An Oxford professor has said state reform of universities may be necessary as he claimed they had lost their moral compass by accepting donations from a trust set up by the late Max Mosley.

Oxford and universities in London have accepted substantial sums from the Alexander Mosley Charitable Trust (AMCT), set up in the name of Mosley’s son who died in 2009 of a suspected drugs overdose.

Critics say the money comes directly from the inheritance left by Max Mosley’s father, Oswald Mosley, the leader of the British Union of Fascists, and is tainted.

Oxford University and two of its colleges have defended accepting the money, saying it went through robust scrutiny and would be transformative for students’ lives.

In his 20s, Max Mosley was a supporter of his father’s postwar Union Movement. In 1962 he was arrested after a punch-up with anti-fascists in east London while his father was out canvassing. Best known for helping to transform Formula One motor racing and for taking on the media over privacy, he died this year aged 81.

Prof Lawrence Goldman, emeritus fellow in history at St Peter’s College, told Sky News Mosley had never apologised for supporting his father’s movement, which made the donations “tainted and dirty money”.

Goldman said the donations would be better going “to the communities who were terrorised and beaten up by [Oswald] Mosley and his thugs twice in the 20th century … in the 1930s and the early 1960s.

“If the Mosley family trust want to atone, if they want to do good in the world, surely they should be building civic centres in Notting Hill or old age homes for elderly Jews who were beaten up in Golders Green and north-west London.”

Goldman said Oxford had lost its moral compass by accepting the trust money. The fact that the London School of Economics, University College London and Imperial College had all accepted money suggested it was a much broader issue, he said.

Asked if the government should intervene, Goldman said: “I do think there is a role for the state. I believe in self-governance, but if they can’t govern themselves effectively and according to the moral principles that I think most British people would expect of great universities … then there may be a role for the state.”

The donations include £6m to Oxford University, £5m to St Peter’s College for a new block of student accommodation and £260,000 to Lady Margaret Hall to fund its foundation year. The university said the donation, like all donations, had passed a “robust, independent process, taking legal, ethical and reputational issues into consideration”.

St Peter’s College said the new accommodation would make a “transformative difference” to students’ lives “for generations to come”. The block was initially set to be called Alexander Mosley House, but the college confirmed that a name would be chosen through internal consultation involving students.

Lady Margaret Hall said the donation “enabled a cohort of students from very diverse and low-income backgrounds to attend Oxford” and participate in the college’s foundation year.

A spokesperson for the college said: “The Alexander Mosley Charitable Trust knew that the cohort of students came from diverse and under-represented backgrounds and was pleased to support the scheme and its aims. Six students from the cohort are now Oxford undergraduates. There was no attempt to ‘rehabilitate the Mosley name’. The AMCT trustees did not ask for, and were not given, any public acknowledgement of the donation.”