Higher education was this week's party pooper, with anti-fees demonstrators outside the Labour party's triumphant conference and a few dissenters inside brave enough to defy the party organisers.

By the law of unintended consequences the anti-fees campaign was a gift to Messrs Blair, Brown and Blunkett. It allowed them to demonstrate the toughness of the decisions they are prepared to make in pursuit of greater equity: university students, most of whom come from privileged families and most of whom will go on to earn above average salaries, are to contribute so that such public money as is available can go to rebuild and refurbish schools, pay cleaners a minimum wage and cut income tax to 10 per cent. Those who do not come from such families - or those that do but do not go on to earn much later - will have to pay for their keep but not their education.

In Blair's brave new Britain there are to be new opportunities - 500,000 more further and ÖйúAƬ students within five years - and new responsibilities. As to the opportunities, the extra 500,000 students is a less dramatic figure than it sounds. Further education has expanded by that amount in the last year or so. Most will probably be part-time. All universities and colleges should be planning to grow their part-time programmes.

As to the responsibilities, unless the cost is to be prohibitive most students will have to contribute. Further education students over 19 already pay (without benefit of means-tested exemption or loans). Full-time university students are about to pay.

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This is New Labour with a vengeance. General tax cutting is preferred to higher public spending. New spending will be targeted. Those in work will get to keep more of their earnings but will have to contribute for the services they want. And in the public sector those earnings are going to be held down strictly. The Association of University Teachers might pause before pressing on with its campaign for a pay review body if academic staff are thereby to become in effect public sector workers subject to government pay policy.

The policy is right. Concentrating public money on schools, job training, participation after 16 is the best way to attack the growing divisions in society. The rhetoric is impeccably uplifting. But selling the case to those on the losing end is going to take all Mr Blair's considerable leadership talent. It is also going to take administrative care and skill to draft policies which are robust and to mobilise the substantial goodwill for the government which exists in further and ÖйúAƬ behind the Blair vision.

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Now that the contentious fees policy is approved, if grudgingly, ministers can stop worrying so much about revolt in the party and settle down to hammering out the details of their higher and further education policy in a way which makes sense. Their white paper is promised for November. There are a number of considerations they should have in mind.

First is how to support the vital further education sector. The latest performance indicators for colleges published this week (page 9) show what they are up against. More than half the 439 colleges are in deficit and the amount of money available to spend on each student is falling sharply from a level already well below that prevailing in ÖйúAƬ.

The easy answer, as supporters of Helena Kennedy's report Learning Works argue, would be to increase the further education funding councils' grants, if necessary at ÖйúAƬ's expense. But Patrick Ainley and Bill Bailey's book, The Business of Learning, published this week (page 14) suggests the obvious may not be the best. They see greater hope in regional initiatives crossing sectoral boundaries.

The possibilities of such initiatives are illustrated by our reports this week of the way colleges are coping with deficits (page 9). Crisis is a great motivator and the two colleges described are solving their own problems, like some hard-pressed universities before them, by turning to collaborative ventures with other local institutions and companies.

Working with local employers to train the staff they need promises a number of benefits: more employers' money coming into education; a way of avoiding inflation as skills shortages develop; a step further towards Chancellor Gordon Brown's vision of full employment; less public spending on welfare.

A second consideration then should be how to develop and support regional arrangements for England, where they are at present vestigial, and how to make sure these work to stimulate, not thwart, local collaboration and initiative.

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A third consideration should be how far the government can bring itself to allow institutions to devise their own solutions. Here the omens are not good. The issue turns on institutions' ability to charge for what they do.

Education secretary David Blunkett promised again this week to outlaw additional top-up fees in universities. This promise has been an important part of his strategy to get the tuition charge policy through. Leaving aside the difficulty of doing this when dealing with a set of private institutions, some armed with royal charters, is it the right thing to do?

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The knee-jerk reaction is yes. Only the most prestigious institutions would, it is argued, get away with charging extra so access to the best would become a matter of money not merit. But the experience of the further education colleges who charge both students and employers suggests this is too blinkered. All universities and colleges charge for many of their services.

The difficulty comes in respect of the elite institutions. Access to them is a positional good. The government wants to control it. The rich want to buy it. The problem is, as both Blair and Blunkett have explicitly acknowledged, we must have excellence - and excellence costs. If our top universities are to keep up internationally they need to attract high-fliers as professors, lecturers, research fellows and students.

The desire to control these universities is profoundly insulting to them. It also goes against the advice emerging from last week's Unesco consultations with university leaders across Europe (page 12). Governments need independent universities.

The government should bring itself to trust universities to use their own judgement about the fees they charge (subject no doubt to auditing if they want to qualify for continued public funding). It is unimaginable to anyone who understands universities that they would rush to maximise their intake of rich kids and never mind the quality. Scholarship schemes would immediately be put in place which would, unlike the government's present plans, ensure that bright students from less well-off homes could study without getting hugely in debt.

It would then be possible to get the rich to provide the additional money needed for scholarships, for world-class academics, for researchers on proper employment contracts which enable them to explore the frontiers of knowledge. Is not this public/private partnership? Is getting the rich to foot the bill for services available to all on merit suddenly not part of Labour's agenda?

It is unattractive to argue that these privileged universities need more money when they already have substantially more than others. It is even more unattractive to argue that that money should come from taxpayers when there are so many urgent calls on tax revenues. The extra could come from those substantially enriched by years of tax breaks and low marginal income tax. Why should it not?

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