The Comprehensive Spending Review unveiled today includes a reduction in the higher education budget of £2.9 billion – from £7.1 billion to £4.2 billion – by 2014-15.

The Treasury says in a statement that the Department for Business, Innovation and Skills, which oversees higher education, will “continue to fund teaching for science, technology, engineering and mathematics (STEM) subjects”.

However, no mention is made of other subjects.

The announcement suggests that the government is following the funding model set out in the Browne Review, which recommends that there should be a minimum £700 million annual budget only for teaching “priority subjects”, such as STEM.

The spending review outlined by George Osborne, the Chancellor of the Exchequer, also states that the science and research budget will be maintained in cash terms at £4.6 billion a year.

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Mr Osborne made an oblique reference to a huge cut in teaching funding in his CSR statement to the House of Commons.

He said that the government will “come forward with our detailed response to Lord Browne’s report on higher education funding and student finance, including our plans to provide financial support to encourage those from the poorest households to stay in education”.

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He added: “Clearly, better-off graduates will have to pay more – and this will enable us to reduce considerably the contribution that general taxpayers have to make to the education of those who will probably end up earning much more than them.”

The spending review document adds: “Subject to parliamentary consent, universities will be able to increase graduate contributions supported by government loans, with a broadly offsetting reduction in the teaching grant, from the 2012-13 academic year.” It says the government will publish a White Paper “during the winter”.

Mr Osborne also said that the government would reject the “unworkable idea of a pure graduate tax”.

Overall, BIS’ resource budget will be cut by 25 per cent over the period covered by the CSR – 2011-12 to 2014-15.

The Treasury statement says that the higher and further education budgets will deliver about 65 per cent of BIS’ resource savings.

The further education resource budget will be reduced by 25 per cent, or £1.1 billion, from £4.3 billion to £3.2 billion by 2014-15.

It adds: “In line with the Browne recommendations, the government is changing the way that higher education is funded, moving away from the current model to one where those who benefit make a greater contribution to the cost.”

By 2014-15, the government will “establish a new £150 million National Scholarship Fund to support students from disadvantaged backgrounds”, it says.

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Mr Osborne said: “Building on the Wakeham Review of science spending, we have found that within the science budget, significant savings of £324 million can be found through efficiency.”

He also confirmed that there will be £220 million in funding to ensure that the Centre for Medical Research Innovation, to be built at St Pancras in London, goes ahead.

Mr Osborne said scientific research was being protected because it was “vital to our future economic success”.

Responding to the CSR, Gareth Thomas, Labour’s shadow higher education minister, said the cuts amounted to around 75 per cent of teaching funding, and warned that some universities could lose as much as 95 per cent of their teaching grant.

“These cuts will put at risk the world class appeal of Britain’s best universities and damage the ability of universities to help drive economic growth, whilst leaving students with massive amounts of debt to pay back,” he said.

Steve Smith, president of Universities UK, said: “Today’s cuts to the higher education budget cannot be good news for our economy and society. Universities UK has consistently opposed cuts to the university teaching and research budget.

“We are extremely pleased that the government has listened to UUK’s views on the importance of science and research to the growth of the economy, and that this is recognised in the protection of the research budget in cash terms. This is a vote of confidence in a vitally important area at this critical time.

“However, the freezing of funding for research will still pose challenges to our universities. We are now one of the only countries in the industrialised world that is not increasing our investment in science and research.

“We now have two priorities: to ensure that these cuts do not impact negatively on current and future students, and to find alternative funding sources to replace these lost funds. This will be particularly challenging given the immediate year-on-year cuts to the overall budget.

“Universities will continue to do all they can to minimise the impact of any cuts on the frontline services they deliver. The government must now respond, as a matter of urgency, to Lord Browne’s proposals to deal with this gap in public funding. A mismatch in timing between Lord Browne’s proposals and today’s announcement would be hugely damaging for students and the university sector.

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“We are also concerned about the impact of policy announcements for other government departments that relate to higher education, such as teacher education and regional development.”

john.morgan@tsleducation.com