Surrey University could become Britain's first public university to opt out of government control and rely on independent funding.

In 2000-01, the university was among the institutions that received the lowest proportion of their income from the Higher Education Funding Council for England.

New figures released by Hefce show that, on average, institutions received 41 per cent of their income from the funding council. Only 17 universities now derive the majority of their funding from the council. Just 25 per cent of Surrey's income came from Hefce, down from 28 per cent three years earlier.

Vice-chancellor Patrick Dowling said that the university listed government higher education policy as one of the highest risk factors in its strategy. "Something has to be done. It could reach the stage where we feel strongly enough (to become independent). I would like to be able to keep our options open," he said.

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He told The THES : "It is not easy going private overnight. But if we were given a major sum or endowment, we would be one of the first ones to say let's have a go."

Until recently, Surrey's undergraduate degree in dance was privately funded by student fees and was never short of applicants. But Professor Dowling said tuition fees should not rise as this could deter students.

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He said the university could operate totally independently from government, being research-led with high-quality teaching at both undergraduate and postgraduate levels.

Since suffering huge budget cuts in the early 1980s, Surrey has worked to distance itself from government funding. It increased the proportion of postgraduate and overseas students (who pay fees) and set up a "land bank", profiting from sales, most recently for the building of a hospital. Surrey was also the first UK university to own a science research park, from which it nets about ?4 million a year in rent.

In 2000-01, the university received ?29 million of its ?116 million income from Hefce grants. The rest came from academic fees and support grants, research grants and contracts, endowments, rental income from its research park, and its ten subsidiary companies.

Other institutions, however, said they would be unable to turn down millions of pounds in funding council support.

Imperial College London received 29 per cent of its income from Hefce last year. But despite raising the prospect of tuition fees of up to ?15,000, the college said it could not afford to give up government support.

Rodney Eastwood, Imperial's director of planning and information, said: "We could not be independent from the ?60 million Hefce research grant." He said that including grants from the research councils, Imperial was 50 per cent funded by the public.

Cambridge University derived 32 per cent of its income - ?140 million - from Hefce. Treasurer Joanna Womack said that the endowment required to generate a similar income was unrealistic.

"At 4 per cent, that represents a capital sum of ?3.5 billion," she said. "We could not raise that, and even if we could, such a sum would just leave us where we are at present, whereas, like all universities, we need to grow our income in order to cover increased costs. What we really need is increased Hefce funding for both research and teaching, guaranteed for several years so that we can make sensible plans."

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Michael Sterling, vice-chancellor of Birmingham University, suggested that he would like to move towards more independent funding. With one-third of its income from Hefce, he said there was no possibility of the university opting out. "That's still too much on our turnover of ?289 million. In our five-year plan, we hope to reduce dependency on Hefce. We'd be doing well if it went down by 10 per cent.

"The government offered us easy money in the 1960s and 1970s, and we took it. But the mood now is to regain our independence."

There is no established procedure for becoming "independent" as no university has tried to leave the public sector. A spokesman for the Department for Education and Skills said: "There is no cut-off point of public funding below which accountability arrangements are suspended."

He also noted that institutions did not have to be in receipt of Hefce funding to apply for money from the research councils.

Buckingham University, founded in 1976, remains the UK's only independent university. With fewer than 1,000 students, only one-quarter of whom are British, it is predominantly a teaching institution.

The UK universities receiving government funding remain autonomous private bodies, governing their own academic and financial affairs. The Privy Council approves the statutes and gives degree-awarding powers and university status to all institutions, whether publicly funded or not.

Cranfield to go postgrad-only
Cranfield University is preparing to resume its role as the UK's only entirely postgraduate university.
It expects to stop undergraduate teaching by 2006, when the Royal Military College of Science at its Shrivenham campus turns out its last graduates. These 640 students form the majority of the Cranfield undergraduate body. The last civilian intake will be in September.

The main campus in Bedfordshire has always catered exclusively for postgraduates.

But vice-chancellor Frank Hartley has no intention of the opting out of Hefce funding. He said: "Our strategy is to use Hefce funding as a foundation on which to build all the rest. We also seek to minimise Hefce funding by leveraging funds from elsewhere, such as business and industry.

"We need the baseline funding to generate the 84 per cent funding from other sources."

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