Civil Research and Development

HL Deb 19 February 1987 vol 484 cc1251-332

6.21 p.m.

Lord Sherfield rose to move, That this House takes note of the report of the Select Committee on Science and Technology on Civil Research and Development.(1st Report, 1986–87, H.L. 20.)

The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper.

When the Select Committee on Science and Technology was set up in 1980, its first report, after a short trial trip on Electric Vehicles, was entitled Science and Government. This drew attention to the fragmented nature of policy-making on research and development at all levels, and recommended a clearer recognition of the scientific and technoligical dimension now present in every field of national endeavour. It proposed the setting up of an advisory council chaired by a senior Minister to oversee the whole of science and technology activity, divided as it was between the Department of Education and Science, the Department of Trade and Industry, the Ministry of Defence and other individual departments. These recommendations were rejected by the Government. But two significant steps were taken as a result of the committee's report.

The first was the strengthening of the position and authority of the Chief Scientific Adviser and his staff in the Cabinet Office, and the second was the inauguration of the Annual Review of Research and Development issued by the Cabinet Office. This review, which has been improved and extended year by year, has given to Parliament and the public, for the first time, a view of the Government's activity and the expenditure on research and development across the board. Without it the committee's inquiry would have been much more arduous.

Since 1980 your Lordships' Select Committee has submitted a number of reports to the House on the state of several disciplines and areas of science and technology, and in every case the same fragmentation, the same lack of coherence, has been identified. So the present report and its conclusions reflect experience gained in these previous inquiries.

While the committee cannot claim that all its recommendations have been successful, a good number have been accepted, directly or indirectly. We have tried to make public policy in research and development more coherent, and to give science and technology a higher profile in the public eye. Next week the Select Committee will publish another report, on Innovation in Surface Transport. In a fairly narrow field, it will, like its predecessors, illuminate and support most of the general conclusions of the present report. I commend it to your Lordships.

Over the past five years the policy of cutting back on higher education, combined with a squeeze on the research councils, has crippled the dual support system on which the health of the research community depends, and, though the research budget has been kept more or less level in real terms, for a number of well-known reasons the amount of research that it can support has declined year by year.

The storm and distress signals flying from every part of the scientific community and the signs of a revival of the brain-drain led your Lordships' Select Committee to inquire into The Policy, and Practice of Public Support for Civil Science and Technology in the United Kingdom, the full title of the report. But since this subject is a very wide one the Select Committee identified and addressed four main topics: first, the organisation of civil research and development; secondly, the sources of funds for basic, strategic and applied research and development; thirdly, the working of the customer/contractor principle, established by the report of the noble Lord, Lord Rothschild, in 1971; and fourthly, the civil implications of defence research. On the second topic, funding, the Select Committee soon saw the importance of the interface between the public and private sectors, and realised that the report would be misleadingly incomplete without consideration of the contribution made to the national research and development effort by the private sector.

The Select Committee appointed two specialist advisers, Sir John Charnley, late of the Defence Procurement Executive, and Professor Roger Williams of Manchester University. Their services were invaluable. The inquiry generated a huge volume of evidence contained in two fat volumes accompanying the report, which itself contains a balanced review of this evidence. All this placed a heavy burden upon the shoulders of the committee clerk, to whom our thanks are due.

The sections of the report dealing with organisation covered more or less the same ground as Science and Government but were buttressed by fresh evidence. It is perhaps not surprising that with some amendments and refinements the Select Committee came to the same broad conclusions in 1985 as in 1980. Once more it recommends a much more public and explicit recognition by the Government of the essential importance of the advance of science and technology to the economic recovery of the country and the creation of wealth. Once more it rejects proposals for a Ministry of or for Science. It repeats its previous recommendation for a Council for Science and Technology at the highest levels of government, presided over by a Minister, to oversee the whole of the national scientific and technological endeavour and the distribution of resources covering the academic community and the research councils, the public sector including defence, and industry.

Advanced science and technology are vital to the country's economic recovery. The committee therefore recommends—and this is new—that the council should be chaired by the Prime Minister at least once a year. In effect the Select Committee proposes not a new organisation but rather an evolution of what already exists. While the Advisory Council for Applied Research and Development—ACARD—would be subsumed in the superior council, its important function would continue. As regards the research councils, the Select Committee encouraged the Advisory Board for the Research Councils to assume a more executive role without at this stage proposing the creation of a single council.

Reading between the lines of the evidence, the Select Committee infers that in the existing Cabinet structure a committee has now been set up to oversee the national endeavour in science and technology. We are not of course supposed to know about the existence of the committee, but most of our members regard this particular bit of security as smacking of bureaucratic mumbo jumbo. It is a good move, but it should be acknowledged publicly. Without threatening collective responsibility, this could help to demonstrate to the nation at large the strategic importance that the Government attach to science and technology for industrial recovery and for wealth creation.

On the issue of the funding of civil research and development, I can be brief. The overwhelming weight of the evidence was that in most areas British research and development was underfunded absolutely and in relation to what our main industrial competitors are doing. Making every allowance for the fact that many of our witnesses had a strong interest, the Committee concluded that the case was made out. In countries where the budget squeeze is also on, for example, in the United States and Australia, the research and development budget is being increased while other departmental budgets are being cut—in other words, there is a reassessment of priorities in favour of research and development.

The Committee, only too well aware of the competing claims on the public purse, considers that a similar assessment of priorities should urgently be undertaken in this country—not just priorities within the research and development budget, but the place of research and development in relation to other areas of public expenditure.

It is not just the Government who are responsible for the present situation; it is also industry and the institutions that finance it. Again, both absolutely and in relation to the industrial contributions of our main international competitors, the contribution of British industry to research and development—with of course some honourable exceptions—is inadequate. The committee considered what steps, in addition to exhortation, could be taken to remedy this inadequacy. Its suggestions are set out in paragraphs 6.80 to 6.96 of the report. Perhaps I should mention one in particular, since it is controversial and is disliked—perhaps feared—by many industrial firms. It is that legislation should be introduced to require companies to disclose their research and development expenditure in their public accounts. But the other suggestions—for example, more tax incentives—if they were followed up, would also help.

Thirdly, the committee inquired into the working of what is known as the customer/contractor principle, first adumbrated and elaborated by the noble Lord, Lord Rothschild, in his report, Cmnd. Paper 4814 of 1971. This principle was to apply to the arrangements for commissioning research by government departments. The committee recognised the validity of the principle, but found that it had never been applied in the manner that the Rothschild Report had recommended. In particular, the report had proposed that a general research surcharge be added to each contract to provide for underlying research support, for orderly transfer of staff between projects and the like. The 10 per cent. surcharge has in practice seldom, if ever, been included in the departmental contracts, and our report recommends that in future it should be added to all government contracts for commissioned research.

I should now inform your Lordships that the noble Lord, Lord Rothschild, has written to me to say that his report has been misinterpreted in one important respect. His recommendation was that the 10 per cent. should be an average surcharge. He illustrated this by referring to two Shell laboratories, of which of course he was once the research co-ordinator, one of which was exclusively concerned with general research while the other was concerned with technical services and did no research so that one would receive much more than the average, and the other, little or nothing. I am most grateful to the noble Lord, Lord Rothschild, for what in diplomatic circles is known as a mise an point; but I was at the same time reminded of the old story about the porter on an American Pullman coach who was asked by a passenger what the average tip was. "The average, Sir", he replied, "is $5 but most gentlemen, Sir, give me the average." Government departments, please note!

Here I should draw your Lordships' attention to what the report says about research in general. In the previous inquiries the Select Committee has found that in a climate of reduced funding the main casualty is not basic and applied but strategic research, that is, research undertaken with eventual product applications in mind, although these cannot at that stage be clearly specified. While basic research is protected to a large extent, and quite rightly so, increasing emphasis is being placed both by government departments and industry on short-term contracts. The committee therefore proposes that strategic research should be explicitly recognised and funded. We are specially concerned to ensure that that strategic research leading to wealth creation should be adequately financed and that industry and academic research should be drawn together into work with long-term benefits for the country.

Fourthly, defence: here the main point is that over 50 per cent. of the research and development expenditure of the country is devoted to defence, with consequences to which the Committee draws attention, but which raise major policy questions outside its terms of reference. In particular, we must be aware how large a part of our scarce manpower resources is taken up by defence research and development; otherwise, the main issue is the level of spin-off for civil purposes achieved by this high expenditure, which is generally considered to be far too low. Steps have already been taken by the Government to try to remedy the deficiency. The committee, while welcoming these moves, urges that more should be done in this direction.

The world does not stand still while Select Committees are deliberating. A number of steps were taken by the Government and other bodies while our inquiry was in progress, and we admit to feeling at times that we were operating on a moving staircase.

The Government initiatives were generally welcomed by the committee. Thus, during our inquiry, an important document was published by ACARD entitled Exploitable Areas of Science, which recommended that a process should be evolved with the object of identifying those areas of scientific research most likely to lead to economic benefit. The committee, and I believe the Government, favour this initiative; but the manner by which this process should be controlled is still under consideration by the Government with the assistance of consultants.

Then there is the so-called Link initiative, launched in December by the Government to promote collaboration between universities and industry in research and development on the basis of shared funding. This is also welcomed by the committee, which had advance notice of it. Perhaps the Minister can tell us this evening how these initiatives are progressing, and in particular how they relate to one another.

The important difference between the committee and the Government in regard to these initiatives appears to be that the Government think that they can be launched without the injection of new government money while the committee does not consider that this is realistic if the proposals are to achieve anything significant. I ask the Minister what action the Government propose to take on Sir Austin Bide's report, IT 86, entitled Information Technology: a Plan for Concerted Action which came out at the very end of the committee's inquiry and which is referred to in paragraph 6.88 of the report.

Before I sum up I wish to draw your Lordships' attention to a rather fundamental issue; namely, whether there is a link between expenditure on research and development and a country's economic and industrial performance. The Government, through the mouth of the Treasury, told the committee there was not. The committee recognised that this link is difficult to substantiate: nevertheless, the committee finds it hard to accept such a negative view when all our industrial competitors take the opposite one and are still increasing their expenditure while the United Kingdom is contracting its expenditure and planning to continue to do so.

We cite the Australian position in the report. In the United States of America there is now powerful bipartisan agreement that a strong science base is essential for industrial success. The President recently advocated increased Federal investment in science to foster industrial competitiveness and has proposed that the National Science Foundation budget should be doubled in five years and that there should be increases in research both for NASA and the Department of Energy.

It is often said, and it was reported to have been said again yesterday by one of Her Majesty's Ministers, that the United Kingdom spent a lot of money on research and development in the 1950s and 1960s and yet went into industrial decline; but I suggest that that result is due, at least in great measure, to the failure of British industry to apply the information available, while our overseas competitors not only took it away and developed it but took some of our best scientific and engineering brains with it. To use that as an argument for not giving maximum support to research and development today is surely a counsel of despair for it implies that British industry is incapable of learning from experience and so we might as well give up.

The committee's report is a substantial one and I cannot cover it all in a speech that is already over-long. I hope that subsequent speakers will develop and illuminate other aspects of it and that the debate in general will assist the Government in formulating their views on the committee's conclusions and recommendations. I do not expect a substantive reply from the Ministers this evening. I appreciate that because the report is a heavy one, more time is needed to frame replies to the committee's recommendations, but I hope that the Government's reaction this evening will be a positive one and that Ministers will assure the House that the Government are taking the report very seriously and urgently and will give the House their considered views before the Summer Recess. I remind the Government that, as we said in the report, Cosmetic adjustments to the status quo will not be enough.

The report may be critical in places but it is firmly based on an impressive weight of testimony. It is intended to be helpful and constructive, to point the way to a reversal of a downward trend in our performance in research and development which has already gone too far, and to revive the morale of the scientific community which is much too depressed.

The committee have recommended a high profile for science and technology, dynamic leadership at the centre and a new approach to funding research and development. These all matter greatly; but what matters most is the determination of both the public and private sectors to create a new confidence and to restore the United Kingdom's prosperity and its international position in science and in industry.

Moved, That this House takes note of the Report of the Select Committee on Science and Technology on Civil Research and Development.(1st Report, 1986–87, H.L. 20)—(Lord Sherfield.)

6.45 p.m.

Baroness Hooper

My Lords, this is a vital and challenging topic, but before I give an overview of major developments by the Government in this important area I should like to thank the noble Lord, Lord Sherfield, who introduced the Motion and who chaired the Select Committee which has produced the valuable report that we are now discussing. Perhaps I can also say how much we welcome the opportunity that the debate gives us to hear for the first time in this House from the noble Lord, Lord Dainton. We look forward to his contribution with considerable interest.

Five years ago the noble Lord, Lord Sherfield, chaired the Select Committee which produced another most important report entitled Science and Government. It was government acceptance of the main thrust of his earlier report in July 1982 which has largely determined scientific and technological input to policy-making during the past five years. In outlining the Government's position and in referring to significant developments since July 1982 I should perhaps mention that I am dealing more with the science-based aspects, while my noble friend Lord Lucas of Chilworth will largely concentrate on the industrial side. I hope that your Lordships will readily appreciate, from what in the time available can only be a brief overview of some government initiatives, that we are very much aware of how important civil research and development is to the growth of new technology-based industries, to the creation of jobs and to the continued prosperity of the country.

In 1982 the Government concurred with the Select Committee's outline of departments' need for advice and its view that what was needed was a strengthening of the centre rather than wholesale re-organisation. The Government also agreed with the committee that the machinery by which advice is to be tendered is less important than the ability, will and perserverance to seek and use such a device.

The major changes introduced in 1982, already referred to by the noble Lord, Lord Sherfield, provided an expanded remit for the Advisory Council for Applied Research and Development—commonly known as ACARD—and improved resources in the Cabinet Office for supporting the Government in their responsibility to secure an adequate scientific and technological input to decision-making. Better interdepartmental co-ordination was introduced through the establishment of the Committee of Chief Scientists and through the awareness afforded by the Annual Review of Government Funded Research and Development, which was first published in 1983. Stronger links were initiated between ACARD and the Advisory Board for the Research Councils (ABRC) to strengthen the interaction between basic and applied science and between science and industry.

I should like to highlight significant developments which have occurred since 1982 in some of these areas. Turning first to the role of what was in 1982 the Chief Scientist, Central Policy Review Staff, and is now the Chief Scientific Adviser in the Cabinet Office, your Lordships will be aware that the Chief Scientific Adviser is now formally located in the Cabinet Office. Since 1982 this central scientific advisory role has been enlarged to include responsibility for advising and representing the United Kingdom in international science and technology. This has led to a particularly heavy involvement of the Chief Scientific Adviser with European Community research and development programmes and policies.

This reflects the growing importance that the Government attach to European collaboration especially on industrial science and technology. The United Kingdom played a major role in setting up EUREKA, for example, with United Kingdom firms participating in 39 of the 109 market-led projects already launched, worth in total some £2.5 billion. The Government are also giving priority to industrial collaboration within the proposed new Community research and development framework programme.

A more recent enlargement to the Chief Scientific Adviser's responsibilities, which I was pleased to see is welcomed by your Lordships, is the establishment under his authority of the Science and Technology Assessment Office. This office has a responsibility to make comparative assessments of the contribution of all government-financed research and development programmes to industrial performance and wider economic benefits. The Government are grateful to the Select Committee for its welcome of this new body. The Assessment Office is not yet fully staffed but is beginning its work, much of which will be done jointly with departments in evaluating their programmes. The aim is to help develop stronger evaluation procedures within departments and provide more information on indicators of relative effectiveness to help those taking decisions at various levels of government on R&D priorities.

The work of the Advisory Council for Applied Research and Development in advising government on scientific and technological issues has resulted in an increased awareness, both within government and the scientific community, of the need to ensure that research and development contributes to the creation of wealth and to the competitiveness of British industry. Those are both points that the noble Lord, Lord Sherfield, emphasised. ACARD's comments since 1984, which have been confidential to government, on the Annual Review of Government funded Research and Development have been particularly valuable in this respect. In addition ACARD has continued to publish reports. An early one in 1982 entitled Facing International Competition: the Impact on Product Design of Standards, Regulations, Certification and Approvals led to the quality assurance advisory scheme and to a government White Paper in July 1982 from which a major government quality initiative has developed. More recently, reports were published last year on Software: a vital key to UK competitiveness and on Medical Equipment, and the Government are considering their response to these two reports.

The second joint report by the chairmen of the Advisory Council for Applied Research and Development and the Advisory Board for the Research Councils was published on 12th December 1986. This report, The Science Base and Industry, recognises that industry and the nation depend on the maintenance of a strong and innovative science base able to contribute to the development of new technologies and advanced skills. They describe promising initiatives which are bringing the academic world, industry and government closer together to harness the science base for the economic benefit of the nation. These valuable initiatives include the special directorates of the Science and Engineering Research Council; the Teaching Company, cooperative research grants, and co-operative awards schemes of a number of research councils; programmes through which large companies directly support university research; arrangements to give individual researchers and their universities incentives to exploit their research; and, most recently, as the noble Lord, Lord Sherfield, has welcomed, the development of a national process to identify the most promising exploitable areas of science. However, the chairmen of ACARD and the ABRC also say in their joint report: In the final analysis it is industry operating in the competitive environment of the market place that must recognise it has the ultimate responsibility to see the potential of research performed under the aegis of the science base and use it to enhance its own innovative capacity. Firms that do not have a commitment to innovation and a healthy R&D base, with staff at all levels capable of recognising the opportunities afforded by the results of their own and others' research and able to formulate what research is necessary to meet future needs, will not flourish. We would urge industry generally to give a higher priority to R&D and to recognise the sometimes irreversible damage that low levels of R&D investment can have on their competitiveness in market places that are increasingly assailed by innovative products". In recent years the Advisory Board for the Research Councils has exerted increasing influence over the deployment of the science budget. It has promoted a redistribution of funds between the research councils in relation to its assessment of national priorities; it has sought to increase research councils' ability to respond flexibly to urgent needs and has created a flexibility margin at board level to assist in this; it has encouraged research councils to shift emphasis toward areas of economic benefit and directed programmes; it has emphasised the need for research councils to manage their resources more effectively, including the need to rationalise and concentrate resources; it has encouraged research councils to prepare corporate plans which bring together scientific, financial and management considerations; and it is itself preparing a strategy document which will be ready in the spring.

One of the important responsibilities of the Committee of Chief Scientists, under the chairmanship of the Chief Scientific Adviser in the Cabinet Office, has been to provide guidance on the preparation of the annual reviews of government funded research and development. The fourth such review was published in December. Although the content of the reviews has followed much the same pattern since their introduction, there has been substantial development and evolution within this overall pattern. The latest review has nearly 200 pages, compared with 52 in the first review. The statistical data used to describe government funded research and development have been collected in a survey of all government departments and research councils conducted by the Department of Trade and Industry. This survey, which has been in operation for many years, has been developed and extended to fulfil the objectives described in the Government's response to the Select Committee five years ago. The 1986 review also contains information on research and development by nationalised industries as well as on research and development expenditure in industry funded by government. The 1987 review will contain information on research and development by companies in the private sector.

As a result of the Select Committee's recommendations five years ago we now have in the annual review a most comprehensive series of data on research and development which enable Ministers to take an across the board view of research and development expenditure and to consider both the present and planned levels and distribution.

In outlining major developments since July 1982 I have largely concentrated on structural changes. However, I should like to close by reminding your Lordships of the progress which is being made in fostering a community of interest between the academic world and industry. I know that that is of considerable interest to many of your Lordships. Important in this is the new LINK initiative. My noble friend Lord Lucas will address LINK's benefits from its contribution to industrial success. I am particularly aware of the benefits to the academic world and am pleased to reply to the noble Lord, Lord Sherfield, at least in part by saying that it is expected that the first LINK programmes will be announced shortly and that they will be funded jointly by government and industry.

