LORD Mandelson today insisted that universities will not be put under threat by multimillion-pound budget cuts.

The Russell Group of 20 top UK universities warned earlier this week that the higher education system could be brought to its knees by Government spending cuts which could eventually run into billions.

Reductions in funding will have a devastating effect, on students and staff, and lead to the disappearance of many institutions, the group said.

But the Business Secretary said that while universities cannot escape the squeeze on public finances, they are not under threat.

The University and College Union (UCU) accused the Government of being in complete denial about the impact of funding cuts.

Last month, Lord Mandelson announced budgets would be slashed by £135m next year, on top of £600m cuts to be made from 2012, announced in the Pre-Budget report, and another £180m of efficiency savings.

With other savings, the public funding cuts will total £950m between 2010-13, ministers have said.

Writing in the Guardian today, Lord Mandelson said: "While universities cannot escape the coming squeeze on public finances, nor are they under any kind of threat.

"Teaching and research funding, after the reductions, will grow between 2009/10 and 2010/11, he insisted.

Universities have never enjoyed such a long and sustained period of public financial support, and more students will be studying next year than ever before in our history. These new constraints are very small in the context of overall university income, and certainly do not reverse a decade of investment in excellence."

Writing in the Guardian earlier this week, the Russell Group, which includes universities such as Oxford and Cambridge, said: "If government targets these huge cuts on university budgets they will have a devastating effect not only on students and staff, but also on our international competitiveness, national economy and ability to recover from recession."

The group claimed such a move went against major investment in higher education seen by countries including France, Germany and the United States.

UCU general secretary, Sally Hunt, said: "I am astonished that Peter Mandelson is seeking to downplay the impact of £900m worth of cuts. Britain invests less public money in higher education than other competitor nations on average and the government is in complete denial if it cannot see the devastating effect these cuts will have on staff and students.

"We face the frightening prospect of universities being forced to close, thousands of staff losing their jobs and much larger class sizes. Unless the government heeds these warnings it will be impossible for the UK to remain a major player in the global knowledge economy."