Cutting student places could squeeze applicants from poorer backgrounds out of higher education, a leading scholar warned this week.
At a time of record demand, it has emerged that there will be up to 6,000 fewer places for full-time undergraduate entrants this autumn.
Universities are also facing fines of up to £10 million for recruiting more students than the Government allowed in 2009-10.
The net reduction in student numbers in 2010-11 has been confirmed by the Higher Education Funding Council for England and is the result of the Government's decision to withdraw the 10,000 unfunded "emergency" places for 2009-10 that were announced last summer.
Sir David Watson, professor of higher education management at the Institute of Education, said it had "long been accepted as an iron law of higher education that if you want a fairer system, it has to be allowed to expand".
A study published by Hefce last week found that there had been an "unusually rapid" increase in the proportion of young people entering higher education from the most disadvantaged areas since the mid-2000s.
"The data from Hefce show that expansion has, over a fairly long haul, begun to bring some dividends in terms of fairness," Sir David said.
But he added there were also signs of "vulnerability".
"Every time in the recent past when numbers have been restricted for economic reasons, it is the 'non-standard' participants who lose out disproportionately," he said.
"It happened under Keith Joseph in the early 1980s and under John Patten in the mid-1990s. It will happen again as a result of Lord Mandelson's cuts: will he be around to see it?"
Teesside University has seen a 30 per cent increase in applications since winning the Times Higher Education University of the Year Award in 2009, but said it would have to turn away full-time undergraduate students as a result of the restrictions on numbers.
In December, Lord Mandelson said universities would be fined £3,700 for each student they recruited above the permitted level.
This week, in a circular letter to vice-chancellors, Sir Alan Langlands, Hefce's chief executive, says: "We have tentatively assumed in our budgeting that we would recover up to £10 million from over-recruitment."
The letter also announces that Hefce is to rejig the funding formula for quality-related research in 2010-11 to favour the research elite.
"The board decided, in response to the Government's presumption in the grant letter in favour of more research concentration, to introduce a steeper funding 'slope' for all subjects," it says. "The effect of the change will provide an initial step towards increased concentration."
The letter sets out in detail where the cuts faced by the sector in 2010-11 will fall.
The sector will receive a Hefce grant of £7,291 million - £518 million less than in 2009-10, although capital funding has been brought forward to partially offset the loss.
The main funding decisions made by the Hefce board at its meeting on 28 January, all of which relate to the 2010-11 academic year, were:
- £4,7 million in recurrent funding for teaching, representing a 1.6 per cent real-terms decrease on 2009-10 figures;
- £1,603 million in recurrent funding for research, equal to a £32 million or 2 per cent increase on the previous year;
- £562 million in capital funding, which represents a 14.9 per cent reduction in cash terms on the 2009-10 allocation;
- £294 million in special funding for national programmes and initiatives, a 7 per cent cut in cash terms on 2009-10;
- £150 million for the Higher Education Innovation Fund - an 11.9 per cent increase year on year.