I look forward to hearing the debate which will I know be a valuable and timely contribution to the Government's response. I should again like to say that we are considerably indebted to the noble Lord, Lord Sherfield, and to all the members of his Select Committee for their analysis and recommendations. The Government will continue to accord civil research and development the necessary high priority in policy decisions to ensure the United Kingdom's prosperity and international position in the scientific and industrial worlds.

6.58 p.m.

Lord Williams of Elvel

My Lords, your Lordships' House will be most grateful to the noble Lord, Lord Sherfield, for his clear exposition of the contents of the report. I should like to join the noble Baroness, Lady Hooper, in thanking him for his contribution as well as thanking other noble Lords who served on his committee.

The report is the result of hard and meticulous work and anybody who has read through it must be impressed by the diligence with which the Select Committee of your Lordships' House performed its task. I should like to join with the noble Baroness also in welcoming the noble Lord, Lord Dainton, who is a maiden speaker today. This is a subject on which he is a great authority and we all look forward to hearing him speak. Having read the report, I must say at the outset that it makes pretty depressing reading. As the noble Lord, Lord Sherfield, said, the message from the committee is almost exactly the same as the message that was conveyed in 1981; namely, that success in science and technology is essential to our future as an industrial nation. It is a very simple and straightforward message. As the noble Lord said, that message went pretty well unheeded in 1981. Today having listened to the noble Baroness I have to say that it seems to me to have gone unheeded again.

As the noble Lord, Lord Sherfield, pointed out, it is not as though the rest of the world is standing still. Other competitor countries have forged ahead. For instance, in proportion the gross domestic product spent on research and development, including defence research and development, in the United Kingdom was at 2.27 per cent. in 1983. In Japan, the United States and West Germany it was at about 2.55 per cent. or 2.65 per cent., with much larger gross domestic products than ours. They are now probably over the 3 per cent. level whereas between 1981 and 1983, when the original message was put forward, our proposition of gross domestic product spent on research and development declined.

Some of your Lordships may ask, "Does it all matter? Why should we be worried if the total R&D spend by our competitors is well in excess of ours?" As the noble Lord, Lord Sherfield, said, the issue is no more and no less whether we are to survive as an industrial nation of the front rank and not sink into a nation that makes other people's products, invites tourists, sells services, lives off the proceeds of certain pockets of activities and cannot keep up with the first rank. That is the issue.

Noble Lords opposite may not believe me. There is no reason why they should. Let me quote in support the Assistant Secretary for Productivity, Technology and Innovation in the United States Department of Commerce, Dr. Merrifield, who said: There is no question that manufacturing is undergoing profound change and we are on the threshold of a new industrial revolution.… It is already here; it is going to accelerate; it is going to happen with us or without us.…… If a country does not realise this is going to happen, your manufacturing will be done by somebody else for you". He goes on to say that research and development is by far the most important industrial priority. It's absolutely essential for survival. It is the single most important thing. In any nation, R&D in excess of 3 per cent. of the national product is now required for survival and growth". He concludes: A nation that does not accord the utmost importance to R&D has made a decision not to be in business in five to ten years". That is what this debate is about. I do not intend to, and I could not even if I did, cover all aspects of what is a comprehensive document. My task will be draw out one or two themes, set out the Opposition's attitude to the report's major conclusions and address myself to the problem of funding in particular.

The report, as the noble Lord, Lord Sherfield, said, is of an inquiry into the policy and practice of public support for civil science and technology in the United Kingdom. It would be wrong, as he pointed out, not to see the findings as part of a larger picture. The committee did so by commenting at some length on the division of responsibility between the public sector and the private sector in research and development.

I thought the committee quoted rather wryly ICI's evidence that unless something is done soon, the research funding problem will solve itself in a disastrous way: there will be so few good young scientists coming forward that even with limited funding we shall be able to support them all. That seemed to be one of the report's most depressing points.

If training is part of the larger picture, then so is capital investment. Because it is not sensible or useful to increase research and development unless we have proper investment and training programmes to make use of the R&D input; in other words, the "D" can convert the results into commercially viable products, and capital investment and trained manpower are there to produce, package and market the products. We see—and I emphasise this—this increased R&D effort not as an end in itself but as part of a comprehensive programme for industrial renewal which embraces investment and training across the whole of manufacturing, conversion and extraction. If any one of those components is missing, the programme has no chance of being successful.

Secondly, any future effort in support of R&D must—and I stress the word "must"—take account of regional disparities in the United Kingdom. It would not be right or sensible for the regional problem to be ignored in this whole debate. If it is ignored, the North-South divide, the comparative depression outside the South-East and South-West, would be aggravated instead of ameliorated.

By an intense effort and by the change in attitude for which the Select Committee calls, we could revitalise our industrial base, not only in the prosperous areas of the South but in Scotland, the North-East, the North-West, many parts of Wales and the Midlands. That is a national imperative alongside the general imperative to increase our R&D effort.

Thirdly, there are the obligations which the Select Committee did not mention and I shall mention briefly. They are obligations that we have as a civilised community towards the poorer parts of the world. If we are to succeed properly in industrial renewal, based on an enhanced R&D effort, we must be prepared to export that technology to those countries of the third world which are in desperate need of the means of development.

By that I do not mean subcontracting manufacturing to Hong Kong, Singapore, Taiwan or whichever country happens at that time to enjoy the lowest manufacturing costs. I mean much more than that. We must be prepared to share the results of our effort with the poorer countries of Africa, Latin America and the Indian sub-continent. We owe it to them and to ourselves to do so. Those are my general comments on the Select Committee's report.

To be more specific, there are two recommendations of the committee's report that can be accepted without incurring any great expense. The first is in the central structure for R&D, and the second is the use of central government purchasing power. We accept the view, and the next Labour Government will implement the proposal, that there should be a Minister who carries responsibility and answers for science and technology across the range. Although, as the noble Lord, Lord Sherfield, said, we are not allowed to speak in public about Cabinet committees, it would also seem sensible that that responsibility should be at the highest level but should be carried out in close liaison with the Department of Trade and Industry, which must in our view be the main motor behind the new effort in civil R&D.

We also accept the view, and will implement the recommendations of your Lordships' committee, that there should be a Council for Science and Technology, absorbing ACARD and charged with overseeing the whole range of scientific endeavour. We accept without hesitation the Select Committee's arguments that only the Prime Minister's close involvement and a clear horizontal view across the full range will produce the necessary political impulse.

We also accept the Select Committee's view on the role of public purchasing in encouraging the private sector to undertake more R&D and to become more internationally competitive. We recognise, as the committee recognised, the dangers of a cosy relationship being built up between government and private industry. But we are as impressed as the committee was by the finding of a report made by the US Office of Technology Assessment, which is quoted in the report, that federal government have a far greater and more positive effect in their purchasing on private R&D expenditures than does federal R&D itself. There is a lesson here which should not escape us.

One last and short point on the theme of public purchasing which spills over into international and community collaboration which the noble Baroness, Lady Hooper, stressed in her speech bothers me a little. It concerns the Joint European Torus project near Oxford. This and other projects of a joint nature have to be encouraged but they need caution in their implementation. I have been astonished to receive advice that UK staff on the project are paid approximately half their Euratom counterparts—leaving aside expatriation allowances and other benefits that Euratom staff receive. I also understand that this matter has been the subject of litigation against the European Commission without success. I obviously do not expect a reply from the Minister this evening but I should be most grateful if the noble Lord will look into the matter and write to me about it. If what I am told is true it shows how sensitive we have to be in implementing these joint collaborative projects with Europe and internationally.

Up to now I have discussed matters which require no serious financial outlay. Reorganising the central structure of government and re-orientating public purchasing will not cost a great deal. But, as the noble Lord, Lord Sherfield, said, we have to address the problem of money since the whole tenor of the Select Committee's report is towards higher expenditure, and in particular higher public expenditure. Its view is most clearly set out at the beginning of Chapter 6 of the report and has been reiterated very clearly by the noble Lord in his excellent introduction to the report.

There are two questions to consider. First, granted that the present R&D effort in British industry is wholly inadequate, what is the best way to improve it? Secondly, in those areas for which the Government are directly responsible—such as basic research and strategic research—how much should the Government spend and where is the money coming from? I believe that there is a political difference between the Government and the Opposition on the first question. The Secretary of State for Trade and Industry is quoted in the report as seeing it as, central to the Government's philosophy that the motivation for spending more on R&D must come from industry itself". Our view is rather different. We believe that British industry has to be induced to step up its R&D effort by incentives. There has to be a kind of kick-start to get the engine going properly in the expectation that when the engine is going properly it will continue of its own accord, and indeed move into higher and higher gear as the change in the attitude with the Select Committee is looking for actually starts to seep through. If there is no kick-start of that kind then we are afraid that there will be no change and the engine will continue to tick over. There will be no great progress, and it will come to the point where the engine will simply peter out.

The committee considered a variety of ways to give that kick-start to the system. I believe that in doing so it accepted our view that it required positive action from the Government. As the noble Lord said, there are a number of ways in which this can be done. The United States and Japan—to take only two examples—have a very elaborate system of fiscal incentives for R&D. The French and Germans have a slightly different system which mixes fiscal incentives with outright grants and cheap rate financing, particularly risk capital. But I think the committee was right to focus on the Australian solution which did two things. First, it concentrates benefits for R&D carried out in Australia rather than carried out anywhere else. Secondly, by putting a time limit on the scheme it made sure that everybody would start now in order to benefit from the six years that they had in fiscal incentives. We have only one problem with the Australian scheme which might be aggravated if it were transferred to the United Kingdom. I have the greatest respect for the Inland Revenue and for Inland Revenue inspectors, but I am not entirely convinced that they would make the best judges of what would be a qualifying scheme for the purpose of tax relief. Furthermore, tax relief helps only those companies which are making a profit. There are certain to be occasions when companies which are not making a profit and not able to benefit from tax relief will need to have some form of support. I therefore think that we should be looking more along the lines of a grant system rather than a tax incentive system such as the Australian one.

As far as direct public expenditure is concerned, in funding R&D through departmental programmes in basic and strategic research we really must reverse the trend of cuts to which the noble Lord referred in the real value of the science budget. It is immensely depressing I am afraid to read the advice that has only this month been tendered by the Advisory Board for the Research Councils to the Secretary of State on the allocations of the science budget among research councils and which was published only last week. After noting their dismay and restating the increased demands made on the UK science base, not least in the AIDS emergency, the ABRC produce this paragraph: It would appear that the Government have set aside these arguments. The Government's declared policy, nonetheless, is to maintain and enhance the strength and quality of the science base. Our advice has to be that this policy and the cumulative tenor of the Government's financial decisions can be reconciled only by reducing significantly the scale of the science base in terms of the numbers of fields in which world class effort is maintained; the numbers of researchers employed and the numbers of laboratories. This kind of contraction will require substantial restructuring funds. We shall be addressing the implications of a major contraction in the strategy paper which we hope to have ready as a basis for consultation in the first quarter of next year. But our strategy paper will also restate our firm view that it cannot be sensible to reduce (whether by default or by overt policy) the research capability of an advanced industrial economy at a time of rapid scientific and technological development". That is from the ABRC and does not augur very well for the future. The Government will no doubt argue that they do not have the money and that in a period of financial stringency every programme, including civil R&D, has to be vigorously controlled. Let me put to the Government one very simple proposition. We are now told on all sides that the Chancellor of the Exchequer has some £4 billion to give away next month. Coincidentally, give or take a few hundred million, £4 billion or so has been raised by the Government in this financial year through its privatisation progamme. We must remember that privatisation proceeds are once-for-all proceeds. One cannot sell British Gas twice. Would it not make sense, and would it not be logical, to reinvest the proceeds of the sale of assets in the industrial future of our country instead of cutting the standard rate of income tax as is apparently proposed? Would it not be a course of action which is wholly consistent with good business practice as well as fiscal prudence and integrity? Is this not, by the Government's own logic, where the money should come from?

Even at this late stage, the Government may repent. The Select Committee has called for a fresh start and a sense of urgency. The Opposition accept that both are needed. The challenge is now to the Government. I repeat the words of Dr. Merrifield: A nation that does not accord the utmost importance to R&D has made a decision not to be in business in five to ten years". I only hope that the Government realise what is at stake.

7.20 p.m.

Lord Flowers

My Lords, we on these Benches thank the noble Lord, Lord Sherfield, for initiating this debate, and for so effectively leading the inquiry that gave rise to it, of which I was so honoured to be a member.

I unreservedly echo what he has said, and I broadly agree too with what the noble Lord, Lord Williams, has said. The crux of the matter, as the Save British Science Society has recently emphasised, is that it would take at least an additional £2½ billion annually, taking government and industry together, to bring our civil research and development funding to the levels that pertain in comparable countries. That shortfall is the single most important consideration. I shall try to avoid histrionics, however, and speak instead about strategic research, mentioned briefly by the noble Lord, Lord Sherfield, because in my view that is a central issue in the consideration of policy for science and technology.

However, science policy is often confused by the use of ambiguous words like "pure" and "applied". Lord Rothschild showed that it is more a matter of who pays for the research and with what motivation, than of what happens in the laboratories. I apologise for seeming pedantic, but I want to avoid that confusion. Pure research is research in any subject—chemistry, sociology, engineering—undertaken primarily in order to expand the frontiers of knowledge. We are still rather good at pure research in this country, but we are finding it increasingly difficult to hold our own with the funds at our disposal. Applied research is research, whatever the content, undertaken because someone considers that there might result to their advantage some benefit commensurate with the cost, and is prepared to pay for it. "Pure" of course is not synonomous with "useless", as some seem to think. As Sir George Porter said only yesterday, there are really only two kinds of research: applied and not yet applied, although it is not always applied as at first imagined.

For example, secure message encoding depends on the properties of very large prime numbers; a subject foundly thought by mathematicians not so very long ago to the utterly useless. The commercial value of this discovery would surely cover the cost of all mathematical research since Euclid initiated the theory of numbers.

What then is strategic research? You can call it pure or applied as you wish; that is in the eye of the beholder. It is research undertaken in order to expand the frontiers of knowledge, and therefore, by our definition, pure. But it is undertaken in fields deliberately selected because they seem likely to contribute significantly to some desired applications. To that extent it is applied.

The most quoted examples today concern the enabling technology, so-called: research into fields like information technology, biotechnology, and the technology of materials, which underly, and study of which should therefore ideally precede, almost everything else that we want to do. Not applications in themselves necessarily, but enabling a wide range of applications to be made. That is clearly a very important matter.

Unfortunately the ambiguity of classification of strategic research so often proves its undoing. Those responsible for the support of pure research regard it as applied, while those responsible for applied research regard it as pure. At times when money is short—and money for research has been getting shorter and shorter, whatever the Government may say—strategic research becomes nobody's prime concern. Insufficiently speculative for the academic, too far from profitable application for the industrialist, it is so easily squeezed out in an economy drive.

The principal responsibility for funding pure research lies with the research councils and the University Grants Committee, both working within the budget of the Department of Education and Science, as befits the prime purpose of pure research, which is to expand the frontiers of knowledge. The responsibility for funding applied research lies with the interested customer and the proxy customer: principally, that is to say, with the industry and with departments or agents of government who deem it in their interest, or in the national interest, to sponsor it.

In pressing the case for strategic research, your committee does not suggest that there should be a third source of funds, a third responsibility. Perhaps it is especially important that I make that clear speaking from these Benches. It is not that there is a dichotomy between the practitioners of pure and applied research and sensible people who are sick of them both. On the contrary, we should all feel responsible for the definition and furtherance of the strategic elements of research, because that is how new products and processes and other innovations of economic value are most likely to be discovered, developed and sold.

It is for that reason that we were enthusiastic about the concept of "exploitable areas of science" offered by the Advisory Council on Applied Research and development—ACARD. Their aim is to draw together the two perceptions of what is possible in scientific and technological terms and what is commercially desirable. Research in the exploitable areas of science is synonymous with what I have called strategic research. What seems new about it is that ACARD has suggested that there may be some systematic process by which exploitable areas may be identified. Whether or not something systematic results—and I am sceptical about that because other countries have tried and failed—the essence of the process must be to obtain a consensus among those responsible for pure and applied research about what areas of basic research seem most likely, after objective analysis, to become applicable within a reasonable time if additional effort and funds can be devoted to them. The consensus must be between industry, research councils, universities and government. That requires political will, and it is for that reason, among others, that we need the Council for Science and Technology proposed in our report, able from the centre to exert powerful influence upon all parties.

Many noble Lords will realise that I am doing little more than spelling out the notion of selectivity and concentration which figured large in the policies of the research councils some 20 years ago. By and large it failed to generate significant application. It failed not because the exploitable areas were ill-chosen, but because the potential users were bystanders rather than participators in the strategic research programme. There was no contribution and no commitment on the part of industry, and therefore precious little real interest. They were spending the Government's money, so it did not matter. Report after report has shown that the same has still to be said today. It is the genuine participation of the potential user that is the vital element in a truly strategic research programme. That should be the prime consideration of the Council for Science and Technology.

Of course there are exceptions, but the only one to offer real encouragement is the Alvey programme in the highly exploitable area of information technology, because it was conceived from the outset as a genuine partnership between industry, research council, university and government in which everyone participates. There have been deficiencies even here—for example, the failure to cover university overheads, a matter about which government departments are rather bad in general. However, the Government, and especially Mr. Kenneth Baker in an earlier incarnation, nevertheless deserve our warm congratulation for the vigorous way in which the Alvey programme was mounted. Of course it will be some time yet before we know whether it has improved our commercial performance. That can only be assessed in the longer term. What Alvey has shown is that research scientists normally engaged in pure research are perfectly willing and able to turn their attention to strategic research, given the leadership of government and the participation of industry.

Therefore, what I find quite incomprehensible is that the Government have not yet seen fit to build on their own success by mounting Alvey-like programmes of strategic research in other exploitable areas.

Responsibility for selecting and funding strategic research in the exploitable areas of science is at present too widely distributed. On the one hand, we have the research councils, the prime responsibility of which is the support of pure research selected on the basis of merit, but nowadays, as the noble Baroness has said, increasing their effort in the exploitable areas. They are loosely supervised by the Advisory Board for the Research Councils, which advises the Secretary of State about his reponsibilities for science. As the noble Lord, Lord Sherfield, has said, your committee hopes that the ABRC, and none too soon in my opinion, will gradually assume greater executive control over the research councils.

The University Grants Committee also has responsibilities for the funding of research under the dual funding system and is nowadays trying to be more selective about it. Although the UGC will obviously take into account subjects selected by the research councils in coming to their own decisions, too close a degree of detailed co-ordination, and too restrictive a view of selectivity, would be undesirable because the UGC provides the seed corn.

However, the UGC is also responsible for teaching, which is the other half of what the universities do. That responsibility is shared with nobody else. In the desire to be selective about research the UGC already pays scant attention to the requirements of good teaching, which are not identical with those of good research. I should not want to encourage that trend at present by proposing that the policies of the UGC should be too closely co-ordinated with those of the ABRC. No doubt we shall develop our views on that when we debate, as I suppose we shall, the recent Croham Report.

The responsibilities for applied research, on the other hand, are even more widely distributed among many government departments and agencies, and among that extremely inhomogeneous collection of institutions known as "industry". From the centre ACARD keeps a watching brief over some of them and offers the occasional nudge. However, it is confined to applied research and development, and over much, especially the defence programme and the associated industries, it has no say. We need a body similar to ACARD, but of higher profile and empowered to oversee the whole of science and technology—pure and applied, civil and defence—whether in university, industry or government.

