The Government risks creating a divided university sector in which a small elite are preferentially funded by the taxpayer to pursue "learning for learning's sake" while the rest are forced to rely on business for direction and support.
This was the warning this week from Les Ebdon, chairman of the Million+ group, which represents post-1992 universities. Addressing a Labour Party conference fringe meeting, Professor Ebdon, who is also vice-chancellor of the University of Bedfordshire, said that the Government should not concede too readily to employer demands.
In his report on skills, Lord Leitch said that 40 per cent of the UK workforce would need to have degree-level skills by 2020 to meet the needs of the economy. The Government plans to expand higher education through courses designed and co-funded by employers.
Speaking at the fringe event, "Students or business: Who are universities for and who pays in the knowledge economy?", Higher Education Minister Bill Rammell referred to employers as the "untapped element" in higher education funding and said they must "make a greater contribution".
But Professor Ebdon said universities had seen little evidence that employers want to contribute. When businesses and other organisations were willing to pay, "the courses they want to co-fund will not always match the ambitions and interests of their employees wishing to reskill or upskill," he suggested.
"What happens if employers won't pay?" Professor Ebdon asked. "In reality, why would employers invest in someone when they could go out and get someone who is already trained?"
While employers are "often very adept at complaining" about the quality of graduates, they struggled to articulate their needs and preferences, he added.
"So which is more important to Labour: a demand-side approach focused on employers or a supply-side approach focused on students and universities?" the vice-chancellor asked.
The best universities, he suggested, sought to balance "the quest for knowledge and learning for learning's sake" with the need to ensure that students' chances of employment were improved.
"Will the Government support the funding and the values of these universities and their students? Or will it hunker down to a model dominated by employer demand for the majority of students while continuing to preferentially fund universities that are historically regarded as elite and whose student profiles are comparatively exclusive?
"That's the underlying and sometimes unspoken agenda of the funding debate."
National Union of Students president Wes Streeting agreed that businesses were prepared to "cough up" to fund courses only if they were allowed a degree of influence that presented "alarming implications for academic freedom".
Speaking at a different fringe event, Malcolm McVicar, vice-chancellor of the University of Central Lancashire (Uclan), said that the economy was likely to change so quickly that predicting its future skills needs was next to impossible.
"We have to get away from narrow vocationalism," he said. Rather, all degree courses should have "employability skills" built in to them. He called on universities to offer more work placements outside the European Union and said he would like to make learning a foreign language compulsory for all students - though the rest of the management team at Uclan had dissuaded him from implementing this.
Mr Rammell said the Government would consider forcing employers to pay for their employees' training if necessary, though he said international evidence suggested that compulsion was not particularly effective.