Question: In 1997 Labour said their first priority was education. How did universities fare?

Baroness Warwick: Universities were delighted that at last government was placing education at the top of the agenda. Having said that we saw that schools were the first to benefit. We've been pressing for higher education to be higher on the agenda. The government has stopped the years of cuts. For that, we were immensely grateful. Indeed, we've actually seen in the last year a small increase in funding. So things are going in the right direction, but with a lot more to do.

The review of funding which we commissioned showed that in order to be able to deliver the very large agenda the government expects of universities, we need at least another £900 million per annum. So that's the challenge for the new government - to be able to provide at least £900 million extra per annum to ensure that universities can deliver on expectations.

Question: Were you disappointed by the main political parties' commitment to higher education in the last parliament?

Baroness Warwick: They've now all said they're committed to higher education. And indeed there's no doubt that higher education is now much higher up the political agenda. I think it's the first time we've seen statements and commitments on higher education included in every single manifesto. So that raises the profile, that means that the parties are considering the interests of higher education - we're pleased about that. We now expect to see some resources put behind that commitment.

Question: Labour have committed themselves to getting half of all under thirties into higher education. When do you think this target could be reached?

Baroness Warwick: The government's target is 2010.

Question: And do you think this is a realistic target?

Baroness Warwick: We're talking about reaching out to young people who by the age of thirteen or fourteen have already thought that education and higher education is not for them, it's a world away. So we've got to develop strategies that enable us to attract and interest potential students who have already been put off education altogether.

Question: How do you attract them?

Baroness Warwick: You have to have long-term strategies. You have to have excellent partnerships with schools. We already have young students in universities going out as ambassadors to schools. Universities are establishing summer schools in inner cities so youngsters can get a taste of what it's like to be on a university campus. We're talking to head teachers - what the government's doing to raise standards and expectations in schools is important. In addition, we're talking to businesses about the kind of employees that they need and working with them to try to get young people to think about taking professional qualifications. So a whole range of initiatives, but they are long term.

Question: Do you think there's almost an inverted snobbery towards higher education by some people. That's not for me that's a middle class luxury?

Baroness Warwick: I think it's much more a problem of aspiration. They don't believe that they can aspire to higher education: it's beyond them; it's something that isn't for them. That may be compounded by peer group pressure. After all if you're going to stick your head above the parapet amongst your group and the rest aren't going to follow you or aren't going to be with you, then there's probably a lot of pressure on you that may affect - even if you get to university - that may well affect whether you stay at university. There is a problem in some instances of retention. So we have to have strategies not just to attract students into universities, but to keep them there. To find ways of ensuring that they get the best out of their studies and that they're not disadvantaged by lack of funds to support themselves.

Question: All the parties are talking about attracting higher numbers and expansion. Do you think they've thought enough about this retention issue? Baroness Warwick: I don't think they realise the size of the problem. It's a culture change that I think is needed in schools, in peer groups, in local communities. We have to get out to those local communities to try to persuade parents and kids themselves that this is something that they can aspire to.

Question: You've talked about there being a shortfall and there needs to be £900 million per annum to meet this shortfall. Are any of the parties anywhere near your needs on this issue of funding, on this financial shortfall?

Baroness Warwick: No party has yet made a commitment to fund higher education to the level that's needed. On the other hand, all parties I think have now recognised not only the contribution that universities can make to social inclusion, to drawing in those who are excluded, but also to competitiveness, to the nation's economy, to the regional economies. Surely, these are convincing arguments for increased public investment.

Question: The tourism industry say that every pound put into tourism generates a higher return to the economy - do you have similar evidence to suggest that an increase in funding for higher education generates a high return for the national economy?

