George Freeman told a fringe meeting of leading space experts that the UK would announce an initiative to regulate the rapidly expanding sector in the coming months.
Currently there are almost 8,000 satellites, with the majority in low earth orbit, but 3,000 of them are redundant, posing a danger to others.
“We need to create a very basic space capability standard,” Mr Freeman told the Winning the Space Race event at the Conservative conference in Manchester. “And if you are compliant, we'll give you more competitive insurance over licensing.”
Currently, 95 per cent of satellites are uninsured, suggesting issues with their disposal or maintenance.
“Why don't we smaller, responsible, sovereign state space countries create a kitemark for everyone,” he said. The idea had the support of both Switzerland and Canada, he added.
While Britain was excellent at innovation in space technology, it was continually failing to maximise the commercial potential with other countries exploiting the advances and poaching its scientists, Mr Freeman said.
“People are laughing at how the Brits do all the science and amazing tech” but then lose it to global competitors, he said.
“If ever a sector needs an industrial strategy the space sector is it,” he said. “We need the state actively working with private sector in partnerships.”
While the space economy was worth £17 billion in Britain, half of this was taken up with Sky television subscriptions, he added.
With a multitude of countries developing space programmes, there was a “race on over who gets the first launch in Europe of satellites into polar orbit”, said Lord David Willetts, chairman of the UK Space Agency.
While the SaxaVord space centre in the Shetland Islands, Scotland, was leading the way for Europe’s first vertical rocket launch, it would be a “close race” with Norway and Sweden both forging ahead, he added.
The Moon was also set to experience a substantial rise in interest, presenting further commercial opportunities, said Lord Willetts, formerly Britain’s science and university minister.
“In the next 10 years we are going to see more missions to the Moon than we have seen in the previous 50,” he said.
Both Britain and Italy were now working on a project to provide “lunar communications”, putting up satellites around the Moon for countries undertaking activities, he added.