Mary Lord, director of education and training at the TEC national council (page 10), has a vision. It is of universities harnessed to the chariot of national competitiveness and preparation for work. She is impatient with what she sees as universities' slowness to respond to employers' needs. She is, she says, confident that her vision is in line with the government's and expects their lifelong learning white paper to confirm this.

The Teaching and ÖйúAƬ Bill suggests that her hope of decisive action is justified. The bill is ostensibly about money - new arrangements for student loans and new powers to control fee levels. It is being presented as a means of reassuring students and their families about the costs of continuing ineducation.

But it is in fact about control. It provides sweeping new powers for the chief inspector of schools to inspect education departments in universities and colleges. More broadly still it gives the Secretary of State for Education and Employment, through the funding councils, power to order all colleges and universities (or any one of them) to charge no fees (further education) or to charge the "prescribed amount" (ÖйúAƬ) for "any specified class of persons in respect of any specified matters in connection with their attending courses of any specified description". The "prescribed amount" is the Pounds 1,000 charge.

Powers that have been drafted, it is said, to prevent the most sought-after universities charging additional fees and thereby creating an elite tier equivalent to the American private universities, will have the effect of embroiling the government in the micro-management of all universities and colleges. It will also draw universities' teeth.

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Universities and colleges will no longer be able to impose extra fees if the money provided by the government is, in their view, inadequate. They used that threat two years ago and frightened the politicians into setting up the Dearing committee. Now they are losing their bargaining counter. They will have to settle for what they are given and lump it.

The powers to control are being taken before the details of the government's policy for lifelong learning, for the University for Industry or for the Oxbridge college fees are published, and before the end of the spending review that will (or will not) provide extra money for further and ÖйúAƬ.

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The bill has been greeted with stunned silence - at least in public. Further education colleges and universities have just about been keeping their heads above water - though deficits are rising (page 1) - by charging students in a whole variety of ways from bench fees and library charges for full-time students to high fees for overseas students. In some universities, and they are not the top tier, two-thirds of students pay their own way.

Now all is uncertain. It appears that ÖйúAƬ institutions can be ordered to subsume within the Pounds 1,000 flat rate fee the charges art and design students pay for materials and geology and geography students pay for field trips.

There are significant numbers of self-financing students in ÖйúAƬ who now pay differential fees out of their own pockets. Will this still be possible? Foreign students have been becoming increasingly aggrieved at paying high fees that subsidise British and European students. Students in further education who are over 19 pay for what younger students get for free. Will the minister now order that they be treated the same as other students?

Ministers will find themselves lobbied by every special interest group demanding, in the interest of the government's declared objectives of fairness and equity, that their fees be capped.

Foreign governments can be expected to join in. The Chinese government, for example, is to send students to Britain (page 14). They will now know that the British government has the power to limit the fees charged to such students to the same level as that charged to home students. This gives them a fine bargaining weapon when the United States and Australia are also eager to attract Chinese students.

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Companies too may try to bring pressure. An overseas firm considering inward investment in Europe could be tempted to bargain over free training of staff in further education colleges for their planned plant. (Toyota is said to be planning to locate its next car plant in northern France.) The government might want to temper the effects of pit closures by ordering local colleges to provide free retraining courses.

Since there is no reciprocal obligation on government to make good any loss of revenue resulting from its policies, the bill is, as Lord Russell says (page 16), a recipe for further reduction in the money available to teach each student.

University councils are charged with responsibility for the financial health of their institutions. They will now have their power to raise additional revenue severely curtailed. Their only recourse will be to cut costs. As Stephen Court points out, the means of doing this were provided by the last government (page 16). The necessity of using that power is likely to be increased by this one.

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Now, of course, Mr Blunkett and his Labour colleagues may not be susceptible to pressures from students, foreign governments or large companies. They may have no intention of interfering course by course in the pricing policy of universities and colleges, though they have just ordered that employers pay 50 per cent more for training in further education. They may be determined to improve access and quality. They may be able to secure from the Treasury the money to do so. But even if all that is so, they cannot bind their successors. Once powers such as these are given they are usually used and are seldom taken away.

Behind the scenes there is consternation. There are those who see the powers in this bill as tantamount to nationalisation - something Labour said it no longer favoured. There are those appalled to find they will no longer be able to escape the vice of ever-reducing unit costs. There are those who see the centuries-long autonomy of British universities ending, and the freedom granted to colleges and former polytechnics when they were removed from local government vanishing. They see the British system being pushed closer to the European norm where academics are civil servants, university autonomy minimal and quality of provision poor.

But there is also palpable fear of the government's bullying tendency. The legislation will allow the minister to make orders in respect of any individual institution. Individual vice chancellors are reluctant to speak out: "I must consider the impact on my university before I sound off about this." Changes under this bill remove prohibitions that previously prevented the minister singling out institutions.

By early this week collective concern had propelled the Committee of Vice Chancellors and Principals into some semblance of life (page 1). The impression has been widespread that those struggling to hold the CVCP together in the face of threats by the top tier to charge top-up fees have been complaisant over the government's legislative intentions. They surely cannot have known the sweeping nature of those plans and must now try to get them modified.

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British universities have a long and proud tradition of independence (page 4). But they have, in this century, become overwhelmingly dependent on taxpayers' money. They have lost the habit of independent action, let alone defiance.