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PENALTIES for social policy departments failing to make top grades in the research assessment exercise would hinder innovation, harm local links and create division between research and teaching, a new report warns.

The study, titled Quality First?, reveals that the assessment of quality in social policy research is counter to the Dearing commi tee's recommendations that departments should not get research money if they fail to receive at least a 3a rating.

Dearing suggested offering extra funding for "private research and scholarships related to their teaching" as an alternative to entering the RAE.

But Gary Craig, professor of social policy at the University of Lincolnshire and Humberside and author of the report, said the idea could destroy potential.

Professor Craig's two-year study found the RAE was the "least worst option". However, it added that funding councils must make clear the terms of the next RAE soon and should extend the time between exercises to at least five years.