SCOTTISH universities have accused funding chiefs of undermining the sector's international competitiveness after an unexpected funding cut of more than £16 million.

Universities Scotland, which represents university principals, issued the warning after the Scottish Funding Council (SFC) said it plans 2% efficiency cuts.

The university sector had been expecting a total funding settlement for teaching and research of £852m in 2013/14 after a 2.5% rise. However, now institutions will get £835m with a 0.5% hike – below inflation.

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The SFC said it plans to reinvest the money, with the expectation it could be used to pay for extra places for students from disadvantaged backgrounds.

Alastair Sim, director of Universities Scotland, said: "This is not about crying poverty. Universities did well in the spending review precisely because the Scottish Government made it a priority to find the funds to keep us on an internationally competitive footing.

"The SFC implemented the spending review settlement in its March 2012 grant letter to institutions, stating that it would secure the competitiveness of the Scottish system within the UK and internationally and clearly setting out increases of 2.5% for next year.

"We were, therefore, very surprised when the SFC announced in October that it intended to take a 2% efficiency saving off core grants for teaching, knowledge exchange and research."

However, Laurence Howells, a senior director at the SFC, said: "In the context of the difficult public spending environment we do not think it's unreasonable to expect universities to make efficiencies, especially as this will be re-invested into the sector to improve opportunities for learners."

Robin Parker, president of NUS Scotland, added: "As far as we understand, these 2% efficiencies are not about reducing the overall funding to universities at all. Instead they're about getting more for the huge sums of money we quite rightly invest, and in particular increasing the opportunities available to people to study at university across Scotland."