Researchers are due to discover next week how much they will be funded following the research assessment exercise. Funding chiefs are considering several options that could penalise performance across the board.
The funding council has in previous years adjusted its grant to universities and colleges so that they do not lose more than 2 per cent in income. It is considering whether this method should also be applied to those who would otherwise see a large increase in income.
The Higher Education Funding Council for England board will discuss whether to renege on a promise to fund 3b and 3a grades. It will also consider arguments to fund grades 3a and 3b in particular subject areas or to fund only grade 3a and 3b departments that have improved their research standing.
Sir Howard Newby, the chief executive of Hefce, has promised that 5* departments will be protected. All other grades will be cut, with departments rated 5 being more protected than those rated 4, 3a and 3b.
This means the old unit of funding per researcher working in a 5* department will be multiplied by the total number of staff now working in a 5* department. In the 1996 exercise, some 5,000 people worked in 5* departments; that figure has now risen to 9,000.
Meanwhile, Universities Scotland has warned of a potential £41 million shortfall, given institutions' improved research ratings.
It is calling for a "research escalator" of a 20 per cent boost in funds over the next three years. It says this would fill the gap by the end of the second year and give an injection of extra funds in the third.
A spokesperson said: "A research escalator would give a clear message that Scotland is committed to research and discovery, which have economic as well as academic benefits. Scottish higher education must not be a victim of its own success."
* Labour MP Gordon Marsden, who sat on the Commons education and employment select committee, has called on higher education minister Margaret Hodge to rethink quality inspections.
Mr Marsden wants to integrate the RAE and teaching quality assessment into a broader Higher Education Excellence Audit. He has also called for teaching and research to be given equal weight in the assessment process.
He said: "The excellence audit would pick up universities that were doing well on the research side but needed to devote more to teaching and vice versa."