There is a big rise in capital funding for next year

Grants from the Higher Education Funding Council for England (Hefce) total just under �6bn for 290 universities and colleges.

Funding for teaching is up by more than 3% in real terms, research up by 1.4%.

But universities say that, once the growth in places is taken into account, funding per student will go up by about 2.8% - little more than inflation.

The increase for teaching allows for another 20,000 full-time equivalent student places for 2004-05.

There is a near-60% rise in capital funding, to �584m, but the amount for "widening participation" - encouraging students from a greater range of backgrounds - is frozen in real terms, at �273m.

The "real terms" increases assume inflation of 2.5%.

The overall total comprises:

• �3,826m for teaching
• �1,081m for research
• �584m for capital funding
• �486m for special funding
• �16m for additional matters

But he added: "Despite the significant funding total for higher education, there is still a need to increase the resources available so that universities and colleges can deliver the best teaching and carry out world-class research, and to address the previous under-investment in the sector."

Baroness Warwick, his opposite number at Universities UK, representing vice-chancellors, said funding for teaching remained "under pressure".

"Teaching is at the heart of universities' activities and must be properly funded if we are to maintain quality and give students the teaching and learning experience they deserve.

"Keeping to the status quo is not an option if we are to continue to provide a world class education."

How grants are calculated

The totals are divided up among 131 universities and colleges of higher education and 159 further education colleges teaching higher education courses.

The amounts each gets are worked out according to formulas.

The formula for teaching is essentially the number of students multiplied by their subjects, in four price bands - the most expensive being medicine, the cheapest being class-based subjects such as history.

For research, institutions are competing for the allocations on the basis of the number of research staff multiplied by their quality as defined in the last research assessment exercise, in 2001.

Some subjects are given special treatment, however, because they are relatively new, so do not have a strong track record in research, but are growing in popularity.

These include such things as nursing and other studies allied to medicine, social work, art and design, media studies, performing arts and sports-related studies.

And there is transitional funding to protect institutions that would otherwise suffer a big, year-on-year drop in their grants.

Hefce then assumes an amount for student tuition fee income at next year's rate of �1,150 to arrive at a "total resource" allocation.