The Council for Science and Technology, under the leadership of the Prime Minister, no less, should be charged especially with responsibility for identifying the exploitable areas of science in which strategic research can most effectively be mounted, and for winning the participation of all concerned. That is how new products and processes are most likely to emerge from the nation's research expenditure, and how research can most readily be harnessed to meet economic objectives.

I must not keep the House any longer. We are all looking forward to the maiden speech of the noble Lord, Lord Dainton. I have known him for many years. He is one of the wisest men in England.

Many of the recommendations of this report were made or implied in the earlier report entitled Science and Government of five years ago. That report was largely ignored by government. Let us hope that they heed your Lordships' committee this time. Competition in research, and in the technologies that are so dependent on research, is nowadays so fierce that there is not likely to be another opportunity.

7.35 p.m.

Lord Dainton

My Lords, alone among the list of speakers my name carries parenthetically the letter "M". I feel as if I were a learner driver, and it induces in me a proper degree of respect for the conventions of your Lordships' House and also a proper degree of trepidation. I suspect that I am also alone in the fact that over 42 years ago, when I gave my first lecture in Cambridge, I was criticised for my presumed defects, not directly but indirectly. It was a lecture theatre which the students entered from the rear and I entered from the front. Not unnaturally, the first few rows of the lecture theatre were unoccupied, which I did not consider to be a personal affront to me. However, I felt it necessary, in view of the fact that I had prepared my lecture with such loving care and wanted all the words to fall on the ears of my audience, to say—foolishly as it turned out—"Can you all hear me"? There was a slight pause and then a student in the first occupied row said "Yes, sir, I can hear you, but I am prepared to exchange places with someone else!"

As I looked at this report, my mind went back to Francis Bacon and his famous remark: "Knowledge itself is power." That, of course, is only a half truth. If knowledge is to be translated into action, human and material resources must be allocated, first, to exploit existing knowledge—that is really the "D" in R&D—and, secondly, by research, to extend and expand the knowledge that we have.

As I read [...]rough the report, there seemed to be a kind of leitmotiv of the two perennial problems which have faced governments ever since science came of age and enjoyed state patronage. The first question was: how much should government and industry spend on research and development in science and technology? The second question was: how can one manage government investment in research and development to ensure that one gets the best value for money and the best outcome for the country?

Your Lordships will know that just about 70 years ago two remarkable men who were to become members of your Lordships' House—Viscounts Addison and Haldane—made what I still believe to be the most profound remarks about the second problem. I do not wish to go into them now, but I do not doubt that 70 years hence our successors will still be debating this question. However, because I believe that progress in this difficult field of science and government can only be made if past decisions are carefully scrutinised and monitored and the lessons learned from them applied, I merely wish at the outset to welcome the recommendation in paragraph 116 of Chapter 6 which says that some proportion of the money—about 1 per cent.—which government spend should be used to evaluate the results of past decisions. By the same token, I welcome the already established Assessment Office.

The report repays careful study. I cannot deal with the details, especially as I am aware of the convention about maiden speakers. However, I have formed a very clear impression that the analysis and the conclusions are broadly correct; they are certainly consonant with my own experience. It is undeniable that the percentage of the gross domestic product which has been applied to civil research and development has declined and, to a newcomer like myself, it appears that this decline cannot be right in a competitive world in which science and technology now offer, and will increasingly offer in the future, beneficial opportunities for the prosperity of the nation through industrial and commercial activities.

I believe that it is also self-evident that to gain the maximum benefit from the world's store of knowledge, to which every country has access, the United Kingdom must have enough people with the requisite skills, imagination and initiative to maintain an across-the-board capability from basic research to application, to manufacture and indeed to marketing. It must also have good machinery for making wise choices in the public sector. It must induce in the private sector a greater willingness to invest in and to exploit research and development. By and large, there must be a public willingness to accept that, as a result of the information revolution through which we are now going, change will be the norm and not the unusual, and that research and development in science and technology will from now on be the engine of that change.

Our record with respect to people has been touched upon, and in recent years it has not been good. In the last quarter of a century there has been a significant swing away from science in our schools. It is almost 20 years since the committee under my chairmanship reported on that and I find it sad to relate that the recommendations about a broad span of studies up to school leaving, which that report advocated, are only now somewhat tardily and, may I say, slightly timidly being tackled by governments.

As has already been commented upon, we allow some of our very best talent to leave our shores. I was dismayed when, last March, I received the list of candidates to be elected Fellows of the Royal Society, to note with some interest that 20 per cent. of those Fellows who had been educated in this country, and trained here in research, were now permanently resident abroad. They are indeed the best gifts that we could make to our rivals.

Much of the report is concerned with the machinery of government. The Select Committee recommends that the advancement of science and technology should be adopted as a central government objective and I wholeheartedly endorse that. It also recommends that there should be a Minister of Cabinet rank to preside over the new central council which is to oversee the whole of government science and technological effort. There are obvious difficulties associated with this idea which have been faced before in this country. They include how much consideration of, and due deference to, any central strategy a hard-pressed departmental Minister can give when faced with immediate problems which demand the full utilisation of all the resources at his disposal? On the other hand, how can the Cabinet Minister at the centre ensure that departmental policies conform with the central strategy if control of the purse strings lies in hands other than his own?

Nevertheless, I believe that the balance of argument has now shifted and points in the direction which the recommendations of the report indicate. If for no other reason than that our future is so closely linked with our competence in science and technology, this aspect of our national life should have a much enhanced visibility in the political arena, no less than in education and in the media.

However, on the question of the organisation of the research councils, I would beg to differ somewhat from the report. It has always seemed to me that science is a seamless robe; that the divisions within it called "subjects" are there for the convenience of the division of labour, and their existence, when they are institutionalised into separate research councils, are more harmful than beneficial. Moreover, science changes rapidly. Increasingly both the advancement and the exploitation of science require milti-disciplinary approaches.

When I was chairman of the Council for Scientific Policy, and later of the Advisory Board of the Research Councils in its first days, I was clear then that the research councils' interfaces—that is to say between the research councils—needed to be made more permeable and more fluid. I now believe that I would go further, and even further than the report. I think that we need a more effective instrument than the five research councils. We need a unified body—call it a national research council or national science foundation, if you wish—simply because there is much greater ease and speed of redeployment of human and financial resources, necessary if the obstacles to the implementation of policy change are to be reduced.

A second reason is that such a body could take a view right across the whole of science, engineering and technology and be better able to identify what the broad priorities should be where they transcend subject boundaries. I sense that some Members of the Select Committee share this view. I wonder whether they also feel that we should not delay. I quote Bacon again: He that will not apply new remedies must expect new evils; for time is the greatest innovator". I should like to refer momentarily to the question of pay-offs for scientific and technological research and development. In advanced countries one finds universally that there are three loci for this work: institutions of higher education, national laboratories and sometimes international laboratories, and industry itself. It is beyond question that the best place for basic scientific work is within the universities and institutions of higher education. As the noble Lord, Lord Flowers, has commented, that is probably also the best place for some strategic research. That arrangement yields very many pay-offs. First, we have the cadres of well trained researchers coming from institutions where teaching and research are kept up to date. It helps to cultivate an awareness over the whole field so that we do not miss those opportunities based on work which is done outside this country and which is part of the international harvest of knowledge.

Furthermore, we must never forget that the mainspring of some of those most radical innovations which have blessed this country and other countries have had their roots and origins in basic research. I need only mention names like penicillin, cephalosporins, the cavity magnetron and lasers to make the point, because there are many others.

In these Houses of Parliament I suspect that we are more interested in the economic pay-off of scientific research and development, where the ultimate result must be the sale of the process or product at a profit in the world's markets. Increasingly, it seems to me that the salability of what we have to offer will, to a very large degree, depend on its technical superiority over the products and processes of our rivals. If British industry is to succeed, it must learn from its competitors in the USA, Japan, Germany and so forth, that it must invest more in R&D and follow it through.

Twenty-eight years ago I was the Arthur D. Little Professor of Chemistry at the Massachusetts Institute of Technology. Arthur D. Little was a chemistry graduate of that institution who founded a consulting firm about 100 years ago. He was very fond of writing and saying that research is the mother of industry. Significantly, when he died he bequeathed the whole of that great consulting firm to an academic institution—to MIT itself.

I have worked a fair amount of my life, one way or another, in the United States of America. Among the contacts I have met have been Dr. Guy Suits of the General Electric Company who, for 20 years, was in charge of its distinguished research laboratory at Schenectady. One lunchtime I remember him telling me never to forget that an industry cannot be successful without research because, research is the best form of industrial insurance". For all these reasons, therefore, I heartily endorse the recommendations of the Select Committee which refer to the need to stimulate industry to invest more in research and development. I think that the two measures proposed—tax incentives, well known in the United States, and also requiring annual accounts to show how much has been spent on that in individual firms—are measures which I would wish to commend to your Lordships.

Perhaps, too, as a last thought, I could put it this way. It has often seemed to me, in my public life concerned with scientific research and development in the public sector and in my academic life, that we have been constantly asking over the years—and quite properly too—what is the cost of doing this or that piece of research or development. I would suggest that perhaps our decisions might be a little better, and certainly would be better in industry, if we also asked and tried to answer the question: what is the cost in the form of a penalty in the future of not doing this or that kind of research? I thank your Lordships for your indulgence.

7.51 p.m.

The Earl of Cranbrook

My Lords, if it were not for the fact that I feel I speak for the whole House it would be almost presumptuous of me to congratulate the noble Lord, Lord Dainton, on the calibre of his maiden speech. In a way what the Select Committee did has sprung from work that he initiated. He was of course chairman of the Council for Scientific Policy working group, on which the noble Lord, Lord Flowers, and I believe the noble Lord, Lord Kearton, also sat, which in 1971 reported on the future of the research council system and which was effective in setting up the ABRC that we now have.

It is a pity in a way that the second half of Cmnd. 4814 is sandwiched behind Lord Rothschild's report because it has at least as much weight and at least as much importance. We are very glad indeed to have heard the noble Lord tonight, and we look forward to hearing a great deal more from him in the future.

I was particularly interested in his views on the Unified Research Council, which is referred to in the Select Committee's report. At present, as a result of another report from the Select Committee on Science and Technology, I am sitting on what can perhaps be referred to as an interface sub-committee which is attempting to co-ordinate research from three research councils. It is an odd role. With this experience, I am very much inclined to put a great deal of weight on the advice that the noble Lord has just now given us.

I should also like to take this opportunity of elaborating briefly on two aspects of the report of the Select Committee on which I had the honour to sit under the chairmanship of the noble Lord, Lord Sherfield. I want to speak briefly about manpower resources and also about criteria for the public support of research.

Those of your Lordships who managed to read the large volumes of evidence will have found them well worth reading. They are large in both senses. I must register a slight protest at the change in size of these books. It means that I have to reorganise my library completely if I want to keep them. It is an annoying feature that they have suddenly doubled in size.

In this evidence your Lordships will find one strain constantly repeated. I take, for instance, from page 44, the words of the British Microcirculation Society, which expressed their anxiety over young research workers who leave research or go abroad; in simple terms, the brain drain. The Engineering Council referred to the difficulties experienced in recruiting and retaining skilled staff. It said: The salaries of academic staff need to be competitive with industry if research establishments and academia are to attract and retain graduates of the highest quality". The Engineering Council was afraid that graduates would leave academia and go to industry, but if we read the words of industry in the person of ICI, one of our largest and most research-oriented public companies, it finds: barely enough good people … for our own recruitment". There is no contention that salaries in research and in universities in general are low by comparison with the rewards offered to exceptional young graduates in almost any other career. These bright people are therefore lost to research. The world abounds with anecdotal stories. Some of the salaries paid by financial institutions to their star performers still in their early twenties are three, four or five times as much as what a young man could expect if he were to enter a research career. I heard yesterday of a young London journalist who, good luck to her, was earning a lot more than a professor before she had reached 25. This is the brain drain.

The direction of the brain drain though nowadays is almost exclusively to the United States. When I was beginning my professional career almost the whole world was available to us. There was a university expansion going on in every quarter of the globe, and we could, and did, find places in many different countries. But now the brain drain is almost exclusively to the United States of America. If Australia is about to found two new universities, there will perhaps be a slight addition in that direction if they recruit internationally. But otherwise that is the direction in which we are looking.

I believe that the Royal Society is shortly to publish new statistics on this point. I believe that it will be found that, although perhaps in quantitative terms the loss is not great, in qualitative terms it is frightening. Quite recently we learnt of a 24 per cent. pay rise negotiated by university teachers. This may serve to ameliorate their circumstances to some extent, but on the other hand it simply intensifies some of the problems faced by the research councils and other grant-giving bodies.

If salary costs are increased in this way within budgets that are fixed on level funding terms, projects that are already under way and budgeted for require increased allocations. These projects run for up to three years ahead in general. The extra costs can only be met either by reducing the number of projects which are funded or by cutting research funds elsewhere. Therefore, it is a double-edged knife.

Let us look at the United States system; let us look at the United States mechanisms for university education and research. We are struck immediately by its diversity; the existence of state, federal and independent institutions. There are some colleges where the primary duty of the staff is simply to teach. Little research is expected from them, and in fact they achieve rather little research. But on the other hand there are famous names among the universities with a high percentage of staff whose whole career is devoted to research, and again there are some research institutes of superb calibre.

If we look at the terms on which the staff are engaged we also find that these are variable. The nine-month contract is quite a frequent form of engagement, leaving the employee free to spend the remaining three months earning money much as he will. There is a great variety of short-term contracts and even tenure within the American system. It does not give the security for life that we find among the less flexible system that exists in our universities. It is true that within our universities, out of necessity, ways and means have been devised, particularly let us say in faculties of medicine or engineering, to allow staff members to earn more by working outside their contract terms.

I recognise clearly the strength of some of the initiatives that Her Majesty's Government have taken in the last two years, as listed for us by the noble Baroness, Lady Hooper. I have felt the impact of them, as I sit on the Natural Environment Research Council. There have been considerable changes, I judge, in the operation of research councils. Is it now time to look at our universities and to undertake a radical review of our university systems to try to create opportunities for high salaries for high performance? A challenge lies before the universities and the Government to examine the systems in other countries, particularly the United States, and to see what structural reforms could be adopted to the service of our scientific and research community.

The second point I want to speak on briefly concerns the criteria for public support of research. The report of your Lordships' Select Committee recognises that within basic science the peer group assessment system is the best available method for determining what research is supported. This involves a judgment by leading practitioners in the relevant fields of research and it includes two considerations. The first is the expectation that results will lead either to new concepts or to new explanations of known phenomena. The second point for evaluation is the worth of the research for training and for the strengthening of the research capacity of the people involved.

The academics who are involved in making peer assessments in the case of basic research would probably agree that they are not necessarily the right people also to judge the commercial potential of strategic research. There have been moves to adjust the composition of research councils and to bring in more people who have experience of the world of commerce and industry as it impinges upon the world of science. But some other method which is not yet clear to us is envisaged in what have been called the exploitable areas of the science process.

Both reports—the report by ACARD and that from your Lordships' Select Committee—emphasise, on the other hand, that not all strategic research is amenable to, or even is desirably evaluated in terms of, commercial exploitation. The report in paragraph 6.66 identifies the Department of the Environment especially as one government department in what is called a non-commercial field, where the research is concerned to benefit sections of the public at large. But this can be expressed in much stronger terms.

There is now evidence that our natural environment is stressed in three main areas. It is stressed in the atmosphere. We see phenomena such as ozone depletion, carbon dioxide accumulation and acid precipitation. The natural environment is distressed in the marine area. For example, any noble Lord who tries to sail across the Kattegat in the Danish North Sea in summer will find it stinks; it is rotting. Our local inshore coastal waters are also too rich—too foul perhaps I should say—in their burden of contaminants. Land is a problem. There are wide complaints about the degradation of our natural environment by agriculture in this country under what is seen as the stimulus of the common agricultural policy. More widely in the world there is serious degradation in terms of erosion and depletion of land quality.

Research in these areas leads to something which is much more than merely the words "public benefit", as used in our committee's report. Reseach is essential to develop policies that will safeguard the natural resources. I reiterate the question asked by the noble Lord, Lord Dainton, just now. We must examine research in these spheres in terms of the penalty for not doing it. That in my view is a full economic justification. It is not in terms of cash, but it is in terms of damage limitation and resource conservation. These extra funds cannot come from the DES Vote. They must come from a government who take proper care of their people, their nation and their environment.

The noble Lord, Lord Williams, referred briefly to AIDS. This is an even more critical problem. It faces the whole of mankind and it again requires a response which I think is outwith the science Vote of the DES. I should not expect the MRC to seek funds from the ABRC flexibility margin but rather to obtain funds from the Government to promote research into this medical problem.

This leads to the final question. We agree that resources are limited. I think that no one—although I felt that noble Lord, Lord Williams, was getting dangerously near—feels that our problems can be solved by splashing out money on a large scale in an indiscriminate fashion. More money is needed, but some research may have to be stopped. The criteria I suggest for supporting research have to be turned on their heads to find some rational basis, some grounds for policy decisions, to say that there are fields of research which need not continue in the national interest; something where exploitability is not clear, where the training value is not apparent and where the protection of the environment is not of obvious significance. That is something which has to be considered with as much care and scrutiny as do the grounds for strengthening our support for research in other fields.

8.7 p.m.

Lord Gregson

My Lords, I first add my congratulations to the noble Lord, Lord Dainton, for what I should describe, as an engineer, as a Class 1A maiden speech. It is indeed a measure of the value of this House that a man of the stature of Lord Dainton can add to the debate of the Parliaments. We should be conscious of that.

I pay tribute to the chairman of the Select Committee, the noble Lord, Lord Sherfield, who chaired this inquiry. His wisdom, his expertise and long experience, arising from distinguished service to the country over many years, was tested to the full by the importance and complexity of the subject dealt with in his report. He came through with flying colours, as the House might expect. We were grateful to the noble Lord, to our clerk, to our many advisers and other people who helped to produce what I consider to be a very important report for the future wellbeing of this nation.

Over many years in connection with a number of organisations with which I have been associated I have had a unique opportunity to study at close hand the activities of most of our world competitors and potential competitors—in Europe, North America and especially the Far East and the Eastern bloc, particularly Russia. I must admit my deep concern that we in the United Kingdom are failing and failing badly to keep up with the rapid pace of the development of technology that is taking place all round the world. Since we in this country have to earn our living in international trade, I believe this situation is untenable.

I have no doubt that your Lordships are all aware that over the last three years this country has had a negative balance in manufactured goods for the first time since what is known as the Industrial Revolution around the end of the 18th century. But I wonder how many are aware of the alarming rate of change there has been from a positive to a negative balance. In 1981 we had a positive balance of £5 billion; in 1986 we had a negative balance of £6 billion, and I would suggest that for a trading nation which depends on its overseas trade to maintain the standard of living of its people, this must give rise to considerable concern. In normal circumstances we should be in an extremely serious balance-of-payments crisis—more serious in fact than anything we have experienced previously. The reason we are not in crisis, or apparently not in crisis, is of course North Sea oil.

May I at this stage correct once and for all the misguided conception held by some Members of Parliament and many newspaper editors that we in this country, by some miraculous means, could earn our living and maintain our standard from our net earnings from services? The GDP of the United Kingdom is roughly a little more than £350 billion. The output from manufacturing is nearly £200 billion: over half our wealth. Most of the rest comes from the extractive industries and from farming. That is the internal account, the housekeeping money.

