Government funding to the Scottish Higher Education Funding Council for next year is Pounds 535 million, a drop of Pounds 7 million on the sum forecast last year. For the first time this has been allocated as a single amount, compared to this year's Pounds 544 million award comprising Pounds 493 million of recurrent funding and Pounds 51 million for capital funding.

John Sizer, SHEFC's chief executive, said that in a very tight public expenditure round, the allocation represented "a degree of priority" for higher education. The single funding stream would allow greater flexibility in the way resources could be used, both by SHEFC and by institutions.

"None the less, we recognise that universities and colleges will not find it easy to cope with these further funding constraints on top of the 3 per cent annual reductions already anticipated," he said.

"We will need to work together to find ways of using available resources to sustain the quality of teaching and research, and to assist institutions in securing new sources of additional private finance."

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Scottish Office education minister Raymond Robertson said education had been treated "very favourably", and that the Government had ensured that SHEFC could maintain funding for places at their current record levels.

But the Association of University Teachers Scotland warned that higher education was facing annual cuts of more than 4 per cent for the next three years.

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David Bleiman, AUT assistant general secretary, said that only a few weeks ago, Mr Robertson had been praising the sector's achievements, especially its importance as an export earner and in attracting inward investment.

"Now he and his colleagues have punished the universities for their success. Jobs will go and the state of buildings and equipment will deteriorate. The quality of education must inevitably suffer."

Funding for Scottish further education has dropped from the current allocation of Pounds 250 million to Pounds 245.5 million, again dropping the distinction between capital and recurrent resources. The Association of Scottish Colleges said that recurrent funding could be maintained at present levels, since the current year's allocation was based on Pounds 236 million for recurrent funding and Pounds 14 million for capital projects, but this would have to be at the expense of a cut in capital spending from the public purse.

The ASC's chairman, Ray Baker, warned that colleges would only be able to play a major role in supporting the Government's education and training targets if they had the necessary capital equipment and modern facilities. "It certainly will be a challenge for colleges to obtain help for such resources from the private sector."

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