The University of Birmingham is planning a ?20 million shake-up of its spending strategy as part of a proposal to cope with cuts in government funding.

The rejigging of the university's priorities is likely to be of wider interest within the sector as it has been masterminded by David Eastwood, Birmingham's vice-chancellor and the former head of the Higher Education Funding Council for England.

The university's executive board has approved plans for investment in research in a series of areas, including globally significant infectious diseases and nuclear energy.

Professor Eastwood said he expected the 2010-15 strategic framework to have an impact on the university's standing, as well as its finances. "I would expect the university to be, if you like, the best of the rest," he said.

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"If you say Oxford, Cambridge, Imperial and University College London will be difficult to shift, then the next places are up for grabs. We expect to be up there."

Professor Eastwood joined Birmingham in April 2009 after leading Hefce for two and a half years.

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This experience should have given him an overview of the sector's strengths and weaknesses as it enters a period of tighter public spending.

The university's annual report says its new strategy will "link our investment decisions to our intention to attract outstanding staff and students, increase our research funding and deliver an excellent educational experience".

Professor Eastwood added that the strategy would "rebalance the university's finances by some ?20 million to take account of funding reductions we're planning for", and focus the budget on "parts of the university that are outstanding".

"We took the decision we would save ?10 million and earn ?10 million," he said. "So as part of the process of saving ?10 million, we will address underperformance of the university in some areas."

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The university plans to increase its income through postgraduate recruitment and increased research grant income. The savings equate to a reduction of 200 posts over three years, but with another 100 posts created.

The university's estate has been earmarked for major changes, with a new ?16 million, 450-seat auditorium completing the semicircular Aston Webb building conceived by Joseph Chamberlain, the Birmingham mayor and MP who was the university's first chancellor.

A section of the red-brick building was never built, but now ?5 million in gifts and pledges will help fill the gap with the new auditorium, finally completing a strategy from the university's past.

It will be called the Bramall Music building in honour of a "transformational" donation from the Liz and Terry Bramall Charitable Trust - Terry being a Birmingham alumnus.

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Among the other areas set to benefit from investment are a "heritage and cultural learning hub", biomedical research, "urban living", and stem cell and ageing research.

john.morgan@tsleducation.com.