The research assessment exercise has had its day, says a hard-hitting report from an influential group of MPs.
The Higher Education Funding Council for England must go back to the drawing board in allocating its £888 million research budget - and the rest of its money, the report says.
The House of Commons science and technology committee report proposes a light-touch research assessment exercise to take place every six years. There would be exemptions for top-rated departments and a development fund to help newer departments get research off the ground.
The report also suggests that the Hefce budget be split into four parts:
* Funding excellence. Top-rated departments can opt out of assessment, their funding based on project funding from research councils, charities and others, and individual discretionary awards from Hefce
* Promoting new centres of excellence. A research assessment process in which funding is based on research quality and volume as now but with a minimum standard of quality required
* Developing research capacity. Departments could bid for seed money with a business plan
* Fostering external collaborative research. A fund to support the costs of attracting external funding.
Other recommendations include: the ring-fencing of research in areas of national priority; prestigious career positions for academics who are primarily teachers; and more support for panel members.
The MP's report says the funding council should have anticipated the improvements in the 2001 RAE and warned universities that there was too little money. It says: "Roderick Floud of Universities UK described the funding of the 2001 RAE as a 'slap in the face' for universities. Hefce should have warned them to duck."
The report also lays into the government, saying it was "very disappointing" that the improvements demonstrated by the 2001 RAE have not been recognised. An extra £200 million is needed.
The Department for Education and Skills is rapped for not taking responsibility for Hefce's financial embarrassment. Higher education minister Margaret Hodge is criticised for shirking funding decisions that could have major repercussions. "We find it hard to believe that the minister is prepared to delegate all of that power to an unelected quango," it says.
Secretary of state for trade and industry Patricia Hewitt also takes a knock for her indifference to the state of research.
The report says careers have been ruined, morale shattered and universities' missions diverted from their teaching, community and economic development roles. It says the RAE stifles developing departments, especially in the new universities, and discourages long-term blue-skies research. Although the report says it believes the improved results of the 2001 RAE were genuine, it flags up gamesmanship and the administrative costs of the exercise.
Committee chairman Ian Gibson, former dean of biology at the University of East Anglia, said Hefce's failure to anticipate the level of improvement "shows how in touch with the university system it is". He said: "The report goes into how universities should be funded and on what basis. It's not just about research. It can't be taken piecemeal. It must be funded differently, with separate funds for each activity. Hefce should be more aggressive in negotiating funding with government and should ensure it backs up the universities."
The report says that Hefce cannot be blamed for the level of funding, but it has to take responsibility for how the deficit is handled. "Hefce seemed to believe that any side-effects of the RAE were unfortunate and somehow nothing to do with itself. If Hefce has a mechanism for selective research funding then it must take responsibility for any distortions it causes."
Dr Gibson said he was confident that the government would provide funding for higher education in July's comprehensive spending review. A Hefce spokesman said the council would study the report carefully and would take its recommendations into consideration. He added: "We are looking at developing a range of rewards for excellence, covering areas other than just research, so that institutions can build on their strengths."
The government has six weeks to respond to the report, which includes a motion for debate in the House of Commons.