Baroness Warwick: That's an interesting thought. What we do know is that the average graduate earns by their mid-thirties 50 per cent more than those who leave school with A-levels or A-level equivalents. So in terms of individual return it's clearly of huge benefit. In terms of 'bang for your buck', I don't think we have any hard evidence, other than to say that employers increasingly now want graduates. They value what graduates bring, they value the spread of talents and skills that graduates bring. So there's no doubt that as Britain has itself become more competitive, the role of graduates and therefore the role of higher education has generated a higher return.

Question: What are the funding options for universities?

Baroness Warwick: The final report of our funding options review group identified four options to fill the funding gap it identified: increased public funding; market fees; graduate income contingent contributions; and institutional endowment.

Question: What about a graduate tax?

Baroness Warwick: If, by that, you mean an open ended premium on a graduate's income tax, then no - we would not support such a scheme. But one of the options, graduate income contingent contributions, would see graduates making contributions to the costs of their university education after rather than before their time at university.

Question: All the main political parties have ruled out top-up fees. So that basically is off the agenda now, isn't it?

Baroness Warwick: It's obviously a matter for government how they fund universities. We've made clear that in order to deliver the very diverse range of demands the government's now put on universities, we need at least an extra £900 million a year. How the government finds that money, it seems to me, is a matter for them. But I don't think we can rule out the possibility of students paying more. The important thing is that whatever system is adopted, whatever level of student contribution, students are not deterred from coming into higher education.

Question: What would you think would be a fairer option - a fee that they pay as they come in, or a fee that is paid when they graduate?

Baroness Warwick: There are so many different variations on this. I would, I think, stick to the criterion that whatever funding method is adopted, we need to be quite sure that students are not deterred from applying and remaining in higher education. So I would like to see a method that ensured that.

Question: The NUS argues that tuition fees and talk of top-up fees hamper attempts to widen the social inclusion of higher education. Would you go along with that?

Baroness Warwick: I would be very worried if that were the case. At the moment there is no hard evidence of that. But it's because we are concerned about it that we've commissioned the study I mentioned earlier to look at the whole question of student approach to debt; what happens to students whilst they're in university; and whether or not they or their friends or colleagues are deterred from coming into university. We expect that study to report next year.

Question: At the moment they say that the average student debt is around £12,000 at the end of it. Do you think that's a manageable debt for a 21-year-old or a 22-year-old or a mature student who has graduated to deal with?

Baroness Warwick: I'm glad to have the chance to answer this question, because it gives me the opportunity to straighten out some of the confusion over this subject. There are two distinct and separate issues here-tuition fees, and living costs.

Firstly, let's look at tuition fees. It's not widely realised that only a minority of students pay the full £1,025 a year expected for each student. From September, a full 50 per cent of students will be exempt from paying any fees. At current levels even those who do pay full fees are only covering on average 25 per cent of the true costs of their courses-the rest comes from the tax-payer. Universities UK members believe that students, or their families, who can afford to, should make a contribution towards the costs of their tuition. We believe this is fair - graduates earn considerably more than non-graduates in their lifetime.

But on the subject of student debt, yes, I would say that vice-chancellors are becoming increasingly concerned about it. They are especially worried when it leads to students dropping out or, in a few cases, excluding students.

These debts are not primarily a result of tuition fees, 97 per cent of which were repaid last year. They are being incurred to pay the living costs associated with three years of study and it can amount of sums like £12,000. Student loans are available, subsidised by the government, and they aren't due for repayment until students are earning after they graduate. Still, it would appear that increasing numbers of students are working longer hours in paid jobs and worrying about their debts. As well as that, there may well be groups of people who are being put off because of the likely costs and their aversion to debt. I'm thinking here of those from the poorest backgrounds, who are the focus of government and university targets for expanding access to higher education.

Question: What sort of things could they do, do you think?

Baroness Warwick: Well, from the universities side, Universities UK has commissioned a group of leading researchers to talk to students and young people about this issue. We are keen to get some hard evidence together so that we can look for new solutions.

