The Government may be seeking to increase the influence of business on universities, but vice-chancellors are far more likely to be swayed by the financial muscle of students, a leading sector figure has said.

Malcolm Gillies, vice-chancellor of City University, said that from a funding perspective, "specific industry contribution to university income, however measured, is normally now a distant third to student or government-derived income".

He said that through their fees, students were steadily "privatising" universities. As a result, "the playing field of student choice is tilted very little by the extent or nature of current industry interventions".

Indicating how far industry must raise the bar if it was to have real clout, Professor Gillies cited the suggestion by the Confederation of British Industry that science, engineering and technology students should get a ?1,000 government bursary to increase take-up of degree places. He said that it would take more like ?5,000 to have the desired impact.

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Professor Gillies made the comments in a lecture "Educating for Industry?", in which he emphasised the importance of universities retaining their role as a nexus of education and research and as a neutral space of intellectual debate.

Discussing the varying pressures put on institutions by the Government, industry and benefactors, he said it was important to recognise that students were now major funders of ÖйúAƬ - in the case of City they were now the majority funder.

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"Some universities are much more publicly funded than we are, but either way our universities are, year on year, being privatised by our students," he said. "Not surprisingly, their expectations are very different from the Government's. Rather than building on long-term national capacities in education and research, or pursuing social skills agendas to 2020, our students look for immediate return on their fees investment."

He later added: "The reality is that our universities, once public by nature and by funding, have become complex mixed economies. They have become 'post-public' institutions, and with that confusing mixture has come confusion, sometimes internal collision, of role and purpose."

As shock waves continue to be felt from the financial crisis gripping world economies, Professor Gillies warned that universities too must review "what we are here to do" in such uncertain times.

"After some years of relative stability and better finances, universities too look to an uncertain future. They see an approaching crisis. Inflation drives up wages, yet income cannot be driven up to match; pension provisions are found to be sadly wanting; and we cannot expect much more from governments forced into instant nationalising roles that would once have sparked revolutions.

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"We start to wonder how students will be able to honour their next fee notices - even whether in 12 months' time we shall have as many students as have started this year."

john.gill@tsleducation.com.