Key Points:

The heads of New Zealand's universities say the Government is unfairly doling out money to students and forgetting the universities themselves.

They also want the cap on fees removed so universities can set the cost of courses.

The New Zealand Vice-Chancellors' Committee yesterday called on the National Government to view universities as national "infrastructure" that was in desperate need of investment.

The committee's primary concern was that student financial support had been put ahead of university funding.

Victoria University vice-chancellor Pat Walsh said: "Put simply, the financial interests of students have been put ahead of the universities they attend."

The committee said the OECD average was for 82 per cent of government funding to be devoted to institutions and 18 per cent to student financial support. But in New Zealand 58 per cent went to institutions and 42 per cent to students.

"We believe there is no point in reducing the cost of university study to students if the quality of universities they attend then declines through under-investment," Professor Walsh said.

While in theory this would mean taking money from student's allowances to give to the universities, University of Auckland chancellor Hugh Fletcher said "politically that's not a reality, is it?"

Professor Walsh said its preferred outcome was to get $230 million to $250 million a year from Government to avoid a "zero-sum game scenario of institutions versus students.

The Vice-Chancellors' Committee said if universities were not going to get increased funding, it would need more money from fees - which is prevented for domestic students by the "fees maxima" cap.

It said New Zealand's fees were on average cheaper than in Canada, Australia and the United States.

Education Minister Anne Tolley said National's policy was to retain the fees maxima "so no doubt we'll disappoint them [vice-chancellors] with that". She said there were no great plans to change the proportion of funding to students and to universities either.

"Basically they are looking for more funding and in tough financial times that is going to be difficult to deliver."

Association of University Staff acting general secretary Nanette Cormack said while it had "sympathy" with the vice-chancellors over the underfunding of the sector, it did not support removing the fees cap or any changes that would affect the affordability for students.

The Vice-Chancellors' Committee's "wish-list", released yesterday, also included a plea for increased research funding, with the Marsden Fund doubled over this three-year term.

They also called for a "step change" to get more Maori and Pacific people to university, suggesting enhancing university engagement with lower-decile schools.

Professor Walsh said the compliance costs universities had meeting government funding requirements were "extremely frustrating".

"At the time when the real value of our funding is progressively reducing, we have to spend more and more of that funding to employ staff to report to government on what we're doing with less and less funding.

"All universities would prefer to employ more teachers to teach our students, rather than administrators to fill out forms. No university ever became great because of its reporting to government."

* Hugh Fletcher on:

The fees cap:

"I just think it's a nonsense for the Government to be controlling fees."

How some degrees should cost more than others:

"[Law] students should be paying a hell of a lot more than those doing a history degree."

How some law schools should cost more than others:

"Let the students decide. If they want to go to the lower priced one, they can go to the lower priced one."

On the deferred maintenance at Auckland University's medical school because of underfunding:

"It's Dickensian. It is a complete and utter disgrace."