Stefan Collini is master of the subtle and sophisticated extended essay. For the past 20 years or so he has been turning his scrupulous intelligence to the so-called crisis in the humanities and to the state of our universities, criticising the rise of reductionist consumerism. I had hoped to engage with his arguments in a speech at a conference in Cambridge last autumn that he attended, but I was shouted down by students chanting that they were not consumers: it was an unhappy episode that showed that in academia, as in politics, one can be embarrassed by one's allies as much as by one's critics.

His latest book, What Are Universities For?, is a sophisticated account of the university as a very special form of institution. He rightly argues that universities are not, for example, badly run businesses. There is a brilliant riff on the so-called real world. Alongside this argument there is a persuasive case for the humanities as a distinct form of intellectual enquiry that is worthwhile in itself. And behind all this is a plea not to reduce these institutions and activities to mere economic calculation, but to recognise their distinctive public value.

I agree with all these propositions and am always grateful to Collini for reminding us of these important truths. But I simply do not recognise his attempt to apply these wider propositions to higher education policy today. This rests on three key assertions.

First, he writes of an assault on the humanities. There is no such assault. The loss of all teaching grant for band D subjects is cited as evidence of particular malevolence towards these disciplines: it is not. The system of banding subjects is based on calculations of their costs, not judgements of their value. The higher fees more than compensate for the loss of band D funding. Many humanities courses will see increases in teaching funding this autumn. And when it comes to research, the so-called science ring-fence quite rightly includes humanities and social sciences as well. In allocating funds between the different research councils, I have followed the clear advice of the research community against any shift in the balance of funding between disciplines.

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The second assertion is that there is a deliberate assault on the autonomy of the university. Again, there is no such assault. The latest attempt to measure these things by the European University Association reported that our universities remain more autonomous than those in most other advanced countries. The mantle of the freedoms, for which Thomas Babington Macaulay tells us the fellows of Magdalen fought against James II, now falls on the shoulders of former teacher-training colleges and polytechnics alike. Our opening-up of university recruitment to students with A-level grades of AAB or more has removed number controls at a stroke from some of our research-intensive institutions, adding to these freedoms. We wish to take it further. My adviser, Nick Hillman, has been doing some fascinating historical research on the intrusive decisions that the University Grants Committee used to take on individual universities, removing some of the nostalgic gloss with which even a historian as scrupulous as Collini has endowed that body.

The third allegation is that we lack any understanding of the public value of the university, as shown by the withdrawal of public funding through the teaching grant. Again, however, I simply do not accept the claim. Public money will continue to get to universities in a host of ways: the loans for fees that will, quite rightly, not all be repaid; grants for high-cost subjects; more generous maintenance support for students; and research excellence funds that will be inside the science ring-fence for the first time. All these payments reflect the public value of what universities do.

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Despite these important disagreements, Collini is absolutely right to remind us of the university as an institution. He has a touching passage where instead of making the conventional complaints about the burden of administration, he acknowledges that some of these chores are necessary to sustain the institution.

I recognise that one of the real challenges of public policy is to look beyond consumers, contracts and services to see the institution that lies behind. Our White Paper was going to have a chapter on the value of the university, but it ended up on the cutting-room floor as the central argument was about changes to the financing of teaching. But Collini's lively book reminds all of us who care about higher education about the university that lies at its heart. For that, we are all in his debt.