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Universities should charge market-rate tuition fees, split into public and private research elites and teaching-only institutions, and encourage academics to work in the private sector, according to a radical report published this week.

Labour MP Ian Pearson's booklet, Universities and Innovation: Meeting the Challenge, is a damning indictment of Britain's "stuffy", inefficient, unbusiness-like, bureaucratically burdened and cash-starved universities.

Trade and industry secretary Stephen Byers wrote the foreword, describing the book as"a radical vision of a possible future for Britain's universities".