British academics will be encouraged to conduct research with their Israeli peers in an attempt to heal fractured relations between UK and Israeli universities.

Gordon Brown has signed up to a £740,000 academic exchange scheme during his trip to Israel today.

The government has been keen to promote links between the two countries to play down attempts by British academics to boycott Israeli academics over the treatment of Palestinians.

In May, members of the University and College Union voted to consider the moral and political implications of education links with Israeli institutions.

But the UK government’s contribution of £20,000 to the scheme which is mainly funded by charities was described as an insult by a leading Anglo-Jewish historian.

Geoffrey Alderman, visiting professor of theology and education at York St John University, said: “Compared to the money that the government is giving to the Palestinian Authority, this is an insult. I would throw this back in their faces. If the government was seriously interested in a programme to foster academic cooperation, it would think in terms of millions.”

The higher education minister, Bill Rammell, said the new scheme would help foster academic cooperation through joint research programmes and academic exchange trips between the UK and Israel.

The Britain-Israel research and academic exchange partnership (BIRAX) will award scientific research grants to junior academics – from postdoctoral students to mid-career researchers and lecturers – who tend to have far fewer international opportunities.

The British Council will manage the scheme, which is funded by the Pears Foundation, the United Jewish Israel Appeal, with smaller contributions from the Department of Innovation, Universities and Skills, the Foreign and Commonwealth Office and Israel’s Ministry of Science.

The academic who led the call for the boycott, Tom Hickey, a politics and philosophy lecturer from the University of Brighton, said academics should consider whether it was “morally acceptable to continue links with Israeli institutions where there was evidence that they were complicit in the occupation”.

The government will give the same amount to improve links between British researchers and their peers in Palestine. Rammell said this would be “in the near future”.

The scheme will last for five years in the first instance, although it is anticipated that it will develop over time into a longer-term partnership.

The British Council is also working on proposals to support academic links between Britain and Palestine, which the government will offer equal funding to support.

Rammell said: “There is a long history of cooperation between Israel and the UK and BIRAX will help further cement this relationship and create new partnerships. It will help strengthen academic links between individual researchers and between universities in both countries.

“There have been calls in the past for a boycott of Israeli academics but I strongly believe that we have much to learn from each other and our researchers have much to gain from working together. Education should be a bridge between nations not a barrier.”

Trevor Pears, the executive chair of the Pears Foundation, said: “The new scheme increases academic collaboration in science and technology with potentially lasting benefits for Britain, Israel and, hopefully, the world.”

The chairman of UJIA, Mick Davis, said the scheme would strengthen “the living bridge that draws on the great history of academic cooperation that has benefited Israel and the UK so greatly over the years”.