Next week the Teaching and ÖйúAƬ Bill begins its committee stage in the House of Lords. Here the elected leader of the British universities, Martin Harris, sets out the universities' terms for their continued support of the government's highereducation policy. These include first, amendments to thebill in two crucial areas: l clause 18, which gives sweeping powers of intervention to the minister, should be modified or deleted.

l money paid by students for tuition should be explicitlyring- fenced for the universities.

And second, that more money be provided for universities in the short-term before fee income can make a significant impact.

The THES supports these demands.

So far, universities have backed the principle of the government's funding reforms. But this support cannot be taken for granted. It is conditional on the government's policies delivering the goods, in the form of substantial additional resources for ÖйúAƬ, as Dearing requires of them. And it also depends on significant changes to clause 18 of the Teaching and ÖйúAƬ Bill which threatens universities' independence.

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Until the outcome of the comprehensive spending review is known in summer, the sector has a major battle to fight, but we do so from a position of relative strength. We have a government committed to education at all levels and its agenda and ours overlap in many crucial respects. And the principle of tuition fees, embraced by Dearing and endorsed by the government, has the potential to deliver a new and revivifying income stream. But there can be no complacency. Our support for the new funding package is predicated entirely upon there being adequate new resources for the sector, in both the short- and medium-term.

The funding crisis universities face has been publicly acknowledged by the prime minister and the secretary of state. We know from funding council figures that if action is not taken 79 institutions in England - more than half the sector - could be in the red by the turn of the century. We must continue to convey forcefully exactly what the implications would be if one institution were to go bust, not just for teaching and research but also for the employment prospects and the economic prosperity of the region in question.

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In 1999-2000 the sector's short-term funding crisis peaks. Using Dearing's calculations, the Committee of Vice Chancellors and Principals estimates that over the next two years universities face a funding shortfall of almost Pounds 800 million. The reality is that this shortfall cannot be redressed by the new fees monies alone. The only way the shortfall can be tackled is through decisive government action in its comprehensive spending review.

CVCP's minimum demand is a reduction in the planned cuts for 1999-2000 to 1 per cent. Second, universities require additional investment to deal with the research infrastructure, equipment and building backlog, and to achieve the increase in student numbers which the secretary of state wants to see. Third, we are looking for a firm guarantee that all the money from fees will come back directly to universities, and that this new money is not clawed back by the Treasury, a possibility which the Education and Employment Select Committee has urged the secretary of state to resist strongly.

But let us not forget our strengths. The sector's power lies in the fact that we have a government which clearly cannot afford to ignore ÖйúAƬ if it is to achieve what it has explicitly identified as its key goals. The government's agenda depends upon partnership with ÖйúAƬ in, at least, three priority areas: competitiveness, regional regeneration and lifelong learning. As pressure on government, public and private, is sustained over the months to come, CVCP's arguments will be made in this context of overlapping agendas and mutuality.

Increased competitiveness is not possible without a secure research base. The Department of Trade and Industry recognises this vital link and the prime minister, too, has spoken of the centrality of research to the national economy.

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It is no accident that the government wants to see strong vice chancellor representation in the regional development agencies which will come into being next year. Launching the Regional Development Agencies Bill, John Prescott emphasised the important contribution universities make to the regions. Universities have forged innovative partnerships with small and medium- sized enterprises throughout the country.

Government initiatives such as the University for Industry and the new focus on regional development will build upon this established partnership approach.

Universities already play an integral role in lifelong learning. The link between social inclusion and education - which is likely to underpin the forthcoming white paper - has informed and prompted access initiatives across the sector. Through the breadth and diversity of our provision and through creative partnerships with further education, we are determined to make our contribution to the prime minister's target of an additional 500,000 students in lifelong learning by 2002 and, by then, the secretary of state's ambition to achieve 35 per cent participation in ÖйúAƬ by young people. Expansion and widening participation must go hand in hand.

The CVCP will hammer home these messages and point out nationally what the far-reaching consequences of our funding crisis will be if it is not adequately addressed. Higher education is not a stand-alone entity and this is a message which also must be communicated locally and regionally by individual institutions.

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One immediate challenge is the implementation of the new funding scheme. CVCP has conveyed to the government that vice chancellors will not accept clause 18 as it stands. The government must also realise that major issues about the collection of fees and the administration costs involved have yet to be resolved.

Universities will judge this government by the extent to which it makes possible an adequately funded, socially inclusive ÖйúAƬ sector. We shall certainly play our part to the full: we confidently expect government to do the same.

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Martin Harris is vice chancellor of the University of Manchester and chairman of the CVCP