Four higher education bodies would be merged to form a "super-quango" under Lord Browne's proposals.
A single Higher Education Council would replace the organisations responsible for funding, quality, access and student complaints.
The organisation would "set and enforce minimum quality levels across the whole sector".
It would also be responsible for identifying and funding "priority" courses, whose curricula it could shape by, for example, setting minimum contact hours.
Private providers would be allowed to apply for public funding for priority programmes but would have to meet the same quality requirements as public providers.
A key role of the council would be to support universities at risk of failing - by, for example, helping small and specialist institutions that experience temporary changes in student demand - via a "market transition fund".
The council would have powers to make recommendations to the governing body of an institution if it viewed the management as "ineffective"; where failure could not be prevented, it would explore the option of mergers and takeovers.
"The judgements involved will be difficult and sensitive, often raising acute political interest," the report notes.
The new body would incorporate the functions of the Higher Education Funding Council for England, the Quality Assurance Agency, the Office for Fair Access and the Office of the Independent Adjudicator.
A university's students would be able to access the Student Finance Plan only if the university agreed an "access commitment" with the council. Universities that did not meet their targets on access and dropout rates would have to agree a minimum spend on efforts to improve their performance.
A condition of grant would be that all new academics with teaching responsibilities undertake a teacher-training programme accredited by the Higher Education Academy and that this opportunity be made available to all staff. Universities would have to publish data on the proportion of teaching staff who hold such a qualification.
The government would also set a minimum entry standard for students using the Universities and Colleges Admissions Services' tariff system every year, but a proportion of places would be allocated directly to institutions by the council rather than through the tariff system.
On the OIA, the report argues that bringing regulation and student-complaints handling together "will enable regulation to be adapted in the light of decisions about student complaints where appropriate".
Lord Browne's report says the panel examined whether there was scope to distribute funding by a metric of quality but concluded that there was no robust way to do this. Instead, it argues, student choice will have a vital role in improving the quality of higher education.
This "more targeted" approach to regulation would mean "greater autonomy for institutions" and less control by government, it maintains.
However, there was scepticism from the sector about this claim.
Bahram Bekhradnia, director of the Higher Education Policy Institute and who has previously worked at Hefce, said: "It's a great pity that the Browne review has been hijacked in several important respects by the government.
"This looks suspiciously like the bonfire of the quangos. Although it could be made to work, it will be suboptimal: there will be all sorts of conflicts of interest and cracks and duplications."
He added that part of the QAA's functions were once part of Hefce but this "didn't work".
"On the other hand, if the government removes a lot of the Hefce grant, as the review group obviously know it will, beefing up the funding council's role is an obvious thing to do," he said.
Don't supersize me
Peter Williams, the former head of the QAA, said that while there were "superficial attractions" to the idea of a single quango, the report indicated that the new body would have functions that represented a significant attack on the independence of universities.
The report's statement that the council would define minimum levels of quality for priority programmes - by setting what the report calls "basic programme content requirements" - "undermines at a stroke institutions' fundamental academic autonomy", Mr Williams said.
"Most significantly, though, the role of the council in carrying out the government's decisions on admissions leaves the reader in no doubt that, whatever the rhetoric about independence, the council would be no more and no less than an arm of government - Hefce in XXL-sized clothes - giving the Department for Business, Innovation and Skills new control over the day-to-day lives of higher education institutions.
"No government gives away power over money; under these proposals, higher education would finally become a state-controlled and regulated industry," he said.
"The costs of this mega-quango, with its task of 'setting and enforcing baseline quality levels' (whatever they are) aren't mentioned, but would undoubtedly be huge."
The report "gives the impression of being written by people who have forgotten much of what they should have learned over the past 20 years, or who view higher education institutions as simply the place that students go to be filled up with skills - rather like a BP forecourt," Mr Williams added.
rebecca.attwood@tsleducation.com
TIPPING POINT FOR PRIVATE FUNDING? UK'S PUBLIC SUPPORT COULD FALL TO BOTTOM OF OECD LEAGUE
The large rise in tuition fees recommended by Lord Browne to mitigate a huge cut in teaching funding could tip the balance in UK higher education in favour of private funding and leave the country with one of the lowest public investments in universities in the industrialised world.
In its recent report Education at a Glance, the Organisation for Economic Cooperation and Development says that in 2007 the UK's public investment in the sector represented 0.7 per cent of gross domestic product, just ahead of private spend at 0.6 per cent.
Thanks to the last rise in tuition fees, the gap between the two has narrowed since 2004, when 0.3 per cent of GDP was spent on higher education from private sources, including students, and 0.8 per cent came from the government.
However, the change recommended by Lord Browne, coupled with the expected cuts to teaching funding, would push Britain closer to the big private spenders on higher education, such as the US, Japan and South Korea.
In the US in 2007, private expenditure on higher education was 2.1 per cent of GDP, while in South Korea it was 1.9 per cent and Japan 1 per cent.
Stéphan Vincent-Lancrin, an analyst at the OECD's Centre for Educational Research and Innovation, said it would be difficult for the UK to reach the levels of private investment seen in the US, where half of it comes from companies, foundations and alumni.
However, slashing government funding for teaching - and replacing it with money from private sources - could push the UK close to 1 per cent, which if its overall spend on higher education remains static at 1.3 per cent would be the majority of funding. It could also lead to UK public expenditure on the sector falling closer to that of Chile, with the lowest government spend in the OECD at 0.3 per cent of GDP.
England would be left with the highest fees in the world for domestic students studying for "public" degrees.
Although they will still fall short of the average $22,000 (£13,800) charged by private colleges in the US in 2007-08, the average public university fee in the US was about $5,600 (£3,500), according to the OECD.
At a fee level of £6,000, England would easily outstrip average public degrees in Japan, which cost about £2,800 in 2006-07, and South Korea, which were £3,000 in 2007-08.