The reason there isn't enough money in higher education is the change of sticker leading to an increase in the number of students as a result. The need for more funding is because once something that used to be a polytechnic has been called a university, and it seems to be politicaly unacceptable to descriminate between universities and give certain universities more money for undergraduate education, so places like Russel Group uni's tend to make a loss on every undergrad they teach.
It seems to me (and this is just so you know where I'm comming from on this) that
the 50% target is a political aim in itself, and the rest of the higher edcuation policy follows from this. The belief seems to be something along the lines of "degrees are better than vocational qualifications or, indeed, anyting else, and anyone without a degree is an idiot. Because, in the past, graduates got paid more than non-graduates, and employers chose to offer jobs to graduates than non-gradautes, the degree is an example of the class system perpetuating itself. Because its ridiculous to sugest that 15%-30% of the country are clever and the rest are idiots, it's obvious that anyone can do a degree.
On top of that, if there are more graduates, there will be more people qualified to do "highly paid graduate" jobs, so there will obviosuly be a huge benefit as everyone with a degree will now be able to get a highly paid graduate job.
Therefore it is imperitive to get as many people with a degree as possible. Lets start with a target of 50%"
Converting the remaining vocational qualifications into foundation degrees is to find a way of meeting the target in the typical Blairite style: if we can't meet it, rename things untill we can clai we have met it.
This of couse, means a huge increase in funding is needed to expand the system by about 25%-30%. But of course, this can't be funded out of increased taxes, so instead they the aim is to try and hive off the universities into mass degree factories (where it is hoped there will be savings in efficiencies) and research institutions.
This is expressed in the idea of encouraging "teaching universities" and the support for "mergers across the sector"
Then, by allowing univeristies to charge differential top up fees, research universities will charge more, teaching universities less, and the funding problem will go away because the students will pay it instead.
However, the result is these big traching unviersities get funding by the student and have to meet their target number of students signed up each year (set by HEFCE), so they offer silly, easy and attractive course in surfing and so forth to get their quota in. Combined with the current guff put about by the Government by Hodge and her succesors "anyone with a degree earns £400,000 more than non degree holders", a degree is "investment", the first lot of students will sign up for these courses. Obviously, the whole thing is unsustainable. Employers are not going to find every qualificaton valuable, and in the end it's the employer that decides how valuable a qualification is, not the government or the voter and certainly not people talking on the internet. People are going to realise pretty quickly when the scare stories continue to hit the paper (as they are already doing) about graduates lumbered with five figure debt but with no increased employability and these degree factories will either have to close down or start to make their qualification more attractive. In the end, we will be back where we started in the 80's with polytechnics and universities, except we will call them all "universities", we will call all post A-Level qualifications "degrees", and the cost of education will have been passed on directly to those undertaking it, which will have access issues. On top of that there will be a bunch of people with large debts and poor qualifications.