By Mike Baker BBC education correspondent

The new university year is just about upon us.

In the coming weeks the anxious and haunted faces on campus won't only belong to confused "freshers" trying to find the library or the bar.

Ministers have made it clear they are willing to accept the pain of departments, or even whole universities, being closed

Many others have plenty to fear.

Vice-chancellors, for example, can rarely have started a new academic year facing so much uncertainty about the future.

Unlike schools and colleges, the university sector has still not been told what its share of the chancellor's extra spending will be.

Wholesale review

The reason for the delay only adds to the uncertainty. The funding settlement is being held up because the government is about to produce its plans for a major review of the university system.

This review - in the form of a White Paper due in November - has evolved from a limited inquiry into student loans and grants into what the Higher Education Minister, Margaret Hodge, has called "a much bigger and more radical appraisal" of the role of our universities.

It is not quite clear why, and at what stage, this limited attempt to provide more financial support to students mushroomed into a whole new, 10-year route map for the entire university system.

Yet that is what is promised.

Bearing the brunt

Ministers say an overhaul of universities is needed to ensure they can cope in a competitive, global system of higher education.

Translated into more concrete terms this means ensuring our best universities do not suffer from the growing "brain drain" of top academics to the USA.

It also means ensuring we have some of the best research departments in the world and the quality of teaching needed to attract growing numbers of international students.

Another group which might be worried are university staff. These are tough times at some institutions.

Luton University recently decided to cut all of its humanities courses, making 60 staff redundant.

Lecturers have borne the brunt of the "efficiency savings" made by universities over the past few years. Now they will have to huddle close to avoid the cold winds of market competition.

No guarantees

Margaret Hodge has already indicated the government's review will involve unleashing market forces.

The newer universities fear the old polytechnic / university divide is about to be recreated

There has been talk of allowing weaker universities to close while the stronger ones are permitted to expand.

As she told the vice-chancellors this week, universities cannot expect to be autonomous and independent and yet still have "a guaranteed and permanent underwriting of their activity and funding by the state".

Ministers have made it clear they are willing to accept the pain of departments, or even whole universities, being closed.

Margaret Hodge's message was blunt: "I accept allowing a freer market may create more turmoil in the sector", she said, "but if students and research funders do not want what is on offer, why one earth should we carry on funding it?"

Numbers increasing

Such messages have particularly alarmed the newer universities. They fear the old polytechnic / university divide is about to be recreated.

The brighter news for universities is that all this turmoil is taking place against a background of overall expansion.

The latest figures from the universities" admissions service, Ucas, show that the number of students accepted is 3% up on this time last year.

That means there are likely to be around 10,000 more students in the system than last year and over 25,000 more than two years ago.

Skills shortage

There is also still quite a way to go to meet the prime minister's target of 50% of young people "participating in higher education" by 2010.

This week, MPs highlighted the imprecision of this target. Indeed, the Public Accounts Committee of the House of Commons found it to be as slippery as a wet bar of soap.

Even the reason for settling on 50% were a little obscure; apparently, though, it is based on a projection of the number of graduate level jobs that the economy will require.

According to the National Skills Taskforce the next decade will see a growth of 1.73 million jobs in those occupations which typically recruit graduates.

However the definition of "participating in higher education" is fairly elastic. It is not, as many people think, a case of getting 50% of school leavers to go to university.

Something for something

The government's definition of "participating" is well short of "graduating".

It reads: the proportion of those under 30 who have been on a course of "one year or more which leads to a qualification awarded by a higher education institution".

Nevertheless, even according to this limited definition, the current figure for participation in higher education is just 41%. So there is a long way to go by 2010.

This alone ought to give universities confidence that they will get at least some of the �10bn extra they say they need. But they are probably wise enough to know they won't get it all.

There will be more money. But there will be painful change too.

This government's public spending mantra echoes King Lear's "nothing will come of nothing".

Ministers will insist on reform in exchange for cash. That reform will involve allowing market forces greater play.

Changes

Yet, in rather contradictory manner, ministers also want to nudge that "free market" in certain directions.

Many universities are broke

That will mean more shorter university courses and many more vocational courses.

It will probably mean some departments at newer universities ceasing research activity and concentrating on teaching.

It will certainly mean some expansion but it will probably also involve institutions merging, as is happening with London Guildhall University and the University of North London.

Many universities are broke. A report last week revealed that the higher education sector as a whole has, for the first time, returned a deficit on its operational balances.

Moreover, about half of all the universities in Britain are in the red.

Divide and rule?

The government wants to meet its target. It does not want to spend too much doing so.

Accept these two facts and the likely pattern of the review becomes clearer.

Cheaper and shorter degrees will drive expansion. Turning some universities, or at least departments, into "teaching only" bodies will save research grants.

The savings can be diverted to elite institutions so they can compete with the world's best.

It could prove to be a divide-and-rule approach. Already there are signs that the fragile unity of the university system is cracking.

Will Oxford, Cambridge and Nottingham rush to defend the interests of Luton, Hertfordshire and the South Bank?

It's going to be a tough and uncertain year on the nation's campuses.

Mike Baker and the education team welcome your comments at educationnews@bbc.co.uk although cannot always answer individual e-mails.