The Scottish Parliament's enterprise and lifelong learning (ELL) committee has condemned the Scottish Higher Education Funding Council for "profoundly mishandling" its review of teaching funding.
It has called on the Scottish Executive to set up an independent review body to investigate teaching costs north of the border and to come up with a new scheme for 2003-04.
The move comes just as Shefc has thrashed out a compromise deal with Universities Scotland for 2002-03. There was widespread dismay within universities and colleges over Shefc's initial proposals to cut the number of subject groups from 22 to six. Critics claimed the funding changes risked destabilising the sector.
Shefc has outlined revised plans for 13 groups, backed by a £5.7 million cushion for teaching funding in clinical medicine; initial teacher training; pharmacy; and business, humanities, communications and languages.
But Alex Neil, convenor of the ELL committee, insisted that an independent inquiry was still necessary because Shefc had "got their hands dirty", which had put the credibility of their proposals into question.
He warned that the committee would be very unhappy if any quango attempted to pre-empt a parliamentary inquiry.
He said: "This is not just a matter for negotiation between Shefc and Universities Scotland. The taxpayer and Scottish society as a whole has an interest, and we represent that interest."
David Caldwell, director of Universities Scotland, said that although Shefc had initially mishandled the review, it deserved credit for tackling the problem in recent months and coming up with robust and coherent proposals.
Universities Scotland believes there is no need to set up a new body because Shefc already has the necessary expertise.
The decision on setting up an independent review rests with Wendy Alexander, Scotland's enterprise and lifelong learning minister, who will respond to the committee's report in a parliamentary debate next Thursday.
The debate will also focus on Shefc's review of research funding. The ELL committee wants Shefc to drop its proposal to end funding to departments rated three and below. It says this would exclude many new universities.
John Sizer, Shefc's chief executive, said: "We welcome the thoroughness of today's report on our ongoing reviews of teaching and research funding... We have learnt lessons from the challenge of trying to establish a pragmatic, fairer and more transparent system of funding."