The threat of state interference in the running of Britain’s oldest universities followed a review ordered by Gordon Brown into relations between business and higher education.

It said that their success was so vital to Britain’s economic future that academics could not be allowed to avoid changes necessary to streamline decision-making and cut bureaucracy.

The review by Richard Lambert, a senior financial journalist and member of the Bank of England Monetary Policy Committe, questioned whether Oxford and Cambridge were capable of sorting out their affairs quickly enough to remain world-class universities able to compete with rivals in the United States and elsewhere.

“Both universities are about to have new vice-chancellors. They face a leadership challenge of the highest order, and the outcome is a matter of public interest that stretches well beyond the confines of the two universities,” the report says.

The review spoke of “a general sense of unease about the direction of both universities” among business and government agencies.

Mr Lambert told The Times: “I think in an ideal world they will come up with a strategy which will lead to an acceptance of change and a certain degree of organisational and structural change.

“But there is a public interest in that happening and if it doesn’t happen then I think there will be a case for outside intervention of some kind.”

Both Oxford and Cambridge have looked abroad for their new vice-chancellors. Professor Alison Richard, Provost of Yale University will succeed Sir Alec Broers at Cambridge in October, while Oxford has appointed Dr John Hood, from the University of Auckland, New Zealand, to take over from Sir Colin Lucas in September 2004.

Mr Lambert, a Times contributor and former editor of the Financial Times, levelled particular criticism at Cambridge, where academics rejected Sir Alec’s attempt to overhaul its management structure in January. He wanted to turn the vice-chancellor into a chief executive able to make decisions about finances and academic policies.

Professor Richard enjoys similar authority at Yale. But dons mounted determined opposition, arguing that the changes would under- mine academic democracy at Regent House, the university’s 3,200-member governing body.

Mr Lambert said that Cambridge’s internal management was “closed and inward looking” and had failed to capitalise on relations with business, despite high-profile partnerships with companies such as Microsoft and BP.

Problems with the establishment of a research partnership with Massachusetts Institute of Technology (MIT) had “contributed to a general sense of malaise”. The partnership, created in 1999 was backed by Mr Brown and received a £65 million government grant over five years.

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