THE Gillard government has threatened to withhold vocational grants to Victoria because of Premier Ted Baillieu's TAFE cuts, putting in doubt almost $435 million of federal funding.

As tertiary bosses prepare to sell campuses, increase fees or cut courses and staff to cope with state government cuts, Canberra has warned ''national partnership'' payments to Victoria are at risk.

In a move that has outraged the state government, federal Tertiary Education Minister Chris Evans is considering withholding money that should flow to Victoria as part of an agreement signed off by the Council of Australian Governments in April.

Commonwealth figures suggest Victoria should gain $435 million over the life of the five-year agreement - including $60 million next financial year - if it can meet a range of targets designed to improve the quality of the vocational system and the number of students trained.

Senator Evans told The Sunday Age that Victoria's TAFE cuts were ''destroying'' the vocational sector and undermining the state's COAG obligations.