Responses to a revised version of the plans, outlined in a consultation that ended last week, were met with caution despite the SFC’s efforts to meet the sector halfway.

In its response to the funding council, the University and College Union Scotland warns that blues-skies research may be stymied by the proposals, which outlined plans to distribute £21 million in funding for knowledge transfer through its Horizon Fund in 2010-11.

Of this, £6 million would be allocated on a project-by-project basis, with applications judged by a committee, and the remaining £15 million by a traditional funding formula.

This marked a change from original proposals, which would have introduced a bidding process with universities competing against each other.

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The final consultation also reveals that the SFC intends to increase the proportion of funding allocated to “strategic projects”, claiming that formulaic allocation methods “have not resulted in a strong, strategic focus on Scotland’s biggest challenge or opportunities”.

The UCU response says of the plans: “Universities are extremely wasteful of highly qualified labour. This is due to an inappropriate management methodology, which directly links specific amounts of cash to the contracts of research staff.

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“UCU believes project-based funding is not a sustainable method of funding knowledge transfer while these employment practices and management mindsets remain.”

The union also warns against creating a culture of dependency on the private sector, with more research taking place in industry.

Universities Scotland’s response to the SFC says it “acknowledges and welcomes [the] significant revision” to the proposals.

But it also warns that universities are split on whether a higher or lower proportion of the Horizon Fund should be distributed on a project-by-project basis.

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A spokesman for the SFC said its aim was to “find the best way to support universities in an area of their work which has taken on an even greater significance in the current economic climate”.

hannah.fearn@tsleducation.com