Universities have reacted with disappointment after the Government department that dealt with higher education was scrapped and replaced by a "super-ministry" that will focus on business, skills and the economy.

Less than two years after it was set up, the Department for Innovation, Universities and Skills has been merged with the business department to create the Department for Business, Innovation and Skills (BIS), led by Lord Mandelson. The move also brings science and business back into the same department.

The post of Universities Secretary, previously held by John Denham, has gone. He has been made Communities Secretary.

The creation of BIS has been interpreted variously as a snub to the sector, a sign that universities are viewed as "an arm of business", and a decision aimed at building Lord Mandelson's "empire" rather than benefiting higher education.

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Bahram Bekhradnia, director of the Higher Education Policy Institute, described the decision as "very unsettling and disappointing". He said DIUS had not been given time to prove itself.

"The positive is that higher education has a very senior, hard-hitting Cabinet minister speaking for it. I think that shouldn't be underestimated," he said. "However, the negatives just stack up.

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"I don't see it as a particular positive that higher education is closely associated with business. There is no real suggestion, I don't think, that higher education hasn't met the needs of Britain's economy or business in the recent past.

"The real danger is that it should simply be regarded as another instrument of business development, and that its non-economic benefits will be neglected and disregarded."

The University and College Union said it was "very concerned" that higher education was no longer considered important enough to have its own department.

The fact that higher and further education had been "lumped in with business" appeared to be "a clear signal of how the Government views colleges, universities and their main roles in this country", said Sally Hunt, UCU general secretary.

"Education has the power to change people's lives, and if we are serious about the important role it can play in helping us out of the recession, we need experts in education at the helm, not business interests."

Alice Hynes, chief executive of GuildHE, said the change "could risk higher education being lost in a 'skills for yesterday' agenda".

Money down the drain

The FDA, the union for the UK's senior public servants, bemoaned the "vast waste of taxpayers' money" involved in the move. It claimed that DIUS had cost more than ?7 million to set up.

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"This is a case study in the costs and wastefulness of reorganising Whitehall," said David Willetts, Conservative Shadow Minister for Universities and Skills.

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He said that David Cameron, the Conservative Party leader, "did not believe in the super-ministry model" and had asked him to carry on in the Shadow Cabinet.

"It is wrong to see universities as simply an arm of a business department," Mr Willetts added, blaming the move on the "internal politics of the Labour Party".

He said: "It is all to do with rewarding (Lord) Mandelson for backing (Gordon) Brown by increasing his empire. It is very high-handed. It is treating really important institutions as if they were toy soldiers to be played with on the carpet of 10 Downing Street.

"These are institutions with deep roots employing hundreds of thousands of people, educating millions."

Mr Willetts also questioned whether Lord Mandelson would give "tricky issues" such as the fees review the attention they deserved, before adding that DIUS had looked troubled before the reshuffle. "Under Denham it had a lot of problems - the maintenance grant increase, then equivalent or lower-level qualifications ... then the very tough regime for student numbers."

Sir David Watson, professor of higher education management at the Institute of Education, suggested there may be one benefit.

"The silver lining in this cloud is that a Government struggling with national and international economic crises, to say nothing of its own survival, may simply find further tinkering with the higher education system too hard."

Speaking at the Science Museum's 100th birthday celebrations this week, Lord Mandelson was due to say that it was right to bring higher education and science under the same roof as business, "because a new world is emerging, one on the edge of a new Industrial Revolution that is driven by new technologies and the ... shift to low carbon".

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He added that the UK's science base, supported by both basic and applied research, was key to the country's future competitiveness, and said he was committed to "protecting and raising" the science and research budget.

rebecca.attwood@tsleducation.com.