Universities will see their core teaching funds cut next year, vice-chancellors said this week.
Figures from the Higher Education Funding Council for England show a rise of 3.7 per cent in total funding for teaching in 2002-03. But Universities UK said core teaching funds would suffer a cut in real terms of nearly 1 per cent.
The cash difference has been moved from core funding to pay the premium for attracting students from poor neighbourhoods.
Baroness Warwick, chief executive of Universities UK, said: "Our analysis shows that this (increase in funding) includes earmarked funds - for example for widening participation and for staff pay - while core funding for teaching distributed through the formula has risen below inflation.
"This, combined with changes in the policy on moderating funding, will have major implications for planning and stability in institutions."
UUK is consulting its members on the effects of the cuts. It will decide how to act once it has compiled and analysed the responses.
Normally, core teaching funding rises with inflation, now at 2.5 per cent. But next year's rise is just 1.76 per cent. Hefce's 2002-03 funding circular gives no indication of or explanation for the cut.
Furthermore, the circular says core teaching funds will rise by about 4 per cent, from nearly £3.03 billion this year to more than £3.14 billion next year. Even taking into account an adjustment of 2.5 per cent for inflation, this appears to leave a 1.5 per cent rise in real terms.
Hefce said this week it had not done the calculations needed to explain how core teaching funding could rise while the inflation-linked adjustment was cut. Officials said they would look into it.
Hefce did say that the core funding would be redistributed in teaching and widening participation next year. Funds for participation will rise from £28 million to £38 million. Cash to widen participation, fund extra students and reward and develop staff falls outside core teaching funds.
Overall, the unit of resource for teaching - which includes fee income and funds for staff pay and development - rose by 1 per cent in real terms, Hefce said.
Bahram Bekhradnia, director of policy at Hefce, said: "It's a combination of being more strategic in widening participation and of the funding reflecting where these students go. But, taking the sector as a whole, its funds for teaching have gone up."
• Sir Howard Newby said yesterday that the effort most universities made to chase research funds was wasted, writes Alison Utley.
At the Northern Universities conference in Hull, Sir Howard, chief executive of Hefce, said the incentive to pursue research funding should be cut to dissuade most universities from taking part.
"The funding of research is the key activity that drives towards convergence, and there is wide agreement that we need to open up other avenues for institutions to pursue. We have enough evidence to convince most that this is a race that few will win and that, for most, the effort spent pursuing research funds is misspent."
The cost of chasing research funds needed to be raised, he said, to ensure that funds were focused on world-class research.
But Sir Howard told delegates that teaching could not be an alternative to research. "It makes no sense to provide differential funding to those that decide to concentrate on teaching," he said. Widening participation as a differentiator was no easier because it was an activity that all institutions needed to engage in, he said.
The only option was the "third leg", which included links with business, the local community and beyond, he said. But institutions would have to decide which game to play, he said, as the aim would be to offer an alternative, not an additional, focus of activity.