Institutions should take greater risks in innovation, such as developing professional courses or launching spin-off companies, but the accountability regime is discouraging them, funding chiefs have acknowledged.
A policy statement on diversity in higher education says that "the future health and diversity of the sector depends on institutions taking risks in developing new activities. Those risks need to be carefully considered and well-managed but, with that caveat, we should encourage greater willingness to take the risks necessary to secure innovation."
The Higher Education Funding Council for England document, published this week, acknowledges that accountability proces-ses can discourage risk-taking.
Next month, the funding council is due to publish the findings of a study it commissioned to map accountability requirements and examine the scope for reducing the aggregate burden.
The report is expected to criticise the duplication, confusion and conflicting demands of overlapping systems and advocate a less interventionist regime.
Bahram Bekhradnia, Hefce head of policy, said: "We want to encourage universities to be responsive and entrepreneurial."
Mr Bekhradnia also argued that it is possible to be innovative and accountable. He said: "You can take risks and be accountable - by taking risks in a measured way."
The statement said the needs and aspirations of students, employers and the wider community were becoming increasingly varied.
However the document identified three areas of activity where funding chiefs do not want diversity: quality and standards; funding for teaching; and accountability.