The National Tertiary Education Union, representing 23 tenured academic staff, nine permanent administrative staff as well as 40 part-time teachers and tutors whose jobs hang in the balance, formally notified the university of a dispute yesterday and was seeking urgent legal advice on management's attempt to spill tenured and permanent positions.

The case will probably end up before Fair Work Australia.

Students and the Canberra arts community are condemning the changes for weakening the performance base of degrees in favour of more vocational skills such as music teaching and administration.

Vice-Chancellor Professor Ian Young told staff the changes had ''been in the making for the past three years'' but were ''accelerated by financial circumstances''.

On Monday Professor Young backed away from a $40 million budget cut and 150 job losses following overwhelming staff opposition.

Yesterday, Deputy Vice-Chancellor (Academic) Professor Marnie Hughes-Warrington warned the ANU could no longer afford to meet the running costs of the school, which loses $2.7 million each year. Staff were presented with a ''Change Management Project'' paper which proposes broadening the current performance and professional practice-based degree with a more vocational slant and reducing the expensive practice of one-on-one music tutoring.

School of Music Head Professor Adrian Walter said only 80 ''cream of the crop'' students were accepted by the School of Music this year out of 500 applications but enrolments would need to increase for the school to start making money. He believed more students could benefit from a music education if they wanted to go into areas such as music teaching, journalism or administration.

Reforms to the music program included reducing one-on-one teaching in favour of group workshops. It also included giving students a $600 professional development allowance each term to choose between further one-on-one specialist tuition, or attending a summer course, master class, conference or learning a new piece of music software. Students would have access to real-time high-definition video and audio-linked sessions through an agreement with the Manhattan School of Music.

Professor Walter said it was unfortunately the case that Commonwealth support for music students was among the most inadequate across the tertiary sector.

Also, each Australian music student lost their university between $2000-$5000 each year.

All seven university music conservatoriums across Australia ran at a loss. Professor Walter said most graduates did not end up working in music performance and the degree needed to encompass business and entrepreneurial skills.

But one long-serving tenured academic, who wished to remain nameless said: ''A lot of people play music but if they are not particularly good at it what are we doing taking them in?''

Working composer and one of the school's top music graduates, Jenna Cave, said she was devastated by the decision which would severely compromise the school's reputation.

Professor Hughes-Warrington sought to assure the 260 existing students their courses would be able to be completed without disruption while the new course structure began operating from next year.

But staff have questioned this assurance when one-third of the academic workforce is retrenched.

Staff have a three-week consultation period to digest the new structure before being asked to apply for one of the 13 new positions.

Professor Young said outside applications would also be invited once existing staff had applied.

''Those who do not secure a position in the new school will be paid their full entitlements.''

ANU Students Association president Dallas Proctor said students were furious about the plans to reduce performance-based learning.

''Students are pretty devastated as this is going to diminish the reputation of the School of Music and their degrees. In every other subject the ANU strives for world-class teaching and learning and in music we see it just wants to dumb things down.''