The question of vice-chancellors' pay always attracts attention, but concentrating on an obviously "headline" issue risks obscuring a more profoundly worrying evolution in higher education over the past few decades.

Pay is best seen as a symbol, an indicator of where power lies, rather than as a matter of primary importance in itself. For those rises in salaries have been accompanied, and facilitated, by the gradual accretion of authority by managers over the institutions for which they work.

This has now reached the point where it threatens academic freedom, damages Britain's reputation and risks impairing the ability of universities to undertake effective teaching and research.

This worries me greatly. In response to the redundancy proposals announced recently at King's College London, I wrote a short paper, "The palaeographer and the manager", which accidentally went into viral circulation on the internet. As a result of that, I received many messages from academics thanking me for writing it, and adding that they were not in a position to do so themselves because they were concerned about the consequences if they did. This article, like my earlier contribution, was written because of my alarm that English universities, to which I owe a great debt, should have been reduced to such a state. English academics are now having to rely on the support of outsiders and of colleagues in China, Argentina, Eastern Europe and elsewhere for protection against their own managers.

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We have come to this shameful situation because, over the past 20 years, bureaucratic reorganisation, pushed forward by various governments, has eroded the power of senates to have effective oversight. The security provided by the tenure system has gone, and careful manipulation of committees and reporting lines have cut all but the most senior academics out of meaningful decision-making. Room for shoddy management, arbitrary decisions and simple profligacy has been created in the dark spaces of "corporate confidentiality".

Under the cover of the cuts imposed by the government, university administrations are now taking into their own hands the right to decide what is, and what is not, useful research, and are in effect claiming the right to fire at will those who do not fit the requirements that they lay down.

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The expansion of management, and its increasing separation from the institutions it commands, can be tracked in the explosion of administrative costs, of which vice-chancellors' salaries are only the most visible part.

At the University of Bristol, which in 2006 saw protests by students over what they perceived as inadequate teaching owing to financial pressures, between the financial years 2000 and 2009 spending on departments rose by 85 per cent, but administrative costs increased by 261 per cent and the vice-chancellor's reward (total package of salary plus benefits and pension contributions) was up 113 per cent. At University College London, while spending on academic departments increased by 79 per cent, administrative costs climbed by 120 per cent and the vice-chancellor's salary jumped by 168 per cent.

At King's College London, administrative costs rose to ?33.5 million in the financial year 2008-09, from ?28.5 million the year before - a rise of 17.5 per cent and more than twice that of the rise in the cost of academic departments. In 2002-03, administration costs were ?16.5 million - meaning there has been a 103 per cent rise over six years. To put this in perspective, King's is now proposing to cut the humanities to save ?2.4 million. This will claw back less than half of the increase in administrative expenses for 2009 alone.

These figures, moreover, are for central administration only; they do not include administrative costs buried in departmental accounts, nor do they take account of the increasing administrative burden on lecturers themselves.

As this has happened, many vice-chancellors have indulged themselves with all the glories of corporate managerialism, and cutting back on these first of all, rather than on teaching and research, seems to be a low priority. While King's is proposing to cut 22 jobs from the humanities, it is simultaneously advertising for a range of administration posts with salaries up to ?85,000.

These will join a structure that already boasts a chief information officer, a public relations department, an external relations directorate, a marketing department, a quality assurance unit, a corporate services section and many others. To make a simple comparison, King's lists 10 full-time staff in its public relations unit and has a web page detailing academics for specific enquiries in specialist areas. The University of Oxford, nearly twice the size, lists 35 people working for its public affairs directorate.

A sample of private-sector companies of comparable size in the service sector suggests that most have only three people taking care of PR, many make do with just one, and some have none at all. When I asked one in the last category why not, I got the response that they "had better things to do".

Even a company such as QinetiQ - a high-tech operation with a complex range of products and services that gives it some similarities to a research university, and with revenue more than three times that of King's and twice that of Oxford - has only four people in this area, with one on secondment.

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Total administrative costs for the 116 or so universities now exceed ?3 billion a year. Rolling them back merely to the levels of five years ago would deliver most of the savings the government is demanding. A thorough prune might even yield more money for education.

This would not be an excessive demand; it is certainly routine for companies to make such cutbacks in non-productive areas when they hit hard times.

Vice-chancellors' salaries are part of this emulation of what administrators consider to be modern business practice, and are often justified by comparisons to private-sector salary levels. This makes them seem reasonable, although, even by that benchmark, they are now somewhat above the level of the average chief executive in the private sector.

This parallel, however, does not support much examination. Chief executives, after all, have a much more precarious existence and are fired for poor results. As there are no easy means of assessing a vice-chancellor's performance, and most universities do not even try very hard to do so, the result is that few ever depart unwillingly; in practice they now have rather greater job security than academics themselves.

Businessmen also cannot count on an assured income from the government and have to answer to shareholders who have the power to vote down pay packages and demand change. Moreover, their companies have to sell to survive, must find their own customers and must maximise their profits.

Shareholders can also indicate their displeasure by selling shares, the price of which acts as a daily "esteem indicator", to use a phrase currently in fashion in universities, of management performance.

None of these factors applies to universities. They do not make profits, so their performance cannot be easily monitored. There are no "invested outsiders" to keep an eye on things. They have rivals, but no competitors in any real sense. And there is little scope for external rebellion to enforce a change if management proves inadequate.

The problem with importing managerial techniques into universities - and into the public sector generally - is that it has centralised authority along business lines, but has not at the same time imported the checks that monitor performance and the balances to control managerial power. Comparisons in any case can be justified only if there is transferability: you match a salary if there is a possibility that the person you wish to retain might go and take up the better one.

