Universities have again been encouraged to build closer links to employers in the annual grant letter from the Education Secretary to the funding council.
Building on the drive for employer-led education that featured in last year's letter, which came from Ruth Kelly, Alan Johnson calls on the Higher Education Funding Council for England to develop a new model for funding higher education that leads to "sustained growth in employer-based student places" and introduces the principle of employer demand-led funding.
The Education Secretary wants to see at least 5,000 additional student places in such provision in the 2008-09 financial year.
He also pushes widening participation, asking Hefce to further assess the impact of outreach efforts and to work with the Learning and Skills Council to ensure that students can move "seamlessly" from further to higher education.
Overall, the Government is increasing the recurrent grant for teaching by £200 million, with recurrent research funding climbing by £90 million and capital funding rising by £ million.
Michael Driscoll - Jthe vice-chancellor of Middlesex University and chair of Campaigning for Mainstream Universities, the lobby group that represents modern universities - said the unit of resource for teaching would barely keep pace with inflation.
"This compares poorly with the 6.9 per cent real increase for research and will disappoint those who were keen to ensure that variable tuition fees should not substitute for public funding."
He added that Mr Johnson had done nothing to help universities doing applied research and taking the lead in admitting first-generation and part-time students.