A few things bound to dampen your party spirit

Academics have little to celebrate as Labour reaches its fifth year in power, says Stephen Court

Today is the first anniversary of new Labour's second administration and - for higher education - the benefits of Tony Blair's first administration are coming on stream. In the coming year public spending per student will rise in real terms. Funding for universities and the science budget is also rising above inflation. The government, aided by the Wellcome Trust, is putting big bucks into upgrading the creaking research infrastructure.

Many in government regard the sector as a success story - productivity, measured by student-to-staff ratios, has doubled in the past two decades. Perhaps that confidence encouraged the prime minister back in 1999 to burden the sector with a further growth target. Perhaps, too, the prominence given to the target - that 50 per cent of people aged 18-30 participate in higher education by 2010 - in Labour's manifesto last year encouraged a false sense of optimism about the new administration.

But, since last June, education has slipped down the political agenda. Greater needs have emerged. The health service is at the top of the chancellor's in-tray. Drift has replaced the drive of Labour's first term - remember education, education, education?

There are general statements - shortly before this year's budget, Mr Blair said education "is and always will be our number one priority", while in his budget speech chancellor Gordon Brown said: "We are pledged to increase significantly the share of national income devoted to education over the course of this Parliament."

We keenly await the results of the government's spending review, which will broadly determine public funding between 2003 and 2006. There will also be the results of the government's review of student finance. This will determine the extent to which the burden of maintenance loans and up-front tuition fees will be eased.

There is a sense that higher education is at a crossroads, and the government lacks the will to take decisions about the direction in which the sector should go. Government by target is not the answer. But how are things drifting? First, there appears to be lack of political will to fund the immediate needs of the sector. Most notably this was seen in the failure to fund fully universities' improved performance in the 2001 research assessment exercise. The impression of a government happy to sit back while nature takes its course was emphasised by higher education minister Margaret Hodge in April when she said that, in ten years, "some universities may have gone, others will have expanded". She added: "We will encourage that diversity and specialisation by concentrating our research resources on the most internationally competitive."

Second, levels of funding from the government do not meet universities' needs. The government's own transparency review puts the annual shortfall at £1 billion. While the state says "can't pay, won't pay", the proportion of gross domestic product spent on higher education falls behind comparable countries. Yet the government expects institutions to expand student numbers, improve teaching, increase the amount of international-quality research, attract more overseas students paying high fees - and be the engine of the knowledge-based economy. Until recently the government had ruled out top-up fees. But last month Ms Hodge told the Commons education select committee: "We are looking at that." This flip-flop policy-making makes it difficult for institutions to plan long term.

Third, the government appears unwilling to meet the implications of widening participation. The institutions doing most about the costly business of widening participation are punished financially for recruitment problems.

The government has not addressed the implications for staff and other resources of its 50 per cent target. Thousands of additional teachers will be needed. But where will they come from? There is growing evidence of recruitment and retention problems. Without addressing the root problem of poor pay, the government will not find the staff it needs to meet its target. And where will the students come from? For the past two years the government has not been able to fill the additional higher education places provided in England. Without a Cubie-style solution - with graduate contributions to tuition costs and a third of students eligible for non-repayable maintenance bursaries - the government is unlikely to attract the 500,000 or so extra students it needs to meet the 2010 target.

But the message from the Treasury - concerned to fund the National Health Service - has been to play down hopes for such a solution. Any thoughts in the sector of a generous birthday celebration are misplaced.

Stephen Court is senior research officer at the Association of University Teachers.