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Canada's most populous province has set up a half-billion dollar endowment that may help offset recent tuition fee increases.

The Ontario government plans to match the Can$250 million (Pounds 110 million) universities already raise privately, it announced in its latest budget.

Ontario's 22 universities are still feeling the effects of a 15 per cent cut to their operating budgets imposed 18 months ago by the Conservative government of premier Mike Harris.

According to the Council of Ontario Universities, there has been a 25 per cent reduction in operating grants, or Can$700 million, over the past five years. Universities have recently been allowed to raise tuition fees by up to 20 per cent to about Can$3,000.

"It is estimated that these trust funds will assist 166,000 students over the next decade," finance minister Ernie Eves told the provincial legislature.

The minister has also pledged another Can$500 million towards a ten-year research fund, which is expected to reach Can$3 billion through partnerships with the private sector and the federal government, although the details are still sketchy.