Leader: Third stream is not third class

Almost exactly a year after publication of the Lambert report depressingly little has changed to facilitate "third stream" activities in universities.

The Chancellor, who commissioned the review, has promised more money - albeit at the lower end of what was recommended - and removed an obstacle to the creation of spin-off companies that he himself had created in the tax system. But, far from business interaction acquiring a place on the national higher education agenda to rival teaching and research, it seems to have quietly slipped back among the second-order concerns. For many academics this will be welcome news: they can get back to their real priorities of educating students and pursuing research. But in other institutions, knowledge transfer has become a key part of the academic remit. They can accept likely exclusion from the major rewards flowing from the research assessment exercise as long as official entreaties to concentrate on their strengths are backed up by worthwhile incentives.

Instead, the debate on strategically important subjects is being conducted almost wholly in terms of teaching and research needs, while funding for third-stream activities fails to offer any long-term stability. In some ways, perhaps Richard Lambert's report was too positive. Rather than lambasting universities, as the Treasury may have expected, it was companies that came in for most criticism for abandoning research and development. Our analysis of citations from non-university organisations in engineering and information technology would have been grist to this mill: 18 companies and research institutes feature among the top 100 producers of highly cited papers, but none is based in the UK. Despite 33 detailed and constructive recommendations, however, the overall impression left by the report was that not much was wrong with higher education's contribution.

Mr Lambert, who writes about academic entrepreneurship on page 30, recognised in his report that third-stream activities needed formula funding, rather than a never-ending bidding process, to bring stability.

But he muddied the waters by calling for changes to the RAE to reward more applied work. If higher education is to play a full part in supporting industry and boosting the economy, it needs a funding stream for business interaction on a par with the RAE, rather than this becoming an afterthought in an exercise with different objectives. The Lambert report showed that third-stream activity should be seen as a service that requires investment, not as an alternative to state funding. A year on, it is time to deliver.