Lord Mandelson's first major speech on higher education prompted strong reactions from the sector this week after it was widely interpreted as a hint that the Government will lift the cap on tuition fees.
For the University and College Union, the speech was a worrying sign that the First Secretary had given a "green light" to higher fees, while for the Russell Group, it offered welcome recognition that universities required "sustainable funding" from graduates as well as taxpayers.
Speaking at Birkbeck, University of London, Lord Mandelson said Britons had to "face up to the challenge of paying for excellence", but he warned that universities that charged higher fees must support poor students.
"Whatever funding mix for higher education we develop, there must always be a link between what an institution charges and its performance in widening access and supporting those without the ability to pay," he said.
Asked how this link might work, he said: "The principle is very clear that where the funding system permits expansion, the excellence of that expansion and widening participation are equally important."
Lord Mandelson went on to confirm that he would launch the long-awaited independent review of tuition fees in the autumn.
He said the fees review would take "about a year" and, for the first time, he admitted that it would not conclude until after the general election.
He also announced a review of postgraduate courses, which will look at access, as well as employer needs and the international competitiveness of universities' offerings.
Led by Adrian Smith, director of science and research at the Department for Business, Innovation and Skills, the review will conclude in early 2010.
Lord Mandelson said postgraduate provision was "a major export earner for the UK, and one which we have perhaps taken too much for granted". He added that he would like to "liberate" postgraduate provision further.
'Collective strategic vision'
The framework for higher education, to be launched this autumn, would present a "collective strategic vision for the sector and its role in our economic life", he said.
The document is likely to touch on his call for "incentivising excellence in academic teaching", but Lord Mandelson said he was not "limbering up for a gargantuan struggle over excellence in academic teaching".
"There's only so much you can take on at any one time," he said. "But I come to this with the same attitude as I do to all publicly funded activity: the taxpayer requires value and we shouldn't tolerate producer-driven attitudes prevailing over (those of consumers)."
He was looking for universities to deliver teaching rewards, he said. "This is not a new front that the Government can open up and wade into."
While he promised to "turn the spotlight on university admissions" and highlighted a "strong case for using more contextual benchmarks" during selection, he stressed that he would "not impose a straitjacket" on institutions.
Diana Warwick, chief executive of Universities UK, asked the First Secretary whether the Government would commit to maintaining the unit of resource for teaching.
"I hope it will not only be maintained but will grow," he replied.
But referring to funding pressures on public services, he added: "We do have to talk the language of priorities - we have to find an approach that is viable for universities and affordable for the Government."
Business needs aren't paramount
Lord Mandelson also promised to support universities in their pursuit of knowledge as "an end in itself".
"I need to be clear that I do not believe that the function of a university is limited to - or even primarily about - economic outcomes.
"They are not factories for producing workers. Defining the skills that directly underwrite many skilled jobs in the UK is not the same as defining useful and necessary knowledge. The case for a higher education system that invests in everything from Classics to quantum physics is a compelling one."
The Million+ group of post-1992 universities welcomed Lord Mandelson's commitment to a "holistic" fees and funding review.
A spokeswoman for the group said this would be "welcomed by those who believe that students of all ages and backgrounds should have access to support".
Wendy Piatt, director-general of the Russell Group of research-intensive institutions, said: "We welcome the ... recognition that our universities have a central role in helping the UK out of the recession and that maintaining our world-class system will require sustainable funding from the graduate as well as the taxpayer."
However, David Willetts, Conservative Shadow Universities and Skills Secretary, criticised the Government for delaying the start of the fees review.
The UCU warned that higher fees would be "less popular than the poll tax".