Scottish warning on top-up fees

Speaking at Aberdeen University, Mrs Liddell warned against treating students as "cash cows".

It is likely to put the cabinet minister at loggerheads with the prime minister, but Downing Street has played down talk of a rift and said there would be a discussion within government.

Her address came as thousands of students across the UK prepared to converge on London to demonstrate against student debt and any increase in fees.

In a keynote speech Mrs Liddell said: "Higher education institutions have a voracious appetite for cash, that is inevitable as they operate in one of the most competitive global markets.

"But they have great riches too, in ideas and inventions.

"Grasping the nettle and recognising that they are also big businesses is the way to give them the extra cash they need."

Mrs Liddell told her audience the state was an essential partner in higher education.

She said: "The taxpayer will always be the major source of funding, but we must be cautious about always seeing the undergraduate as the cash cow to make the government's money go further."

Aberdeen University has set itself a target of raising £150m by the end of the decade.

It has already exceeded the 2002 target of £40m.

In Scotland, an inquiry into student finance led by lawyer Andrew Cubie recommended the abolition of up-front tuition fees.

Two years ago, under pressure from the Liberal Democrats, the coalition Scottish Executive, agreed to set up the Student Awards Agency for Scotland which provides financial support for students.

All eligible Scottish students are entitled to free tuition (£1,100 for 2002/03).

John Knox

Graduates have to contribute £2,000 towards grants for poorer students once they are earning £10,000 a year or more.

During her speech in Aberdeen, the Scottish secretary spoke of the long tradition of higher education north of the border.

Mrs Liddell said: "Here in Scotland, where education has had a prized place in our culture since John Knox pledged a school in every community, we have always believed that prince or pauper, each must have the same opportunity.

"In leading the way by recognising that the university too can be innovative in fundraising, Aberdeen is being true to those values"