Vice-Chancellors and students erupted in fury after more than £ 500 million university budget cuts were announced today.

Universities will be fined about 10 million pounds for recruiting too many students last year, and the total intake of undergraduates in time could stop this year for the first time in recent history.

This means that hundreds of thousands of school leavers can get lost in college this fall. Many places are already promised to those who missed last year, creating a bottleneck.

Leading universities warned of dire consequences on the quality of education and rectors said the cuts were deeper than expected. Student leaders described as an act of “self-harm” by the Government.

The Higher Education Funding Council for England (HEFCE), the body which distributes government money to universities, appearing in spending cuts would fall in the academic year 2010/11.

He emphasized that the funding of £ 449 million lower than expected, and £ 518 million less than last year.

Mr Mandelson, the Secretary of Universities, announced in December that £ 135 million was vice-rectors cut budgets “next year, on top of £ 180 million efficiency savings.

In the next three years will be the university loses £ 950 million, research institutions more important to note that paralyze the industry.

Investment projects will be most affected, with 15 percent budget reduction, but teaching and research will also be affected.

The grant will be reduced in the teaching of 215 million pounds and that 40 million pounds was withdrawn funding for old and historic buildings are a key feature of many universities. Another £ 24 million will come from accelerated and intensely-taught postgraduate courses, and another 24 million pounds of funding for the establishment of two degrees year.

This comes after ministers said they wanted the universities to offer more options and flexible courses, including degrees of merit.

Ten million pounds has been earmarked to help universities to change their teaching to science and math topics, which they say is encouraged by the Government, and comes on top of £ 25 million already provided to protect high cost and vulnerable science courses.

Last summer, tens of thousands of good level of students were turned away from universities because of a limit on the number of seats and a funding gap.

Professor Steve Smith, president of Universities UK, which represents principals, said that last year nearly 160,000 students applied to be a safe place at university.

Applications for this year are already 10 per cent in 2009, when the number of application log.

Professor Smith added: “There will be plenty of students this year who do not get a place.” He said the cuts would have an impact on the quality of teaching.

Sally Hunt, general secretary of the University and College Union, said: “If these cuts forward the dreams of thousands of students, encouraged to apply to university by the Government, will be shattered. The massive funding cuts will impact. The industry simply can not do more for less.

“Our higher education system is already creaking under the pressure of government efficiency savings.”

Dr Wendy Piatt, director general of the Russell Group, said: “Our main institutions can not remain competitive internationally, provide a first experience in teaching and the level of generous support to provide disadvantaged students do not have access to a increased funding.

Professor Les Ebdon, chair of million +, which represents new universities, claimed that as a result of the cuts, the number of places available in institutions in 2010/11 would be the same as in 2008 / 9, and lower than this academic year.

Professor Ebdon, who is also vice-chancellor of the University of Bedfordshire, said: “This is totally counterintuitive.

“The evidence points to increasing demand, but funding for student support, which the Department of Commerce, Innovation and capabilities intended to enable newly recruited 10,000 students in 2009 has been withdrawn and universities do not have these numbers available for students wishing to enter university in 2010.

David Lammy, the Minister of Universities, said: “There has been a lot of scaremongering on the savings that we have asked HEFCE to do. But we are confident they can achieve these HEFCE in a way that minimizes the impact on teaching and students as requested in our recent award letter.

Mr Mandelson last month told its partners that act as tighter budgets create a “” to universities to find alternative sources of money and “mind focus” on quality teaching and research.

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Families face record competition for places at secondary schools in more than a third of local authorities this year, a Guardian survey has found.

Demand for places at the most popular schools has reached a new high, with soaring applications meaning that in many parts of the country more than one in five children have missed out on their first choice of school.

Local authorities are working through the weekend to confirm the allocation of every state secondary school place in England before they send out letters to the parents of 570,000 11-year-olds on Monday.

Several councils in London and the south-east are reporting soaring applications linked to an exodus of pupils from private schools in the recession. It is adding to the pressure in the competition for places at high-performing state schools and grammars. In Kensington and Chelsea and Richmond in west London nearly four in 10 people will not get their first choice of school this year. In Middlesbrough, one in four will have to settle for second best and in Windsor one in five missed out.

The Guardian contacted the 150 local authorities in England. With many still working to allocate their places, 55 responded. The figures reveal how the government is still struggling to meet its pledge that parents in every part of the country have the choice of good schools for their child.

Calderdale, Darlington, Herefordshire, Peterborough, Salford, South Gloucestershire and Worcestershire all face increases in applications along with 10 of the 17 London local authorities in the survey. Lambeth saw a 17% rise in applications; Westminster and Merton both saw increases of more than 7%. In West Berkshire 17% of families have missed their first choice, in Gloucestershire 19% missed out and in Sandwell 26% were given a back-up instead of their first choice.

In other areas the future of some schools will be cast into doubt as a demographic drop leads to more empty seats in classrooms this year. Some 27 local authorities reported their applications had fallen. The rest saw no change in application rates.

In 17 local authorities which responded demand for places has risen. Richmond, west London, is reporting a “considerable” rise with the proportion getting their first place slipping from 64.4% last year to 62% this year. Cormac Smith of Richmond council said: “We are feeling the pinch as parent switch from private to the state secondaries. There is pressure on places this year.”

“If schools are oversubscribed, the government should give councils the financial support to put on another form. It’s time that Jim Knight and Ed Balls take a bit of the blame for all this. They continually blame parents but what’s so wrong about wanting a school in the right place? You can’t overestimate the stress parents go through waiting for a school place. We aren’t all terrible people and can’t all afford to move house.”

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