The Australian government is to slash Aus$1.8 billion (Pounds 0.9 billion) from the ÖйúAƬ budget over the next three years and radically reshape the way students pay for their tuition in the first major cut in federal spending for 15 years.

Thousands of jobs are likely to be lost despite universities being allowed for the first time to charge full fees to students who do not win a government-funded place.

Federal education minister Amanda Vanstone released details 11 days before the official budget is presented to Parliament. She also announced an independent review along the lines of the Dearing inquiry in Britain to focus on the next ten to 20 years.

The 5 per cent cut over the next three years and a restructuring of the ÖйúAƬ Contribution Scheme are breaches of pre-election undetakings to maintain spending but Senator Vanstone said the government had only promised not to change HECS for students already enrolled. She described the cut in operating grants as "a mere nick" that universities would not notice.

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The announcement ruled out help for universities to meet a 15 per cent pay claim by academics and other staff. Vice chancellors estimated that covering the cost of even a moderate pay rise would mean a budget loss of up to 15 per cent and massive redundancies.

Students enrolling next year face annual fee increases of between Aus$850 and Aus$3,050. They will also have to pay off their debts more quickly after they graduate.

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Subjects will be split into three bands, with the most expensive either those that cost most to teach or those the government says potentially lead to the highest incomes. The cost of degrees in law, medicine, dentistry and veterinary science will more than double, with a five-year degree costing more than Aus$22,000. Students in education, nursing, the arts and humanities face a 35 per cent increase - Aus$3,300 a year.

Currently, students incur a HECS debt of Aus$2,500 a year, which they can repay as a tax surcharge later when their annual salary reaches Aus$28,500. From next July, the threshold will fall to Aus$20,700. The HECS changes will add Aus$1.1 billion to government revenues by the end of the decade.

The government is to offer 1,000 scholarships a year over the next four years to exempt students from paying HECS charges.