Money set aside to encourage students from poor backgrounds to apply to university is under threat, a university think-tank has warned.

Million+ believes that the Treasury and the Cabinet Office are “pressing for reductions” of up to £200m in the Student Opportunity Fund – a pool of cash handed to universities that recruit students from disadvantaged backgrounds. The think-tank said that the cuts – which could reach 60 per cent of the total budget – would represent a “defeat” for social mobility.

The warning came after Universities Minister David Willetts refused to rule out a cut as he answered questions on student loans in a session held by the Commons business select committee.

Mr Willetts was asked by one member of the select committee to give assurances that the funding would not be cut.

He replied: "We have yet to finalise the grant letter and I can't share with the committee the grant letter which has not yet been sent."

“This cut would fly in the face of the Government’s social mobility agenda,” said Pam Tatlow, the chief executive of Million+.

She added: “To lose this funding would be a real disaster, especially since the withdrawal of £100m from the National Scholarship Programme a year early. It appears that the universities who are doing most of the heavy lifting in social mobility are the ones paying the price for the expansion of student numbers.”

Million+ believes that the cuts, which would be made as part of a cost-saving plan at the Businessness Department, are due to be announced in the Government's annual grant letter to the Higher Education Funding Council for England (HEFCE), which is responsible for handing out money to universities.

Toni Pearce, the president of the NUS described the possibility of cuts as “an absolute disgrace”.

“We already know that young people from the most advantaged neighbourhoods in England are still three times more likely to enter higher education than those from the most disadvantaged. Unfortunately, the Government’s sustained attacks on our education system do nothing to help young people with the financial practicalities of staying in college and moving onto higher education.”

A BIS spokesperson said:  "The Government has been very clear about the importance of widening participation and improving fair access in higher education – all those with the ability should be able to study at university, irrespective of family income.

"Ministers will announce the detail of funding for higher education through the grant letter to the Higher Education Funding Council for England.”