All the major political parties are reviewing their ÖйúAƬ policies. Like those working in and served by the ÖйúAƬ sector, we will all have to come to terms with the difficulties created by underfunded expansion.

All parties will have to decide whether or not further expansion at the expense of reduced quality can be justified. And, in seeking ways to boost funding, Labour and the Liberal Democrats will have to decide - just as the National Union of Students has recently considered - whether or not to drop current opposition to some form of post-qualification pay-back by students while at the same time ensuring that they do not face the current levels of hardship while studying.

However, before considering additional funding, we will need to be convinced that best use is made of the money currently available. And in one area at least it is not.

Complaints about the methodology used by the ÖйúAƬ Funding Council for England for the allocation of research funding are now rife. Ron Johnston (THES, June 9 and today), for example, suggests that the system produces a general regression to the mediocre.

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It certainly does not reward the best and bring on those with potential. And to do either requires real accountability which is also missing.

Currently, for example, there is a mismatch between assessments - done at department level - and allocations made at an institutional level. The recent National Audit Office report on financial control in ÖйúAƬ states that no institution seems able to separate the costs of research and of teaching and that all remain committed to seeing an "even" capability as far as research strength is concerned. This is hardly surprising since just as there are no rules about who within an institution gets the money, so there are no rules about its use. Thus universities use research money to subsidise teaching, to support departments awarded low ratings or even to enter the "transfer market" for staff with good publications or "with potential".

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What chance is there for the development of research excellence under these conditions and with such a clear lack of mission? There can be no doubt, for example, that some forms of research can benefit teaching. But even on this issue the current funding council thinking is opaque.

Certainly the English funding council has a somewhat unclear view of the contribution of the one activity to the other. Of more than 200 institutions which receive funding from the funding council only 112 receive any research money.

So, for the council, it is obviously not a requirement of teaching at this level that there should be a research presence. And, as a further indicator, only Pounds 16 million of the Pounds 616 million research money is fed into development to support teaching despite the clear need to enable a sector-wide revolution in teaching and learning methods and strategies.

There is a more beguiling methodology applied to research and that is the one used by the research councils. There is some anxiety over the use of peer review - which has been shown to be weakest when faced with innovation, which is arguably what is most needed. But despite this, the research council methodology tends to ensure that it is the best projects that are supported. But, and this is the real tragedy, present resources do not permit all the projects, even in the excellent category, to be funded.

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This highlights a real shortfall in the system: we cannot afford to see funds siphoned off to departments that are poor in research while projects that are excellent go begging.

It is this analysis that suggests the real problem is that the funding council does not have a clearly focused mission. The four issues of assessment of teaching, allocation of teaching monies, allocation of funds for teaching-related research and allocation of funds for other forms of research are all mixed up, with several bodies having overlapping responsibilities. This is a sure recipe for reducing value for money.

The following alternative might be considered: * Use Pounds 200 million, from the funding council's approximately Pounds 600 million per annum, to enable all academic staff to engage in research or development work designed to improve the quality of learning; * Transfer all the assessment staff within the HEFCE to a new enhanced quality council that would make quality assessments. This would separate the judge from the quartermaster; * Transfer Pounds 200 million to the research councils giving them primary responsibility for research in ÖйúAƬ. This would enable the greater development of centres of excellence outside London, Oxford and Cambridge universities, that together take 8 per cent of total funds but 37 per cent of research allocations; * Use the remaining Pounds 200 million to improve the academic infrastructure and the backlog of maintenance that has accrued over the last decade.

This may not solve all the problems but it would give a real boost to a discouraged sector doing a good job and it should produce better value for money.

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Don Foster is MP for Bath and Liberal Democrat education spokesman.