A university's mission should determine how much public money it receives, according to a report published today.
The report, commissioned jointly by the Standing Conference of Principals and the Council for Higher Education and Industry, advocates a rethink of the work of the funding councils.
Under the plans, the micro-management of higher education would be abolished and institutions would no longer feel compelled to bid for all available pots of money.
Patricia Ambrose, executive secretary of Scop, said: "This study is about identifying a more effective distribution of money and what institutions can save in terms of time and money. It is wasteful for institutions to constantly bid for money."
Richard Brown, chief executive of the CHEI, said: "There is a consensus emerging on amalgamating the plethora of initiatives into a single funding stream allocated on a formula basis."
The report calls for institutions to be funded for three years at a time, using business plans to underpin the allocations, with sector-wide performance measures.
Special initiatives funding would be replaced by a strategic development fund. Other funding streams would be established to cover: teaching, research, business and the community outreach and widening participation. The five funding streams would be allocated on the basis of formulas within the context of an institution's business plan.
Nigel Brown, who wrote the report, said that the system would concentrate marginal funding on institutions that specialise in, for example, widening participation. He called for the new regime to be phased in over the next few years.