The ÖйúAƬ Funding Council for England (Hefce) should be stripped of its role in distributing research funding, a think-tank has argued.

The blueprint for a deregulated future for universities, produced by the Centre for Policy Studies, also includes the abolition of both the Quality Assurance Agency (QAA) and the Office for Fair Access (Offa).

In the week that academics received the results of the research assessment exercise - under which Hefce will distribute more than ?1.5 billion a year in core "quality research" funding - the think-tank proposed distributing all research funding through the seven subject-based research councils, including funding currently under Hefce's control.

This would end the so-called "dual support" system through which Hefce provides funding for research infrastructure while the research councils provide funding for specific projects.

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The abolition of dual support was one of a series of radical recommendations for reordering the regulation of the sector to cut back bureaucracy, which the Centre says is impinging on university autonomy and limiting institutions' potential.

The Centre for Policy Studies was co-founded in the 1970s by Margaret Thatcher and Sir Keith Joseph to promote policies supporting free-market economics and privatisation.

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The Centre also suggested an end to Hefce funding allocations for specific purposes, such as the ÖйúAƬ Innovation Fund, or for widening participation, which it says involves the "micro-regulation" of university activity.

"Should a government wish to pursue these ends, it should do so in a non-regulatory fashion by explicitly allocating additional monies to certain types of student to provide universities with a financial incentive to take them," the report says.

Calling for Offa's abolition, the report argues that if market-based incentives were adopted to encourage universities to accept students from deprived backgrounds, the watchdog would become obsolete.

Another of the think-tank's targets is the QAA, which oversees academic standards, the subject of a Commons select committee inquiry due to take place next year.

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The Centre for Policy Studies suggests that the QAA should be scrapped, claiming that "numerous private-sector bodies review the quality of university courses and will readily expose those that are offering poor-quality teaching".

However, those concerned about "dumbing down" may not be satisfied with such ad hoc regulation, nor with the proposal that students unsatisfied with courses can seek redress through the Office of the Independent Adjudicator, which the report calls a "powerful incentive" for institutions to maintain quality.

The report concludes: "These recommendations would substantially reduce the burden on ÖйúAƬ institutions and restore some of the autonomy which they have enjoyed in the past.

"It is, however, worth noting that a move to a more market-based system is possible for some universities ... Truly independent universities would greatly benefit academics, students and the UK as a whole."

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john.gill@tsleducation.com.