Chris Patten warned Oxford University faced tough challenges as he was sworn in as the 294th Chancellor of the university on June 25.

Oxford University's Encaenia procession in the Bodleian Library quad

The EU Commissioner and last governor of Hong Kong sounded a sober note during a colourful ceremony in which he bestowed an honorary degree on the opera singer Placido Domingo.

Mr Patten told people at the Encaenia ceremony at the Sheldonian Theatre in Broad Street that universities were getting more interference from the Government but less money.

He said that Oxford had to be run in a business-like manner to compete with the 'weapons of mass attraction' of more wealthy American universities.

Mr Patten has succeeded the late Lord Jenkins of Hillhead at a time when Oxford faces difficult decisions over funding and top-up fees.

Wearing a black, gold-trimmed gown, with a train carried by a page boy, the former Conservative Party chairman entered the theatre to a fanfare of bugles.

It was a great change from when he first entered Balliol College as an undergraduate -- the first member of his family to pursue higher education.

Watched from the audience by his wife and three daughters, Mr Patten received the university's statutes, keys and seal from vice-chancellor Sir Colin Lucas and gave a short speech in Latin.

He then switched to his native tongue and said Oxford was vulnerable to natural selection in a culture that found it difficult to distinguish between value and price.

He added that the challenges facing Oxford were even greater than in 1987, when Lord Jenkins, who died in January, was inaugurated.

He said: "This university, much the best known in the world, has no God-given right, immune to accountability or criticism, to be revered as a national treasure and an asset beyond quantification."

Mr Patten, who will hold the unpaid but prestigious post for life, said universities had suffered from two decades of "public parsimony" and Government red-tape.

He said that Britain had become "institutionally illiberal" and was "much worse governed as a result".