As part of plans to “make an early start on tackling the public finances in this Parliament”, George Osborne has asked the Department for Business, Innovation and Skills to find “further efficiency savings” in 2015-16.
The savings are part of measures announced on 4 June to save £4.5 billion, including £3 billion from Whitehall departments outside of non-protected areas such as schools, the NHS and international aid.
Other announced cuts include £450 million from the Department for Education’s non-schools budget, which includes sixth-form colleges.
It is not yet known how the savings at BIS will be found, but a Treasury statement mentions “savings in higher education and further education budgets”.
Universities have already been handed their annual allocations for 2015-16 when almost £4 billion in funding was announced by the Higher Education Funding Council for England in March.
However, institutions were warned by Hefce that individual allocations could change depending on “any subsequent changes to the funding available to us from Government for 2015-16”.
“Accordingly, institutions should plan their budgets prudently,” it said.
If the £450 million cut were to fall squarely on Hefce's allocation to universities, it would be equivalent to roughly one-third of all teaching grants for 2015-16 (a total allocation of £1.4 billion) or a third of research funding (£1.56 billion allocation).
The cut is likely to renew pressure on student opportunity funding – otherwise known as the "student premium" – used to help harder-to-teach students and those from poorer backgrounds, which is worth £380 million next year.