Universities are in an unenviable position. Despite having no shareholders, like any company they must produce annual reports, and they must also comply with some of the rules and accounting procedures that govern private enterprise or charities.

However, because they receive public funding, they are also subject to many of the various regulations that govern public-sector bodies, such as those for freedom of information. It therefore came as no surprise to hear recently that two vice-chancellors were seriously considering giving up the Treasury cash that comes with so many strings attached it looks more like a macram¨¦ straitjacket.

Now, with the annual pay round, the issue is becoming more convoluted than ever. The government views universities as private when it wants them to compete with one another, but also seeks to constrain that competitiveness by trying to influence how much of their money they should spend on paying staff. David Willetts, the universities and science minister, has criticised universities for spending too much of the extra income they obtained from the last rise in tuition fees on wage increases for staff.

No doubt there are fears of a recurrence with the move to ?9,000 maximum fees, and government pressure, it seems, is again being applied. Mike Robinson, national education officer for the union Unite, says the government has made "threats to vice-chancellors and senior administrators at various seminars and utterances on the subject of pay".

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Recent national pay offers have been so low, however, that some universities are considering pulling out of national bargaining and striking their own local pay deals. They are worried that their salaries will become uncompetitive in the global recruitment market. The national offer from the Universities and Colleges Employers Association for the next academic year is a measly ?150 (even for staff on the very bottom of the pay spine, that is only about 1.1 per cent). Ucea says this was formulated in a climate in which a number of institutions face considerable financial uncertainty and is in line with its mandate from universities. Two institutions outside national bargaining are already moving in different directions. Imperial College London has offered staff a better deal: ?500 or a 2 per cent rise (whichever is higher) for next year. While at London South Bank University, staff have still to see the 0.4 per cent for this year or the 0.5 per cent for last year, and University and College Union members held a one-day strike over the vice-chancellor's refusal to re-enter national bargaining.

One of the institutions looking to join them and pull out of national bargaining is the University of Exeter. David Allen, its registrar and deputy chief executive, has pointed out that there will, in future, be two types of universities: the AABs and the ?7,500 ones. He describes the current arrangements as "stuck in the 1970s". That's hard to argue with and it is inconceivable that things can continue as they are. The wealthier universities will not want to be held back from offering higher salaries in a highly competitive global marketplace, while financially weaker institutions will not want to be bound by an agreement they might not be able to afford.

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Like it or not, a market in higher education also means a market in staff salaries. National pay bargaining has had its day.

ann.mroz@tsleducation.com.