We import nearly £80 billion-worth of goods from abroad and we pay for them by exporting £60 billion of manufactured goods and a net £7 billion of services. The difference is presently made up by exporting North Sea oil. The manufacturing industry is absolutely vital to the economic wellbeing of the United Kingdom. In recent years the decline in our manufacturing earnings abroad has been almost exactly the reciprocal of the build-up of the sale abroad of the surplus of North Sea oil, over and above our own needs. In other words, the total balance was slightly positive.

I fully recognise the contribution which services and overseas investment make in earning our living, but they really do not come anywhere near substituting for the £60 billion that we earn from manufacturing exports. It is the erosion of that manufacturing base, without the prop of excessive North Sea oil earnings, that is the root of my concern for our economic future.

Since the United Kingdom is not rich in physical resources other than energy in the short term, our ability to compete in the world markets with our goods and services is entirely dependent on adding value to the materials and resources which we import from abroad. That means we must rely primarily on the quality of our human resources, their skill, their enterprise and their versatility—in other words, technical knowledge and the intellectual capability to apply it.

A most important feature of the 20th century is the rapid emergence of new technologies, and the pace is accelerating. The Office of Technology Assessment of the United States Congress recently did an assessment of the development of computer science. Their conclusion was that knowledge in this subject has a half-life of 2.7 years: in other words, in the time of the average first degree a graduate is already out of date. This exponential increase in technology appears to be a factor which we in this country have failed to realise. It takes more and more effort to keep up with the front runners: you cannot rest on your laurels or assume that the provisions we made yesterday to compete are sufficient for today; and they are certainly not sufficient for tomorrow.

Another feature of new technology is that it is all-pervasive. There is hardly an area of man's endeavour that is not affected today and will not be more and more affected as we follow technology up the exponential scale. To remain competitive in the world markets we must be at the forefront of a good many of the developing technologies, if we cannot be at the forefront of them all.

Unfortunately, as I said at the beginning, we are falling behind our competitors in the rest of the developed Western world. In general we are not keeping at the forefront of science and technology. In general we are not applying innovation to our endeavours in manufacturing industry, and, since this will drastically affect our ability to earn our standard of living, it simply must not be allowed to continue. For our sakes, but more particularly for the sake of our children, we have got to climb back by hook or by crook to being a leading manufacturing nation on a world scale. It concerns every one of us, and every one of us has a part to play.

There is no doubt of this country's competence in science: the whole world acknowledges it. The regrettable fact that over the past few years we have failed to provide the resources to maintain that capability I am sure will be dealt with by other speakers in this debate. But the great failure of this nation over many, many years is the failure to exploit the scientific discoveries which have come from our universities and research laboratories. I believe that that failure lies equally at the door of government and of industry.

We have heard a great deal over the past few months of the disastrous effects on industry of the short-term outlook of the institutions of the City of London, which are now by a very substantial amount the majority shareholders of British industry. There is no doubt in my mind that, coupled with poor management and interest rates that border on usury, the short-term approach is a fundamental cause of British industry retreating into technological obsolescence, which is so damaging to this country's potential in world trade. In these days of universal and rapid communication, you can no longer sell yesterday's technology anywhere in the world. The days of selling pig iron to India and rice bowls to China have long since disappeared. If we are to remain a major trading nation it is a nonsense to rely on a low exchange rate as a sole basis for improving competitiveness. Prices are no longer the all-dominant factor. Technology content and quality are becoming fundamental and unless we want to enter into competition with the third world, flogging native artefacts and shoddy goods, we have to improve the input of technology to industry.

This was very apparent in the period when the dollar was very strong in the exchange markets. If your Lordships remember, last year the pound nearly reached parity with the dollar, and it was quite frightening to realise that during that period although we increased our exports for such things as fine china, fine worsted and a semi-antique car, there were very few technological goods that America wanted to import from the United Kingdom. But the American markets were flooded with technological imports from Germany and Japan: by comparison with those countries, our trade balance with America hardly moved.

We should be very stupid indeed to ignore the warning signs of that experience. The essential weakness of British industry is that it has got out of the habit of spending money on R&D, particularly on the expensive phase—development—which costs maybe a hundred times as much as the original research. Industry has got to be led back to the understanding that it is morally wrong for the future of UK Ltd. to increase dividends in the short term at the expense of developing the products and processes which are essential for the long-term wellbeing of the company and the country.

Industry must not be allowed to hide its failure. It is not in the public interest for it to do so. Companies must be required to publish their spending on R&D. Those who underspend must be shamed into spending more. Those City analysts who want to spot companies with a good future in high technology should be given the figures to do so. Those who only look for short-term profit should be reminded about the long-term future that is necessary for the continued well-being of the country. The mood of the City ought to be moving fast towards greater disclosure, in the light of recent scandals, and disclosure certainly needs to include R&D spending.

Make no mistake, my Lords, industry will need a great deal of help to recover from the bad habits it has been forced to adopt, and this help is simply the role of government. Pump priming is the key and the Department of Trade and Industry has a most crucial role to play in this. I only hope it will heed the gipsy's warning!

May I now turn briefly to the other component of our disastrous decline, the failure to exploit the intellectual capability of our people to earn our living. There can be no question that our educational system at all levels is devoted to teaching people to spend money or to shove it around the City, but certainly not to earn it. We have the smallest percentage of our children proceeding to higher education. We have the smallest graduate community compared with our competing nations. Within that small graduate community we have the lowest percentage of technologists, and that tiny fragment of our population that we are training to be technologists in order to earn our living in the world has the poorest level of qualifications.

Your Lordships might say at this stage: "How stupid can you get? How could we possibly contrive to get ourselves into that position?" But the situation is even worse than that, because as yet I have only mentioned this tiny community of technologists as they leave our universities and out polytechnics. They then go into industry, and here we have the lowest level of expenditure on training among our competitors, 0.015 per cent. of turnover compared with an average 1 per cent.—eight times less.

Then, unbelievably, despite the fact that technology is expanding on an exponential scale, we do not systematically up-date this tiny minority of technologists, who are charged with the awe-inspiring burden of earning a living for all of us in the 40 years of their working life, in spite of the fact that the half-life of the underlying technologies is less than three years. I consider that to be unbelievable.

I readily admit that there are exceptions that prove the rule, but what I have said is substantially correct. And the net result that does prove the rule is that industry is desperately short of the skills of the technologist in the midst of 3½ million unemployed. That is unforgiveable. Fact is indeed stranger than fiction! So what can we do about it?

We must, of course, in the longer term change the whole attitude of the nation—Sir Keith Joseph's famous cultural shift; we must convince our children of the need to earn money before we spend it or even shift it around; we must improve the teaching of maths and physics in our schools; we must motivate our children to qualify for science and technology courses in the universities and polytechnics and we must provide more places to accommodate them.

We must realise that a first degree is no longer a qualification in technology. We must strengthen the provision for postgraduate education as Japan, Germany and America have already done, so that the first degree becomes a general degree and specialisation does not take place until the second degree. We must provide for a continuing education throughout the whole career of our technologists and scientists. I realise that we in the United Kingdom now face an enormous task if we are to restore our place as a major trading nation in the world, but even before we attempt to do that we have to climb out of the abyss of technological obsolescence.

I believe that, taken with our report, the two steps I suggest would at least initiate the process of the long recovery. Implementation of the report will cost money both from government and from industry, but I must say that not to spend this money now could be the greatest error of omission ever committed in the economic history of this nation.

8.25 p.m.

Lord Ezra

My Lords, in his remarkable maiden speech, the noble Lord, Lord Dainton, reminisced about his experiences some 40-odd years ago as a university lecturer. I, too, should like to go back some 40 years, because that was the first time I met the noble Lord, Lord Sherfield. He was then, as Sir Roger Makins, a powerful figure in the Treasury and he was chairman of a committee which co-ordinated our overseas trade. I had to appear before that committee to beg them to let us export some coal which was then in very strong demand. I always used to prepare for those meetings with great care because of his logical and probing approach, which of course we have seen in full measure today in the speech with which he introduced this report.

I should like to concentrate on R&D in relation to manufacturing industry and I know that the noble Lord, Lord Lucas of Chilworth, will be dealing with this issue when he replies. Of course, the importance of the problem of R&D in relation to manufacturing industry comes out very clearly in the report and has been referred to already in speeches by many noble Lords. It was underlined in the report produced by the Overseas Trade Select Committee, whose chairman, the noble Lord, Lord Aldington, will, I am glad to see, be speaking later in this debate.

There is not the slightest doubt that R&D is an essential ingredient in industrial recovery and growth. I find it very hard, as the noble Lord, Lord Sherfield, found it hard, to follow the reasoning of the Treasury in this respect. I tried to understand its language in the evidence it gave. But that language was so convoluted and complex that I gave up and simply concluded that the Treasury was, on balance, rather against R&D.

Of course, it is difficult to tell what the level of the R&D effort should be, as the noble Lord, Lord Dainton, emphasised. It is also important to recognise that civil R&D, particularly industrial R&D, is primarily the responsibility of enterprise, but government none the less have a powerful role to play in stimulating the necessary level of effort.

As to whether the effort of civil R&D in this country is adequate, I think this is conclusively shown in a quotation from pages 24 and 25 of the report which reads as follows: Of the five leading industrial nations, the United Kingdom now devotes the smallest share of its gross domestic product to civil R&D. This disadvantage in quantity is not offset by any generally greater effectiveness of R&D in Britain". That is not what the committee said. That is what the DTI said in its Science and Technology Report for 1984–85. So I think we can take it as read that we are deficient in our R&D compared with other countries.

Reference has been made to the undue proportion of R&D which goes on defence expenditure in this country, matched only by the United States. But, in the United States, it looks as if the spin-off for civil uses of its massive defence R&D effort is relatively greater than ours. So we suffer by comparison with others and the forward estimates of expenditure put out by the Government suggest that this difference between the defence expenditure on R&D, on the one hand, and public civil expenditure on R&D on the other, will, if anything, widen in the years ahead. That appears to be the forecast. So what we now regard as serious will become even more serious in the next two to three years if government plans materialise.

There are two ways of remedying the situation so far as industrial R&D is concerned. The first and main initiative must be taken by industry itself. However, that initiative must have a full measure of support from government. How should that be brought about? The report is clear in this respect and I believe that there are four measures, some already referred to by other noble Lords, which should be taken to remedy the situation.

The first measure is that enterprises should publish their expenditure on R&D in their annual reports. This is of vital importance, in my opinion, because we are all suffering in industry today from a short-term attitude. One way of reminding ourselves that there is a long term is to be told what the effort is in research and development in terms of expenditure. We do not know what that expenditure is. I am glad to note that in the next annual review that the Government will produce on government-funded R&D they will have a shot at indicating what the level of private R&D is. I think this is of great importance and I think the lack of information on R&D expenditure in most annual reports of private enterprise companies contrasts unfavourably with the reports of nationalised industries, on which I speak with some experience.

So far as the National Coal Board, as it was then known, is concerned, we produced a whole chapter on R&D and indicated fully what we were doing, as well as setting out what the expenditure was and how that compared with the previous year. We took a pride in that, and I believe that that sort of pride should be taken by all companies in this country in their R&D effort. In my opinion, that would be a very good move.

Looking to the longer term, we have to recognise, as British Aerospace said in its evidence, that a 10 to 15-year planning horizon is required for the introduction of a new technology. One starts research today and, if one is lucky, one gets the results in 10 to 15 years' time. It is essential that the long-term view be introduced into the thinking of companies and into their annual reports.

Secondly, there is the question of the role for the DTI, which is already very important. It is, after all, the key ministry in the whole industrial sector. It is doing a good deal of funding already. However, as the report indicates, the totality of its funding could well be concentrated on the single Alvey project on advanced information technology. If that were done properly, there would be nothing left over for anything else. This is an area which certainly merits substantial additional funding on selective projects, on targets and in such a way as to supplement, support and stimulate investment in R&D by the firms themselves.

Thirdly tax incentives have been referred to. Many countries, as the noble Lord, Lord Williams, emphasised in his important speech, have devised ways in which R&D expenditure can be stimulated by fiscal measures, by grants and in other ways. We are at such a difficult and indeed critical stage in this matter that I should have thought it essential that some way of stimulating R&D fiscally or by appropriate grants should be undertaken.

Finally, I refer to public purchasing, which was also mentioned in the report. Public purchasing is a very potent weapon for stimulating effective R&D activity among suppliers. I was saddened to read in the report that the enlightened public purchasing policy, which seemed to be part of the approach of the Government to the problem a few years ago, now has a low profile. I hope that that is not true. However, it was said in the report, based on the evidence received.

That would be a regrettable situation. I found in my experience with the coal industry—we were big purchasers, buying in those days about £1 billion-worth of supplies—that we could achieve very competitive quotes from British firms if we worked hard at it and joined with them in the R&D and in testing and marketing. We knew that those products were competitive because they were being sold throughout the world. When I used to visit the stockyards of pits, the bulk of equipment which I saw on the surface, waiting to go down the mines, was made in Britain. When I visit the shop floors of factories, the bulk of machine tools that I see on shop floors is made abroad—in Switzerland, Germany, America and elsewhere. Very few of those pieces of equipment are made in this country and they are usually of the older type.

If there is a determined approach to this problem, particularly through the purchasing route, that situation can be altered. We need to bring to bear on the issue all the pressures we can to change the situation.

As to the morale of people in the research and development sector, I, like the noble Lord, Lord Williams, was approached by the people employed on the JET project at Culham. I was amazed to learn of the discrepancy in the salaries which are paid to British personnel, compared with almost twice as much paid to the other Community personnel. That is leaving out of account the expatriation grants which are also very substantial. I should be happy to receive a copy of the letter which I hope the noble Lord, Lord Lucas, will be able to send to the noble Lord, Lord Williams, on that subject, if he is not able give a response when he speaks. I am very much with the noble Lord, Lord Williams, in saying that we have to see the whole question of reactivation of R&D as part of the reactivation of industry generally. There are three ways in which that has to be done.

First, we have to make sure that we have an adequate level of investment in industry. I regret to say that I do not think we have. Just a few minutes ago, over the tapes, information was made available by the DTI to the effect that in the fourth quarter of 1986 investment in manufacturing industry was 10 per cent. below the fourth quarter of 1985. During the whole of 1986, it was 4½ per cent. below 1985. We know that in 1986 we had a bigger than ever deficiency in our balance of payments on manufacturing products. I therefore fear that on one of the three legs of this regeneration effort—investment—we are not yet there. We need to get that aspect right.

We also need to get our training right. Much has been done to increase the level of training in this country. The noble Lord, Lord Gregson, remarked upon the fact that in the midst of all our unemployment we are increasingly short of skilled personnel. Surely, we can get that right after all these years. I have been much involved in industrial endeavours and export endeavours, and I have not known a time of economic recovery since the war when we have not been desperately short of skilled personnel. Surely the day must come when we can avoid that difficulty. After all, when we are short of products made by skilled personnel, we find no difficulty in importing such products from abroad. Evidently, other countries can meet their increased needs because their economies are rising in concert and still have enough over to supply us. This is an area to which we must devote a great deal of attention.

The third leg is R&D. We must do the research for the longer term future and development for the medium term so that investment can be put in and trained personnel can operate the processes and equipment. It all makes a whole; it is the firm basis for industrial regeneration which has been fully recognised in Germany, in Japan, in the United States and in France—all our major competitors. We cannot afford much longer to ignore such a strategy.

I should like to conclude by quoting once again from this excellent report. It refers to the fact that in 1903 the Royal Society said in its yearbook: Expenditure by the Government in scientific research and science institutions, on which its industrial prosperity so largely depend, is wholly inadequate in view of the present state of international competition". The hope I express is that the Royal Society yearbook for the year 2003 does not contain those same words. Whether or not it does depends entirely on what we decide to do today.

8.40 p.m.

The Earl of Bessborough

My Lords, with other noble Lords, I welcome this report and congratulate the noble Lord, Lord Sherfield, on his presentation of it. It certainly has had a very good reception in the media, and it must be giving us all cause for grave concern. Incidentally, I was very glad to learn recently that, like my right honourable friend the Prime Minister, the noble Lord, Lord Sherfield, had become a Fellow of the Royal Society. He is to be congratulated on that. I also congratulate the noble Lord, Lord Dainton, on his quite delightful and very wise remarks in his maiden speech. We certainly all hope that we shall be hearing him frequently.

At the outset I must apologise to the House, and in particular to the noble Lord, Lord Lucas, who understands my predicament, and to the noble Lord, Lord Sherfield, that due to a prior engagement I shall not be able to remain to hear the winding up speeches. I hate having to do this but in this case I have no option.

I fully appreciate that because of the importance and breadth of the recommendations involving several departments the Government response to the committee may not be completed until well after this debate. I appreciate therefore that my noble friend Lord Lucas may not be able to anticipate the Government's reply to specific recommendations. I appreciate, too, that the Government response must be co-ordinated through the Cabinet Office and that this may not be completed much before the Summer Recess. I hope, however, that a White Paper will be produced before then and we look forward to my right honourable friend the Prime Minister presenting it to Parliament.

Although I was not a member of the sub-committee of the noble Lord, Lord Sherfield, in this case, I was a member of the committee when it produced its report on Science and Government which led to the Government response in Cmnd, 8591, which, as I understand it, still provides the basis of arrangements for scientific advice to government. Although the Government accepted, as the noble Lord, Lord Sherfield, has said, most of the recommendations of the committee in that earlier report, they did not accept the proposal for a Cabinet Minister to speak for science and technology; nor for a council for science and technology. I am glad, however, that as a result of that report stronger central machinery at official levels and the broadening of the field of study have been introduced.

I was also interested to note that my right honourable friend the Prime Minister said in a Written Answer in another place already in October 1979 that since issues may arise which straddle the responsibility of several Ministers, it would not be sensible to ask one of them alone to take the lead, and that in such a case my right honourable friend would herself play the co-ordinating role.

I quite understand that my noble friend Lord Lucas may not perhaps be able to go much further than that this evening. However, my main message is that I wish that science and technology could be given a larger profile. I think that this did happen to a certain extent in the early 1960s when my noble and learned friend the Lord Chancellor was Lord President of the Council and Minister for Science and I was his humble number two. My noble and learned friend spoke often of the seamless role in exactly the same way as the noble Lord, Lord Dainton, did in his maiden speech. That took me back a few years.

We all seem to know, even if we may not be supposed to know that there is a Cabinet Committee dealing with science and technology generally. This more or less emerges from Chapter 6, paragraph 5, of the Select Committee's opinion. Having been a member of more than one Cabinet Committee in the past, I agree with the Select Committee that conventions of secrecy about Cabinet Committees are not helpful when there is a need to project the public image of science and technology and no one is allowed to admit that any ministerial machinery exists to draw up priorities. The Select Committee is rightly convinced that more than this is required. Recognition of the vital, primordial role of science and technology in the life of the nation, which has been mentioned by so many noble Lords this evening, should certainly be public and visible.

The economic future of this country must depend to a large extent on government support and promotion of new technologies in the world as a whole, although I agree that industry and the City might well do more for themselves when one considers that 50 per cent. of R&D funding is already paid for by Her Majesty's Government and that this is, as I understand it, high compared with some of our competitors. I recognise that some friends in the City sometimes expect returns on a short-term basis and that this discourages companies where R&D programmes must run over a longer period.

