Lecturers in the old universities have blamed institutions for low staff pay, saying the government has almost met funding targets.
Submitting a pay claim for a 30 per cent salary rise over the next four years, the Association of University Teachers said that while staff income has lagged far behind average earnings, the income of higher education institutions has been increasing, particularly under the present government.
The Higher Education Funding Council for England revealed last week that recent university accounts appeared to show nearly a third of universities were running a continuous deficit.
But the AUT argues that the average annual surplus remains nearly Pounds 200 million in total. "Institutions' hands are less and less tied by their direct income from government," it states.
Dearing recommended that UK higher education needed Pounds 350 million extra funding in 1998-99 and Pounds 565 million in 1999-2000.
The AUT says extra government funding for these years, including grants, fees, capital spending and money to widen access in England, amounts to Pounds 218 million and Pounds 646 million respectively - just Pounds 52 million short of the Dearing target.
It states: "It is time the employers spent more on people. Institutions have a financial surplus, and their income - particularly under new Labour - is increasing at a greater rate than staff income."
Figures compiled for the recent Bett report into higher education pay and conditions showed that institutional spending on pay had fallen since the mid-1980s, from 66 per cent to 58 per cent.
The union wants institutions to investigate areas of non-staff expenditure that can be reduced and to prioritise staff pay.
It claims that because of university expansion, lecturers teach almost double the number of students they did 20 years ago.
But a spokesman for the Universities and Colleges Employers Association said the Bett figures covered a period of change from "chalk and talk" to new technology. "You would expect fewer teachers but more spending on equipment and back-up and support staff," he said. "It is a new mode of delivery."
The AUT claim also includes calls for employers to address sex and race discrimination in staff pay, introduce a catch-up London weighting allowance and reduce casualisation.
It wants employers to take advantage of proposed changes to the annual pay settlement date to agree an enhanced settlement, covering more than 12 months. It also wants them to put pressure on government to meet remaining funding shortfalls and to establish a pay review body.