With health policy set to dominate the chancellor's Budget, university vice chancellors have called for increased investment in the higher education sector.

Roderick Floud, Universities UK chief executive, has written to education secretary Estelle Morris claiming that university budgets would have to increase for the government to meet its expansion target for 50 per cent of young people to attend university by 2010.

"You are already aware of our bid for extra resource in the review and will no doubt be fighting hard for more resources for higher education in your negotiations with the Treasury," he writes.

"But if the new funds we have identified are not made available, universities will not be in a position to achieve some of the government's key goals for the sector."

His call has been backed by Barry Sheerman, Labour MP for Huddersfield and chairman of the education and skills select committee. He said that education policy should be of higher priority to the government than health.

"The benefits are provable and apparent. I believe that an extra pound invested in higher education is better value than an extra pound invested in health. One of the real problems in our country is that we don't take higher education seriously enough," he said.

"This government plans to increase funding to higher education in England by £1.7 billion in the six years to 2003/04, that's 37 per cent in cash or 18 per cent in real terms," a spokesman for the department for education and skills said.

"In 2001/02, the amount of publicly planned funding per full time equivalent student is set to rise by 0.7 per cent in real terms - the first real terms increase in over a decade. In response to the outcome of the Research Assessment Exercise, the government added £30 million to the amount of funding distributed by Higher Education Funding Council for England for research. This is a clear and substantial demonstration of our commitment to higher education."

Shadow education secretary Damian Green said the letter "confirms that universities are being put under intolerable pressure from the Government."

"Quite apart from the funding complaints the universities are making today, they are having their admissions policies distorted by Ministers demanding they take certain pupils with lower grades, and their academic freedom threatened by the Government's attempt to control the flow of academic information with its Export Controls Bill," he said.

"No wonder morale in the universities is at its lower ebb ever."