The political class has been entranced for a year now by the camp charm of Peter Mandelson: the Comeback. The de facto Deputy PM glides from yacht to Downing Street, receiving awed applause for the cut of both his suits and his jib. It feels almost vulgar, then, to mention his policies. Yet Mandelson is enthusiastically pushing Britain further down a path that is damaging one of the great tools for human progress – scientific research – and slowly corrupting the medicine you take and the air you breathe.

At Mandelson's instigation, universities have been taken out of the Department for Education and moved into his Department for Business. He explains why: "I want the universities to focus more on commercialising the fruits of their endeavour ... business has to be central." He wants individual corporations to be more closely involved in steering research in university science departments and profiting from the results. He says it is just common sense: we are all part of UK plc, and the ivory towers should be tilted towards serving British business.

A new report by Scientists for Global Responsibility (SGR) lays out the consequences of this process. They start with a story most of us know. The tobacco companies knew from the early 1950s that smoking caused lung cancer but they denied it relentlessly and paid university scientists to give the impression there was an ongoing "debate". A similar process is speeding across Britain's science departments. From drug trials to the energy sector, companies are ensuring that publicly funded research serves their profit-margins rather than the public interest.

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For example, oil companies are one of the biggest providers of private funds to our universities. As Mandelson says, this funding "isn't something for nothing". They get to direct the scientists we employ and the labs we provide towards their purposes – which are to find ever more elaborate ways to drill the last dregs of oil and gas from the earth. That's why in our universities five times more is spent on research into fossil fuels than into renewable energy sources – even though fossil fuels are destroying our ecosystem, and renewables can save it.

At the heart of science is the idea that a good scientist should follow the evidence wherever it leads. It's this blue skies thinking that produces the greatest breakthroughs. But corporate funding prevents this from happening: if research veers from the immediate interests of the corporation, it is shut down. Edinburgh University used to have a Centre for Human Ecology that looked into corporate damage to the environment, until the director of an affected company wrote furiously to the head of the university: "You really will have to gag [them, because they] will alienate most, if not all, wealth creators." The Centre was shut down. It only reopened years later, at the Open University.

Drug companies today are the largest funders of university research, and they too expect a return. A study published in the Journal of the American Medical Association looked at 370 randomised drug trials, an essential phase in finding out if medicines work. It discovered that if a study is sponsored by a drug company, it tells you the drug is safe to use 51 per cent of the time. But if the scientists are publicly funded, they say the drug is safe only 16 per cent of the time.

The consequences of this process can – according to the SGR report – be startling. In 1996, Dr Nancy Olivieri was commissioned at her university to study a drug developed by Apotex Inc that treats a rare blood disorder. She discovered a serious side-effect. When she tried to inform her patients, the company brought the study to a sudden halt, and told Dr Olivieri that she could be sued. She then discovered another more dangerous risk – and they threatened more lawsuits. At this point many scientists would have shut up. In 2002, a series of independent reviews completely vindicated her.

How many cases like this happen in the shadows? It's hard to tell, but the more universities are dependent on corporations, the more it will occur. In 2002, Proctor and Gamble paid for scientists at the University of Sheffield to evaluate the effectiveness of their new osteoporosis drug Actonel. One of the lead scientists on the study, Dr Aubrey Blumsohn, noticed that when the research was published under his name, some 40 per cent of the data had simply been left out. P&G refused to tell him why, saying it would breach commercial confidentiality.

He complained that the company was manipulating medical data – and according to the SGR report Blumsohn says he was offered $300,000 by the University of Sheffield to stop embarrassing their corporate sponsor. When he spoke out to the media, he was suspended from his job. When I put these allegations to Sheffield University, their spokesman said: "This is a confidential internal matter and I wouldn't want to go into any details." P&G say they adhere to "the highest standards of research integrity".

The corporate capture of medical research now runs remarkably deep. A recent study by Professor PC Gotzsche found that 70 per cent of published articles in the biosciences had been ghost-written in part by corporate PRs. The risks are plain, but Mandelson wants to take us deeper. Only research that can make a short-term buck for a big company will occur. Malaria research out; treatments for "shyness" or "sexual dysfunction" in. Tidal power out; leeching petrol from tar sands in.

Mandelson claims there is no other way to pay for research in a recession. It's not true. The wealthy OECD nations currently spent £48bn on military research and development a year, and only £33bn on health and environmental R&D combined. Transfer just half of the cash we currently spend on weapons to human needs and we don't need any of this corporate contamination.

British science gave the world Isaac Newton, Charles Darwin and Stephen Hawking. They figured out how we became human and the shape of the universe. Now Peter Mandelson wants to bend that great tradition to serve the yacht-owning overclass he adores. If he succeeds, we may never know the magnitude of our loss. We won't see the health risks that go unreported, the cures to diseases that pass unfound, or the green technologies never invented. They will all pass silently into the corporate-sponsored night.

j.hari@independent.co.uk