The Scottish Government yesterday went on the offensive over the amount of money universities will receive after the spending review and said they have not been shortchanged.

The SNP administration faced an angry backlash after universities across Scotland, who had asked for an increase in public funding of £168m above inflation by the end of the three-year deal, were instead given just £30m.

In the wake of the announcement, institutions said the settlement would damage any prospect of funding new research and would make it difficult to pay for rising salaries and mounting pensions and fuel costs.

University Principals argued it could even mean universities north of the Border would struggle to compete with rivals in England - particularly given the impact of top-up tuition fees there.

However, Fiona Hyslop, the Education Secretary, said yesterday that universities had received a "very fair" amount, despite a "tight" spending agreement for Scotland from the UK Government.

"It's not as much as I would have liked, of course it's not, but that's what we've got to live with under the Westminster settlement," she said.

"Despite that tight settlement, we're prepared to give a bigger share of government spend to universities than they had under the last government.

"I think the universities may have to argue the case with the public as to why investment should be going to them, as opposed to health and to school pupils or hospital patients."

Ms Hyslop went on to reject calls from the Scottish Conservative Party for an independent inquiry into higher education funding.

Instead, she wants to hold a review with university Principals to look at finding extra sources of income after 2010 when education ministers in England are expected to raise the current £3000 ceiling on top-up tuition fees.

"The issue is where will the university sector be post-2010? What can government do to mobilise and help support these institutions?" said Ms Hyslop.

It is understood the review would look at universities increasing foreign students, building more overseas campuses and forging closer alliances with multinational companies.

However, it is unlikely to include discussions on any more government money at this stage and is more about using innovative ways of making the most out of existing funding streams.

That is likely to cause concern to universities' Principals who have stressed in the past that the sector is already working flat out to develop these areas, and there comes a point when extra money is needed to compete.

Meanwhile, the Scottish Conservatives said it was time for an independent review of university funding to be carried out as a matter of urgency which would look at fundamental issues such as the number of universities in Scotland and how they are funded.

Murdo Fraser, the party's education spokesman, said: "We have to be bold enough to set this up now and allow it to ask some tough questions."