The head of the organisation representing the UK's universities has issued a "put up the money or shut up" challenge to ministers.

Chief executive of Universities UK Diana Warwick said the government must decide whether its priorities for higher education were worth paying for.

Challenge: Baroness Warwick

She said it seemed to have an "odd" vision of a free market.

Her own vision of the universities of the future was one in which "poor students won't be deterred by fears of debt", she told a fringe meeting at the Liberal Democrat conference in Brighton.

"There will be seamless links with further education. Universities will work with business, reaching out to help develop their regions.

Debt worries

"Our universities' international reputation will be even higher.

"The sector will be a magnet for teachers and researchers from around the world, paying staff competitively for the excellent work they do."

Universities were already working towards this - but to be sure of achieving it, they must be properly funded.

"As universities strive to widen participation, we recognise that one barrier to access is finance," she said.

"And there is no doubt in my mind that some potential students are deeply unwilling to start a course which will leave them with several thousand pounds' worth of debt at the end of three years," she said.

The government is due to produce plans for a major overhaul of higher education and of student finance in a few weeks' time.

It has talked about a "free market driven by student demand" - allowing universities which fail to attract students to go to the wall.

Staying local

"The implications of such a move would be worrying," Baroness Warwick said.

A significant trend of recent years had been that students wanted to study close to their homes.

This was especially true of those whose families had no history of university education - the very students universities had to attract to meet the prime minister's target of half of young people experiencing higher education.

Universities were willing to respond to demand - but they also performed a public service and must be maintained so that they were fit for the needs of future generations.

'Careful' costings

"The government has never challenged the basis for our spending review bid for �9.94bn," she said.

"It has said, however, that vice-chancellors were living in 'cloud-cuckoo land' if we expected to get so much.

"But all we have done is presented a carefully-costed, even cautious, bill based on independent evidence for what the government itself wants to do.

"It is for the government to decide if the price of its own priorities is worth paying - if it isn't, then it needs to say so and talk about how the circle will be squared."