Is there anyone out there who wants this degree?

Some higher education institutions struggle to fill their places. So where will the students come from for the new foundation degree? And will it offer anything new?

The mandarins must be rueing the day Tony Blair made his big promise about getting 50 per cent of young adults into higher education. How on earth do you do it? And, more to the point, how do you pay for it?

In his Greenwich speech, the Secretary of State for Education, David Blunkett, came up with an answer to the first question: foundation degrees. These will be new vocational qualifications lasting two years and enabling students to acquire a full Bachelor's degree if they stay on or return for a final, third year.

"It's just what's needed and I am strongly in support of it," says Ruth Silver, the principal of Lewisham College in south London. Not all the experts, however, share her enthusiasm, particularly now that they have seen the consultative document, which is short on detail.

Baroness Perry, the principal of Lucy Cavendish College, Cambridge, believes it's a rotten idea. "It's ill thought out," she says. "I think it devalues the three- and four-year vocational degrees. I don't know where this fits in. And it's another qualification for employers to get their heads round."

The hope is that the reform will lift such vocational qualifications out of the ghetto. The idea is that students will flock to sign up because they will receive a piece of paper with the word "degree" on it. A degree connotes class. It opens doors to jobs and it makes all that swotting worthwhile.

But commentators are asking whether young people will sign up for the new qualification. The Prime Minister's commitment is for another 500,000 in higher education. Where will those budding students come from? Higher education institutions, particularly the former polytechnics and colleges of higher education, are struggling to fill their places. But they find they can't. The problem with higher education is one of demand, not supply.

The experts are also asking what the degrees will look like. "The thinking behind the new qualification is still not clear," says Roger Brown, the director of Southampton Institute. "It is not obvious that it offers anything that the Higher National Diploma (HND) does not. We want to see what the demand for this qualification is."

There is also a concern about quality. In his annual report, John Randall, the chief executive of the Quality Assurance Agency (QAA), drew attention to failings in higher education programmes in further education colleges. The expectation is the two-year degrees will be delivered largely in further education. But the QAA has found proportionately more departments in further education to be lacking compared to those in universities.

There have been a series of attempts over the years to launch a two-year sub-degree as a stepping stone to an honours degree. Most have foundered and the HND suffers from not being a degree.

What evidence is there that the new qualification will be any more successful? Critics wonder at whom the new degree is aimed - people who currently do HNDs, who fail A-levels or achieve only one A-level or do badly at A- levels? And will employers give it the thumbs up?

"It needs to contain the best of what's currently available to make it worthwhile," says Judith Norrington, of the Association of Colleges. "Unless employers think it's worthwhile, it won't be taken up."

Tom Wilson, the head of the universities department at the lecturers' union NATFHE (the National Association of Teachaers in Higher and Further Education), is in favour of foundation degrees but worries they will be provided on the cheap. The average cost of education in further education is lower than in higher education. "These students need more unit funding, not less, because they need special help, which your conventional degree student does not," he says. "There's a big danger the Government may be going to have 50 per cent expansion on the cheap."

Professor Ivor Crewe, the Vice-chancellor of Essex University and chairman of the working group which is designing the foundation degree, says it will not be aimed at any one narrowly defined group. "It's almost certainly not going to be confined to part-time students," he explains. "It's not going to be confined to school or college leavers or mature students. It will be distinctive because it will offer vocationally relevant programmes that will lead to employment. In some cases, it will be for people already in employment, who want to make further progress."

According to Professor Crewe, the design group will not be prescriptive about entry qualifications for the new courses. That means that applicants will be able to sign up without formal qualifications and will, for example, be able to gain accreditation for skills learnt at work.

The group is acutely aware of the problem of demand, he adds. "The foundation degree will have to be made sufficiently distinctive from the honours degree, and sufficiently attractive to prospective students to bring in the kind of numbers the Government wants," he says. And that means everything from the marketing of courses to the way they're funded.

Neither is Professor Crewe fazed by concern that the new degrees will be higher education on the cheap, provided essentially by further education colleges which don't come with a quality seal of approval. First, he says that not all the new foundation degrees will be taught in further education colleges.

Anyway, he adds: "The vast majority of higher education courses in further education have been found perfectly satisfactory by the QAA."

The key to whether the new degrees take off could be funding. At present there is a question mark over whether young people who avoid three-year degrees will be prepared to pay tuition fees on the scale charged in higher education. This autumn, charges for degree courses will be £1,050. Is it realistic to expect foundation degree candidates - the Government thinks they will be bright, working-class young people - to forfeit jobs in today's buoyant economy for two years of hard slog and financial pain?

Some experts think not. One is on the committee deciding the shape of the new degree, Professor David Robertson, of Liverpool John Moores University. In fact, Professor Robertson is chairing the sub-group which is doing the work. Observers are therefore expecting ministers to come under strong pressure to introduce a different funding regime for the foundation degree. If students on the new qualification were to be given the first year's tuition free, and the second year at a discount, they might look at it with new eyes.

But there is another reason why the experts are expecting a revolution in the financing of foundation degrees - and, by extension, conventional three-year degrees. And that is that the Treasury believes an expansion of higher education on the scale of the Prime Minister's 50 per cent target is not on. It would simply be too great a burden on the taxpayer.

At present one-third of young people enrol in higher education. Pushing that up to one-half would be too expensive for the Exchequer, it is believed. Although home students contribute to tuition fees, they don't pay anything like the real cost of their degrees. Most of the money for higher education comes from the Government.

Therefore discussions are taking place among Treasury mandarins, according to informed sources, about charging all students a big supplement for the third year of their degree. Fees for the first two years would have to be kept low to entice the blue-collar high-fliers into higher education and meet Mr Blair's promise. But charges could justifiably be loaded onto the third year. And funds garnered could thereby be used to finance the expansion.

"In effect, the Government would only offer publicly funded higher education for two years and the bulk of what they collect from charging the full cost of the third year would go on the vocational two-year qualification," says Roger Brown, of Southampton Institute.

"If the foundation degree students wanted to move on to a Bachelor's degree, they would have to dig into their pockets, take out a loan and do what three-year degree students do now. That is the agenda."

It is debatable, however, whether another major reform to student financing is politically acceptable, certainly in the short term. But the Government's hand has been strengthened by pressure from the Russell Group of top research universities, which is investigating élite institutions that charge more for their degrees.

Certainly, experts in higher education finance believe the Treasury must have expressed alarm about an expansion of higher education to 50 per cent. "It must be the case that the Treasury is edgy about the fiscal cost of such expansion," says Dr Nicholas Barr, senior lecturer at the London School of Economics.