Ministers may abandon plans to find £875 million in spending review savings by switching medical budgets between departments, Times Higher Education understands.
If the proposal is dropped, it would raise the prospect of deeper cuts for higher education and the possible slashing of the National Scholarship Programme.
The Department for Business, Innovation and Skills has still not settled with the Treasury in talks over the 2015-16 spending review, to be announced on 26 June.
The department will be required find savings of up to £1.4 billion.
As THE has reported, BIS had been considering plans to find a chunk of those savings by transferring the medical education budget (worth £300 million) and the Medical Research Council resource budget (worth £575 million) to the Department of Health - which is protected from cuts.
But senior sector sources believe the plan may now be off the table, after opposition from the medical establishment and the universities of Oxford and Cambridge, as well as fears from the Treasury that other departments would seek to transfer funding to health rather than making cuts.
However, there is potential for another turnaround before BIS settles with the Treasury, and officials in the department are understood to believe that it is premature to rule out the medical budgets transfer altogether.
One possibility would be something on the spectrum between a full transfer and the complete abandonment of the plans, with some funding switching to the Department of Health.
Without the medical budgets transfer, BIS would have to find other savings to fill the gap.
Sector sources suggest that the National Scholarship Programme could find itself first in line for cuts, or possibly be scrapped altogether.
Government funding of £150 million had been announced for the NSP from 2014-15 onwards.
The NSP started in 2012 when the higher fee regime was introduced, offering individual students from low-income backgrounds support worth at least £3,000 a year, provided through combinations of bursaries, fee waivers or discounted accommodation.
“Student opportunity” funding for widening participation and retention - which assists universities with the added costs of teaching disadvantaged students and will be worth £332 million in 2013-14 - is also likely to suffer cuts.
