* Extra cash for new funding stream * Better-run universities should get greater financial freedoms * Code of conduct for governance established
The government should plough up to £200 million more into university research because the funding system is concentrating too much money on a small elite, thereby threatening the viability of entire research departments, according to a review for the Treasury.
Richard Lambert, in his review of university-business collaboration, published last week, says that a new funding stream worth "in the region of £100 million to £200 million" should be set up to protect departments doing essential research with businesses.
In a move that is seen as a boost for universities' case for more public investment in next year's comprehensive spending review - predicted to be the tightest ever - chancellor Gordon Brown welcomed the report.
Mr Brown said: "At their best, business and universities in the UK produce world-class results and can build world-beating partnerships, helping to foster productivity growth throughout the British economy.
"A centrepiece of our next budget and spending review will be government playing its part in helping universities and business face up to these new challenges."
Mr Lambert stresses that the investment has to be in addition to the £1.8 billion a year allocated for university research, which is only "just enough" to keep top universities globally competitive. "Public resources are limited. But investment in research departments that can show they have strong backing from business will bring significant economic return," he says.
The report, which emphasises businesses' failure to embrace research activity, highlights shortcomings with the dual-support system, where universities are funded through the research assessment exercise for their infrastructure and by the funding councils for specific research projects.
Mr Lambert reports that funding from dual support is highly concentrated, with 61 per cent of all RAE cash (£514 million) and 69 per cent of all research council grants (£399 million) going to 15 universities.
He says that although he supports such selectivity to keep Britain's best universities competitive, there is concern that the concentration of funds, primarily in the "golden triangle" of London, Oxford and Cambridge universities, could damage research activity in other institutions.
"The greatest worry is that research departments that are doing work that is of real value to business but that do not rank highly in the RAE, will find it increasingly difficult to sustain themselves," he says.
Universities such as Cranfield and Loughborough attract significant business investment, he says, "but only a relatively modest proportion of (RAE) funding". He says that new universities often get "very little" support from dual support.
Mr Lambert says that the new £200 million funding stream could be administered through existing initiatives, but will be best distributed on an "entirely business-led basis" through regional development agencies, as they are "close to the market".
As The THES exclusively revealed last week, Mr Lambert also calls for a Pounds 60 million increase in funding for the commercialisation of university research - the Higher Education Innovation Fund - from £90 million to £150 million a year.
Sir Howard Newby, chief executive of the Higher Education Funding Council for England, said: "We warmly welcome the recognition that increased public funding has a major part to play in encouraging the further growth of university-business collaboration."
Ivor Crewe, president of Universities UK, said: "The chancellor's commitment to help universities and businesses in knowledge transfer as a centrepiece of the next budget and spending review is very positive."
The government will make a formal response to the recommendations of the Lambert report by next summer.