One of Scotland's leading universities has been accused of a lack of will over plans to pull out of a satellite campus set up to help regenerate the south of the country.

The Scottish Funding Council (SFC), which distributes higher education money on behalf of the Scottish Executive, said Glasgow University could continue provision at the campus if it saw it as "sufficiently strategically important".

Last week, Glasgow said its involvement in the Crichton Campus in Dumfries was under threat as it was running at a loss of £800,000 a year.

The university revealed plans for "phased withdrawal", blaming the SFC's refusal to its request in November 2006 to increase the number of full-time funded places at the campus from 88 to 300.

The university said costs at Crichton - set up seven years ago with Paisley University, Bell College and Dumfries and Galloway College - significantly outstripped income generation, making it "the only part of the university that has an underlying deficit".

Today, Glasgow is to unveil an operating surplus for the first time in 12 years after undertaking a voluntary redundancy exercise last year to save £10m. The operating surplus is now £7m.

In a private report prepared by the SFC for the November meeting, seen by The Herald, officials pointed out that total funding to Glasgow in 2006-07 was almost £147m, with more than £100m for teaching - the second highest in Scotland.

The report said: "While the council would want Glasgow University, along with every other higher education institution, to ensure that its finances are sustainable, the (Scottish) Executive believes that Glasgow University, with sufficient will, could choose to organise itself differently to sustain its provision at Crichton if it saw it as sufficiently strategically important to do so. There is a risk in responding positively to this request (for additional funds), that we would weaken the incentive for autonomous institutions to respond from their own resources to their own priorities, by creating an expectation that the council will separately fund all strategic change."

Last night, a spokeswoman for Glasgow University denied any lack of will. "The university has always been able to recruit strongly and to fill its funded numbers in Glasgow. This was the case when the decision to embark on the Crichton project was taken.

"Accordingly, for Glasgow University, activity at Crichton was viewed from the beginning as additional to our main work at our Glasgow campus.

"Distributing the Crichton places evenly across the whole institution would lead to funds generated by our work at Glasgow being drawn from Gilmorehill to Crichton. This is not sustainable."

Karen Miller, president of the Crichton Students' Association, which yesterday held a protest at Glasgow's Gilmorehill campus, called for university officials and the funding council to thrash out a deal.

"The students were shocked that Glasgow is leaving because it is such an asset to Crichton," she said. "We have waited 100 years for a university presence and it needs time to develop and flourish, but that opportunity is being taken away form us. We want the university and the funding council to come up with some sort of solution."