universities currently have the freedom to over-staff and are rewarded for doing so under the present system.
Uh... really? Are we really over-staffed (uh.. I mean in the teaching and research positions, not the central facilities)? If so... who are the buggers who aren't doing anything, and why can't we get them to take on the surplus work of those who are working overtime to raise funds, do research, write courses, mark, etc. etc. etc.?
To me, it would appear that problem would be not that there are too many academics, but that there are too many members of staff at universities who are meant to justify their existence by research activity when they actually have to spend much of their time teaching. A greater acceptance and acknowledgement of the role teaching has in universities is perhaps required.