Cash endowments should replace grants for basic research in universities, according to a leading social policy expert.
Julian Le Grand, professor of social policy at the London School of Economics, said that endowments would free universities from state and commercial interference, allowing them to concentrate on blue-skies research.
Professor Le Grand said: "The case for state funding of basic research is overwhelming. There is... a benefit to society. But, at the same time, it is a good idea to have universities as independent of government as possible.
"So we need a way by which research can be funded without having to bow to dictates of government or the markets."
Professor Le Grand's proposal turns on its head the Conservative Party's policy of endowing university teaching.
The Conservatives proposed one-off institutional endowments of perhaps £1 billion. Vice-chancellors said the bill for the sector could be about £100 billion.
Professor Le Grand ruled out endowments for teaching because of the expense. He said that these would be a state subsidy for the middle-class students who continue to secure the bulk of university places.
His idea is that universities would be endowed for research over perhaps ten years. The government would give annual amounts to universities for endowments as part of their Higher Education Funding Council for England research grants.
The endowment funds would be ringfenced and invested to produce an annual income.
An institution that received £20 million a year for ten years would be generating £10 million a year for basic research after ten years, assuming a 5 per cent real rate of return.
Some of the largest research institutions would need endowments several times this size to generate enough to support their research activities.
The annual Hefce grant would be reduced year on year in line with the amount an institution's endowment was generating.
"This could mean that at the end of ten years, we could dispense altogether with the process of allocating money through the research assessment exercise," Professor Le Grand said.