The money, known as a "national fund for talent", will provide £10m a year to help inventors - particularly youngsters - exploit innovations in science, the arts and technology.

The BBC's Torin Douglas: "It is known unofficially as the national talent fund"

It will be distributed by the National Endowment for Science, Technology and the Arts (Nesta), run by luminaries from across the three fields, including film-maker Lord Puttnam and TV presenter and mathematician Carol Vorderman.

It is hoped that the fund will save the estimated £160m a year which the UK loses by failing to exploit its own inventions.

Cockerell: Lived on a meagre pension

A recent Japanese study found that 56% of the world's greatest inventions came from the UK, but that it has lost £165bn in potential profits from them.

Britons arguably invented the lightbulb, television and even the computer - yet their creators often died in poverty.

Hovercraft inventor Sir Christopher Cockerell, who died earlier this month, was paid £150,000 in 1971 for the rights to his invention and lived on a meagre pension in a modest Southampton home.

Alan Turing, whose work on code-breaking during World War II helped to build the first practical electronic computer, received almost no official recognition and finally committed suicide.

And James Dyson, inventor of the bag-free vacuum cleaner, struggled for several years before his invention became a commercial success.

Mr Dyson, who is now a millionaire, is backing the scheme: "Creating new technology products is vital to the future of Britain," he said.

Chris Smith: "It will give youngsters a leg-up to the professional world"

Lord Puttnam, chair of Nesta, said: "We are interested in exploration, exploitation and explanation."

Individuals supported by Nesta, whose inventions prove profitable, will be expected to return a proportion of their royalties to finance other projects.

Culture Secretary Chris Smith said: "History is littered with examples of great British ideas which were turned into hugely profitable business by other countries.

Carol Vorderman will help decide which idea to support

"The government wants to help people to turn bright ideas into reality, and we will all profit as a result."

The first three products to be supported by Nesta were announced on Wednesday, at the Tomorrow's World Live exhibition in London.

The first was the Young Entrepreneurs project, run by the Young Engineers, which aims to help talented 16 to 19-year-olds turn their ideas into commercial products.

The second is the Cambridge Motivate project, which allows Cambridge University mathematicians to teach exceptional pupils from disadvantaged schools in the London Borough of Brent, via video links.

And the third is Squids, a one-year demonstration study based at the University of Sussex, which could revolutionise electronics.

Chocolate teapot?

Meanwhile, other inventors are invited to apply to Nesta for funding.

Brainwaves being showcased at the Tomorrow's World Live event include a remotely operable bass drum pedal, invented by Stranglers drummer Jet Black.

There is also a mass-producable non-drip teapot, invented by Damini Kumar of The Non-Drip Teapot Company Ltd.