The government is planning to fine universities with too many students
University organisations have voiced fears about the scale of spending cuts being imposed in England by the government.
They would cut budgets by more than £130m on top of nearly £200m ordered earlier this year. Longer term cuts of £600m were unveiled last month.
And next year will see the loss of 10,000 additional student places that were brought in this year.
One union official said the cuts would do long-term damage to the economy.
Business Secretary Lord Mandelson said in his annual grant letter to the Higher Education Funding Council for England that the cuts were needed to pay for the "higher than expected" costs of funding grants record numbers of students during the recession.
The government said it remained committed to ensuring that 50% of school leavers went on to university, which is a central plank of Labour's education policy.
Higher Education Minister David Lammy insisted student numbers would continue to enjoy managed growth, a stance dismissed by both university unions and opposition parties.
They point out that not only are teaching budgets being cut by £50m next year but the government is also planning to fine universities that have taken on too many undergraduates by £3,799 per student.
Dave Prentis, general secretary of the Unison union, said the cuts would do "long-term damage to our economy".
"A quality higher education sector is what this country needs to keep competitive in the global economy," he said.
Rehana Azam, national officer for the GMB union, said: "This is of serious concern to GMB members in the higher education sector, many of which are already in redundancy consultation processes.
'Kick in the teeth'
"This announcement of funding cuts comes at a time when record numbers of people are seeking university places, primarily due to the recession and people seeking to upgrade their skill so that they can support themselves through this recession."
Sally Hunt, general secretary of the University and College Union, described the letter as a "real Christmas kick in the teeth for staff and students".
She called it "Final proof that the Government has completely lost its way when it comes to higher education. You cannot make these kinds of cuts and expect no consequences."
The vice-chancellors' organisation Universities UK said the higher education sector understood the current pressures on public spending and was playing a key role in tackling many of the long-term challenges facing the economy, but that these cuts would put universities in England under severe pressure.
"A reduction in the public funding per student could seriously threaten our ability to offer the high-quality experience our students deserve and expect," said its president, Professor Steve Smith.
And he noted that it was the rising cost of student support in the recession that was causing much of the funding squeeze.