Universities should not fear increased competition from further education colleges gaining the power to award foundation degrees because "there is plenty enough business to go round", the Higher Education Minister said this week.

As a report confirmed that the Government was on track to meet its target of 100,000 foundation degree students by 2010, Bill Rammell said the figures proved that foundation degrees were "a success story".

In an interview with Times Higher Education, the minister also responded to concerns about the general failure of employers to pay the fees of their workers who pursue foundation degrees. He admitted that it was difficult to get employers to commit to funding, but he argued that there was no alternative.

The report on foundation degrees produced by the Higher Education Funding Council for England says: "The evidence suggests that students, even part-time students, do not get their tuition fees paid by their employers or (receive) any other financial support.

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"This underlines the challenge of the employer-engagement programmes, to develop provision such that employers will be willing to make a contribution significantly greater than the fee."

On the Government's drive to get employers to contribute more, Mr Rammell said: "You've already got significantly more public funding - there is a limit to how much public funding you can deliver beyond that. There isn't a third way out there."

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On the reaction to the Further Education Bill, which allows further education colleges to seek foundation-degree awarding powers and which came into force this month, Mr Rammell said some universities had been guilty of self-interest.

"I think some of the comments that have been made (by universities) have been with a view to protecting their own organisational interests, which isn't necessarily the same thing as the consumer or business interest," he said.

Only "very high-quality" colleges would gain the powers, and there would be no threat to the reputation of foundation degrees, he insisted.

"I think it will provide a degree of competition - and I don't see that as a bad thing - but I also think there is plenty enough business to go round," Mr Rammell said.

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"If we were talking about a static market, I could understand universities defending their patch. We're not. We're talking about a further expansion, up to 100,000, and ... we're going significantly beyond it in the early part of the next decade."

The Hefce report says 76 per cent of foundation-degree students were satisfied with course quality, but only 56 per cent agreed that their course was well organised and run smoothly.

About half of foundation-degree students gain a higher education qualification within the expected time. But of those taking part-time two-year programmes, one in three or fewer qualify in the expected time frame.

Although Mr Rammell conceded that "teething problems" were inevitable, he argued that foundation degrees were helping widen access to university and meet employers' skills needs.

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He denied accusations that the launch of a Tesco foundation degree in retail in April was a sign of dumbing down.

"I don't think in any way, shape or form it is dumbing down, and I think most members of the public are with us on this," he said.

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"That's absolutely the kind of initiative you want, where you've got higher education providers working with some of the major retailers to develop a bespoke higher education qualification that will help drive the skills and abilities of their employees forward."

rebecca.attwood@tsleducation.com.