An extra £12.8 billion will go into education over the next three years, a rise of 6 per cent in real terms. This takes the total budget from £45 billion in 2002-03 to £57.8 billion in 2005-06.
But there was disappointment for higher education as it was made clear that the bulk of the additional money was for secondary schools.
And once again after a spending review, higher education was told it would have to wait to find out how much money it would get, this time until the publication of an autumn white paper.
There was encouragement for students with a promise that from September 2004 education maintenance allowances would be available throughout England.
Under the scheme, 16 to 19-year-olds will get up to £30 a week, depending on parental income, with additional bonuses for attendance and achievement.
The results of the research assessment exercise will also be better funded, with an extra £244 million going into recurrent research spending by 2005-06. There is a £200 million shortfall in research funding next year, as measured by the old funding method. Some of the extra cash may be used to create a capability development fund or for some aspects of reach-out.
David Rendel, Liberal Democrat higher education spokesman, said: "This statement is a kick in the teeth for universities and students. Ministers are happy to deliver lectures about widening participation but they are not providing the resources that universities need to support increased student numbers. Public funding per student is lower now than it was when the government took office.
"It makes little sense to accept the principle of education maintenance allowances (EMAs) in the sixth form but then leave students without any maintenance and force them to pay for tuition once they get to university."
Shadow education secretary Damian Green said: "Estelle Morris has accepted a further delay in finding a policy for our universities, where morale is even lower than it is in the school sector. This statement is a sad waste of opportunity by the government."
Universities UK said it was "disappointed that the chancellor's announcement did not make clear how much higher education will receive".
Paul Mackney, general secretary of lecturers' union Natfhe, said: "We had hoped to see some specifics regarding increases in university funding per student - across the board as well as for widening access. And while we welcome the extension of EMAs, we regret the government's failure to ease the burden of higher education student debt."
The Association of University Teachers called for better academic pay.
* Further education college heads have welcomed a halt in the financial decline of their sector, writes Tony Tysome .
Colleges will receive a 1 per cent real-terms increase in their core funding every year between 2003-04 and 2005-06 under plans unveiled by the chancellor this week. The boost should mean "substantial extra sums" to help further education institutions meet growing demands on their budgets, the Association of Colleges said.
But even more money may be needed to close the gap in funding between colleges and schools, and between the average salaries of further education lecturers and schoolteachers.
Mr Brown warned that extra money and rewards for high-performing institutions came hand-in-hand with a crackdown on failing colleges that could be subject to funding cuts or forced mergers.