The prime minister has launched a multi-million pound prize designed to solve some of the world's most pressing problems.

Timed to mark the 300th anniversary of the Longitude Prize, which saw a London watchmaker win a fortune for devising an accurate method for navigation at sea, the new prize will offer a reward to those who can solve the issues that matter most to the public.

Launched by the UK Parliament in 1714 and won by self-educated watchmaker John Harrison, the Longitude Prize was one of the first ever national challenge prizes, and showed that the best ideas can come from anyone and anywhere. As well as Harrison's ultimate solution, many other advances were also made that helped to prevent shipwrecks and radically advance sea trade.

The new prize, to be managed by Nesta, will be targeted at some of today's biggest problems (to be decided by a public vote) - such as how to care for an ageing population, how to generate cheap and safe energy, and how to feed the world. The Technology Strategy Board has pledged the first million pounds towards the challenge prize fund.

The initiative will draw on the expertise of Nesta's Centre for Challenge Prizes - which has a track record for designing and delivering successful challenge prizes, such as the Ageing Well Challenge Prize, which sought ideas to reduce isolation among older people, and Hands Off My Bike, which offered a prize for the best idea to combat bike theft.

The prize will be managed by an illustrious committee, headed by Astronomer Royal Lord Martin Rees, who will lead on shaping and developing prize topics, for selection by public vote, and in the setting of the criteria by which they will judge success.

Nesta will embark on a programme to engage the creativity and enthusiasm of the British public in debate and dialogue about these challenges - to discover which ones really matter to their lives - and will draw in the very best scientists, technologists and engineers to get their insights on which challenges matter most and which ones are potentially tractable.