Universities can no longer be "ivory towers" and must become "engines of economic growth", said Peter Mandelson, secretary of state for trade and industry, outlining the thinking behind the government's competitiveness white paper launched this week.
"There are lots and lots of bangs locked up in our science base, locked up in universities, locked up in labs, just waiting to be liberated," he said.
With science and the need to commercialise it at its core, the white paper, Our Competitive Future: Building the Knowledge- Driven Economy, includes a number of new incentives to promote innovation and commercial acumen.
"The ability to turn scientific discoveries into successful commercial products is vital if businesses are to thrive in the knowledge-driven economy," said Mr Mandelson. "We must encourage universities to engage with business so that new discoveries can be turned into marketable products as quickly as possible."
The white paper proposes a new Pounds 50 million Higher Education Reach Out Fund (Hero) to reward universities for collaboration with business, doubling the Teaching Company Scheme, and a new national network of Faraday Partnerships.
Hero, a third leg to university funding, is to be run by the Department of Trade and Industry, the Department for Education and Employment and the Higher Education Funding Council for England. The fund will be worth Pounds 50 million over the next three years and will reward universities that work with business to promote technology transfer. It will "help recognise the importance of university interaction with business alongside teaching and research", says the white paper. Some Pounds 10 million will be available in 1999-2000, rising to Pounds 20 million in 2001-02.
The fund will also support initiatives to improve student employability, such as work experience and projects that help students gain the key skills that business says it needs. Activities that keep higher education courses relevant to those in work will also receive funding.
The new fund was welcomed by Luke Georghiou, director of Manchester University's Policy Research in Engineering, Science and Technology , who last week said the main barrier to individual academics working with industry was the lack of incentives. He called the initiative "a very positive step in the right direction".
There will also be a doubling of the Teaching Company Scheme, which enables academics to spend up to two years in a firm developing innovative ideas. The extra money will enable some 200 extra projects to be backed every year.
A new national network of Faraday Partnerships was also announced. The scheme, which nurtures networks between universities and businesses, will build on the initial four Faraday Partnerships established in 1997 by the Engineering and Physical Sciences Research Council.
The DTI will provide a further Pounds 10 million to promote high-quality research partnerships between universities and businesses, particularly small businesses, through a second round of the Foresight Link awards.
The white paper also announces a review of the working practices of public sector research establishments to ensure that they are making the most of the commercial potential of their research.
Peter Mandelson, page 12