Potential PhD students could find that they can only get public funding if they secure places at top-rated university departments, as a result of a proposal published this week. The major review has recommended that the ÖйúAƬ Funding Council limits research funding of postgraduates to departments which have achieved a grade 3 or above in the most recent research assessment exercise.

The review has caused some ÖйúAƬ experts to squeal loudly. They fear such concentration will make it very difficult for a department that is less elite, but does have potential, to climb into the premier league. Highly rated departments do not always have the best research supervisors, so students may not benefit, and they are concerned that the move could reduce postgraduate choice.

Some are also privately worried about the effect on staff morale if departments lose funding for PhD students.

Roderick Floud, vice chancellor of London Guildhall University: says "The research assessment exercise has got very little or nothing to do with the ability to teach."

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Professor Floud is a member of the Economic and Social Research Council. "The whole thrust of the work that the ESRC training board has been doing over the last few years, with its insistence on improving completion rates and the production of training guidelines for students, has been that it's important to see the research supervisor as a teacher," he says. "The ESRC training board has consistently found that the best researchers are not necessarily the best teachers and supervisors."

In reply, Martin Harris, vice chancellor of Manchester University, who chaired the review, points out that the overwhelming proportion of the Pounds 14 million spent on postgraduate research students goes to those in departments attaining grades 3, 4 and 5 in the assessment exercise, so the bulk of students are already concentrated in the highly rated institutions.

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The rationale behind the recommendation is to protect postgraduate students and the quality of postgraduate research. Higher rated departments attract more funding anyway from Hefce. Those departments should therefore have more staff supervision time for students.

Research students need a substantial group of research-active staff, he says. But that is only one part of what they need. They also require libraries, laboratories, equipment and the company of other research students.

"Our obligation was to maximise the criteria for the success of students," he says.

And, he added, if his committee had not recommended further criteria to protect quality, there was a possibility that the money for postgraduate research students would have been taken away by the Government as part of a further dual support shift and given to the research councils. The councils would have funded students only at institutions winning a grade 4 or 5.

Professor Floud worries about part-time students, who are more widely dispersed and have less chance than full-timers of moving to a research-active department. "It's dangerous in principle and likely to discriminate against universities that have large numbers of part-time research students," he says.

Postgraduates are opposed to the recommendation on the grounds that it will reduce choice because it will concentrate funding in the research-rich institutions.

Ewan Gillon, general secretary of the National Postgraduate Committee, says: "Because a department receives a rating of 3 or above there is no guarantee that it will offer appropriate support to the research students in the way of facilities and good supervision."

Another vice chancellor, Kenneth Edwards, of the University of Leicester, although generally in favour of the recommendations, is concerned that greater concentration of postgraduates would work against flexibility for the department. "If a department has managed to produce a lot of good research, having got a grade 2, it will be difficult for it to progress," he said.

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This proposal from the Harris review has many supporters, however. It is consistent with a report last month from the leading British academies which called for an end to research council funding of departments which fall below the 3 rating. "I am very comfortable with it," says Maxwell Irvine, principal of Aberdeen University.

The best thing you could do for a postgraduate student on a discipline-based course is to put him or her in touch with a leading mind in that field, he says.

"I know from my own experience I had good teachers and I had bad teachers," said Professor Irvine. "I learned more from what might be regarded as the bad teacher who was the outstanding intellect in my field at the time.

"At the end of the day in ÖйúAƬ the ultimate quality is the quality of the intellect and the quality of the mind you can draw into the system. It would be wonderful if they were always brilliant communicators, but at least proximity to them might allow some of their thinking to rub off."

The review's other recommendations - including laying down a code of practice for postgraduate research which would require universities to have in place facilities and supervision arrangements - have been widely welcomed. So has the proposal for a directory of postgraduate courses and for clarification in postgraduate terminology. The recommendation is for taught masters courses to be given an "M" title, and for masters degrees containing an element of personal work to be called an MA or MSc.

Behind the report, sponsored by Hefce, the Committee of Vice Chancellors and Principals and the Standing Conference of Principals, lies concern at the effect of mushrooming postgraduate education in Britain.

One-fifth of students are postgraduates. The number of postgraduate students has tripled in 15 years as young people have opted for taught masters and conversion courses to improve their chances of a decent job.

That boom has created a crisis in funding. The lack of any cap on postgraduate numbers means that students simply roll up for their masters with their fees following them for example from the research councils or their own pockets, but with no new funding for the extra teaching load.

The committee concluded that the situation is untenable. It has recommended that public funding of taught postgraduate courses be separated from that of undergraduate degrees to prevent further erosion of the unit of resource and that it be set for the system as a whole and for individual institutions.

Martin Harris is adamant it does not mean an end to growth. "We tried to find a way in which that immense vitality and ingenuity in the new postgraduate sector could be maintained," he said.

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Therefore the committee turned against capping numbers, but said any institution which wanted to continue to expand would have to find the money from efficiency gains or from charging higher fees.