Teaching staff at Scotland's most prestigious performance arts academy are facing job cuts as part of moves to save more than half-a-million pounds.

The Royal Scottish Academy of Music and Drama (RSAMD), whose past students include actors James McAvoy and David Tennant, and composer James MacMillan, has offered a voluntary severance scheme to its 300 full-time teaching staff.

John Wallace, the academy's principal, who was awarded a pay rise of 7% last year, said compulsory redundancies would be considered if the current scheme did not make the necessary savings of £600,000. Given that the average salary of teaching staff is £30,000-£35,000 the scheme could lead to the loss of up to 20 lecturers. Other vacancies may not be filled.

The crisis was, in part, initiated by the signing of a pay award for lecturers in the UK in 2006 worth 13.1% over three years.

Although initial reactions to the deal were positive because it brought to an end an acrimonious boycott of exams, universities warned the offer was at the "limits of affordability".

Senior staff at RSAMD yesterday said, because of the small size of the academy, it was impossible to find money from other budgets.

They say the situation has been caused by long-term under-funding of teaching at RSAMD by the Scottish Funding Council (SFC).

For every music student taught by the academy it receives £13,000 a year from the funding council, but it gets only £7000 a year for drama students. By comparison, similar academies in England such as RADA are paid £12,000 a year for drama students.

Mr Wallace said: "We are not given the levels of funding required to pay for drama teaching. That means that we have to subsidise the teaching of drama from the money we get for teaching music and that is not sustainable in the long term.

"We would urge the funding council and the Scottish Government to look again at our case for extra funding."

A member of staff at RSAMD, who asked not to be named, agreed there had been a long-term problem over drama funding.

Despite the financial concerns, there are major proposals which would see the establishment by 2009 of a new dance school, in collaboration with Scottish Ballet, and a new school of contemporary Scottish culture.

There are also proposals to set up a touring theatre and musical company with the National Theatre and Scottish Opera.

"These grand plans are all well and good, but there is a feeling among staff that RSAMD is being taken away from its roots as a place which provides the very best teaching for those who want a career in the performing arts in Scotland," said the source.

"There is a concern they are trying to save money by getting rid of staff to pursue ambitious plans which are not at the heart of what we should be doing."

An SFC spokeswoman said: "We compared our funding of drama with other funding councils in the UK in 2005 and found our unit of resource is above that of the other funding councils."

A spokesman for the Educational Institute of Scotland, which represents many of the staff, said: "Our aim will be to avoid any compulsory redundancies."