This is certainly a problem when one has to consider the interests of shareholders. In my view shareholders should nonetheless be asking companies what their R&D programmes are and obtaining more information about them, recognising that research may well be more of an asset than a liability. The well known firm of Plessey, which I know quite well, is a very good example of a firm which declares its R&D expenditure—£81 million in the past year, more than 5 per cent. of its turnover, plus £237 million jointly with customers such as the Ministry of Defence. Despite this we cannot ignore what its head of research, Professor Gosling, said in The Times today about the need for government intervention. Above all we must recognise that under the leadership of my right honourable friend the Prime Minister, the Government have defeated inflation as well as reactionary trade unionism and feather-bedded management. In the words of Mr. Peregrine Worsthorne in the Sunday Telegraph last Sunday, industry and commerce are now leaner, fitter and more competitive". Now therefore seems to be the time to promote more effectively our undoubted capabilities in science and new technologies. The rest of the world wants to know what we have to offer to our mutual benefit. I know this from my many travels abroad promoting our abilities in these fields. In my view we must give our scientific and technological capacity a higher profile. I know it is common knowledge that there is a new science adviser to the Government in Dr. John Fairclough. I cannot help feeling that it might help him if our policies in science and technology were given more public and international prominence.

As Sir George Porter, the President of the Royal Society, suggested in his speech to the Parliamentary and Scientific Committee yesterday, it will be a good thing to follow the recommendation of the Royal Society that a high level national science council, under the chairmanship of the Prime Minister, be set up to raise the profile and assist the science adviser in the task of co-ordination, promotion and exploitation of the efforts of our very well qualified scientists and engineers, who should, I believe, be as well rewarded in Britain as they are in other parts of the world if we are to reduce the brain drain. With other noble Lords including the noble Lord, Lord Ezra, I also was briefed on this point by our laboratories at Culham. I also consider that there should be no shortfall in the funding of education, teaching, research and training. I noted the vice-chancellors' call for urgent action in this respect.

Although the recommendations in the present report are somewhat similar to those in the Committee's earlier report on science and government, there are, I note, certain subtle differences, and in particular in regard to the Japanese experience. I hope that the Government have been looking at the Japanese model, which I have studied in some detail.

Finally, as my noble friend Lady Hooper has done, I stress the importance of European technological co-operation. I apologise to your Lordships for having been doing this so often over the past 25 years, and most recently last summer and autumn in our debates, on Second Reading and in Committee, of the European Communities (Amendment) Bill, ratifying the Single European Act, which includes a substantial package on technological co-operation. As I said more than once then, it is only through such co-operation that we can hope to compete effectively with the United States and Japan. I only hope—I trust that my noble friend Lord Lucas may be able to comment on this—that the budget of the European research and development framework programme of 7.7 billion European currency units will not be too drastically curtailed by Britain, France and Germany. I think that I have told my noble friend about this, and arranged for him to be further briefed on the subject.

As usual, the noble Lord, Lord Sherfield, and his committee have produced a most important report and they must be given full credit for it. I feel sure that the Government have been giving it, and will continue to give it, very serious thought.

8.45 p.m.

Lord Swann

My Lords, although he has had to leave, I want to add my tribute to the noble Lord, Lord Dainton, a very old friend of mine, for his characteristically perceptive maiden speech. I want also to congratulate the noble Lord, Lord Sherfield, and his colleagues on an extremely valuable report. I can only hope that the Government will not merely welcome it, as so often happens with such reports, but will actually do something about it, and especially the first three recommendatons.

Much has already been said with which I agree. I want only to comment quite briefly on one or two aspects of the report that might have been emphasised more than they were or where I have some reservations—but that in amplification rather than criticism.

We are fortunate in Britain in having a mulitiplicity of sources for the funding of research and development of every sort. There is no single source of far-sighted wisdom in this world, and everyone involved in making decisions about the funding of research ought to heed the well-known academic aphorism; namely, that peer review is a splendid method of eliminating bad research and, along with it, the very best.

The most famous example, of course, is Mendel, who laid the foundation of genetics and molecular biology, and hence most modern medicine, and with that, for example, the possibility of finding a cure for AIDS. But despite the fact that he sent his classic paper to every distinguished biologist in the world in his day, it was totally and utterly ignored for 40 years; so one could rate his chances of getting a research grant from a research council or a government department as anything but pretty depressing. Fortunately for him, however, and still more so of course for us, he did not need research grants. He was the abbot of a monastery in Czechoslavakia.

It is for this reason that I have reservations about the suggestion in the report, stemming, it would seem, from the Advisory Council for Applied Research and Development, ACARD, that strategic research and its close relative, now known as exploitable areas research—those areas, in short, that lie midway between pure basic research and straightforward applied research—should be funded by a new process and presumably, although the report is not wholly clear on this, by a new body.

I do not believe that a unitary process with a unitary body is the best way to go about encouraging these important but neglected areas. I am sure that the research councils should regard such research as part of their responsibility, as should government departments, one hopes with their chief scientist and customer/contractor mechanisms strengthened. Indeed, the committee so recommends. But to impose a new central mechanism on top of this seems to me unwise.

For similar reasons, I have suspicions about the idea of a unified research council. Central decision-making in the area of research, like peer review, is liable to eliminate not just the bad but the very good along with it, and with no possibility of the right decisions being made somewhere else in a decentralised system. Research is simply too incalculable to be left safely to central decision-making. This may be irritating to politicians and civil servants, who like tidy structures, but it is an inescapable fact of life.

Turning elsewhere, the report has a lot that is valuable to say about industrial research and development. Here again, I have a reservation. Research and development is not an end in itself, like basic research. It is a central part of the mechanism of innovation and the subsequent introduction of new products and new processes through the market. It is only this that generates wealth for society.

The report, I think, tends to overemphasise R&D at the expense of the other aspects of innovation. Unless R&D, and particularly the "D" part, on which the report rightly lays much stress, actually produces saleable goods and services at a price that enables the producer to thrive, it is likely to be money wasted. R&D effort, in short, has to be matched by good management, marketing effort, training and much else if successful sales are to be achieved.

Does the volume of R&D expenditure by a company predict its commercial success? By no means necessarily, it would seem. Moreover, it has to be remembered—and this is a point made by the noble Lord, Lord Sherfield—that around 30 years ago the United Kingdom was one of the heaviest spenders on R&D. But the lesson learnt then, and since apparently

forgotten, is that it is the use made of R&D, deriving from the quality of management of the business, that determines success and not just the number of pounds actually spent on R&D.

It follows that simply exhorting companies to spend more on R&D will not necessarily produce results; and bribing them to spend more by tax concessions may only produce creative accounting. The emphasis must surely be placed on encouraging the whole managerial process of innovation. Once performance improves R&D growth will follow automatically. Industrial R&D without the will, understanding and ability to exploit it may help our competitors but it will not help us. The plain and depressing fact is that the crucial gap in United Kingdom performance is the lack of confidence on the part of all too many British managers and entrepreneurs that R&D can be turned into profitable innovation. It is an intractable problem that the report goes only part of the way to grasp.

I have touched on two of the problems that beset us in the support of research and development with a view to the ultimate benefit of society. They are the problems of choosing what R&D to do in the first place and of how to cope with the whole managerial process of innovation so that R&D is translated into commercial success. There remains a further difficult area; namely, that not only are managers suspicious of and resistant to technological change but so also is the workforce for fear of losing jobs.

This trio of areas—the choice, management and acceptability of technological change—lies at the heart of Britain's industrial problems and they too demand investigation and research. The report has some comments to make on that score. There are, for example, recommendations for more evaluation and in particular—a point raised by the noble Lord, Lord Dainton—for a small percentage of government-funded research money to be spent on various forms of evaluation. There is, too, a call for more information to be made available on the pattern of R&D and the amount of money spent on it.

Fortunately, some research on these problems goes on. There are one or two private institutions and a few units and individuals in universities involved in it. The Economic and Social Research Council has realised the importance of this trio of problems and is funding work on them. I should tell the House that I have a particular interest in this myself as chairman of a body called the Technical Change Centre; a small research organisation that the council funded. It is devoted specifically to a study of the choice, management and acceptability of technical change, and directed by a former industrialist, himself responsible for a number of highly significant technological innovations.

The various organisations and individuals involved—all, it has to be said, financed on a small scale—have a range of deeply intractable problems to wrestle with but they are doing valuable work. If we do not use the methods of research to guide us in how best to choose and manage R&D and how best to overcome the many obstacles to getting innovation accepted I fear that industrial progress will continue to be very slow.

Market forces having failed all too often to do the trick, this is a crucial area of practical research. I hope the Minister can assure us that it will have every support and encouragement from the Government.

9.4 p.m.

Baroness White

My Lords, before turning to the main subject of this debate, I, too, wish to proffer my congratulations to the noble Lord, Lord Dainton, on a maiden speech of outstanding quality. I do so with particular pleasure as I sat under his chairmanship some time ago when I was a member of the University Grants Committee, over which at that time he presided.

Delighted as we are to have the noble Lord, Lord Dainton, with us, I am sure he will understand if I point out that one scientific swallow, however distinguished, does not make a summer. As a lay member of the Science and Technology Select Committee, and a former chairman of the European Communities Committee, with its seven subcommittees, I echo the opinion expressed yesterday by the President of the Royal Society, Sir George Porter, at the function referred to by the noble Earl, Lord Bessborough, and presided over by my noble friend Lord Gregson. Sir George said that in the Upper House, the country is fortunate to have a few highly qualified scientists and technologists as well as some others who are well informed about science. If ever the Upper House were to disappear or be substantially changed, many of us would wish to know how this important source of independent scientific opinion was to be replaced at parliamentary level. I give your Lordships that quotation because with the recent public discussion as to whether or not the Prime Minister should advise Her Majesty to take account of the needs, rights or expectations of minority parties, little attention has been paid to the unique value to the British body politic of the particular specialist knowledge and experience which some Members of this House can contribute; knowledge and experience mostly acquired by persons of considerable achievement who would never dream of taking on the quite different responsibilities which are inherent in being elected to the other place and with which some of the rest of us were engaged before coming here.

While we have lawyers a-plenty, a good many financiers, a sprinkling of busy industrialists and some excellent Bishops when they can spare the time to be with us, we are in real danger of running short of Members who have the knowledge of science in its very rapidly changing modern manifestations—knowledge which is needed to enable this revising and advisory Chamber to do its work as effectively as we all wish.

Of course we are deeply indebted to those of our company who do spend a great deal of time with us, often at great inconvenience or expense to themselves. It must be within our knowledge and experience that some of our most respected and knowledgeable scientists, through advancing years, find it difficult to play as full a part as heretofor. It would be invidious to list individuals, though the names of the noble Lords, Lord Ashby and Lord Zuckerman, must surely come to mind.

Those of us who have some experience of trying to formulate scientific policy—a subject with which this debate is partly concerned—recognise how essential it is to strengthen our lay committees not only with our admirable specialist advisers but also with at least a dependable minority of colleagues who have the experience and standing in the scientific and engineering worlds to help guide our deliberations. In this field, which is of increasingly urgent and indeed vital national importance, generalists and highly experienced scientists or technologists are not entirely interchangeable. So I strongly support the concern that was expressed yesterday by Sir George Porter that this House should remain an "important source of independent scientific opinion" and I hope that his sentiments may secure in high quarters the attention that they undoubtedly deserve.

Having made that point and as there are many speakers in the debate, I shall try to concentrate on two other topics only. One concerns the attitude of the Treasury, the City of London and manufacturing industry to the true importance to be accorded to the main subject of our report; namely, civil research and development. Do they share our view that unless there is an urgent and profound change of attitude in these all-important sectors of our society, Britain will face the possibility of such a rapid decline that we could indeed be transformed into what has been called the industrial peasantry of the 21st century?

That may sound like an exaggeration. However, let me give your Lordships one recent illustration of this process. Anyone who listened to the news on the radio this morning must have been severely shaken by the announcement of the Japanese exploitation of a novel method for recording music and sound. It could displace the newest type of compact disc that is being manufactured in Britain and they are hoping to bring it to this part of the world before we in Britain have had time to get our product fully established, let alone to have reaped the full commercial benefit from it. That is just one example, but to my mind a rather frightening one, of the speed with which modern technology is developing.

Several speakers have already referred to the rate of obsolescence with which we are faced, not only in products but also in skills, and which means that the labour force will have to be retrained not just once or twice in a lifetime but every five or 10 years at a minimum. I am sure that other noble Lords will have been as interested as I was in the series of articles on technology that has been appearing in The Times this week. Those who have read those articles must be full of well founded apprehension that as a country we may not be able to keep up. That was the inference that I felt obliged to draw from some of the information contained in that extremely interesting series.

Some of us have tried to come to terms with CAD. CAL and CAM, to which we must now add CIM (Computer Integrated Manufacture). It is not just computer "aided" design, learning or manufacture; it is "integrated" manufacture. There is a new spectrum of exploitation which is only just starting but which in a few years in certain areas may carry all before it using multi-purpose machines with a fantastic range of operation in manufacturing heterogeneous products.

We need managers who can keep pace with such a speed of change. Do we have them? I doubt it. Obviously there are some, but not on the scale that we need if we are to maintain the kind of standards and position in the world which I am sure we all hope to achieve.

The noble Lord, Lord Gregson, has dealt eloquently with some of those considerations. I do not wish to traverse the ground which he has covered with far greater knowledge and experience than I could command. I am sure that the recommendations made in our report should be taken seriously not only by government and industry but by our financial institutions, which should heed the emphasis that we lay on the point that they should regard it as part of their normal procedure to tell the world what they are doing and what importance they lay upon their investment and effort in research and development.

We need to try to change the whole ethos and emphasis of our financial institutions and the investing public. I hope that such influence as this report may command will help in that necessary process. It is not only in those institutions that change is needed. I felt, and I think that at least some of my colleagues felt much the same, that the evidence which we received from Her Majesty's Treasury was the most depressing contribution to our inquiry. We commented on it in the report in paragraphs 6.8 and 6.30, with, I think, considerable restraint.

In paragraph 6.30 we come to the other topic that I wish briefly to touch upon. It is the appointment of a new Minister. In that paragraph we suggest that one possibility would be to place that responsibility not merely on No. 10, Downing Street, but in the Treasury itself. Of course, the Prime Minister is First Lord thereof. In the paragraph we explain how disturbing it is: that a department as powerful as the British Treasury has … as a consequence of its particular evolution, a definite blind spot in science and technology. Requiring a Treasury Minister to speak to the science and technology brief in Cabinet would eventually upgrade the Treasury's own understanding and appreciation of science and technology, a development which could only be to the general benefit". I expect that there will be some sceptism about our recommendation for the appointment of a Minister for Science and Technology without the back up of a major department and a large budget over which he, or conceivably she, might have control. It is not the first time that we have experimented with a Minister for Science and Technology. The noble Earl, Lord Bessborough, reminded us that way back in the period 1959 to 1964 that position was held by the noble and learned Lord on the Woolsack, the Lord Chancellor, Lord Hailsham.

It was rather a chequered experience because at that time he combined the offices of Lord Privy Seal and Lord President of the Council (he alternated between the two) and Leader of the House of Lords. In 1962, he also took on responsibility for sport. In 1963, he added to that the further responsibility for employment in the North-East, which even at that time was causing deep concern. In November, 1963, he disclaimed his hereditary peerage and reverted temporarily to the House of Commons, where he became Secretary of State for Education and Science, a position which has persisted since then. He seemed to have lost technology on the way, but that was later picked up by Mr. Tony Benn in the 1960s.

We need not necessarily judge the requirements of the present day by the experience of what is now, after all, nearly 30 years ago. Times have changed. At that time we had overcome the worst of the difficulties of the immediate postwar world. We then still thought that we could muddle through. Nowadays, surely even those of us who are least concerned with science and technology must appreciate that we can no longer muddle through and that we must therefore take the most serious and intelligent decisions that we possibly can.

I have spoken for long enough and I must go no further. I emphasise only what I believe to be the great importance of the recommendations in this report. I repeat that primarily the report is addressed to the Government, but it is also addressed to the other industrial and financial institutions and not only to the scientists and technologists themselves.

9.20 p.m.

Lord Aldington

My Lords, it is a long time since I have spoken immediately after the noble Baroness. However, I am glad to be able to assure her one point. Although the comments of the committee on Her Majesty's Treasury were made with restraint, I do not think that my comments will be quite so restrained. Perhaps therefore the noble Baroness will wait to hear them.

This has been a fascinating debate. However, I feel that some noble Lords will agree with my belated protest that it is outrageous that in a debate as important as this the 12th speaker out of 26—for that is what I am—rises at twenty-past nine in the evening. I hope that my noble friend Lady Hooper will pass on that comment to her noble friends.

We are enormously indebted to my noble friend Lord Sherfield for introducing this debate and for being responsible for what I consider to be a masterly report. It has taught me an enormous amount. I am, in the terms of the noble Baroness, a lay person in these matters. However, I listened with great interest today to many noble Lords who have great distinction in the scientific world. I felt in particular privileged to be able to listen to the elegant maiden speech of the noble Lord, Lord Dainton, which was full of wisdom and experience. Perhaps I may add my tribute to his very attractive delivery. I am glad to welcome the noble Lord back into the Chamber.

I say that I am a layman and I feel rather an unworthy participator in this debate. But I do not think it can be surprising to many noble Lords that one who shares with the committee a concern and anxiety about Britain's manufacturing industry in the increasingly competitive world should wish tonight to add his small voice to the warnings and wise advice offered to us in the report. The report covers the whole of the chosen area and has valuable points to make. I cannot attempt to tackle more than a few of them.

However, I start by emphasising the gravity of the situation as reported to us. I venture to suggest to your Lordships—as another Select Committee tried to make clear in its report—that the reason for the gravity of the situation, and the answer to such questions as why we are underspending on R&D and why the morale of the scientific community in industry needs raising urgently, cannot be found simply by looking at policies and events in the last seven years or even in the six years which preceded them.

Rather than spend time and argument on looking backwards, we should follow the committee's lead and consider what has to be done today. We have in this field to look first—as we did in the overseas trade report—at the attitudes in the nation as a whole, and that includes attitudes in the Government. I quote from the report, paragraph 1.11, The key issue is one of attitudes: the determination to make the United Kingdom industrially successful, combined with new hope for those engaged in science and technology". It goes on,

Cosmetic adjustments to the status quo will not be enough". I have heard the noble Lord, Lord Sherfield, comment on cosmetic adjustments before, and I would guess that his pen wrote those words.

The simple fact is that industry cannot succeed except by applyng to its products the best scientific and technological knowledge, both in the selection and design of the product, and in the making of it. There is nothing new about that. What is new is that the speed of change is accelerating every day, and the time taken to explore science and then to develop from that exploration for industrial use is growing longer every day, and with it the cost both in person terms and in the machines and instruments needed. The market dictates the speed of change in its requirements.

The importance of change to industry was stressed by Dr. Merrifield, whom the noble Lord, Lord Williams of Elvel, quoted. It is no surprise to some of us, but I think it is a surprise to some people in the Treasury, judging by the answers they gave to your Lordships and the Select Committee, and the memorandum which they put in and which I shall come to. It is this speed of change which forces greater attention to R&D in any industrial country.

One Minister has been reported as saying that the report is a bit apocalyptic. I hope that that kind of smothering of the important things which it says will not detract from the importance of the report to the public opinion as a whole. It looks from the excellent and impressive leader in The Times today that at least our principal daily newspaper has got the point of the report. I have to say that The Times has so disappointed me recently that I was just about to give it up, but if the editor minds what a person like myself thinks about him, I promise him, following that leader, that I will continue to buy The Times every day as I have done for the past 50 years.

