Student support and academic pay would be the main beneficiaries of the alternative budget proposed by the Liberal Democrats this week.

The party's education spokesman, Phil Willis, told The THES : "Higher education is the most important priority we have to resolve. Higher education to us, as a party, is far more than simply how we get more students into university. We have to have a highly qualified workforce, and that's a challenge for the nation. Our higher education system will drive Britain in the new millennium, and a failure to invest in it would be a huge failure to the country.

"In terms of health, the money going in from the spending review is sufficient and the big issue for health is how that money should be spent.

In terms of schools, we have seen significant additional resources going into schools. Higher education is the priority."

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The party has dropped its "penny in the pound" pledge to increase taxation to pay for public services. But it would still introduce a 50 per cent tax on anyone whose gross salary exceeded £100,000. This could raise £4.2 billion by 2005, the end of the government's current spending review period. Between £1.2 billion and £1.6 billion of this has been earmarked for higher education.

The Liberal Democrats have pledged to abolish student tuition fees, which would cost them some £430 million in the coming year, rising to £485 million in 2005. They would also implement the findings of the 1999 Bett report on boosting academic pay. This would cost them between £365 million in the coming year using Bett's calculations, and £770 million based on estimates from the Association of University Teachers.

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The corresponding figures for 2005 are £412 million and £806 million, respectively.

The party has also promised to reintroduce student grants of up to £2,000 that would be repayable after graduation and to allow students who cannot find work during the summer holidays to claim benefits, as happens in Scotland. This would cost a further £288 million for 2003, rising to £305 million in 2005.