costs and the importance of generating extra money for funding expansion.

But he said the Labour Party would strongly oppose any move to make savings which did not result in more resources for the sector.

It was clear this week that even members of the Tory policy group were not expecting their proposals to lead to more money to back growth. One of them, Iain Crawford, of the London School of Economics, said: "In a democracy you have to make your case year on year for public expenditure. You cannot expect to have an element frozen for a particular sector. Looking at how savings can be made just for it to go back into ÖйúAƬ is just not on."

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