Threat to £115m university grant scheme

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Universities are facing the threat of a further multimillion-pound cut in their funding on the day a government inquiry is set to recommend huge rises in student fees.

Vice-chancellors fear £115m of a grant aimed at helping them raise vital cash from businesses and former alumni will be axed. The money is the third year of a matched-funding scheme introduced by the Blair government to encourage former students and businesses to make donations to university coffers. Under it, the Government pays a pound for every pound donated to the university.

If they lose the funding, the universities will face increased pressure to raise more money from fees from the present level of £3,290 per year. A government inquiry by the former BP boss Lord Browne is expected to recommend lifting the cap today. Much of the cash already raised under the scheme has been used to provide scholarships and bursaries to help poorer students take up places at top universities. Now vice-chancellors are expressing "a high degree of anxiety" that the scheme will be axed as part of George Osborne's public spending squeeze. Already £85m has been paid out in the first two years to match private donations.

In a letter to Mr Osborne, professors Eric Thomas, vice-chancellor of Bristol University, and Shirley Pearce, of Loughborough University, said of the scheme: "This is a beacon of light and hope in these difficult times." The professors are convinced the funding has been a major factor in persuading people to donate to universities. But, they added: "We detect a growing degree of anxiety within universities about the vulnerability of the third year of the scheme."

Lord Browne's inquiry is expected to recommend lifting the fees cap, leaving most universities to charge about £7,000 in future. They would be able to charge more as long as they provide aid for disadvantaged students from their own coffers.