Vice-chancellors are being asked how they want to spend their shares of the £500 million Science Research Investment Fund.
The Higher Education Funding Council for England will announce allocations for the second round of the SRIF in January. Vice-chancellors will have until the end of May to submit plans for how the money should be used.
The money, from the comprehensive spending review, is intended to provide a recurrent funding stream to address crumbling research infrastructure, the result of historical underinvestment. There is an estimated £3.7 billion deficit in facilities, buildings and equipment for science, engineering and technology. Arts and humanities facilities face a £500 million deficit.
Hefce chief executive Sir Howard Newby told vice-chancellors: "The priority of SRIF funds should be addressing past under-investment and not increasing capacity, except where this is justifiable, for example, new and emerging fields of research."
He said that any new build plans would need to be accompanied by option and investment appraisals and should be offset by disposal of old buildings.
Allocations will be calculated using a formula whereby half will be based on the institution's 2002-03 quality-related research income and half on total research income received in 2000-01.
This round of the SRIF will require institutions to find 10 per cent in matching funding from partnerships with external organisations. The last SRIF, allocated in 2001, required institutions to raise 25 per cent in matching funding, forcing many to redirect cash from other areas to secure funds.
The previous SRIF is believed to have contributed to University College London's financial deficit. It was allocated £46.4 million and had to find more than £10 million in matching funds.
As before, collaborative projects between UK institutions will not require matching funding. In a change of strategy, projects from humanities, language-based disciplines, design and the creative arts will now be eligible for funds.
Ian Haines, chair of the UK Deans of Science, welcomed the reduction in matching funding but warned: "There is a risk of putting too much reliance on research assessment results, which, if followed too closely, will fail to encourage institutions to develop third-leg funding streams."
Levels of funding for Scotland, Wales and Northern Ireland have yet to be settled. The Department for Education and Skills will distribute £200 million to institutions in England only. The Office of Science and Technology will allocate £300 million across the UK - this includes £15 million to support "cooperation between institutions, including mergers".
Funds will be available from April 2004.