'Long cash freeze' for universities

But the Universities Minister warned institutions against cutting back on what they offer and accepting the public funding reductions, insisting the sector must find other sources of income.

It comes two weeks after The Russell Group of 20 top UK universities warned that the higher education system could be “brought to its knees” by Government spending cuts which could eventually run into billions.

In an article for Policy Review magazine, published today, Mr Lammy said: “I suspect that it will be a good few years before universities can expect to see any really significant upturn in their income from the public purse.

“One reaction to that would be simply for them to cut their cloth and to accept cost-cutting and contraction as the price of dependence on the taxpayer.

“I think some may go down that short-sighted route.”

But he suggests universities should not be relying on the ongoing fee review leading to a hike in tuition fees.

The review will not report back until after the general election, and both Labour and the Tories have refused to state their position on raising the 3,000 per year fee cap.

Mr Lammy writes: “Some may choose to gamble on Lord Browne’s independent review of access leading to a large-scale increase in tuition fee income without a corresponding reduction in the volume of those who actually pay the fee.

“A different and, in my view, much better approach, one that this Government has been seeking to encourage in recent years, is for universities to try to diversify their sources of income. To find ways of relying less on the taxpayer as a hedge against any future tightening of the public purse-strings.”

Mr Lammy advises universities to ask the private sector for more funding.

Last month, Lord Mandelson announced budgets would be slashed by 135m next year, on top of 600m cuts to be made from 2012, announced in the Pre-Budget Report, and another 180m of efficiency savings.

With other savings, the public funding cuts would total 950m between 2010-13, ministers have said.

In his article, Mr Lammy admits some institutions are already struggling to provide the traditional “universal” role of universities offering teaching and learning in a wide range of areas, and these problems could “intensify” in the future.

He said he expects to see some universities specialise in what they offer to students.

“That may affect the range of subjects that some offer, or how they organise their research – I certainly expect to see some institutions collaborating to form larger and more powerful research groups – or indeed how they arrange their teaching,” he writes.

Other universities may begin to focus on distance teaching and learning, and more students could begin taking part-time courses, he suggests.

Last week, Business Secretary Lord Mandelson claimed that budget cuts could actually improve institutions.

The Business Secretary told peers at Lords questions that tighter budgets would act as a “spur” to universities to find other sources of money and “focus minds” on teaching and research quality.