Universities are facing a 10 billion financial black hole that is sure to grow if the top-up fee legislation falls, vice-chancellors warned this week.
Vice-chancellors' lobby Universities UK will ask for an extra £10 billion from government in its submission to the next comprehensive spending review (CSR).
UUK is finalising its submission, due in January, and is yet to put a final figure on what English universities will need for 2006-07 to 2007-08.
But speaking on the Today programme this week, UUK president Ivor Crewe, vice-chancellor of Essex University, put the figure at about £8 billion. UUK sources say this is likely to be an underestimate.
UUK is thought to be excluding any projected top-up fee income from its submission calculations because of the uncertainty over the future of the higher education bill.
Labour backbenchers are threatening to vote against the government bill, which would usher in fees of up to £3,000 a year from 2006.
But if the bill is passed and top-ups introduced, UUK sources said that this would only ameliorate, not solve, the funding crisis. Even if all universities charged the full top-up fee of £3,000, the sector would only be £1.4 billion better off a year. The UUK spending review submission is likely to argue for six times that amount.
The acceptance that universities are underfunded is one of the few pieces of good news for the sector to have come out of the top-up fees debate. But it looks as if it will have done nothing to reduce the bill presented to government for the 2004 CSR.
While the review in 2002 saw an extra £3.7 billion go to higher education, almost all of the additional money was for research.
Michael Driscoll, chair of the Coalition of Modern Universities and vice-chancellor of Middlesex University, said: "The real-terms increase in the CSR was for research. If you are not a research-intensive university you are under the cosh."
He said that universities faced rising labour costs because of increased pension and national insurance contributions and a 3.44 per cent pay claim.
"Universities face a financial black hole, but the real black hole is in teaching. We do not have enough money to pay our staff," he said.
What if the bill fails?
"There is no alternative source of money, so if the bill were lost, the impact would be severe. Not to have the income from the proposed graduate contribution scheme would be a disaster for the sector." UUK spokesman .
"If there is no extra money, then Middlesex, like Oxford, will have to rely on more overseas students and postgraduates." Michael Driscoll , chair of the Coalition of Modern Universities and vice-chancellor of Middlesex University.
"If the bill fails, the UK would be consigned to a second-rate system for the rest of the decade."
Michael Sterling , chair of the Russell Group and vice-chancellor of Birmingham University.
"It would be to the detriment of universities and their students if the bill fails. We need a fairer way of distributing the costs, one that does not penalise poorer students." Claire Callender , professor of social policy at London South Bank University.
"If the bill fails, our core activity, teaching, will remain seriously underfunded. We may look to recruit more full fee-paying students and postgraduates." Oxford University spokesman .