This will be a something for something reform, to help institutions to recruit and retain the key staff they need

Education secretary David Blunkett

The planned increase assumes an expansion of student numbers by 78,000, chiefly in those studying vocational qualifications part-time.

It will take the total to �6,393m in 2003-4, up from �4,686m when Labour came to power.

Part of the increase is to fund rises in the salaries of staff, who have long complained of falling behind comparable workers.

Extra money for next year was set out in the comprehensive spending review in September, but universities have now been told what they can expect for the following two years.

New degrees

The initial response from them and from unions was that the extra money for their staff was particularly welcome.

Lecturers whose wages are 30% lower than comparable professions will be expecting to see some of this extra cash

Union leader Paul Mackney

The Education Secretary, David Blunkett, said: "Next year, for the first time since the 1980s, the higher education sector will receive a real increase in funding per student and expansion will be fully funded in the following two years," he said.

"Higher education institutions will be able to recruit an additional 45,000 students next year.

"Further expansion is planned in the following two years to make steady progress towards our aim that, by the age of 30, half of all young people should have had the opportunity to benefit from higher education.

"This expansion will be delivered largely through vocational programmes, particularly for those who want to study part time whilst in work."

With that in mind ministers have introduced new "foundation degrees", starting next August, which will involve partnerships between employers and the universities.

Mr Blunkett said these would be important in broadening access to higher education.

Keeping up standards

In addition, part of the funding is intended to help universities refute charges of elitism by recruiting more bright students from poorer families.

But he stressed: "This will not, and must not, be at the expense of standards."

"I recognise that staff recruitment and retention, equal opportunities and human resource development are central to providing a world class higher education," he said.

But in return he demanded "clear and satisfactory plans" as to how they would improve quality and management.

Sir Brian Fender, Chief Executive of the Higher Education Funding Council for England, said universities were "key players in building a knowledge-based economy and an inclusive society".

"But they can only play a leading role if they have the necessary resources, and we are delighted that the government has recognised the strong case for a substantial extra investment."

Possible pay strike

In response, the Committee of Vice Chancellors and Principals - representing university heads - said it wanted to see the detail behind the headline figures, particularly the specific targets on additional student numbers.

Its chief executive, Diana Warwick, said: "The year on year increases on offer also demonstrate that government has heard our argument that the sector needs on-going and increasing resources to ensure we can invest in our staff - who are crucial to the success of universities in the UK in the future."

The general secretary of university and college lecturers' union Natfhe, Paul Mackney, said universities now had no excuse but to improve their latest 3% pay offer on which his union has balloted for a strike.

The result, due next week, could mean a one-day stoppage on 5 December.

"Lecturers whose wages are 30% lower than comparable professions will be expecting to see some of this extra cash in their pay packet," he said.

Manual staff

The Association of University Teachers detected a victory in its own campaign to improve pay but said it would be going over the figures carefully.

You don't need a maths degree to work out that �4.22 an hour is poverty pay

General workers' union

"Today David Blunkett has explicitly recognised that university staff are 'central to providing world class higher education'," said the general secretary, David Triesman.

"We have turned the corner on funding for higher education."

The Transport and General Workers Union, which represents 10,000 cleaners, caterers, porters, clerical and security staff in higher education, said it doubted the extra money would fund the increase from �4.22 to �5.57 an hour recommended in the recent independent Bett report.

National secretary for public services Chris Kaufman said: "Places of higher learning are also places of low earnings. You don't need a maths degree to work out that �4.22 an hour is poverty pay."