Calculations by The Australian show that the Rudd government's Health and Hospitals Fund and Education Investment Fund will carry $4.53bn after meeting grant commitments already announced.

The funds, whose assets are managed by the Future Fund board of guardians, commenced operations on January 1 last year.

The EIF began with a transfer of $6.484bn from the now-defunct Higher Education Endowment Fund, a vehicle created by then treasurer Peter Costello as the centrepiece of his 2007 budget. "The capital will not be spent," Mr Costello said in his final budget speech. "It will be invested. And, what is more, we will add further capital from future budget outcomes to this perpetual fund."

Last night, Mr Costello, who was appointed to the Future Fund board in December by the Rudd government, said Labor's approach was deeply flawed.

"The HEEF was set up to be a fund in perpetuity to develop world-class Australian universities and the Labor Party has now raided the capital in a short-sighted attempt to spend money today at the expense of tomorrow," he told The Australian.

In Labor's first budget in 2008, Wayne Swan announced three nation-building funds for long-term and strategic investments in health, education and the Building Australian Fund for major economic infrastructure.

But Labor decided to spend both the capital and earnings from the two funds on its fiscal stimulus and recurrent spending, while also broadening the scope of the education grants to include teaching expenses and vocational training.

By the end of December, the balance of the EIF was $5.998bn. According to the Finance Department, the fund has been debited $735 million "to be spent on infrastructure projects".

Education Minister Julia Gillard decides what research and education construction projects are ultimately approved for EIF funding.

Given she has announced $4.153bn in spending from the fund, through the economic stimulus packages and in last year's budget, the balance of the EIF will soon fall to $2.58bn, or a 60 per cent drop in the value of the initial endowment.

It is a similar story with the HHF, which received two lump sum transfers of $1bn and $4bn from the 2007-08 budget surplus in February and June last year. By the end of December, the balance of the HHF was $4.902bn.

The HHF had been debited $221m by the end of last year. Health Minister Nicola Roxon determines HHF projects, whose total value so far has hit $3.172bn and includes a new $67m cancer centre at Rockhampton Hospital in Queensland announced yesterday by the Prime Minister.

Once the remainder of allocated HHF funds is disbursed, the fund's balance will fall to $1.951bn. Again, the drawdown will represent a 61 per cent erosion of the health fund's capital.

With quarterly returns from the nation-building funds running at 1.1 per cent, interest accrued may slightly alter the rate of capital erosion, as will the speed of transfers to meet grant obligations.

The budget surpluses that formed the start-up capital for the health and education funds came from Mr Costello's final budget. The former treasurer had earmarked $10bn for the HEEF but the Coalition lost office and the funds were diverted. In office, Labor has not generated a budget surplus.

The Australian revealed this week how the Rudd government has allocated up to 84 per cent of EIF and HHF grants to Labor-held seats or those most likely to tumble to the government at the next election.

Deputy Opposition Leader Julie Bishop, the co-author of the HEEF, said Labor had "destroyed the capital base as well as the guiding principle" of the Coalition's "groundbreaking" education fund.

"Julia Gillard has turned (the EIF) into a short-term slush fund for political gain," she said. "Our goal was to have a fund in perpetuity so that we could get at least one of our universities into the world's top 10."

A spokesman for Ms Gillard said: "The Rudd government took the decision that, after more than a decade of neglect of universities by the Howard government, that in the midst of a global recession it would invest in our higher education to help keep Australians in work.

"Every credible economist has said this approach was the right one. The record capital funding in our universities and TAFE sector includes not only the EIF, but also a $1bn investment from the budget to ensure we gain the massive benefits both economically and socially that come from a more educated Australia."