The future of university science is under threat, with the authorities lacking the "teeth" to save courses, a report by MPs says.
Students have held protests against the chemistry closure plan
The science and technology select committee called Sussex University's proposal to close its highly rated chemistry department "disappointing".
Until stronger national guidelines were in place, further such closures were "inevitable", it added.
But Sussex University called the report "partisan and contradictory".
'Lack of support'
The MPs found declining interest in chemistry was "without doubt a national concern".
The government had failed to give the Higher Education Funding Council for England (Hefce) enough "powers or political support", but had encouraged a "market", within which vice-chancellors were very powerful.
This had left Hefce with neither "the teeth, the tools, nor the will" to do its job effectively.
The report said: "It is extremely unfortunate that in an area of higher education so crucial to the nation's future industrial strength there is now an acknowledged policy failure."
Treasury figures show the number of students graduating in chemistry fell by 7% between 2003 and 2005.
However, applications to Sussex in the subject increased by 45% in 2004, 27% last year and 40% this year.
'Not enough students'
Vice-chancellor Alasdair Smith said the rise had been from a "low base" and that more applications did not always translate into more undergraduates.
He added: "Not enough students in schools want to do this subject."
From this autumn GCSE science is being overhauled to include a larger "applied" element, in the hope this will encourage more young people to go on study it after the age of 16.
Sussex wants to replace its chemistry department with one offering "chemical biology" in 2007.
Academics told MPs there was no guarantee of chemistry keeping its 5 rating for the quality of its research - the second-highest possible.
The report said: "It is disappointing that the university has taken such a negative view of the sustainability of this achievement, rather than seeking to build on this success."
Prof Smith said: "It is clear that the committee has allowed itself to become part of a campaign rather than taking a dispassionate view of the real difficulties which universities face in provision for science, technology, engineering and mathematics subjects."
Exeter University, King's College London, Queen Mary London and Swansea University have closed their chemistry departments, but these all had a lower research rating - and funding - than Sussex's.
The head of Bristol University's school of chemistry, Guy Orpen, said it was ironic this was happening when applications for undergraduate places were rising - demand was at "an all-time high" in his department.
"The key problem here is that the costs of operating a chemistry department are high and not reflected in the price that Hefce pays a university to educate chemistry students," Prof Orpen said.
"This mismatch of income versus expenditure is what leads vice-chancellors to consider closing these departments. It is notable that no closures happen in low-cost subjects".
The chief executive of the Royal Society of Chemistry, Dr Richard Pike, has called on the government to change the funding formula.
A spokesman for Universities UK, which represents vice-chancellors, said: "Universities are autonomous institutions, and a vice-chancellor's job is to make the right decisions to enable his or her institution to deliver excellence - and these can sometimes be tough decisions."
Higher Education Minister Bill Rammell said the government had "no current plans to interfere in institutional decisions" but wanted universities to work together "to help manage change smoothly".