A third of universities expect debt next year

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ONE IN three universities expects to plunge into debt by next year, according to financial forecasts published by funding officials.

The number facing a deficit will have almost doubled in two years, according to estimates produced for the Higher Education Funding Council for England.

Fifty universities are forecasting a deficit in the next year, compared with 28 in 1997-98, the most recent year for which final figures are available.

A report by the council said the position had improved on earlier forecasts, but warned that "it still represents 30 per cent of the sector operating in continuing deficit".

The forecasts are produced by universities as part of their financial returns to the funding council, the Government agency that manages the pounds 5.4bn annual budget for higher education. Universities have complained that funding per student has been cut by 1 per cent for the past two years, despite rises in the national higher-education budget.

Last week Baroness Blackstone, the minister responsible for higher education, announced a pounds 295m increase in university budgets for 2001 and insisted that funding for higher education had increased by 11 per cent in real terms over the past four years.

The Committee of Vice-Chancellors and Principals (CVCP), which represents universities, criticised the settlement, saying that money was needed to fund the Government's plans for expanding the number of part-time and mature students.

The Association of University Teachers said the debt projections were "deeply worrying". A spokeswoman said: "Any institution working on a deficit basis can only do so for so long. Since these institutions use public funding it is a matter of public concern."

Phil Willis, Liberal Democrat education spokesman, said students had been "hoodwinked". He said: "It is hardly surprising that more universities are forecasting deficits when unit funding continues to decline."

Tony Bruce, head of policy at the CVCP, said: "You cannot continue to run a deficit, particularly if you don't have reserves. Universities will have to take action; they might have to reduce staff or suspend new investment. Universities are being squeezed a bit too far."

Tom Wilson, head of universities at the National Association of Teachers in Further and Higher Education, said: "There is no level playing field for universities. The ones likely to get into difficulties do not have big reserves and have no other sources of funding."

Ian Lewis, head of finance at the funding council, refused to name the universities involved and said he could not discuss the scale of the debts. He said universities were conservative in their estimates and predicted that some of the forecasts would prove to be pessimistic.

"The fact there are deficits does not mean there is necessarily a problem in an institution.

"The position has not markedly changed from a year ago and the additional funding from the Government can only help to improve the situation," Mr Lewis said.