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20 December 2010
Last updated at 06:58 ET
Universities in England face a 6% cut to this year's teaching budget, and are likely to lose a further 16% as the new fees regime comes into force from 2012.
Teaching grants will be cut from £4.9bn to £4.6bn for 2011-2012, ministers said in the annual letter to the Higher Education Funding Council for England.
They project this will then drop to £3.8bn for 2012-13, which would be offset by raised tuition fees.
The government said higher fees could mean 10% more investment by 2014.
Business Secretary Vince Cable and Universities Minister David Willetts said the government faced "extremely challenging public spending constraints".
But Mr Willetts said universities were "well able to handle" the cuts and it was a "very solid cash settlement" for universities.
He said fees income would also rise in 2010-11, by about £100m, off-setting some of the teaching grant cut.
Places freeze In the letter outlining universities' funding allocations for 2011-12, the ministers said the number of student places funded by the government would remain the same, despite rising demand.
An extra 10,000 places created last year will be maintained, but no new ones added.
The ministers pointed out that the new fees regime, under which students could be charged up to £9,000 per year, could mean the government increased its investment in the higher education sector.
This is because it provides loans to students to cover the upfront cost of tuition, which are then paid back after the student graduates.
The letter said this could mean total government investment would rise, in cash terms, from £9bn in 2011 to about £10bn in 2014.
However, ministers said their models assumed average fees of £7,500 per year - despite saying initially that universities would only charge the highest level fees in "exceptional circumstances".
Wider cuts This year's cuts are part of £1bn in savings that the Department for Business, Innovation and Skills has to find under the October 2010 Spending Review, as the government seeks to reduce the national deficit.
By the end of the spending review period, teaching grants are expected to be cut by about 80%.
This will mean teaching grants for all subjects except those deemed strategically important, such as science, technology and maths, will be largely replaced by income from tuition fees.
And over the spending review period, the higher education budget is to be reduced by 40%, or £2.9bn, from £7.1bn to £4.2bn by 2014-15.
In early 2010, the UK's top universities warned of meltdown, after the previous Labour government made plans for £900m worth of cuts over three years.
And cuts to that year's teaching budget of 1.1% sparked a further outcry among lecturers and academics.
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Teaching grants will be cut from £4.9bn to £4.6bn for 2011-2012, ministers said in the annual letter to the Higher Education Funding Council for England.
They project this will then drop to £3.8bn for 2012-13, which would be offset by raised tuition fees.
The government said higher fees could mean 10% more investment by 2014.
Business Secretary Vince Cable and Universities Minister David Willetts said the government faced "extremely challenging public spending constraints".
But Mr Willetts said universities were "well able to handle" the cuts and it was a "very solid cash settlement" for universities.
He said fees income would also rise in 2010-11, by about £100m, off-setting some of the teaching grant cut.
Places freeze In the letter outlining universities' funding allocations for 2011-12, the ministers said the number of student places funded by the government would remain the same, despite rising demand.
An extra 10,000 places created last year will be maintained, but no new ones added.
The ministers pointed out that the new fees regime, under which students could be charged up to £9,000 per year, could mean the government increased its investment in the higher education sector.
This is because it provides loans to students to cover the upfront cost of tuition, which are then paid back after the student graduates.
The letter said this could mean total government investment would rise, in cash terms, from £9bn in 2011 to about £10bn in 2014.
However, ministers said their models assumed average fees of £7,500 per year - despite saying initially that universities would only charge the highest level fees in "exceptional circumstances".
Wider cuts This year's cuts are part of £1bn in savings that the Department for Business, Innovation and Skills has to find under the October 2010 Spending Review, as the government seeks to reduce the national deficit.
By the end of the spending review period, teaching grants are expected to be cut by about 80%.
This will mean teaching grants for all subjects except those deemed strategically important, such as science, technology and maths, will be largely replaced by income from tuition fees.
And over the spending review period, the higher education budget is to be reduced by 40%, or £2.9bn, from £7.1bn to £4.2bn by 2014-15.
In early 2010, the UK's top universities warned of meltdown, after the previous Labour government made plans for £900m worth of cuts over three years.
And cuts to that year's teaching budget of 1.1% sparked a further outcry among lecturers and academics.
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