Cambridge University says it will break even in four years

It blamed the rise on pension costs, adding that there were "no surprises".

But the latest figures from the University of Cambridge Local Examinations Syndicate - a �6.4m profit - are included for the first time.

Without these, the deficit - on outgoings of �654m - would have risen to �16.9m. The university expects to break even within four years.

'High standards'

Cambridge's pro-vice-chancellor for planning and research, Tony Minson, said this was "not simply a case of balancing the books".

He added: "The university and the colleges have very high standards to maintain: world class teaching and research, unparalleled pastoral care and irreplaceable national collections and libraries - and that requires us to find new income."

Cambridge has said it will charge students the full �3,000 a year for tuition when variable fees are introduced in 2006.

The university is also increasing its fund-raising efforts, targeting former students and other donors.

Plans are in place to give individual departments more say over budgeting, to help them "decide their priorities".

Prof Minson added: "The university and the colleges have faced years of chronic underfunding and although tuition fees will go some way towards addressing the balance in meeting the costs of teaching, it will not be enough.

"We must ensure that fees do not deter students from low-income backgrounds, by offering bursaries to those who need them to study here.

"We are addressing these financial challenges by intensifying our fundraising efforts and changing how we allocate our resources."