The council, set up 50 years ago, will become a lighter organisation than it has been over the past 20 years, employing fewer staff, but spreading its London-based operation further into the regions to assist new or struggling small to medium-sized companies to produce well-designed goods.
Mr Heseltine's move is a recognition that, while good design undoubtedly adds value to mass-produced goods, the Design Council itself had become soft and flabby.
Staff will be cut from 210 to 50, and some services will be privatised. The council's budget is likely to remain about pounds 7m next year, but an extra pounds 6m is being allocated to boost British industry's interest in industrial design over the next three years.
The extra funding will be spent by a new network called Business Links, involving local authorities, chambers of commerce and training and enterprise councils.
John Sorrell, chairman of the Design Council, who conducted the review following his appointment last autumn, said: 'Now is the moment to create something new and radical. The Design Council must be at the leading edge of change.'
Mr Heseltine's policy of change will be viewed as timely by the design community. The Design Council has recently seemed concerned more with giving awards to mechanically-correct widgets than raising the banner of contemporary design.