That was the view of Steve Egan, deputy chief executive of the ³ÉÈËVRÊÓƵ Funding Council for England, who also warned when he spoke at an event on higher education finances and efficiency today that there were ¡°real threats¡± to the future of the ring-fenced ?4.6 billion research budget.

Capital spending by English institutions is currently at ¡°record levels¡± of about ?3 billion a year ¡°in response to student demands and higher competition¡± as well as low interest rates, Mr Egan told the Westminster ³ÉÈËVRÊÓƵ Forum event.

But he warned that the wider public funding environment was ¡°a real risk¡± given that cuts are set to continue after the next election. He said that given that the government is currently estimating that it will write-off 45 per cent of outlay on student loans, the ¡°outlook is challenging¡± and only after the next comprehensive spending review will the sector ¡°know what that may be¡±.

During questions from the audience, he discussed the government¡¯s plans to sell pre-2012 income-contingent loans ¨C which George Osborne, the chancellor, has stated is the means of paying for the abolition of student number controls after 2015.

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Mr Egan said that interest from investors in the loans was ¡°limited at the moment¡± and private buyers would ¡°demand huge premiums¡± for taking on the risk of the loans.

David Willetts, the universities and science minister, has proposed that sales could be achieved by universities buying the debt of their graduates.

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Mr Egan said: ¡°Some institutions are interested in taking it on themselves.¡± But he thought they may discover that the ¡°risk of it is really quite high¡± and that it ¡°may not be the smartest investment, in purely investment terms¡±.

He said of the future of the government¡¯s ring-fence around the research budget in the long-term: ¡°There are real threats to that.¡±

He also warned that any future higher education legislation after the election must ensure the ¡°principle of institutional autonomy is in no way eroded¡±.

john.morgan@tesglobal.com