Ministers are set to consider a proposal that could lead to millions of pounds finding its way back to universities for the support of research infrastructure. But it will also lead to a decrease in the number of projects funded by the councils - possibly by up to 50 per cent in the first year.
This could mean concentrating fewer research projects at a more limited number of institutions.
Research councils may have to increase their overhead payments to universities following strong complaints from institutions about the workings of the dual support system whereby funding councils and research councils pay for research.
The proposal by officials at the Office of Science and Technology is in response to a review of the dual support system by Coopers & Lybrand for the Government last year. The report showed that not all the money transferred to research councils to pay for project costs in universities had been used that way.
Ministers will now consider research councils increasing the overhead payments for projects they fund from 40 per cent of the salaries cost per project to 45-50 per cent.
Research council sources say the impact on research volume will depend on whether the councils are asked to hand out the increased overhead costs to existing research projects as well as new ones. The impact in the first year of such a regime could be a dramatic decrease - up to half - of projects that can be funded by the councils.
If only new projects are affected, a 10 per cent downturn is estimated in the volume of research projects funded. Under both scenarios, the long-term cut in volume of research is predicted to be about 10 per cent.
The transfer from the funding councils to the research councils took place as part of new arrangements for the dual support system in 1992. Coopers & Lybrand said there was strong evidence that since the transfer, money had been used inadvertently by councils to sponsor more projects instead. Universities seized upon the findings as backing their claims that they had lost out on millions of pounds of funding for equipment and technicians.
Gareth Roberts, chairman of the Committee of Vice Chancellors and Principals, said of the OST proposals: "Money for indirect costs has been directed into extra projects. Universities have been subsidising this extra research. This is unacceptable and unwise. Any redress is welcome, although we have asked for a 10 per cent increase in indirect costs. We hope the situation will be kept under review."