David Willetts has argued for a "new contract" between universities and their business schools in which the latter get to keep more of their teaching income.

Speaking at the Association of Business Schools' annual conference at the University of Warwick on 15 October, the universities and science minister questioned whether cross-subsidising other subjects using income from business students was a "stable business model".

Many deans of business schools "regard themselves as cash cows that are being used to finance other activities in the rest of the university", he said.

"What strikes me is the number of private conversations I have when visiting business schools where, in the course of the discussion, the head of the business school confesses to me that he or she wants to do a UDI (unilateral declaration of independence)," Mr Willetts continued.

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According to an ABS survey carried out last year, about a third of business school deans thought that their department was making too much of a contribution to the running of other disciplines.

Asked whether he would be sympathetic towards greater autonomy for business schools or even independence, Mr Willetts said that he could envisage "a new type of contract between a business school and the rest of the university in which perhaps the business school gets to keep more of the revenues generated by its students".

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In return, business schools could help the wider university with activities such as entrepreneurship schemes and planning expansion abroad, he suggested.

He said that the rise in tuition fees this year did not mean that universities could not cross-subsidise courses, but he added that the pressures to reduce this practice would rise as students asked what they were getting for their money.

Mr Willetts also told delegates that he wanted to move away from a model where business school academics were awarded money and status for appearing in highly ranked journals, which they did by applying "innovative statistical techniques to large historical data sets from American industrial sectors".

Creating incentives for this kind of research does not "work in the long-term interests of our business schools or the country," he said. "How can we break free from this?"

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One-fifth of the weighting in the 2014 research excellence framework will be based on the "impact" that research has, a change Mr Willetts said would "help" business schools to focus more on the state of the UK economy.

He said that business schools could also stimulate economic growth by training the UK's current and future managers at university level.

"I buy the argument that a company is much more likely to be innovative, [and] to be able to absorb and learn from science and technology from universities, if it's got a strong representation of graduates," he said.

Adrian Alsop, director of research, partnerships and international strategy at the Economic and Social Research Council, told delegates that business schools were failing to "step up to the plate" in applying for some types of grants.

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For example, in a competition earlier this year for research funds to examine why UK businesses do not export as much as they could do, just one out of the 14 awards went to a business department, he said.

Business schools' performance with the ESRC was "patchy", he added.

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Conference delegates also received the ABS' annual report, which shows that the association ran a ?246,758 deficit in the year to 30 June 2012, partly due to a significant drop in income from training programmes.

davidmatthews@tsleducation.com.