Lancaster University is to hive off its teacher training operation at Charlotte Mason College following a controversial Ofsted report that rated important areas of the college's work as unsatisfactory.

The decision is intended to safeguard the position of more than 600 students, who could find their degree awards withheld, since the Teacher Training Agency is taking steps to withdraw accreditation from the college.

As well as relinquishing teacher training Lancaster is planning to shed 140 jobs to balance its books, although university authorities insist that the two difficulties are unconnected. Charlotte Mason has 100 staff.

University secretary Stephen Lamley said the university was pinning its hopes on a transfer of Charlotte Mason in Ambleside to University College of St Martins, Lancaster, an independent Anglican institution accredited by Lancaster.

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"We don't like running away from problems and many people here feel equivocal about the decision," he said. "However, this is an academic problem made worse by financial constraints."

Academic staff at Charlotte Mason are deeply unhappy with the proposal, according to Chris Rowley, local secretary of lecturers' union Natfhe. "We have been sold down the line politically and the decision is entirely driven by the university's financial problems," he said. "This is a good college with some minor weaknesses and we are now being subject to enormous changes because of an inadequate study by Ofsted. We are simply being scapegoated."

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Charlotte Mason merged with Lancaster University in 1992 and has accumulated debts of Pounds 2 million.

Mr Lamley said any new merger agreement would need to include taking on the debts and there were other hurdles to be overcome before the college's position was secure. The Teacher Training Agency needed to approve the plans and much of the detail concerning jobs, students, buildings and so forth was still to be hammered out.

St Martins was this week beginning a due diligence report on Charlotte Mason and principal Ian Edynbry said Lancaster had proposed transferring its initial teacher training and in-service education to St Martins. "We shall now begin an intensive period of discussions, investigation and negotiation with the university and the funding councils in the hope that agreement can be reached," he said.

St Martins is awaiting publication of its own Ofsted report which will rate all four areas inspected as "very good", the highest rating possible. The inspectors saw the students on the BA and PGCE primary courses which account for 900 students.

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The college has more than 3,000 full-time and 2,500 part-time students.