"You can tell a great university by the companies it keeps"

The British are good at universities. It is not just that Oxford and Cambridge remain among the best in the world ; another dozen regularly rank in the international top 100. Given their relative poverty compared with American universities and the country’s size, it is an extraordinary achievement.

Nor does it stop there. Wherever there is an university, there is an identifiable buzz. What they do spills over into everything from cafe, club and restaurant life and local companies, large and small, feed off their research, academics, students and graduates.

Universities are sources of intellectual, economic and social vitality. But the alchemy that creates the university is very particular. Their culture is sustained because they are autonomous, serving their vocation as places of free learning, scholarship, teaching and research. Any beneficial impact they have on the city in which they are located comes next.

Everyone pays lip service to the idea of university as an Enlightenment centre of knowledge. But those who govern universities - and their government paymasters - face a tricky task. Too much emphasis on knowledge and learning for their own sake and the university becomes an ivory tower ; too much emphasis on economic benefits and the idea-generator implodes. In the US, despite American universities’ world standing, there is growing concern that too many universities and academics have sold their intellectual birthright to the demands of commerce, so killing off the very idea of the university. Some British academics are beginning to voice similar concerns.

Their worries reached a new pitch last week by a document, leaked to the Financial Times, that sets out how the new Department for Innovation, University and Skills (DIUS) sees universities - or did four months ago. The paper, like the innovation white paper to be published later this month, stresses the economic impact of universities and their research as their alpha and omega. They must further move towards becoming business-led hothouses of local innovation to which other university objectives must be at least partially subordinate.

Business must be enlisted to design degree courses and partly fund students’ courses, and universities must do more to exploit commercially their intellectual property. New money will go to the universities that get the message ; those which do not will live on short rations, with even their precious autonomy threatened.

Already a row is brewing. For the government, there are academics such as Derek Fairhead, professor of applied geophysics at Leeds, whose fast growing spin-off company Getech has made him and colleagues millions while generating jobs and exports aplenty. If university research is left unexploited, he says, it is a scandalous opportunity lost.

The University of Nottingham’s Philip Moriarty, professor of physics, takes the opposite view. Universities should not become the research and development wings of corporations, using tax payers’ money for research that is not in the wider public good. There are differences between how company and university scientists approach research which must be respected to the last.

Both men recognise the tightrope they walk : Moriarty does not want to be cast as the defender of the ivory tower, nor Fairhead the apostle of hyper-commerciality. But there is an academic vocation that does not readily sit with commercial values. The evidence is that research needs to be undertaken for its intrinsic interest, with researchers free to go down blind alleys. If you force universities to overprescribe what can and can’t be researched at the behest of corporate backers, you kill the goose that lays the golden egg. It is only later, when an idea hatches and a proposition is proven that business should enter the frame.

And yet ... universities are pivotal to the economy and set to become more so. To forgo making money from research is to ignore that truth. And despite all the effort and exhortation of the last few years, the amount of additional income generated by commercialising intellectual property by the UK university sector was a mere £31m in 2005/6 with only 187 spin-offs, a success rate that would embarrass a single venture capitalist, let alone the university sector worth some £10bn. A survey by law firm Morgan Cole found that 90 per cent of universities still prefer publishing to boost their research standing rather than applying for patents. Small wonder the DIUS ministers get impatient.

Yet business’s part in the failures remains largely free of criticism. Business wants research on the cheap and, too frequently, it is as much its failure that ideas do not become translated into business propositions, as a recent pro-business review of university-business links conceded. Nor is business any more generous about training. At the last count, there were just 2,045 students who were part-funded by business in doing their foundation degrees. The chances of lifting that number by some 100,000 over the next 12 years to meet the government’s targets, unless business radically changes its tune, are zero.

The government needs to recognise that there is an enormous value in a university for a university’s sake, backing its words with cash. British universities need more wholeheartedly to set about exploiting the ideas they generate and ploughing the profits back into their academic heartland. And both need to call business’s bluff. British business is full of complaint and seems only interested in tax breaks, avoidance and evasion. Now has come the time for it to start writing some cheques instead, to put its money and effort where its mouth is.