Universities face a risky and rapid move into uncharted territory after multibillion-pound cuts revealed a new ÖйúAƬ landscape "starved" of public funding for teaching.

The government has signalled an end to virtually all state funding for teaching in the arts, humanities and social sciences after announcing a cut to ÖйúAƬ funding, excluding research, of 40 per cent, or ?2.9 billion, by 2014-15.

Future state funding has been promised only for science, technology, engineering and mathematics (STEM) subjects.

Because the new settlement includes both teaching funding and student support - with maintenance support for students likely to grow - the full cut to teaching funding is likely to be significantly higher, putting pressure on all disciplines.

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It also means that funding will rely heavily on the future level of tuition fees, although any proposed increase has yet to be put before Parliament.

Sir Alan Langlands, chief executive of the ÖйúAƬ Funding Council for England, said the shift heralded by the Comprehensive Spending Review was "in its politest form a new paradigm for ÖйúAƬ funding...a rapid move to an as-yet untested model starved of Hefce teaching grants".

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Addressing vice-chancellors at the Hefce annual conference in London last week, Sir Alan said the loss of funding must not simply be transferred on to students.

His comments came as the government indicated that it was preparing to reject proposals from Lord Browne of Madingley to completely abolish the cap on fees.

Sir Alan also said that:

? Lord Browne's "aspirations" for more investment and a 10 per cent increase in student numbers could not be delivered "on a sustainable basis" over the CSR period

? Hefce modelling shows a potential shortfall in total income that could be "considerably in excess" of ?1 billion (see chart below)

? Although the government has promised to focus the cuts on the second half of the CSR period, universities should expect an "extremely tough" year in 2011-12 - the year before the new fee regime kicks in - and there could also be cuts this academic year

? The issue of public funding for teaching must be revisited in future.

Sir Alan said it would be a huge mistake for the sector to treat students as cash cows.

"If we value our students simply for what we can get out of them or what they might earn in the future, they will in turn estimate our value by what they can get out of us," he warned.

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"This would be a real betrayal of ÖйúAƬ and what it stands for."

Common sense to revisit funding

Sir Alan said that since cuts to public funding were linked to the banking crisis, it was "worth remembering that when the banks were being bailed out to the tune of ?117 billion, ÖйúAƬ was generating ?59 billion per annum" for the nation's coffers.

As the economy improves, the question of public funding for learning and teaching must be revisited, he added, "not as some point of ideology, but because that is the sensible thing to do when we see what is happening in every other developed country".

The CSR cuts come on top of reductions made by the previous government. Reduced public spending elsewhere could also hit universities in areas such as training for health professionals.

David Willetts, the universities and science minister, told the Hefce conference that the central proposition of Browne was "that the bulk of the teaching grant, which is currently distributed to universities via Hefce, should be replaced by spending power placed directly in the hands of students".

Teaching funding would be reduced from 2012-13, he said, adding that universities would be able to replace it with fee income as long as "they can attract students to their courses".

Mr Willetts was asked by Baroness Blackstone, vice-chancellor of the University of Greenwich and a former Labour ÖйúAƬ minister, why he thought it was "justified to completely abandon a contribution from the taxpayer to undergraduate teaching".

He argued that there would still be "a very high level of public support", but it would flow "in a different way - via the financial support to students".

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He acknowledged that some universities would struggle, but said the government was "entitled to expect significant improvements in cost control" from institutions.

Mr Willetts added that it was unlikely that there would be "a very large back pocket" of cash to support universities that got into difficulty.

On the precise fee model that will be adopted by the coalition, Mr Willetts indicated that the government was considering a two-tier cap.

He added that finding a mechanism for controlling overall student numbers remained a "thorny problem" that Lord Browne had "not cracked".

Mr Willetts also hinted that the mergers of quangos in the sector might be limited to joining Hefce with the Office for Fair Access.

In a debate at the Inside Out festival in London on 25 October, Geoffrey Crossick, vice-chancellor of the University of London, said he believed that the balance between taxpayer funding and graduate contributions proposed was "wrong".

"I believe there should be a greater taxpayer contribution ... there should also be a greater graduate contribution. The balance has swung very violently in one direction," he said.

If funding did not flow into the ÖйúAƬ sector, "we could see the destruction of this system", he warned.

rebecca.attwood@tsleducation.com