The government is considering cutting the number of students going to university as part of a radical shake-up of further and higher education ordered by the new business secretary Vince Cable.
With university spending one of the casualties of spending cuts, Cable has made clear that he plans to launch a national debate over the next few weeks to investigate whether the expansion of undergraduate places has come at the expense of quality.
Last week he used his first keynote speech to outline plans to boost the role of further education and vocational training as part of the coalition government's growth strategy. Now he has let it be known that he believes it is time to abandon the previous government's target-based approach to university numbers.
One source close to Cable said: "The next big item is numbers. There needs to be a big national debate between excellence and quality on the one hand and bums on seats on the other hand. Packing more and more students in is not necessarily good value for money."
Cable is braced for strong opposition to any reduction in places. The coalition has already faced anger about its decision to fund 10,000 fewer university places this autumn than there would have been under Labour. Students and lecturers have already expressed alarm at the notion of actual cuts.
Aaron Porter, president of the National Union of Students, warned such a move would "jeopardise the fragile economic recovery and place us at risk of returning to a higher education system accessible only to a liberal elite". He pointed out that France and the US were investing in their universities in response to demand for high-level skills.
Others agreed, arguing Britain should follow the example of its competitors. Sally Hunt, general secretary of the University and College Union, said she would welcome a debate on the future of universities, but said Britain could not be a major player in the "global knowledge economy" if it cuts funding or limits student participation, adding: "Vince Cable gave a very moving speech about how education transformed his mother's life, and I cannot see how denying thousands the chance to fulfil their potential at university and increasing the strain on the benefits system would be in this country's interest."
However, it is understood that both coalition parties believe the existing model is no longer sustainable. Tony Blair set a target of putting 50% of young people through university, but Cable is sceptical of the argument that an ever-increasing number of students is intrinsically a good thing.
The government is now contemplating a fundamental overhaul of the system in an attempt to give vocational training the status it enjoys in Germany. Cable believes that the government may secure better value for money by putting money into training and further education and is keen to break down the snobbery that has traditionally elevated a university education above blue-collar training.
Despite contributing more than £700m to the £6.2bn in savings found by the government for the current financial year, Cable made clear last week that he felt further education had been badly neglected by Labour.
The future of universities will be one of three priorities for the business department over the coming months, along with forcing the banks to lend more and adult education.
Dr Wendy Piatt, director general of the Russell Group, which represents Britain's most prestigious universities, said the priority for them was to ensure that the quality of higher education was maintained, rather than expanding numbers, but added: "We would be concerned about any proposals which fail to address the problem of the under-funding of teaching for home students in the UK."