The next research assessment exercise should be abandoned to make way for a more modern and dynamic research funding system, a vice-chancellor argued at a national conference this week.
Peter Knight, vice-chancellor of the University of Central England, accused funding council chiefs of attempting to lock the sector into another five years of the RAE before the results of a fundamental review of it are known.
This was at a time when the government's agenda was for encouraging more wealth creation and entrepreneurship - a factor "virtually ignored" by the RAE.
Dr Knight told a meeting of the Association of University Administrators at Loughborough University last week that even the best 5*-rated departments stood to lose out under the current system, which was unlikely to be altered for the 2001 round by the funding councils' recent review.
With an expected better overall performance but no more money, departments achieving a second consecutive 5* rating could lose up to 20 per cent of RAE funding, he said.
Dr Knight told the conference it would be better to follow an Australian-style model, where public funding is matched to private research funding. Under this system, institutions such as Cranfield University, Imperial College, and University College London, which are good at attracting private funding, would be winners.
Dr Knight said: "It's a question of which policy direction drives research in the UK. If we want to reward wealth creation and entrepreneurship, rather than the number of papers published in learned journals, then we need something different.
"We have to ask why is the Higher Education Funding Council for England conducting a fundamental review of the RAE while at the same time continuing with the RAE 2001? Why not get the policy right first and then decide whether we should go ahead with this massive bureaucratic
Rodney Eastwood, director of planning at Imperial College, London, who attended the conference, said: "It is something we have advocated. For science, engineering and medicine, external research income correlates well with RAE income, so it would be a reasonable way of allocating the funds."
But Tim O'Shea, master of Birkbeck College, London, disagreed. He said: "The dual funding mechanism works better than the research funding models that operate in other parts of the world. I see the RAE as a really successful British innovation. It keeps the research culture lively, it allows change and it allows world-class research."
He added: "The point at which this model breaks down is where university research is ahead of commercial research. Where did the worldwide web come from? It was set up by particle physicists wanting to communicate with each other, not by IBM, Microsoft or Xerox. If public funding for research was tied to private research income, I would chase after the private funding using the public funding. Institutions will follow the driver."
Mike Milne-Picken, head of planning at the University of Central Lancashire, said there seemed to be a "strong Treasury hand" steering the Department of Trade and Industry towards putting pressure on the RAE.
But he added: "I don't think that is necessarily wrong - there is a lot of public money involved."