Of course we shall hear defensive arguments from within the Government. The committee heard something. I am sure we all have in mind the points that my noble friend, Baroness Hooper, and other noble Lords have made, about the good things that have been done and the improvements that have been made by the Government and their predecessor in recent years. Alvey is a good example, as the noble Lord, Lord Flowers, said. But as I have said before to your Lordships, one of Britain's weaknesses, so it seems to me, is to concentrate on comparisons of present performance with past performance in Britain, rather than to compare our performance and policies today with the performance and policies of other leading industrial countries. This weakness is to be found inside governments as well as outside governments. It is even to be found among your Lordships. That insular approach is rather comfortable sometimes, but it is unrealistic in a world where competition in industrial matters is global and not national.

Chapter 4 of this report is headed "International Comparisons". It is very important, as is the warning in paragraph 6 that conditions and classifications differ greatly, and that it may not be sensible: to copy systems appropriate to different political and social environments and cultures". However, what does the evidence show? It shows that the level of public funding of civil R&D in Britain is woefully below that of our European competitors and that the total funding of civil R&D as a percentage of gross domestic product is the smallest of the five leading industrial nations.

The Times on its Spectrum page on Monday last had a chart showing in a most graphic way how our relative expenditure as a percentage of GDP had fallen behind what the United States, Germany and Japan have been doing, and what a tremendous spurt France has been making while we have held steady. Some of us have been preached to by economists and the Treasury for not understanding about market forces. However, when looking at R&D, surely one of the most relevant of the forces in the market place is the level of effort on R&D thought right by our competitors. They think it essential to spend more on R&D and to increase that spending faster than we do. How can Britain be so arrogant and so stupid as to assume that they are wrong, especially when we look at their rather better economic success?

I was appalled to read in paragraph 6.8 of the report that the Treasury think that there is no: direct relationship between the health of the economy, or sections of it, and the levels of expenditure on R&D". No wonder the noble Lord, Lord Ezra, formed the impression that the Treasury was rather against R&D. However, surely even the Treasury must know that there cannot be industrial growth without R&D and that there cannot be faster growth without more R&D. I take on board all that the noble Lord, Lord Swann, said about the importance of management. The importance of training and the importance of capital investment—points which were also made by other noble Lords.

However, today we are talking about R&D, and there seems to be no doubt at all that the more R&D, the faster growth can be, but the less R&D, the less likely we are to have fast growth. I simply do not understand why these excellent men in the Treasury—for so they are—try so hard to defend the indefensible with such fervour as they show in the supplementary memorandum which is appended to the end of their evidence on page 311 of Volume II of this massive work. There is no sign of any urgency. There is an apparent contentment that while every other leading industrial country is increasing its support for science and techology we should move at a slower rate and actually—to use their words—contemplate a reduction. I am sure that they are right in saying that industry ought to do more. However, we shall not get things better if government shelter behind that argument and do nothing themselves, any more than we shall get things better if industry shelters behind that argument and does nothing itself.

There is the constant refrain that all government have to do is to ensure the right climate for industry to increase its effort in R&D. However, that does not seem to have worked so far, does it? Even it it were working better, surely British industry is entitled to be supported by its government on research and development as much as its competitors are supported by their governments.

There is another shortcoming in our current attitudes that has been mentioned in the debate, and that is the concentration on the short term rather than the long term. That of course can cause more damage to science and research and development than anything else—even more than investment. I hope that within the Treasury they do not suffer from "short termitis".

The point has been made that there are signs of "short-termitis" in the City and among financiers. There are signs that "short-termitis" has found its way into managing directors' offices. The problem of "short-termitis" in the funding of manufacturing industry goes wider than R&D. I very much agree with what the report has to say, and with the Bank of England that much can be done to improve the understanding of the financiers by a fuller disclosure of R&D spendings and an explanation of them. However, in the short-term I do not think that that will be enough if we are really intent upon getting bigger expenditure on R&D inside industry. Government simply cannot wash their hands of underspending on R&D wherever it is. They can exhort; they can and should increase the DTI's support for innovation in the ways suggested; they can and should help through public purchasing, as has been mentioned by some of your Lordships. However, I think that they would be wise to consider carefully the evidence given to the committee about the need for incentives, including tax incentives.

The committee has stressed the urgency of tackling the underfunded R&D in Britain, and I do not apologise to your Lordships for concentrating my remarks on that matter. There is no way of securing the necessarily quick results without a lead from the Government, which means more money. One Minister has described such a process as "spraying cash". He says that spraying cash will not work. However, without more cash we shall not solve the problem. As the noble Lord, Lord Williams, has said, happily every day we read of the large harvest of surplus revenues which is accruing to the prudent Chancellor. I cannot believe that he will pass by the opportunity of using some of this harvest for the very best form of seed-corn: greater support of civil research and development.

In the Chancellor's colleague's elegant phrase, as the Chancellor sprays cash among either departments or taxpayers, the cash he sprays at R&D will work even

better at securing the economic growth that he requires than any other way of spraying the cash.

Thus I think that the report under debate is even more timely than might have been expected. I very much hope that the Chancellor will bear in mind the closing conclusion of the Committee's most valuable report. The paragraph begins as follows: The Committee's enquiry has revealed the gravity of the United Kingdom's prospects in R&D". I shall not read the rest of the paragraph but I hope that the Chancellor will have in mind the whole of it when he makes his Budget decisions.

9.38 p.m.

The Earl of Selborne

My Lords, I read the report with a great sense of relief and I have listened to the debate with an equal sense of relief. When in the fullness of time the Government give their response—and we quite understand that we shall not have a full response tonight—it may not necessarily be all that we seek. However, at least there will be a feeling abroad, particularly among the scientific population, that the problems are now well understood.

If ever there was demonstrated a need for making a strong case, it is the astonishing evidence given by the Treasury officials, which has been referred to by a number of speakers tonight, not least my noble friend Lord Aldington. In that evidence there is set out clearly the problem against which the science Vote has had to fight: the illiteracy of the Treasury—perhaps I should say the innumeracy of the Treasury—in trying to determine what can be expected of publicly-funded research. Many speakers tonight have clearly and demonstrably pointed out the failures of government and the failures of industry to recognise the contribution which can, and will, be made by science if only it is correctly funded towards the long-term growth of the country's economy.

Just to complete the story—and this may be a little uncharitable of me—I must also say that I think that scientists themselves have perhaps fallen short of what might be expected of them in this respect. I am a layman, as are so many other speakers, though I am chairman of the Agriculture and Food Research Council, so I at least get involved in part of the administration of research funding. Scientists could have done more over the last few years to demonstrate the value and the worth of assessments and evaluations of research projects.

The Select Committee's report makes a recommendation—and Professor Ashworth in his evidence suggested—that about 1 per cent. of the value of any research project could often usefully be spent on an economic evaluation. It is clearly the case that much basic research does not lend itself to economic evaluation. Some research, such as that which my noble friend Lord Cranbrook referred to, is going to be much harder than other work to assess. If it is research work on damage limitation, in giving government options or formulating policy, clearly it is an indefinite science.

That is why scientists have been so cautious about trying to give an economic assessment or evaluation of their research findings. But this has led directly to the view held in the Treasury—which the committee suggests charitably has a blind spot so far as science is concerned—that, because it is very often so difficult to make an economic assessment, therefore it cannot be done, and therefore it follows that there is probably no such correlation in the economy as that between the value of science conducted and the value of the research done.

Having said that evaluation is essential, I believe that research councils, universities and other research contractors using public funds have an absolute duty, first of all, to refine rather better the science of evaluation, and then to put it over in a much more assessable form. I know that there will always be criticisms of this evaluation, but it does not mean to say that it should not be attempted.

To demonstrate the need that there is to make such assessments available within government, let me quote the case of agricultural research, with which I have been directly involved. As it happens—and this is just of historical interest—agricultural research in the last three or four years has been quite heavily cut back. It has been cut back for reasons which probably largely lie in the cost of the common agricultural policy. It is widely perceived that the CAP has got badly out of control. There is concern in the Treasury that this amount of support was not intended for farmers, or perhaps even for the food industry, and that something must be done to cut costs.

What has happened is that overall costs right through the Ministry of Agriculture and the other agriculture departments in grant aid of one form or another have included the cost of research and development. This was done in isolation from the overall strategic look at the research requirements not just of those agriculture departments and the industries to which they relate but also the research requirements of other departments and industries which go well beyond agriculture and food.

This short-sighted approach is now quickly being shown to have damaging implications for an area which goes way beyond that which was ever suspected when in January 1985 the public expenditure White Paper was published. This demonstrates the need for the Council on Science and Technology. I am certain that the Select Committee is right when it says that there must be a forum in which the overall strategic considerations for research in the Ministry departments, research within the research councils and indeed research in industry (publicly funded, as some of it is) should all be considered together.

The problems in agriculture became rather more severe as a result of Rothschild, when the agriculture departments were given responsibility for commissioning research. When that happened the amount of the science funds which were put at risk by departmental cuts increased.

If there had been a council for science and technology sitting four or five years ago—when quite sensibly the government of the day would have pointed out that their requirements for agriculture were changing, that the cost of agricultural support was getting out of hand—there would have been consultation with the Department of Employment about the consequences for rural employment and with the Department of Education and Science on the consequences for other sources of funding on the science vote. There would have been consultation with the Welsh Office, which always takes a great interest in employment in Wales; with the Department of the Environment, which, as my noble friend Lord Cranbrook pointed out, has a great interest in matters concerned with conservation and the countryside; and with the Department of Trade and Industry, with its concern for the biotechnology programmes.

If we put that altogether and at the same time work out what is needed for an agricultural industry—which is required to be very much more competitive in the market place and will have to live in a position which it has not been used to; that is, exposed to market forces such as it has never experienced before—I suspect, though I may be wrong, that the conclusion of such a council would have been, "Yes, by all means reduce the support for the agricultural departments, but, having reduced it, make sure at least that the research which is there to support that industry and areas much wider than the agricultural industry is protected or even increased to ensure that the industry, which has been so responsive in the past to science and research and development, is given a fighting chance of surviving in this harsh climate".

That did not happen, because the way we operate in this country is that we cut funds to departments when they are seen to be out of line, without consideration for the interlocking interests of other departments. I say again that I do not believe this would have happened had some body been responsible for taking the overall view.

As a final commentary on this sad episode of these cuts, one of the laudable proposals was that the agricultural industry should be encouraged to pay more for its own research. It is quite correct that it should and it is a sad reflection on agriculture that it has contributed little to its own research in the past. To achieve this funding it was necessary to put a Bill through Parliament, the Agriculture Act 1986, which allowed the Home-Grown Cereals Authority, the Horticultural Development Council and other statutory bodies to raise money for research if the growers and farmers so wished, which in the event, they have.

However, because there was no strategic oversight because the cuts were enforced within months of that White Paper, the infrastructure to conduct the research on behalf of these industries was already in the process of being dismantled by the time the Government, wearing their other hat, had put together on the statute book the legislation that allowed such funding to take place. That again is a farcical, but nevertheless true, commentary on the disorganisation from which so much of our research seems to suffer.

Scientists are disillusioned, not necessarily because of cuts—though that certainly is disillusioning enough—but because when cuts are proposed they are proposed in such a disjointed way. There must be a view determined, if one is to fund research from public funds, as we clearly must, which takes a longer-term look than the three-year public expenditure reviews. If one is funding research in basic, strategic or even applied areas, one often will be funding work for five or 10 years. It is totally impossible for research contractors to respond within months, as in the case of the Agriculture and Food Research Council, when the funding is suddenly removed—and that in isolation from advice which is probably coming from the Advisory Board for Research Councils and others. I say firmly that if ever a need for a council of science and technology has been demonstrated with hindsight, it is in the sad story of the last few years of the funding of agriculture and food research.

9.50 p.m.

Lord Tedder

My Lords, I should like to begin with a personal welcome to the noble Lord, Lord Dainton, whose lectures I had the good fortune to attend as an undergraduate at Cambridge. I had better not say how many years ago that was. Quite a number. Also, I must crave your Lordships' indulgence in that I hope to catch a train back to Scotland tonight. I shall remain in the House for as long as I can, but I hope that your Lordships will forgive me if I do leave.

I welcome the report of the Select Committee. I do not wish to take up your Lordships' time in discussing details covered in the report. I shall not therefore discuss the need for adequate funding of research and development. I am going to assume that better funding of civil research will be provided, and I want to consider how it will be allocated.

I am mainly concerned with the allocation of funds to the universities. In particular, I am worried by the concept of centres of excellence which, if incorrectly applied, could be absolutely disastrous. If active research was to be restricted to the largest universities I am prepared to predict that within a decade the quality of research in the universities would deteriorate, and in 20 years it would become moribund. Topics of scientific research are like living organisms which start with a burst of activity, attain maturity and then quite rapidly wither away, to be replaced by new topics.

A wide variety of research is essential. Obviously, not every university should promote research in every field, but every university should have specific areas of research which would be funded by the UGC. The number of chosen research areas would depend on the size of the university or, more particularly, on the size of the chosen department. Thus a very large university might have five or six areas each in chemistry and in physics while a small university might have only one area of sponsored research in physics and another in chemistry.

A member of staff at a university or polytechnic could choose to join a UGC-supported team or opt to work on his own. I never know whether to say "he" or "she"—perhaps I should use the words alternately. If he/she chose not to work in an established team, he/she would only get the most basic facilities from his/her university.

Baroness Seear

Perhaps I may advise my noble friend simply to say "he".

Lord Tedder

I am grateful to my noble friend. If he chose not to work in the established team, he would only get the most basic funding from his own university and would have to raise money for his

research either from the Research Council or from industry. In contrast, a member of staff who elected to work as part of the established team would have access to funds provided as part of the university's annual grant.

The areas of UGC's chosen research must be under continuous review, and a staff member working by himself who proved to be a successful researcher could become the nucleus of a new team. Support for university research must depend on its scientific quality and the competence of its research workers and not on the size or antiquity of the university involved.

9.55 p.m.

Lord Mottistone

My Lords, I hope that the noble Lord, Lord Tedder, will forgive me if I do not immediately follow him in his contribution which was too specialised for me. This debate has already been conducted for the past four days in The Times and it is pretty well exhausted there. I have to say to your Lordships that I prepared my speech yesterday and the similarity of my views to several of those of my right honourable friend Mr. Geoffrey Pattie is purely coincidental.

One point which was particularly made by Mr. Pattie is worth repeating: the market approach does not mean leaving everything to market forces. Some government direct investment in R&D is of course necessary and my noble friend Lady Hooper has shown us some of the things that the Government are doing. However I believe that a great deal more should be left to industry than is currently the case, is recommended by the Select Committee or appears to be wanted by the noble Lord, Lord Williams.

The summary of conclusions opens with the words: The advance of science and technology, which is essential to the economic recovery of the country, must be a central objective of government policy. Yes, my Lords, but how to do it? Successive governments for far too long have been seeking to direct matters from the centre with all too little success. For example, there is some evidence that the best engineering systems are produced commercially rather than in response to closely controlled government contracts. Certainly that was an impression that I formed when closely concerned with the development of naval radio equipment in the 1950s and early 1960s, and I have had no reason substantially to modify that view since.

So maybe government should stand back from close involvement with civil R&D and use their "money" as tax incentives to commercial firms for identified R&D, rather than as grants for specific projects. Many noble Lords have touched upon that as being necessary and indeed the report itself makes mention of it, but it does not make mention of it as a principal way of encouraging R&D in industry. This view has indeed recently been recommended to my right honourable friend Mr. Norman Lamont, the Financial Secretary to the Treasury, by the Conference of Electronics Industry which is an association of most of the electronics manufacturing trade associations.

This same approach might indeed be more widely adopted for much more defence R&D than has hitherto been the practice. With a massive change of attitude that such a new approach would need, defence could seek out all possible opportunites for decentralisation of R&D, excluding only the few really secret or genuinely specialised matters that really need special treatment. If this could be achieved there could be a massive saving in defence in-house R&D expenditure, a substantial reduction in security problems, a better chance of defence inspired R&D having a civil application, as has been called for in part J of paragraph 6 of the report, and almost certainly the possibility of better engineered products.

On the last point, there is evidence to show that a lot of American manufactured defence equipment has over the past 50 years been better engineered than British equivalents. There seem to be at least three reasons for this. First, engineering and engineers have been accorded greater importance in the USA than has been the case here; secondly, central government control of defence projects has not been so technically detailed as in this country; and, thirdly, British firms that tried in the 1960s and 1970s to take a long-term view of investment in R&D, as was called for by my noble friend Lord Aldington, turned out all too often to be the companies that were particularly stricken by industrial relations strife. This malady did not, on the whole, apply in the United States.

Extending this suggestion that our problems may be better solved by less government intervention rather than tidying up the present system, one wonders whether the Select Committee might not have accepted the recommendation of a single research council and examined ways of making it work, rather than dismissing that option and seeking to justify the retention of the present research council setup.

I was delighted that, in his excellent maiden speech, the noble Lord, Lord Dainton, who I should very much like to congratulate on his speech and who really knows about these things, suggested the same approach.

To take another point, what about the funding of basic research? I commend to your Lordships a most interesting article on page 25 of last Friday's Economist. Among other interesting points, the article commends the University of Surrey for selling on a long lease 11 acres of prime greenbelt land with planning permission as a science park to BOC for £4 million. Not only did that bring extra money into the university and hence less reliance on state funds; it also puts a science park alongside the university so that an easy exchange of ideas between the industrial and basic research scientists is possible.

At a lunch of the Parliamentary Scientific Committee yesterday I happened to sit next to a geologist. I said to him: "What do you think can be done to improve the situation?" He said: "Put science parks alongside universities". That is what we are told that the University of Surrey did. They also made money in the process; is that not splendid?

The University of Salford is also commended by the Economist for bringing in extra income by attracting overseas students who pay more to them and by winning more research funding from Government and from private industry. It seems to me that self help is the keynote of those actions. Perhaps this is a welcome sign of a change of attitude.

Indeed, it is a change of many attitudes that I believe is required. The basic pessimism of the report that we are debating seems to me to be based on a disappointment that the present system does not work and perhaps on an unexpressed assumption that it would work if only the Government would put more money into this part of the bottomless pit.

I suggest that we have tried that particular approach of centrally controlled science and technology for far too long. It does not work in peacetime and some of what the noble Lord, Lord Swann, said seemed to me to confirm that he had views slightly in the same direction—although I would not accuse him of having views totally in the same direction!

The more we encourage the advance of science and technology through private industry, the more likely we are to succeed. Tax incentives and dependable industrial relations legislation are the way forward for encouraging British industry to invest more in R&D for the long term. I hope that that is the line that the Government will continue to follow.

10.4 p.m.

The Earl of Halsbury

My Lords, I rise to express three points of agreement with the noble Lord, Lord Aldington, who I am sorry is no longer in his place to hear me give him a measure of agreement.

First, I wish to thank the noble Lord, Lord Sherfield, and his colleagues for this long, painstaking and detailed report. Secondly, I wish to protest, along with the noble Lord, Lord Aldington, and to the usual channels, that a report of a Select Committee of our House should have been so maladroitly launched at half-past six. It is now around 10 o'clock and I do not suppose that I shall get home until midnight. The noble Lord, Lord Aldington, protested at that, and I protest in exactly the same way.

Thirdly, I wish to say of my noble friend, Lord Dainton, whom I have been privileged to know for many years, that his maiden speech is exactly what I would have expected. It was a pleasure to listen to, and we hope to hear from him on many occasions in the future.

I very much agree with my noble friend Lord Swann and equally with the noble Lord, Lord Mottistone, about the dangers of centralism. It is a will o' the wisp to suppose that one could draw up an organisation chart for science in the country. It is far too delicate and ramifying a network. One can understand it only by getting into it and finding one's way around it from the inside.

