The VAT rise and cuts to educational budgets will hit universities hard, according to industry experts. It is thought that funding for the institutions could be cut by a quarter and up to £200 million may be lost following the VAT change. In the budget Mr Osborne did not specify where the axe would fall, but noted that there were "particular pressures" on education and defence. The Department for Business, Innovation and Skills has an unprotected budget.

Paul Marshall, chief executive of the 1994 Group of smaller research-intensive universities, said the Budget was "distressing" news for higher education. He issued a call for the sector to lobby for a cut lower than 25 per cent. In terms of fees, income may flow back into higher education if the government decides to ratify any tuition fees increase recommended by Lord Browne of Madingley's independent review of fees and funding.