The college, due to open in 2000, will receive Pounds 10 million start-up costs from the Government. It could be free-standing or attached to an existing business school.
In a speech to 600 newly-appointed heads at the Queen Elizabeth II conference centre in London, Mr Blair said the National College for School Leadership would make full use of successful serving heads, leading business schools and public-sector management colleges.
Heads and aspiring heads will be able to take courses leading to the National Professional Qualification for Headship and the new schemes for in-service training of heads. In addition to residential courses, there will also be a "virtual college" using the National Grid for Learning.
Ministers are also making Pounds 25m available in 19992000 for training heads and for in-service training of heads, well over twice the amount available this year.
But the Prime Minister combined his call for better recognition and higher salaries for good heads with a declaration that those who were not up to the challenge should face the sack.
Doug McAvoy, general secretary of the National Union of Teachers, said it was a pity that Mr Blair had chosen to mar his announcement with "yet another attack on teachers", and said classroom teachers should have access to the academy too. And Nigel de Gruchy, general secretary of the National Association of Schoolmasters Union of Women Teachers, voiced concern about the proposed link with a business college, and about duplication of effort in headteacher training.
Training leaders, page 25