For the rest, I want to deal with what I think are the proper functions of government in research; first, executive control of everything connected with standards. I refer to physical standards—the standard weight, the standard yard and the standard metre. Then there are health and safety standards—safety on roads, safety in the air, safety in the environment and industrial safety. These should be the responsibilities, in so far as they have a research element attached, of the Ministries which are answerable through Parliament to the nation for these standards of safety and so on. The terms of reference to the Permanent Secretary of each Ministry should be, "Do it or get it done on contract, but you are answerable either way for it being done." Do not tell me that a Permanent Secretary could not take a directive on those lines. Of course he could.

Then there are the proper functions of government on the lines of services—the Meteorological Office, the Geological Survey, the Ordnance Survey. All these involve research problems. These are properly the problems of government research. There are the problems of coastal defence, the problems of water pollution, the problems of flood control and so on.

In one sense, responsibility should be taken for the universities. I want to define for my own purposes a university as a self-governing body of scholars dedicated to the conservation, dissemination and expansion of knowledge, regarded as a good in itself. The conservation of knowledge is its library function. A university without a library would be unthinkable. The dissemination of knowledge is its teaching function. A university that did not teach would not be serving a useful function. Finally, there is the expansion of knowledge, its research function.

Just because universities are communities they tend to be equalitarian in their sharing out of the loaves and the fishes. Therefore, if you want to have selective encouragement of the high flyers in particular universities, you need selective bodies to do that. That is what the research councils are for. We have five. I do not need to run over the course. They carry out the selective non-egalitarian research based on quality only by peer selection. The first priority is that the high flyers in our universities should be given 100 per cent. support for what they need, because the high flyers are not necessarily the most expensive ones.

I turn from the universities to another big demand for money made by "big" science and the international projects on which we are engaged and obliged to continue by treaties solemnly entered into between the high contracting parties. There is the fusion project of JET to design something that will produce nuclear fusion. It involves a training ground for the most advanced engineering of its kind in the world. There is the work on nuclear physics and particle physics at CERN. Why should we do it at all because nobody can think of any use to which we shall put Quarks or Higgs particles even if they exist? Again, it involves a training ground for the most advanced control engineering in the world. The same is true with radio astronomy at Jodrell Bank and space research and rocketry.

All these are international projects. We are by treaty obligation bound to meet the cost escalation. We must not do that by cutting the science budget. There must be no fudging in this respect. There must be no cutting of the high flyers at our universities merely in order to comply with treaty obligations undertaken solemnly with the high contracting parties who are our partners.

Between those, I want to deal with a very great body of research that is carried out under government auspices and where I believe my line is very much that of the noble Lord, Lord Mottistone. I would transfer an enormous block of government research out of government control altogether into industry on contract for a five-year term to let it keep itself. Let industry take it over and be paid for doing so for a limited period. And then, at the end of that period, if it had something to sell, perhaps the Government would buy it or someone else would buy it. But we cannot keep armies of people doing research ending up with no product, nothing to sell.

When we talk about research, one can end up in one of two ways only—being able to do something or being able to make something. If people who think they are doing applied research do neither the one nor the other, they should be redeployed in as painless a way as possible.

I know very well that in this field I am a total iconoclast, and my noble friend Lord Sherfield gave me an opportunity to attend the committee and tell him this. I do not think that the committee agreed—the fact was not included in its report—but my iconoclasm needs further examination in this respect.

There are one or two other points that I should like to mention. I believe that a central committee presided over once a year by the Prime Minister quite literally is a fudge. I do not believe it. I do not think that anything would ever come of it. What matters is that the chief scientist in the Cabinet Office should have the confidence of the Prime Minister and the confidence of all the people to whom his influence radiates as the result of decisions taken centrally.

The noble Baroness, Lady White, was discussing the career in science of the noble and learned Lord upon the Woolsack. But, my Lords, with the Development of Inventions Act 1954, I got into this up to my neck, and I have been there ever since. If I had been at Harrow instead of at Eton, I should be singing "Forty years on" at this point because mutatis mutandis I have seen a Labour Government sitting on the Front Bench and Lord Cherwell making the kind of speech that I have heard from the noble Lord, Lord Mottistone, this evening. Viscount Samuel led a debate exactly like this evening's when I made my maiden speech. This is about the fortieth edition of my maiden speech, which I publish every year.

In the old Department of Scientific and Industrial Research, before the split was made between the Department of Trade and Industry on the one hand and the research councils on the other, the two best Ministers we ever had in my opinion were the late Lord Salisbury, who was not a scientist at all, and the noble and learned Lord now upon the Woolsack, because they were patient and dedicated to their clients. They were senior Cabinet Ministers; they could pull a lot of weight if they wanted to; they could listen patiently to the exposition of a case and say, "The Treasury will never wear that, so go back and do some more homework". Then they would get it through for us.

I beg everybody: do not have the illusion that one can have a central Minister for Science. I will tell your Lordships exactly what would happen. Set up a new Ministry, and every Permanent Secretary in the land will say, "We are not going to be junior to him." So he goes right to the bottom of the pecking order from the word "go". Is that the way your Lordships want to encourage science, by having such a single Ministry? That is not the way to do it.

I have been at this so long that I feel I could almost say with the poet, "here I go round the prickly pear". I have been listening to these speeches for nearly 40 years. That is why I am an iconoclast. As Bernard Shaw said in one of his prefaces, old men should become more revolutionary as they get older because they ought to be more disillusioned with things as they are.

10.15 p.m.

Lord Beloff

My Lords, I must begin by craving the indulgence of the Minister and of the noble Lord, Lord Sherfield, that I may not be here for their winding up speeches for the reasons already given, I very much hope that the authorities who conduct our affairs will look into the question of having our business unnecessarily interrupted earlier in the day and making this debate even later than it would have been in the normal course of events.

It is also a pity that the remarkable maiden speech of the noble Lord, Lord Dainton, should have been made on an occasion when the House is clearly worried about the nature of its own procedures in a matter of this importance. It is a matter of great importance and I share the view expressed by the noble Lord, Lord Gregson, and others, that this is a critical situation for this country. In fact, looking not so much at the report but at the evidence on which this report was produced I wonder that the noble Lord, Lord Sherfield, and his colleagues are not, like Robert Clive, astonished at their own moderation. I think that if I had been writing that report the punches would not have been pulled to quite the same extent in some respects.

There is a difficulty and one must not go in the other direction and believe that scientists are infallible and that all we need is to find ways of channelling resources to them. Scientists, like administrators, make mistakes and those mistakes can be costly. What happened to Nimrod? If we take civil research, who now remembers British Rail's high-speed train, which spilt soup all the way from Glasgow to Euston and was never heard of again? There is the failure to prevent, on a 125 which has been in service for years, the smell of the brakes coming into the carriages every time it pulls up. There are a great many reasons for thinking that our scientists, and particularly our engineers, have not achieved the degree of infallibility which would make us consider ourselves merely their servants.

However, when that has been said it still remains a fact that, by any reckoning on the international comparisons which have been adduced by a number of noble Lords, we are doing very badly and are likely to do worse. However, I think that some of us feel—I certainly do—that because the situation is so grave the positive proposals made in the report, though themselves unexceptionable, are hardly likely to make the difference that is required. A Council on Science and Technology with the annual appearance of the Prime Minister at its head would attract, no doubt, a headline or two in the next day's papers, but it is difficult to believe that the proposals would have on society as a whole—and this is a social problem, not an administrative problem—the kind of effect that we believe is needed.

What seems to me to come out from these volumes of evidence is that we live in what can perhaps best be described as a sclerotic society—a society in which the effort needed to bring about any considerable change is obstructed by many forces and many institutions. The Treasury has been mentioned. People are surprised that the Treasury cannot see, in spite of the statistics, the relationship between research and development and the prosperity of our industry in export markets. Since a few years ago the Treasury could not see any connection between studies of engineering in this country by students from overseas and the place from which they were likely to buy their equipment in the future. I have given up hoping even for the modicum of common sense that a government department might be expected to have. Indeed, the whole of my historical studies, going back long before the present Government and before the war, suggests to me that on the whole the Treasury has been a greater damping force on the energies of British society than almost any other single institution.

However, it would be unfair to blame the Treasury alone. We have trade unions, and I think that the noble Lord, Lord Mottistone, referred to them. It is true that an enterprise that is considering innovation on a great scale is not likely to find its trade union representatives jumping for joy. They did not, for instance, jump for joy at the Channel Tunnel, which is likely to bring massive advantages to the working population in many parts of the country. Incidentally, I see in the report that the TUC gave written evidence but that it has not been reproduced. I find it difficult to understand the reason for that and perhaps the noble Lord, Lord Sherfield, will inform the House about what happened in the interval between drawing up the list and printing the evidence. Even at my most malicious, I can hardly believe that the evidence was not printed because it was not thought worth printing.

Let us consider just one branch of the trade union movement—for example, the AUT (the Association of University Teachers). The noble Earl, Lord Cranbrook, called our attention to the situation in the United States, where a great many financial and other differentials are made in order that institutions may attract and retain the best staff. The slightest hint of differentials given on national or any other grounds will be resisted to the nth degree by the Association of University Teachers.

Of course sacred cows exist not only at that level. They also exist in the sphere of education. I think it is very important to remember that, because the human resources part of our problem is very great. If the energies that have been devoted to social engineering had been devoted to engineering, the schools might have been able to fill some of the skills vacancies to which many speakers have called attention.

I do not think that anyone has mentioned specifically one very important gap in our supply of skills; namely, girls trained in science and engineering. What is the reason for that gap? It is the passion for co-education. Everyone knows that the record in science and engineering of girls coming from single sex schools is a great deal better. That is true for both the maintained and the independent sector. Those who take seriously the notion that this is an untapped reservoir of national talent ought to be prepared to review their educational assumptions in order to bring about such desirable recruitment.

As I have said, it seems that in our society and as individuals—for whatever reason it may be, and historians may trace it back over many decades—we have lost the capacity to enthuse people with risk-taking. We have lost the capacity to find a way in which society can make people feel that taking risks, whether in research or industry or in discovering or producing things, is something infinitely worth while. That is at least a partial if not a total explanation of the brain-drain, the evidence for which is now, I think, conclusive.

On that subject I should like to make another remark, which is that by singling out science and technology we may overlook the fact that universities and other institutions of higher education have to be viewed as a whole. It is only in an institution which is throughout full of innovation, dedicated to research and concerned with teaching that the right atmosphere will be created. Although much less fuss is made about it (I agree that the immediate economic effects are harder to measure) the fact that we are now losing scholars in the humanities to the United States at an increasing rate is a course of worry to me.

I hope that at some time your Lordships' House will not be satisfied with having a Select Committee on Science and Technology, useful though its deliberations and reports are to all of us. I should like to see a committee, perhaps permanent, perhaps ad hoc, on this country's human resources. Earlier in the debate someone said (it may have been the noble Lord, Lord Gregson) that the human resources are roughly what we have. I do not think that we make the best of them. It is our business, going beyond these desirable administrative improvements, to take a serious look at why it is that we do not.

10.26 p.m.

Lord Carver

My Lords, I must also apologise to the House, to the noble Lord who will wind up and to the noble Lord, Lord Sherfield, for the fact that I am unable to be here at the end of the debate. I have an important engagement in the country first thing in the morning and I must catch the last train home. I am most grateful to the noble Lord, Lord Nelson of Stafford, for agreeing that we should change places in the speaking order so that I may do so.

I wish to draw your Lordships' attention to that part of the report which discusses and makes recommendations on the relationship between civil and defence research and development. I must make it clear that, although I am a member of your Lordship's Select Committee on Science and Technology, I was not a member of the sub-committee which produced this report and I made no contribution to it. My excuse for commenting on it is that I have direct experience of that relationship.

I made some comments on this subject when last year your Lordships discussed the report on marine science from the sub-committee on which I served. As on that occasion, I find that there is a considerable degree of confused thinking on the subject, leading to recommendations which tend to conflict with one another. In this report the committee has tried to clarify the issue, but I am afraid that in an attempt to reconcile conflicting opinions it has supported some views which are in conflict and at variance with one another.

What do the critics say? They can be divided into three categories. The first comprises those who deplore the fact that the Ministry of Defence spends so much on research and development. Secondly, there are those who suggest that the Ministry does not spend enough on research, whatever it may spend on development. Finally there are those who do not dispute the amount spent but suggest that it should be spent differently.

If I may, I shall take them in turn. First, there are those who deplore the disproportion between what the Government spend on defence R&D and that which, through other government departments and via the Department of Education and Science (through the research councils), they spend on civil R&D. In addition to the latter, there is the considerable sum handed out through the UGC to support research in new universities.

The report effectively dismisses the simplistic view that if the government finance devoted by the Ministry of Defence to R&D were reduced, it would be reallocated to the civil science budget. But it supports the criticism that defence R&D, both in-house and in the defence industry absorbs a high proportion of what are called QSEs (qualified scientists and engineers), of whom there is a national shortage, to the detriment of their employment in civil work, which would enable us to compete more effectively in world markets and so become richer, and thus be able to afford more and better defence. That is linked to another basis of criticism: that the major defence firms have been feather-bedded with cost-plus contracts so that they have been able to employ large numbers of QSEs in a wasteful way, paying them high salaries but making no effort to see that their work had a spin-off in the civil field.

I think that much of the criticism on that general score is exaggerated, if not actually false. However, I believe that there is some substance in the criticism that the major firms in the defence industry have been less cost conscious than they should have been and have expected the Ministry of Defence to foot the bill for many extravagances, including all the research and development which lay behind the product, whether finished or unfinished—sadly, often the latter, of which Nimrod is only the latest in a long line. I recognise that the Government have made efforts to remedy this disease and I shall comment on the whole vexed question of spin-off later.

There is one simple solution to the criticism that the Ministry of Defence spends too much on R&D both in proportion to civil R&D and to its own equipment programme as a whole; that is, to buy equipment that has been developed by somebody else. That would also often assist standardisation either within NATO as a whole, if it were American in origin, or in Europe, if it were French, German, Italian, Dutch or Belgian. It could either be bought outright or manufactured under licence, as many items of service equipment already are. All those QSEs, technicians and skilled workers who are now involved in the development and production of defence equipment would then be free to concentrate on meeting the needs of civilians, boosting exports and replacing the imports which every surge in personal income attracts.

But would that be the result? I beg leave to doubt it. I think that a large proportion would become unemployed, or seek work overseas, as would many scientists and research workers in firms, universities, polytechnics and Government civil research institutes, as well as in defence R&D establishments. A great many firms would protest, as they often have, that, far from releasing resources for them to compete more effectively in world markets, it would gravely prejudice that, and I am inclined to support that view.

What then of the criticism that the MoD should spend more on research? Those that take this line make unfavourable comparisons with the Pentagon, which is prepared to place research contracts in industry, in universities or with research contractors for the type of basic or strategic research which in this country we expect the research councils to foster. The Ministry of Defence's answer is that the money it extracts from Parliament must be spent on R&D directly related to the provision of equipment for the armed forces, and that it is not its job—and in any case it is not given the money for it and cannot afford to spend it—to go in for speculative research which might or might not have a significant defence application. Nevertheless it funds some research in this field jointly with the Science and Engineering Research Council. But I get the impression from scientists who are working on such contracts that they would prefer them to come directly from the Ministry of Defence, SERC's involvement merely in their view adding an unnecessary bureaucratic interference.

My experience and impression is that the Ministry of Defence has become significantly more parochial in this respect over the last 20 years as the cost of equipment has escalated, leading to reductions in the number of equipments and therefore of combat forces and to constant pressure for economies. The Government's decision to make severe cuts in the ministry's R&D establishments, farming out R&D in theory to industry, has aggravated the situation. The R&D establishments maintain a much closer link with academic research staffs and laboratories working in the civil field than the defence industries have ever done, with a cross-fertilization that has benefited both.

The criticism that the MoD's obsession with secrecy, which has been compared unfavourably with that of the Pentagon, is one of the principal obstacles to a more enlightened attitude to research, may have some validity in a few cases. However, it is seldom as restrictive as the secrecy practiced by industry for fear that a rival firm may profit from the research and development that it has initiated or undertaken

The ministry's critics on this score tend to overlook this cross-fertilisation between scientists working in the Ministry of Defence's establishments and those working elsewhere, including those on extra-mural research contracts placed by those establishments in universities. There is a tendency on the part of industry to wait for academic scientists to come along and suggest that they might have something to contribute, rather than to go out looking for ideas. And the Ministry of Defence, I suggest, has a better record in that respect. No doubt it could be improved, and perhaps we need to get back to that fruitful relation between military staff and scientists that was created in the Air Ministry half a century ago, of which radar was one of the outstanding results.

Finally, what about the suggestion that the Ministry of Defence should maintain its level of R&D funding but spend it in a different way? I have already discussed one aspect of that, but one which would involve more expenditure on research. This other criticism concentrates more on the development aspect, suggesting that more should be done to see a greater spin-off in the civil field from the development of defence equipment.

There are widely differing views about spin-off. The Ministry of Defence itself wavers between claims that there is a considerable spin-off, particularly in the electronic and aerospace fields, and a cautious warning that, on account both of the wide divergence between defence and civil requirements and of security considerations, too much should not be expected. In general, the firms which are engaged in defence contracts on a large scale claim that there is an appreciable spin-off in both directions; defence profiting from developments initiated with the civil market primarily in mind and vice versa, while those who are not engaged in defence work, or only on a minor scale, protest that much more could be achieved in both directions.

The research councils paint a picture of almost total separation, but that is because Ministry of Defence research contracts placed in universities or with the research councils' own laboratories, unless they are joint ones with the research council in question, do not pass through the hands of those councils.

Surely nobody can doubt that in general terms research and development to meet defence needs has had very significant spin-offs both in the academic and in the commercial fields. There are valuable spin-offs in the creation and maintenance of a body of highly qualified scientists and engineers whose knowledge and skill is available in non-defence fields, and a very important one in materials research, which is stimulated by the demanding criteria of meeting defence needs. It is materials research which is at the bottom of an enormous amount of development: in actual hardware, aircraft, the whole field of sensors, computers, radio communications up to and including the use of satellites, both for communications and for remote sensing, optical instruments of all kinds, lasers, launchers to place objects in space—all those have originated in military requirements. However, when they have reached an advanced stage of development, effort devoted to their further improvement for military purposes may contribute little spin-off in the civil field, which by then will have developed its own specialised requirements. It is at that stage that we should look carefully to see whether a considerable effort on defence R&D in that particular field is bearing fruit, or whether it might not be better to adapt for defence purposes what has been developed to meet a civil need. That is what has largely happened in the military vehicle field.

Of the recommendations on this subject, which are summarised on page 66 of the report, I fully support paragraph 37; that civil and defence R&D budgets should normally be recorded separately and that a thorough examination of defence R&D should be an early task of the Science and Technology Assessment Office, and the proposed Council for Science and Technology. I also support paragraph 739, which suggests that a more detailed annual report on defence R&D should be published. I am afraid that for the reasons that I have explained at some length I have reservations about the other recommendations in those paragraphs and in 738. That said, however, I fully support the general theme of the report and its principal recommendations. I consider it to be an extremely valuable one, to which I hope the Government will respond positively.

10.40 p.m.

Lord Butterworth

My Lords, I should like to add my congratulations to the noble Lord, Lord Dainton, upon his excellent maiden speech which was as authoritative as it was graceful. I am delighted that he has been able to join one of the committees of the Select Committee on Science and Technology.

Undoubtedly the main theme which has emerged this evening is the serious under-funding of science. However, I should like to spend a little time upon a factor which lies behind it and to which somewhat less attention has been paid this evening. I am referring to the need for selectivity which will continue even if the funding for science is much improved.

