Oxford University has had to make cuts of Pounds 9 million this year to offset costs caused in part by the research assessment exercise.
In preparation for next year's exercise, the university had made an above-average number of appointments over the past two years and had drawn on reserves rather than departmental budgets to cover costs.
But now all departments face cuts of more than 4 per cent to balance the university books. Some fear the cash shortage could promote the case for top-up fees.
In a statement on this year's university budget, published in the Oxford University magazine, the Gazette, the university warns: "The underlying position will deteriorate steadily unless radical steps are taken to align the university's costs with its income in the long term".
University administrators blame a 2 per cent cut in real terms for Oxford announced in the grant settlement in March. This was the result of several measures, including general efficiency gains in higher education and reduced research income because Oxford's RAE showing had not improved as fast as other comparable universities.
To help make the necessary savings, target surplus and contingency cash has been cut by half, more use is being made of trust funds, building and safety programmes have been reduced, and the university has put on hold a planned salary merit award scheme.
Terry Hoad, honorary secretary of Oxford University's branch of the Association of University Teachers, said that any reduction in funding was bad news. "It will unfortunately give some ammunition to the people who think top-up fees are a good thing," he said.
He predicted that cuts would mean fewer posts being filled and less to spend on library services. He was also concerned that more staff would be employed on fixed-term contracts.
The problems facing Oxford and other research universities were an example of the way in which the research assessment exercise could distort university planning, he added.
Oxford University registrar David Holmes said: "In itself it has not brought top-up fees closer. But it obviously underlines the serious position that research universities and others now have."
Last month Cambridge University predicted a deficit of Pounds 2.2 million in 2000-01 to be funded out of reserves, and calculated that the annual deficit could increase to more than Pounds 15 million in the next three years unless extra income was generated.
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