Universities face a real-term cut in funding of more than 9 per cent next year, although the recurrent grant for teaching and research has largely been protected.
Allocations unveiled on 18 March by the Higher Education Funding Council for England show that higher and further education will receive a total of £7.36 billion for 2010-11.
This is 7.2 per cent less than the total for 2009-10. With inflation calculated at 2 per cent, it amounts to a real-term cut of 9.2 per cent year on year.
However, the situation is not as bad as it may appear, as much of the reduction is explained by the £250 million in capital funding that was brought forward from 2010-11 and given to universities in the previous two years.
Adjusting for this, the total reduction in the grant is 1.6 per cent - or 3.6 per cent when inflation is taken into account.
It is the first time there has been a real-term reduction in Hefce funding since 1996-97, at the end of John Major's term as prime minister of the last Conservative government.
Not every university will get less: of the 130 higher education institutions in England, 62 will see their grants increase in cash terms next year.
But when inflation is factored in, the figure falls to 29, which is a long way short of the 87 that received above-inflation rises in 2009-10.
Some institutions may see their grant cut still further, as Hefce has not yet imposed fines for universities that recruited more students than they were allowed this year.
Sir Alan Langlands, Hefce chief executive, said the funding council's "overall approach has been to maintain quality", with an emphasis on protecting teaching and research.
For higher education, recurrent grants for teaching, research and knowledge exchange activities will rise 0.4 per cent in cash terms compared with this year.
Sir Alan said that Hefce had "maintained our commitment to key policies including widening participation, supporting strategically important and vulnerable subjects, strengthening the research base and promoting interaction with the business community".
The total allocation includes £4.73 billion for teaching, £1.6 billion for research and £150 million for business and community engagement.
After adjusting for the £250 million in capital funding that was brought forward, funding for capital projects will be reduced by a further £135 million - or around 15 per cent.
In addition, special funding to support Hefce policies such as widening participation will fall from £316 million to £294 million - a cut of £22 million.
Winners and losers
In broad terms, the institutions with the largest percentage rises in their total Hefce funding are those that will be given extra teaching cash to cover additional student numbers.
The sector will receive £33 million for 13,400 extra full-time equivalent places.
By contrast, the biggest losers will be the universities that saw their research grants cut following the 2008 research assessment exercise.
Those institutions received "moderation funds" to help them cope with the reductions in 2009-10, so 2010-11 is the first year that the full effects of the RAE will be felt.
The University of Worcester will enjoy the biggest percentage rise in teaching grant, netting an extra 23 per cent. And although Worcester's total research grant will fall 12.6 per cent, the sums involved are relatively small - down from £323,000 to £282,000.
It is therefore the sector's biggest winner in percentage terms, with its total grant up 13.3 per cent on this year.
Other winners include Harper Adams University College, which will see its total allocation increase by 10 per cent, and Canterbury Christ Church University, up 8.3 per cent.
For all three institutions, the rises are largely due to additional student numbers.
The University Campus Suffolk - run jointly by the universities of East Anglia and Essex - will also enjoy a large percentage rise in its teaching grant (19.5 per cent). It is among the 10 English institutions with the largest percentage rises in overall grants (see table below).
Specialist institutions will suffer the largest percentage cuts: worst hit are the London Business School, which will see its cash allocation fall by 11.9 per cent, the Courtauld Institute of Art (down 10.9 per cent) and the Institute of Cancer Research (10.3 per cent).
Of the non-specialist institutions, the University of Reading will receive the greatest reduction - its total grant is being cut by 7.7 per cent - while the London School of Economics will see its allocation reduced by 6.3 per cent. The University of the Arts London faces a 4.7 per cent cut.
Other universities that will lose out are those that have previously been given extra cash in their teaching grants to help maintain old buildings.
Hefce is withdrawing £40 million from the budget for historic buildings in 2010-11.
Other cuts from recurrent teaching funds include £24 million related to intensive taught postgraduate courses and £12 million from support for foundation degrees.
The two universities that will see the biggest cuts in their teaching grants are Bishop Grosseteste University College Lincoln (18 per cent) and Cranfield University (12.4 per cent).
Teaching-grant funding to the federal University of London - as distinct from funding given to its constituent institutions - is down by 74 per cent.
Most of the cash Hefce pays to the University of London is categorised as "special funding", so the institution's teaching grant was small to start with.
Bishop Grosseteste will suffer from the historic buildings cuts, while Cranfield is still feeling the effects of Hefce's 2008 review of "exceptional funding" for institutions that "engage in activities which produce additional public value over and above that produced by other institutions not in receipt of the funding".
Allocations at a glance
- Total funding for 2010-11 is £7.36 billion – 7.2 per cent down on last year
- Total funding for teaching is £4.7 billion
- Total funding for research is £1.6 billion
- 29 institutions have been awarded above-inflation increases in funding
- 99 institutions saw real-terms funding cuts
- 69 institutions saw cash cuts
Share of total recurrent grant by mission group
These figures are for English members of the respective mission groups.