When Baroness Blackstone was made minister in charge of further and higher education, there was general approbation from the universities. Here was one of their own landing the top job. Tessa, as she prefers to be called, had been master of Birkbeck College London, so she knew all about the chronic shortage of cash in the colleges and universities, the underpayment of many lecturers, the burgeoning bureaucracy and the hatred of the research assessment exercise.
There was hope she would stand up for higher education and put right what was wrong. Three years on, however, disillusionment reigns. "They have done nothing," says Frank Gould, the Vice-chancellor of the University of East London. "They brought in tuition fees which has put off poorer students, ethnic minorities and mature students from entering higher education.
"And we in the Committee of Vice-Chancellors and Principals made the mistake of swallowing Lord Dearing's thinking that anything was better than the previous government's spending plans."
The Tories had been squeezing the universities by 3 per cent a year. New Labour accepted the Dearing recommendation that the efficiency squeeze on core funding from the Higher Education Funding Council (Hefce) be reduced to 1 per cent. The result is that higher and further education are still feeling the pinch - though less painfully than before 1997.
To be fair to the Government, it has put more money into higher education. But this has been for research and has come from other government departments. The result is that in the past three years there has been an 11 per cent real increase in funding for universities. At the same time, however, student numbers have risen by 14 per cent. So, the cost per student has declined.
That manifests itself in increasingly dilapidated lecture theatres, according to Geoffrey Copland, the Vice-chancellor of the University of Westminster. "The sad thing is they have not really delivered," he said.
Tom Wilson, the head of the universities department at the lecturers' union, the National Association of Teachers in Further and Higher Education, points out that the new money for research has been channelled mainly to the "old" universities belonging to the Russell Group, the top institutions with medical schools. "The other three-quarters of the sector have suffered an even worse cut than 1 per cent a year," he argues. "So, even though it might look as though there has been some slight easing of the situation since the Tories, in fact things are almost as bad as they were."
Not everyone paints such a black picture. Many commentators are in favour of charging tuition fees, and there is support for the e-university and two-year foundation degrees proposed by the Secretary of State for Education, David Blunkett. Professor Tim O'Shea, who succeeded Tessa as master of Birkbeck, says the planning environment for universities is much more predictable than it was. "We don't think we'll wake up one morning and find we've suddenly suffered a 5 per cent cut," he says. "And Labour has been quite good about consultation."
Professor O'Shea believes that Mr Blunkett's Greenwich speech containing the e-university idea and two-year degrees was inspired. "Ten years from now there is a possibility we might turn round and say 'Wasn't that important?'" he thinks.
Other supporters highlight Mr Blunkett's commitment to equal opportunities. The Secretary of State for Education has said he is deeply concerned about the lack of opportunities for women and ethnic minorities in academic life and has told the universities to put their houses in order. "He has acknowledged that fundamental discrimination is scarring the whole system and has got to end," says David Triesman, the general secretary of the Association of University Teachers. "He is putting consistent pressure on everyone to make sure it happens."
Many of the academics who research higher education have thrown their weight behind tuition fees. They believe fees are essential on grounds of equity and that it wasn't fair to have a system where those who didn't go to university had to subsidise those who did. So they approve of what the Government has done. Some wish them to go further.
Professor David Robertson, of Liverpool John Moores University, thinks ministers will have to revisit the fees issue in the second term of a Labour government. "It can't stay as it is and it can't go back to where it was," he says. "You can't have a mass system of higher education, which is what we have now, supported by huge public subsidies. There has to be a shift towards those who can afford to pay more."
Another supporter of "top-up" fees is Professor Gareth Williams, of London's Institute of Education, who believes students at elite universities such as Oxford, Cambridge, UCL and Warwick receive considerable added value. Why shouldn't they pay more? However, he is surprised the Government has accomplished as much as it has. "My own view is that Tessa has done rather well," he says.
The Government is given high marks for its reforms of education and training for 16- to 19-year-olds - and for the extra money it is pumping into broadening the sixth-form curriculum. Dr John Guy, the principal of The Sixth Form College Farnborough, says ministers have done brilliantly. "The education of 16 to 19s in further education had been progressively underfunded year-on-year and no one was listening to our concerns," he explains. "It was hard to maintain standards of provision.
"Next year, this college is receiving an additional £700,000 to deliver Curriculum 2000. That extra cash has come about from the Government recognising that full-time 16 to 19s in college need to have the same level of funding as their counterparts in schools."
Further education is known to be one of Mr Blunkett's passionate concerns. It dovetails with the Government's social inclusion agenda and with its desire to improve the United Kingdom's economic competitiveness. As a nation, we have been good at educating our elite - those who would have run the empire - to the very highest levels. But we have fallen down on intermediate qualifications, giving young people technical skills, compared with, say, the Germans. Adult illiteracy is also a serious problem in the UK.
"David Blunkett has sought to shift the focus of policy on to those areas," says John Brennan, of the Association of Colleges. "It has been a policy priority for him to try to improve the services available to the post-16 learner."
Further and higher education are rarely high on the political agenda, though Professor Ron Barnett, of the Institute of Education, believes that is changing. New Labour is more sensitive to issues of globalisation than the Tories and is also more concerned to ensure the public sector is adhering to standards. The thinking on schools is seeping through into further and higher education. "I think it's very worrying," he says. "Many of us have grave concerns about the tightness of the accountability models that are developing."
The hard truth about higher education is that there are no dead bodies on hospital trolleys. And protesting students tend not to hit the headlines. That is one reason why politicians neglect the universities. Labour has a particularly ambivalent attitude towards higher education. Although its leaders are traditionally products of the best universities, its followers are not.
This tension manifests itself in a number of ways. Professor Alan Smithers, of Liverpool University, says Labour is confused about the purposes of higher education. On the one hand it seeks excellence; on the other, it wants inclusion. Unlike a football academy, which is urged to develop the talents of the highest performers, Labour keeps looking over its shoulder at the postcodes and social class of the people who are recruited.
"You can imagine what would happen if Manchester United was having to worry all the time about the postcodes of its players," he says. "These twin objectives sit uneasily together in higher education."
There is another tension - between the inclusion agenda promoted by the Department for Education and Employment and the wealth-creation priorities of the Department of Trade and Industry. That manifests itself as follows. Over the years the sources of funding for universities have diversified. That trend has accelerated under New Labour. Manchester University, for example, receives £280m a year in income, but only £88m comes from Hefce. Much of the rest comes from the DTI and the Department of Health.
That is because Manchester, as a highly rated research university, receives a big boost for research. But the money which pays for academic salaries, building maintenance and teaching facilities has not been boosted at all. In fact it is being squeezed by 1 per cent a year. "I am delighted at the extra investment universities have received from the DTI and Department of Health," says Martin Harris, who is the Vice-chancellor of Manchester University. "But I am puzzled that core funding which underwrites undergraduate teaching and basic infrastructure is still subject to an annual efficiency gain," he adds.
"One of the consequences is that we're still not able to pay salaries adequate to reward the excellent young men and women in our profession."
Universities don't have much of a problem retaining staff. Where do 50-year-old lecturers go? But they are beginning to have difficulty sometimes recruiting bright young things in subjects such as economics, law and computer science. "There is a big problem of motivation and morale right across the sector," says Roger Brown, the director of Southampton Institute.
Treasury officials and university representatives are deep in discussion about how to inject more money into the universities. The Treasury will not give more cash without strings. What will those strings be?
There is talk of boosting the pay of academics in subjects where there is a shortage, or tying extra money for salaries to whether universities meet targets on equal opportunities. More cash would lift the fog of disappointment hanging over higher education and raise Tessa's popularity rating.