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Virginia Bottomley's announcement this week that an extra Pounds 40 million will be ringfenced for research and teaching at teaching hospitals has been given a cautious welcome at medical schools.

They are worried that funds for teaching medicine are threatened by the Government's assessment that a quarter of the lump sum for teaching and research is for research and three-quarters goes to teaching.

The Secretary of State for Health announced that Pounds 40 million, which is at present handed out to all hospitals, will be diverted into the fund entitled Service Increment for Teaching and Research, raising it to Pounds 530 million. SIFTR goes directly to university hospitals to make up for the extra costs of doing teaching and research.

Mrs Bottomley also said that the costs of teaching and research are to be regarded nationally as 3:1. "This helps prepare the way for a new research funding stream to take over the funding of the NHS costs of research over the next few years," she said. This allocates far more to research than many people believe happens in practice.

Martin Harris, vice chancellor of Manchester University, said: "I welcome the Secretary of State's intention to build up gradually a ringfenced resource for research in university hospitals. However it's important that these new funds are made available from sources other than those that support teaching."

The Committee of Vice Chancellors and Principals has published a document for the House of Lords on the NHS reforms this week. The CVCP is worried that the transition to a single funding stream for research will seriously damage research if it is not carried out smoothly.