It is absurd to argue, for example, that a primary school teacher should be paid as much as an investment banker because it is unlikely that a primary school teacher might otherwise go off and join a bank. Similarly, few vice-chancellors have the skill or experience required for a position as a chief executive in the private sector, where conditions are more Darwinian and the job very different. Nor are that many equipped to go and work abroad.

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Universities are not businesses, however much some administrators would like them to be. Legally they are charities, required "to further the charitable aims of their governing document" - to educate and do research. And once you start making comparisons here, then the scale of vice-chancellors' pay becomes less obviously justifiable. At Oxfam, for example, which is the size of a middle-ranking university, the chief executive is paid less than ?110,000 to administer a turnover of ?299 million, and this seems to be the going rate across the board (except for medical charities - the high pay now given to anyone involved in medical research is another phenomenon of the past few years).

If vice-chancellors' pay were to be brought in line with the charitable, rather than the business, sector, then average pay would be much lower: for the University of Bedfordshire, adjusting to the Oxfam ratio of remuneration to revenue would reduce the vice-chancellor's reward package to about ?38,000 from ?261,000; at King's the total remuneration would drop to about ?190,000 from ?312,000; at the University of Nottingham it would decline to about ?170,000 from ?308,000.

Openness on the question of vice-chancellors' pay is, unfortunately, one of the few such areas where universities disclose useful information about their inner workings; elsewhere, they have shrouded themselves in considerable, and often entirely unnecessary, secrecy.

In general, financial statements stick strictly to what they must reveal and rarely offer anything more. While MPs now have to make their expenses public, managers of universities are not required to do so, and they do not volunteer the information. In contrast, many charities often do this as a way of assuring donors that their money is not being wasted.

Universities are now impressively sized organisations that have become expert at wielding control by their dominance of procedure; indeed in many ways their operation can best be understood by reading about the way the Communist Party infiltrated, then took over, Czechoslovakia in the 1940s by easing themselves into the positions where they could set the agenda then move to take control.

Administrators have seized on their authority to "reshape" departments to fit their "strategic vision" and are now leveraging that into an implicit ability to fire anyone they choose, which is a potent means of control even if never used.

Committees, often dominated by people who are not specialists in the subjects they are analysing, are now deciding, as at King's and the University of Sussex, that some areas of study are "sub-critical" and are to be disposed of.

The subsequent consultation process is frequently highly weighted in favour of management: King's is in a process of consultation, but there is only one set of fully worked-out proposals to discuss. They may be amended, but there is little practical chance of moving to another model entirely.

While savings could be made by cuts in administration, and many academics at institutions in the US are taking voluntary pay cuts to minimise redundancies, these options are currently up for discussion at only one place in the UK, the University of Sheffield, where managers have compiled a list of 13 money-saving options including offering staff sabbaticals and shorter working weeks.

The use of high-handed management techniques drives a coach and horses through the very idea of academic freedom. Merely knowing that they could be targeted by a management that does not really have to explain itself will be enough to stop all but the most reckless from speaking out or straying too far from the prescribed area of research. Such a state of affairs will have, in the long term, several effects, none of them good.

For the most part, academics are not primarily motivated by the pursuit of wealth; most could have earned very much more had they decided to take a different career path. More important to them are the desire to do research and the pleasure of teaching, the freedom to follow ideas and the collegiality that universities once provided.

The status of individual institutions depends heavily on reputation, which has a material impact on the ability to attract grants, high-ranking researchers and the best graduate students. The methods being adopted by places such as King's and Sussex have destroyed much of this at a stroke.

If these methods become general, anyone who values his or her own judgement will think seriously about the wisdom of going into academia; if they are going to be subject to such arbitrariness - where even having a record of excellence is no defence, as is the case at both King's and Sussex - they may conclude that it would be better to work in the private sector and be paid properly.

The willingness of academics to come to Britain from abroad will also wither - and it is noticeable that, of those named for possible removal at King's, the most prominent are foreigners or are people who returned from abroad to take up their posts. Academics talk, and nowadays news travels fast and far: the international protests about King's have damaged its reputation to the point that it is now cited in influential and mainstream magazines in the US as an example of the "disgrace" of British universities.

While universities often stress the importance of matching international norms for recruiting administrators, they seem to overlook the importance of such factors for attracting the best academics. But the market for such people is very much more transparent and liquid than that for university administrators. It is also very much more international: the best academics go to the institutions and countries that offer the most favourable conditions for doing their work, and there are more of these every year. With the universalisation of English (except among administrators who produce strategy papers and policy documents, which are written in a bizarre corporate pidgin) and the increasing importance of universities in China and East Asia, this competition will become ever greater.

But British universities in future will not be able to offer competing salaries; government policy combined with the decline of the pound makes that inevitable. They will not be able to offer attractive and collegial working conditions if their management continues the policy of dividing and cowing their faculties to make them more biddable. They will not be able to promise the vital freedom to research, because laying down what areas are, and are not, acceptable to management undermines that completely. Finally they will not be able to offer job security, as it is now clear that any assurances on this are meaningless.

And unless King's dramatically changes course, it will not even be able to offer prestige or reputation; one of the notable aspects of the protest letters on the internet, signed by hundreds of international scholars, is not the anger - that flares up and fades quickly - but the dripping contempt. That will last very much longer.

The best business practice understands that, ultimately, management must be by consent, not coercion. That is especially the case when dealing with a high-level workforce that is as well educated as their management.

It is why hedge funds, many specialist consultancies and companies in the high-tech sector have in general moved away from the hierarchical methods developed for manufacturing to control large numbers of frequently poorly educated employees.

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The administrators of British universities, however, persist in using methods that are both inappropriate and outdated. The result at King's has been a public relations disaster. If other universities take the same road, then Britain will eventually get only the world's leftovers, with all the consequences for its reputation, and for the "knowledge economy" it hopes to build, that this will entail.