So the Government has finally recognised that it is going to have to put more money into education. In his speech last week to "Middle England", the Prime Minister emphasised the need to provide support for the sector as a whole. How much support, how it will be distributed, and over what period of time remains to be seen.

The most likely target will be the funding of pay awards. The combination of efficiency gains and the lack of funds to support incremental drift and pay awards means that institutions in further and higher education face cuts of about 25 per cent over the next three years. This will do untold damage and raises serious doubts about the commitment to investment in education and training as a pre-condition for the "knowledge society".

In the meantime, letters have been arriving at institutions outlining the grant for 1995/96. They do not make pretty reading and underline the continuing massive inequality between institutions.

Those with reserves will be able to manage a budget next year without seriously damaging the quality of the programmes they offer. Those of us who do not have such reserves, already have an historically-low funding base, and those with pressing needs for major investment in infrastructure and curriculum will do well to cope.

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At the same time, the National Union of Students' conference was struggling to come to terms with the serious material deprivation which many full-time students now experience. We really do have to face up to the issues of funding student tuition fees and student support and we need to do this across the sector as a whole.

The sector cries out for a period of consolidation. But with the new funding regimen, this will not happen. Instead individual institutions will face more fundamental questions about their current operations.

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At Thames Valley University, for example, we are having to consider yet again the organisation of the academic year. We have launched a debate on whether to move back from our semester system to a three-term academic year, or whether to move to a European "semester system", where the gaps for Christmas and Easter are kept to an absolute minimum. We are looking again at the number and range of modules which students take. One of the key issues is how far we can continue to thin-slice the cuts which are imposed.

Perhaps it is now time for us to look again at a more fundamental review of the nature and organisation of our programmes, the breadth versus the depth of qualifications and subjects we offer, and to think through ways in which we can make the investments in teaching and learning which we all need.

The financial situation facing many universities will be exacerbated by the decisions taken to increase access to private financing for building works. While this has many attractions as a way of raising much needed revenue and much needed finances for campus refurbishment and redevelopment, the repayment of such loans will bear hard on institutions, and will intensify the pressure on the revenue budgets.

Of course, if the Government was to change its policy on consolidation of full-time we would face a very different scenario. The pressure for institutions to be able to meet the demands of the market should continue to be made loud and clear.

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Mike Fitzgerald is vice chancellor of Thames Valley University.