Australian Education Minister Brendan Nelson has shocked academics by vetoing seven large research grants recommended by the Australian Research Council.

The grants, in the humanities and social sciences, went through the usual rigorous peer-review process and gained approval. It is the second year running that Dr Nelson has overturned some of the board's recommendations, provoking widespread outrage in the higher education community.

The ARC is the largest research funding body in the sciences and humanities. It allocates more than A$500 million (?213 million) a year.

When a vice-chancellor complained last year about the vetoing of at least three grants, Dr Nelson asked the ARC board to establish a "community standards committee" to vet the decisions of its expert review panels.

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When the board refused, Dr Nelson announced that he would abolish it and have ARC executive director Peter Hoj report to him directly. He also unilaterally set up a three-member "quality and scrutiny committee" to comment on applications for ARC funding.

The committee comprises three lay people, including commentator Paddy McGuinness, who edits the conservative Quadrant magazine. Mr McGuinness said he had proposed that applications were rejected because they were either "silly or had no obvious contribution to the knowledge of anything in Australia".

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He said he did not fully understand the peer-review process but it appeared to have become a "mutual back-scratching exercise".

The Australian Vice-Chancellors' Committee demanded that Dr Nelson explain his reasons for intervening. The Council for the Humanities, Arts and Social Sciences also demanded an answer. Malcolm Gillies, its president, said scholars would be apprehensive about applying for grants if there were political interference in the assessment process.

Stuart Mcintyre, one of Australia's top historians and dean of arts at Melbourne University, said the veto was "shrouded in the secrecy we have come to expect of this government".

"But we do know that these researchers are victims of a form of political interference in the system of national competitive grants that is unique to this country," Professor Mcintyre said.

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"A committee appointed by the minister, meeting in secret and applying mysterious criteria, is vetting academic applications. Those with applications rejected never find out what was wrong with their applications or have the opportunity to argue their case."

He said a minister who intruded his own political ambitions into Australia's research arrangements was unfortunate, but his exercising of power without accountability was totally unacceptable.