Tim Boswell this week ducked a challenge to give the new universities a better deal for teaching.

Sir Graham Bright, Conservative MP for Luton South, asked the further and higher education minister to reward the new universities for taking the bulk of extra students during higher education expansion.

Sir Graham argued that the current formula historically favoured the old universities. A new system driven by student numbers, more in line with schools or colleges, would ensure a fairer distribution of the cash available.

But Mr Boswell, responding in the adjournment debate on Wednesday, said that allocating resources was a matter for the Higher Education Funding Council for England, which had its formula under review.

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Sir Graham told the Commons that variations in funding for teaching, such as Imperial College receiving Pounds 998 per student more than Luton, were "indefensible".

"Funding for teaching is allocated according to a formula which should be fair and transparent and unfortunately neither is the case," he said.

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"The Government would be within its rights to query the formula used by HEFCE."

Mr Boswell replied: "We are not and should not be in the business of instructing the funding council or telling institutions how to run their own affairs in their own circumstances and with the resources available to them."

He urged Luton to raise its concerns with HEFCE as part of the council's own review of funding.

However, HEFCE policy chief Cliff Allan said the council was evaluating its method, not consulting on change. It has appointed Coopers and Lybrand to compare its methodology with other formulae, for example those used abroad and by the Further Education Funding Council, for a report which will be ready by the autumn.

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Tony Wood, vice chancellor of the University of Luton, said: "Luton is funded for teaching at a lower level for students than any other university or college in the UK. This gross inequity puts us at a very severe disadvantage. No one expects a level playing field but we do expect reasonable equality."

He said the HEFCE should show similar determination to the FEFC in converging funding. "FEFC shows how a Government quango dealing with education has tackled the issue in a determined fashion. HEFCE has virtually ignored it."