The funding council has rejected a request by London Metropolitan University to defer a decision to take back millions of pounds of teaching funding.

According to the Higher Education Funding Council for England (Hefce), problems with the university's data on student dropout rates meant that London Met has been "substantially" overfunded for several years.

In July it emerged that Hefce planned to reduce the university's teaching grant for 2008-09 by ?15 million, and that it was also considering clawing back other funding for the three previous years.

In an email to staff on 1 October, university vice-chancellor Brian Roper said that Hefce had turned down London Met's requests for either a deferral in the reduction of its grant or a lower level of reduction.

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"Regrettably, some job losses now appear to be inevitable," Professor Roper said.

The situation has also raised questions about this year's staff pay rise.

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All staff are due to receive an increase in line with the next retail prices index figure - expected to be about 5 per cent - under the 2006 pay deal.

However, Professor Roper said that the agreement "provided that if an institution is in serious financial difficulty it may defer implementation ... by up to 11 months in order to minimise job losses".

He warned that there may be a "shortfall in the university's ability to fund a pay increase greater than 3.5 per cent".

The level and timing of the 1 October pay award will be decided later this month.

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The university has also published a draft strategic plan for 2009-18, which sets out its ambition to become a "research-intensive" institution, a move it says will both inform teaching and improve the university's brand and reputation.

The document, which reports that the university has suffered a decline in the number of home students it has recruited in recent years, says "the university does not 'do' widening participation: it lives it".

But it adds that "a concentration on 'non-traditional' students ... comes at a price," and claims this fact is only "notionally" recognised by Hefce.

The document also outlines plans to recruit "a wider range of able students", raise entry standards and progression rates and set a higher target for the recruitment of "traditional" UK students.

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A spokesman for Hefce said that, after careful consideration, its board had agreed that the ?15 million reduction in funding was "appropriate", adding that this "provides mitigation of more than ?6 million from the full reduction that would have been due".

He added: "The university has (been) offered further support in the form of a recoverable grant of up to ?5 million."

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A spokeswoman for London Met's University and College Union branch warned that staff would be "very angry" if they received a below-inflation pay rise and said that the union had not been given enough time to discuss a strategic plan in which "several aspects give rise to serious concern".

rebecca.attwood@tsleducation.com.