Members of Canadian universities fear their institutions will lose as the provinces exercise greater control over spending under changes introduced in the 1995/96 budget.

Cash payments are expected to remain the same into next year, but in 1996/97 the delivery of social spending and the amounts available will change dramatically.

In 1994/95, the cash transfer payments for education amounted to Can$2.6 billion (Pounds 1.24 million) The total higher education subsidy amounted to $8 billion - about half the system's budget - if tax points, grant money and student aid are all accounted for.

In 1996/97, however, the government will cut provincial transfer payments for social programmes by Can$2.5 billion and hand the funds for health, welfare and postsecondary education over to the provinces in one envelope.

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The new system, the Canada Social Transfer, replaces two of the three largest transfer programmes: the Established Programmes Financing, for post-secondary education and health care, and the Canada Assistance Plan, for welfare. The 1994/95 EPF budget was Can$1.6 billion, which covered cash and tax points.

What worries the universities most is that the provinces, which control education constitutionally, will have to prioritise among the three sectors. Guy Caron, chairman of the Canadian Federation of Students, said: "It's obvious that if you have to choose between putting people in the street because of less welfare money, cutting hospital beds or raising tuition, you will raise tuition."

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Claude Lajeunesse, the president of the Association of Universities and Colleges, says the group wants "to ensure some conditions to the CST transfer payments. Otherwise, post-secondary education could end up with nothing". One of the problems for the sector is the total absence of a national standard, such as the Canada Health Act, to govern it.

Finance minister Paul Martin has said that under the new arrangement, provinces will wield far greater powers over social spending. As the government cuts its contributions - the CST will decrease by Can$2 billion in 1997/98. In addition to cuts in transfer payments, the three national granting councils will have their budgets trimmed over the next three years. The budgets for the Natural Sciences and Engineering Research Council and the Social Sciences and Humanities Research Council will drop by 14 per cent, while that of the Medical Research Council will decrease by 10 per cent.

Finance minister Paul Martin called his budget "fundamental action . . . by far the largest set of actions in any Canadian budget since demobilisation" after the Second World War.