Meanwhile there are already a substantial variety of funds available to those wanting to go into higher education and any student facing difficulties in managing financially should seek help from their university - there are lots of people who can help, both in student services and in their student unions.

In the longer term, I would like to see the new government reviewing the plethora of schemes like the opportunity bursaries and other student support schemes. We need to make sure that the new types of students we are seeking to reach - the most disadvantaged groups in society - can be sustained financially as well as academically through university.

Question: Just talking about Scotland. Do you think the issue of devolution has thrown up different arrangements for students, do you think that's caused problems?

Baroness Warwick: I don't think it's caused problems. I think it's inevitable that Scotland will take different decisions. That's after all been part of the purpose of devolution. What we would want to ensure, and our colleagues in Scotland want to ensure, is that students have the same opportunity of access, that nothing in either country discourages students from disadvantaged backgrounds. Scotland is very much part of the UK higher education system and all of us want to make sure it remains so.

Question: What kind of role do you see the private sector taking in universities in the coming years? Do you see that as an expanding role?

Baroness Warwick: Yes I do. I think the universities have been very effective in drawing in the private sector; not just private sector resources but the interest of those in the private sector to make a contribution to the development of more effective courses, for example. We have many, many partnerships with people in the private sector: with companies; with individuals. There's much more interchange these days between managers and leaders in companies and heads of department or researchers in higher education. The whole role of universities in innovation has been a very positive development. And I think there's much greater partnership now, much greater awareness of the importance of partnership between companies and higher education, so I see a growing role there.

Question: Is there a problem that the quality of higher education could suffer at the expense of these grand expansionist aims?

Baroness Warwick: There's been no evidence of that so far. And if you think about the way in which universities have expanded in the last fifteen years, it's been dramatic. I don't think people quite understand the changes that have taken place in higher education. So I don't think that there's any indication that standards have fallen. Indeed we now have a mechanism through the Quality Assurance Agency demonstrating the very high quality of university teaching, despite the years of cut back. Universities have been immensely productive. I think their staff have made a marvellous contribution in ensuring that they deliver high quality education.

Question: Talking of the staff, has teaching in higher education become an increasingly attractive career option over the last parliament?

Baroness Warwick: I think teaching in higher education is now very pressurised. We've seen a huge increase in the number of students; a huge increase in the number of courses; the introduction of modular courses; semesters; changes in structures; much more responsiveness in higher education to the demands of employers, for example. So all of this has demanded a lot of flexibility from staff.

Question: And have they received the rewards in return?

Baroness Warwick: I don't think they have. The levels of pay in universities are very depressed. We've seen levels of pay in teaching elsewhere and indeed in other professions, increase much more speedily than in higher education. And it's one of the areas where we in our Charter for Higher Education say that government must act. We need additional resources to recruit and retain staff. We need additional resources in order to ensure that we fulfil statutory obligations on equal opportunities or disability. We need additional resources to provide incentives to university staff. And very important, we need to change our structures in order to be more flexible. That requires resourcing. Any employer will tell you that you can't restructure pay scales that have been around for years and years without additional resources. So yes, new resources are needed. I think they are well deserved by university staff.

Question: What's at stake if we fail to have this restructure; we fail to have these new pay levels for teaching staff?

Baroness Warwick: Universities in the UK have a world-class reputation. There's no doubt though that other countries have begun to recognise the value of their higher education systems and are investing heavily in them. If we don't do the same: if we don't ensure that we're producing top class graduates; that we provide them with state of the art infrastructure, equipment, teaching methods, IT; if we can't ensure that we stay at the top of the research tree; that we are producing the innovations that are recognised internationally then I think not only will the country suffer but our competitiveness will suffer as well.

Question: And the brain drain - a realistic scenario?

Baroness Warwick: Academics in universities have always welcomed interchange between different countries. What would concern me enormously is if our status on the world scene changes so that we are no longer perceived as world-class. Then we won't be attracting academics on equal terms. If the new government acts, this won't happen.