Just what is a university? One school of thought says that it is, in the vocabulary of the European Court, an "emanation of the state," largely paid for by the government, having a licence to trade from the Privy Council and in some cases giving staff and students a right of appeal to the Queen. According to the other, it is a free-standing body with its own staff, management, finances, degree-awarding powers and charitable status.

Usually the truth lies somewhere between these two poles, in a sunny equatorial zone where universities have been able to get cash without too much pressure on the uses they make of it. But in the past few years, the funding and research councils that hand over the money have become increasingly keen on saying how it might be used. And some time soon, the issue of how the assessment of teaching quality is organised will finally be resolved, opening up new vistas for the central control of British higher education.

The urgency of the decisions over quality assurance for teaching is illustrated by the letter from Diana Warwick of the Committee of Vice Chancellors and Principals to Michael Forsyth, secretary of state for Scotland, urging him to lean on the Scottish Higher Education Funding Council to join in the new national quality system which the CVCP and others are setting up.

SHEFC's reluctance to join in the university-owned agency unless its criteria are met is baffling. If Scottish devolution happens - a strong possibility after the election - Scottish higher education will need to be able to reassure potential students across Britain and beyond that independent funding and administration do not mean drifting standards. Scottish higher education is a small but well-regarded system. It must ensure that it carries on being demonstrably good. English, Welsh and Northern Irish universities also have a lot to gain from a quality system in which Scottish colleagues are full participants.

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After the election, too, comes Sir Ron Dearing and his report. Quality will be second only to funding in its concerns, and it is known that, unless the universities allay his quality fears, a national quality assurance body like the former CNAA may figure among his recommendations. Politicians like the idea, and Sir Ron has not built his career on annoying ministers. In any case, years have gone by without the universities building their own quality machine. Why should the Government not impose one on them instead?

Anyone doubting the centralising lust of the people in charge of British higher education need look no farther than the world of research, where for many years the funding councils have had a theoretical duty to provide background, unhypothecated research support while the research councils have supported peer-reviewed research proposals from the university system.

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Although special initiatives and programmes have always eaten into the free money the research councils have to spend on research grants and awards, changes are taking place. John Griffith points out this week (page 12) that the funding councils too are becoming directive to the point of dictatorship in their ambition to control research spending.

The most chilling aspect of the English funding council's ambition is the notion that its future research spending patterns should "respond to national priorities." There have been occasional instances of cash allocated by bureaucrats in line with imagined national needs not being wasted, but from nuclear power to Concorde, the record is mainly awful.

The "market-driven" approach which the Department of Trade and Industry promises to follow with technology research is, if possible, even less promising. Long-term spending on research - in other words, anything with a time horizon of more than a year - cannot be driven by a market which does not exist yet. Asking industrialists and civil servants, neither breeds famous for their vision, what ought to be paid for is bound to waste some money and misallocate the rest.

The real role of the funding councils in research has long been defined and has worked well. It is to ensure that there are laboratories, libraries and other resources where research can be carried out, and to find some small sums for research which is not yet advanced enough for full-scale research proposals to be feasible.

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No case has yet been proven that anything was wrong with this way of working, except that it failed to meet the managerial ambitions of funding council figures whose idea of national priorities seems to exclude the independence of the university sector they are supposed to be supporting.

This mindset would be alarming enough if the funding councils were increasing the resources available to universities, instead of overseeing yet more "efficiency gains". But at the moment universities are being forced to rely more and more on new sources of funding, including industrial money, charity funding, European cash and perhaps, some time soon, tuition fees from home students.

In this climate, a more directive quality system for teaching and a more managerial research system will mean that the state may end up reducing the effectiveness of British universities to external funders. The overall structure of higher education is in the hands of the Government as the provider of core funds for both teaching and research, and as the body responsible for institutional viability.

But nobody can force a big company or a major research charity to put cash into an institution whose major funders are forcing it in what seems to them to be the wrong direction. Other options open to them include taking research in-house or offshore. The unsubtle model of innovation is one in which the English funding council seems to believe is the strongest hint yet to major companies that their research money would be better spent somewhere else. It is also a pretty obvious hint to British institutions of international repute and fund-raising power to keep their privatisation plans up to date.

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There are, of course, things that universities can do that would allow them to defend their position against these related threats. Perhaps a spot of legal advice on the status of government direction of university funds might be an asset.

Another notion would be to revive the idea that academic freedom is worth paying for. Academic freedom is in part the freedom to say things that annoy funders, vice chancellors and politicians alike. But it must also involve the freedom to teach apparently useless subjects, or to research a subject even if people in power cannot see how it is going to turn into something saleable.

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Although some British universities were set up in the 19th century to avoid the religious discrimination faced by applicants to Oxbridge, the UK lacks institutions with names like the "free" and "autonomous" universities found in countries with even more bitter political histories. Now is the time for universities to insist that they are valid autonomous enterprises that deserve to be funded as such, and where money is generally very well spent. Although they are dependent on state funding, the state is also dependent on them. Civil servants do not deliver lectures, carry out research, write books and papers or win Nobel prizes. The people who do so are entitled to insist on being properly valued and respected by those who do not.