The coalition government is to cut £200 million from this year’s higher education budget, reducing by 10,000 the number of extra student places for this autumn.

The £0 million university modernisation fund – designed to fund an extra 20,000 places and unveiled only in March – was one of the areas of public spending singled out in the government’s move to cut £6.243 billion from its budgets this financial year.

The fund will be cut by £118 million and reduced to 10,000 extra places. Universities must also find £82 million in efficiency savings this financial year.

This is out of a total higher education budget of £7.3 billion.

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George Osborne, the chancellor, and David Laws, the chief secretary to the Treasury, announced at a press conference today that the Department for Business, Innovation and Skills – which includes higher education – would have to save £836 million as a whole. That is the biggest saving required from any department.

Mr Laws said: “We will proceed with the higher education modernisation funding for an additional 10,000 places.”

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But he added that “good value-for-money bids” had not been received for all of the 20,000 places, meaning that the government would be able to “make a saving here”.

The fund was announced in the last Budget, in March, by Alistair Darling, who was then chancellor. It was designed to allow universities to provide 20,000 more places, mainly in science, technology and engineering subjects. The places were funded for the first year, but the pot of money also included cash to allow universities to find efficiencies to fund the subsequent years.

john.morgan@tsleducation.com