The lion's share of cash for research should be ploughed into regional centres of excellence, Sir Ron Dearing's inquiry is to recommend.
Most money currently distributed to universities according to their performance in the Research Assessment Exercise could be allocated to such centres, based in the strongest research universities around the country.
But other higher education institutions in the region would have a right to share the centre's facilities, with their academics and postgraduate students spending at least some of their time working there.
The centres might also benefit from a regional research fund, possibly run by the Department of Trade and Industry, for applied research.
Development funds currently provided by the funding councils might be added to boost the scheme, expected to be worth around Pounds 50 million a year.
Extra support could come from the research councils, which may be asked to increase their contribution to overheads from 45 per cent to 60 per cent.
The whole scheme is designed to fit in with Dearing's proposals for greater regional collaboration across higher and further education, an idea strongly endorsed by ministers.
Tessa Blackstone, the higher education minister, has told vice chancellors she is keen to build on European and North American models of research collaboration, based in regional centres.
Sources close to the Dearing committee say higher education regions need not necessarily be tied to Government regions. It is expected that up to 20 research centres might be established.
Postgraduate students might spend their first year in a "normal" university, before moving on to the centre of excellence to complete their second and third years of research.
Dearing: credits, PhDs and work placements, page 3