Research is becoming so expensive; equipment and apparatus are becoming so costly; and too frequently manpower is in short supply that we have with us, as a permanent factor, the need to select the projects to be funded. No longer can we assume that we can afford all worthwhile projects. As a result of the need for selectivity, we begin to need a co-ordinated programme of priorities continually updated over what is necessarily a wide, complex area. That is one of the reasons why the council was put forward.

There are three complex areas: first, the science base represented by the work in universities and research council laboratories; secondly, the research and development undertaken by government departments themselves; and, thirdly, the research and development undertaken by industry. Your Lordships will be aware that this process of selectivity has already gone a long way in each of those three wide areas.

The UGC has undertaken its selectivity exercise in relation to the grading of science departments in universities. That exercise is important, because it contains a very important shift of policy. It has inevitable long term consequences which may well bring fundamental changes to the whole university system.

While the universities are themselves in favour of selectivity, they are concerned about the problems that have arisen for them because of the decay of the dual support system. There is a fundamental dilemma here which will require a great deal of thought and planning. On the one hand, selectivity among departments is becoming increasingly necessary. There are distinguished chemists who point out that the cost of equipping chemistry laboratories to international standards are now so great that this country will soon be able to afford no more than 10 or 12 departments equipped to that standard.

On the other hand, the UGC's contribution to the dual support system ensures that young researchers are enabled to develop during that crucial period before their work becomes so mature as to enable them to apply to the research councils for full research grants. If universities can no longer make provision for those young scientists, the next generation of young scientists will simply not be developed. The need for selectivity in industry has already been commented upon this evening. I would not wish to express a concluded view about ACARD's recent report on a process for identifying exploitable areas of science. It is too early yet to tell. However, recently an interesting report published in America showed that even there, with their enormous wealth, what a hit and miss business commercial breakthroughs are from a scientific base. The report quotes how Sir James Black took the idea of Tagamet to Smith Kline, an American chemical firm, after ICI had turned it down. Eventually Tagamet was the world's first drug to achieve sales of over 1 billion dollars.

It is interesting that in Smith Kline the eventual success of the drug is alleged to have been due to a bunch of stubborn British employees who refused to stop working on it. I believe that behind this there lies a very important lesson: inventors and scientists alone do not make commercial breakthroughs. Success needs teams of people and co-operative managers working in industry. Breakthroughs often occur when the product is pushed through by technology and not market-led.

I turn to government funded research and development. This causes particular problems for selectivity because each department determines its own research programme to support its own policy objectives in the light of its own priorities and in relation to its other costs. It is therefore particularly difficult to arrange priorities between different research programmes of different government departments. I understand that it is for that reason that the Cabinet has set up the committee, which was referred to earlier, so that priorities can be accorded to government research.

There are therefore two major problems: first, to raise the whole significance of science and technology to a higher power in national consciousness and at the same time to be more selective and concentrate our effort in research and development whether it is funded as part of the science base, or is funded by government or industry.

It was for those reasons that the Committee made its recommendations that the Prime Minister should be identified with the science and technology dimensions and that in Cabinet a specific Minister should be responsible for science and technology issues.

Perhaps I may spend a few moments speaking about the Council for Science and Technology. The committee did not give great detail about how it might work. I believe that some of us were inclined to think that this would be a new British model which would, to some extent, follow part of the Japanese experience. What is needed is almost a new type of body. It is quite an interesting constitutional problem. It simply cannot be an advisory body working at a distance and independently of government, for such a body would not discharge the tasks that we had in mind.

On the other hand, it is quite clear that the Government must take the decisions alone. The problem is that neither industry on the one hand nor government on the other can themselves determine the priorities and complex programmes over these very wide fields. Such complexity requires a great amount of detailed work, and if on the council there come together members from government, industry, if scientists are included, academics and others, those members must be willing to work within government guidelines and policy, and they need to be serviced by a strong team probably drawn from the Cabinet Office. An expanded ACARD could not meet this need, for ACARD is a simple advisory body, although, as the report suggests, the ACARD function could be absorbed into the council if it were to be established.

One extra point I wish to add about the council: I do not think it would be effective if it dealt only with research. I think it would have to have within its terms of reference not only research but training too for the reasons that have been given earlier. Research and training in this field must be considered together. Training is quite fundamental.

I wonder whether I might be allowed to give just one specific example which has occurred recently. There are a significant number of school-leavers who would like to become engineers or mathematicians but who have wrecked their chances of so doing because they took the wrong A levels. Indeed, the output of higher education is often thought to fall short of the national need in respect of the numbers who become mathematics and physics teachers, and of course those who become engineers.

The number of physics and mathematics teachers and engineers could be increased if courses were provided which assumed that entrants did not have the correct A levels. Such courses would obviously take longer. They would take four years. The real obstruction to putting such courses on is the difficulty of getting mandatory awards for each student for the full length of four years. If my noble friend the Minister could prevail upon her right honourable friend the Secretary of State for Education to help in this matter, he might be asked to ensure that a more positive attitude should be adopted to this problem by the awards branch of his department.

The new council then could help to create new national attitudes towards science and technology, research and development; land from a recruitment point of view research and technology have to be fun and they have to be financially rewarding, otherwise the brains will flee, like the hearts, to where they are best loved. It must be a matter of great concern today that Britain's most assured export seems to be our well-trained technical people.

I have only one last point to make, and I do not need labour it. But listening to the evidence from some quarters, I too formed the view that too many were unaware of the real nature of our problem. Indeed, listening to some, I formed the view that today maybe our greatest danger is ignorance of ignorance.

10.55 p.m.

Lord Nelson of Stafford

My Lords, I add my warm congratulations to the noble Lord, Lord Dainton, on his excellent maiden speech, which reflected, as one would expect, his depth of experience and characteristic wisdom. I also pay tribute to the noble Lord, Lord Sherfield, for the excellent report which we have reviewed this evening and which I fully support.

At this late hour, having listened to the very good speeches we have heard, I shall not dwell on the problems. They have been well aired and it has been made clear in the report that they are serious. I concentrate my remarks on some thoughts on what might be done in the short term to improve the situation.

My first thought stems from my experience and privilege of being a member of your Lordships' Committee on Science and Technology. All the reports we have had in recent years, particularly the one which the noble Lord, Lord Sherfield, presented to us, bring out one thing in my mind, and that is the extreme danger when, quite rightly, the Government are attacking public expenditure of the very blunt tools that are available to them.

I have in mind particularly the so-called cash limits. We have seen on many occasions the application of those cash limits, good as they are and good as the objective is, reflecting more than proportionately on the research and development spend in the areas affected, possibly because that is easier, possibly because it is not so publicly obvious.

But there is another danger—that what is cut out is the more expensive element in the research and development programme; the "D", the development. It is the development that ultimately makes the research into an end product, as was explained by the noble Earl, Lord Halsbury. It is the "D" that finally produces the results. The equipment which is provided for the scientists to enable them to do their work is also in danger of being cut. It is no good spending the money on research—it is no good spending it on development for that matter—if the right equipment is not available. These are the two things which tend to be cut out. I commend to my noble friend the Minister that in attacking this grave problem of public expenditure that special steps are taken to ensure that research and development is not damaged in those areas where it is of vital importance to the country.

My next thought relates to an area in which I have spent a lifetime; namely, manufacturing industry. I have always been in an industry which has had a very high research and development activity, the electrical industry. The company with which I have long been associated has a vast research and development programme. It is currently running at £285 million per annum in the civil field to its own private account. This is a massive programme.

Two things strike me. The first is that it is not in the end the amount of money that is spent—one has to spend it—but how it is spent. This is something we have to keep our eye on all the time. It is no good saying, "Spend more money. Throw money at it", as has been said earlier in a number of speeches, but how will it be spent. Are we getting value for money?

Secondly, looking back over my experience where there have been failures—there are failures; we have had failures and other people have had failures—it has nearly always been for lack of development. It has not been for the lack of research; it has not been for the lack of ideas. But the development has been starved and the product has not been seen through to completion. This is the matter to which we have to address ourselves.

With that background, your Lordships will appreciate that I do not dissent from the report's recommendations that industry should do more. I agree with that: so it should. But there is a role for government as well and I should like to emphasise two points which are made in the report, and quite rightly too.

First, the Government have to maintain the fundamental research base. That has been touched on by a number of speakers and I do not think it needs further emphasis. It is vital. The second point is that government have to create the right climate whereby industry is stimulated and encouraged to invest in its own research and development.

Here there are two specific areas, both of which are vital and both of which, I am glad to say, are touched on in the report. First of all there is the role of public purchasing. That has been touched upon already but I am going to spend a little more time on it because I think it is one of the most important matters of all. Public purchasing in a number of areas means that it is the sole British customer; it is the sole home market. It determines the R&D programme of the companies which are supplying those industries.

People will say this is already being done and that public purchasing supports British industry. So it does in some areas, and I would quote one of them. When the noble Lord, Lord Ezra, was chairman of the National Coal Board it had an excellent programme in supporting British industry and developing mining equipment. The result was that the British mining equipment industry sold its equipment all over the world, and it was developed during his period as chairman. That is a perfect example to my mind. But it is not happening everywhere. There are large areas of public purchasing where it is not happening and people cannot see that they are setting the standards for British industry. I was reading the other day an ACARD report on medical equipment. Here it is. It makes the point that that is not happening in the medical equipment field. I could quote other examples.

But if we are to have the equipment necessary to do the job at home and to sell overseas, we must have a fully co-operative approach on the part of both user and supplier. We have heard on many occasions of the success of Marks and Spencer in just that. The same holds, to my mind, inthe public sector. Perhaps I may say to my noble friend the Minister, "Please see that all public sector purchasing activities are directed to this end, and also those which are being privatised but are still monopoly services".

The second thing I should like to do—and this comes right back to my noble friend's department—is to reinforce the suggestion made in the report that there should be more DTI support for industry. I am not asking for more money to be thrown at industry. What I am going to draw your Lordships' attention to is what our competitors do, particularly those on the Continent. They go in for many more demonstration projects, jointly funded by industry, by the user and by government. That is very, very effective because it attracts money from industry and gives stability to the programme. It gives the home customer an opportunity to introduce innovation into his service and at the same time proves to the overseas customer that the project is being properly developed, is being demonstrated in service and has the full backing of industry, user and government.

That is an extremely effective way of ensuring our success in a new technological field, particularly where innovations are involved. I commend this most strongly to the Government. More could and should be done in this field, and it would attract a lot more money and a lot more business from outside in the process.

The report recommends the publication of R&D expenditure in company accounts. The company with which I have been long associated has been publishing its R&D figures for years now. I fully support the proposal, or at least I have no objection to it. But one has to be aware of the problems. If this is to have the effect of discouraging "short-termism", or whatever is the latest phrase for a short-term outlook in the financial world, I am all for it. That is very good. It is exactly what we want to have. But is it? Is it going to be clear to the analyst what these R&D figures really mean

If you ask somebody what they are, the standard answer of the department and elsewhere is "Ah, the FRASCATI formula". But look at the FRASCATI formula. It defines basic research. It defines strategic research. But when you come to development, it is as long as a piece of string. Is a new process plant development or is it production investment? Is a new productive process development? The noble Baroness, Lady White, referred to computer integrated manufacturing systems. Is that development or is it production investment? If someone is introducing a novel new product under a contract, is that development or is it contract work? There is a wide range of definitions of what is research and development.

What I am afraid of is that unless you are very careful, unless there are clear definitions of what R&D means, the analysts will make what they like of it and it will not necessarily be helpful to the cause we have in mind. So I ask if this is followed up, and if legislation is introduced on this matter, please let us have clear-cut definitions of exactly what is to be included.

There is one final point that I would make to the Government. I think that they should go more public in emphasising their support for civil R&D. It can be talked about around Whitehall and so on, but you must put it across to industry as a whole. It must be seen that the Government are receptive to ideas for research and development. If they are to encourage industry to do its own thing, let it be seen that it has the encouragement of the Government. The Government must go much more public in putting this across. Equally, they must demonstrate their willingness to come in with industry in key areas where our research and development will bring us real benefits in the future.

11.7 p.m.

Viscount Blakenham

My Lords, I believe that the structural recommendations made in the report are very important and they do not cost money. A compact Council for Science and Technology, absorbing ACARD and chaired by the Prime Minister or a senior Minister, a streamlined and more executive ABRC working closely with the research councils and the councils themselves working more closely together, should produce more direction and better results.

It is late and I shall be brief, but as a business man I should like to address a few further remarks to your Lordships' House in the hope that the Department of Trade and Industry is also listening. None of these remarks will be expensive. First, the general disclosure of R&D expenditure in company accounts, to which my noble friend Lord Nelson referred, the importance of which has been pointed out by many noble Lords, just will not happen unless it is made compulsory. It happens in a few cases but, on the whole, it will have to be made compulsory, and the sooner it is made compulsory the better. Of course there will be problems, but I think that the analysts will appreciate it, because it will give them the ammunition to ask the right questions if they do not get the picture straight away.

Secondly (and I am thinking here of merger policy) the DTI should do what it can in this and other ways to encourage investors to take a longer-term view than many take at the moment. Thirdly, tax incentives would be encouraging in the short term, and in the long run would prove to be cheap. I should risk the danger of creative accounting.

Fourthly, I should like to draw attention to two private enterprise initiatives designed to get more "D" our of R&D. With both I am pleased to declare a commercial connection. The first is Defence Technology Enterprises, which is mentioned in the report. I quote from page 21: DTE has privileged access to MoD scientists for the specific purpose of identifying and exploiting spin-off opportunities in the defence research establishments. DTE has a 'ferret' in each of the main establishments with access to both classified and unclassified work to spot potential civil applications… In the first twelve months 450 items have been identified for circulation to its 150 associate members, many of them small companies. When an item is selected by a company DTE is prepared to assist, if necessary, with the raising of finance for exploitation". The second initiative is a national on-line database named BEST—British Expertise in Science and Technology—which enables subscribing companies to know who is doing what research in which British university, polytechnic or government research establishment and how to get in touch with them.

I hope that these two initiatives will establish themselves commercially without needing financial backing from the Government. But because the sums, in Government terms, are small and in spin-off and multiplier terms could be extremely large, I believe these are the sort of projects on which the DTI should keep a close eye, with a view to helping in whatever way it can.

The point I wish to make is that the resources for research and development are scarce and as a result, I think both Government and industry must combine closely to make the most of what is being spent.

Finally, as a member of the committee that produced the report, I should like to thank the noble Lord, Lord Sherfield, for the brilliant way in which he chaired our meetings.

Baroness Seear

My Lords, the hour is late and I shall be extremely brief. Your Lordships have had a quite outstanding debate this evening and I can only echo other noble Lords who have said what a pity it is that we were not able to have it at an hour in which it would have been heard by a far greater number of people, as it undoubtedly deserves to have been.

Of the remarkable contributions which we have had this evening, I think that all your Lordships will agree with me that perhaps the most outstanding came from the noble Lord, Lord Dainton, in a maiden speech which I think few of us have heard paralleled at any time. If I may humbly echo the noble Lord, I was particularly impressed by his suggestion for a single research council. It would be a means of breaking down barriers between different faculties and subjects at a time when what we surely need is a great deal more multi-disciplinary research in order to approach many of the problems confronting us which require research at the present time.

The noble Lord did not make it quite clear whether he intended this, but I hope that in that single research council could be included the social sciences as well as the natural and physical sciences. I think that it is the joint working together of all the sciences which will be most likely to help us solve the problems with which we are confronted by advancing knowledge in the whole area.

That said, I wish to spend a very few minutes on one aspect which I think has not been discussed tonight, though one or two noble Lords have touched upon it. We have talked a great deal about research and about development. This is what the report is about. But it is also about the application to the problems of the economy of research and development, and unless they are used to improve the position of the economy, of industry and of manufacturing industry particularly, although not exclusively, the future for this country is extremely bleak. This is a matter of the greatest urgency.

We have spent six hours talking about the subject but time is running out, not only in your Lordships' House. Time is running out for dealing with the problems that we are discussing today. Other noble Lords have referred to the articles in The Times this week—and very alarming they are—about our position in comparison with other countries. Research and development are essential but it is no use having research and development unless we have the people in the country at all levels capable of making use of the research and development. This means not only the scientists and the technologists but the technicians and the great mass of people. They must join in the application of the newly discovered and developed ideas and apply them up and down the country in new industries and in old industries if we are to have the recovery which we are seeking and which is the focus of the discussion tonight.

That means education. We have talked a good deal about education in one way or another in your Lordships' House over the past two or three weeks, but the fact remains that unless there is a quantum leap in education we can spend money on research and development and it will have precious little effect on the economy, on rebuilding industry—the manufacturing sector and elsewhere—and on recovering our place in the world economy. It is not something over which we can afford to delay or with which we can tinker.

We are woefully behind in comparison with our competitors in the level and type of education that we give to our school-leavers; we are woefully behind in the proportion of our young people who go to polytechnics and universities. This is a most extraordinary moment to be cutting down on government support for universities both on the teaching and on the research side, as is going on at the present time. We need to be improving and increasing, not cutting down. Unless we do this the money that is being put into research and development will be of no use because it will not be applied. This is where we have failed so lamentably in the past. We have had great ideas and great scientists but we do not follow through in application and development because we have a totally inadequately educated and trained labour force.

It is no use the Government saying that 20 colleges of technology is the answer to the problem. What is needed is a general lift throughout the whole education scene; at the school level, at the university level and, above all, at the retraining and the re-educating level.

The burden of the report—this point has been echoed in many of the speeches today—is that the rate of change is now so fast that people have to learn and relearn. As one noble Lord said, they are out of date by the time they have finished their first degrees. This requires an investment, and I use the word "investment" deliberately. So often we talk about education as if it were purely a consumer good. It is indeed a consumer good; it is also and essentially an investment. Without the money put into that investment the aims behind the speeches of noble Lords this evening will be lost.

I do so hope that the Government will at last recognise—and I know that with the difficulties there have been in the schools it is hard to take the overall view that is required—that this is a matter of the greatest urgency. Unless they do so the present decline will continue. It is no use the Government pointing to some increase in the GNP and to some improvements in productivity. The general trend has been downwards. I hope that the Minister will not insult the intelligence of the House by telling us that everything will come well if we leave it to market forces. This is a matter of great urgency and this is the area on which we desperately need to concentrate.

11.20 p.m.

Lord McIntosh of Haringey

My Lords, the House and the country owe the noble Lord, Lord Sherfield, and his colleagues a great deal for the signal service that they have performed. They must feel, as I do, that it cannot simply be an accident that the business managers have chosen that the debate should take place so late and that so much of it should take place without the benefit of television cameras. I make no apology for saying that it is a debate that ought to be at the forefront of political discussion—politics in the widest sense. I do not believe that this is a technical matter. I believe that it is a matter on which the survival of our society depends. That is what I take politics in the best sense to be about.

There cannot be any doubt about the state in which we find ourselves. It needs only two sets of figures to be quoted, and all the excuses drop away. The first figures that have to be quoted are those showing the proportion of our gross domestic product that goes in civil research and development in comparison with our major competitors in world markets. I will not go back into history. There is no point in saying that this is what happened under this or that Administration in the past. The fact is that we now spend 1.6 per cent. of our GNP on civil R&D, the French spend 1.7 per cent., the United States, which has a vastly higher defence research and development expenditure, spends 1.9 per cent., and Japan and Germany both spend 2.5 per cent.

I said now, but, of course, the figures stop at 1983, a fact that The Times describes as putting our heads in a paper bag. We do not have adequate data since 1983 on the total of our research and development expenditure. I was encouraged to hear that it is intended that the annual review will this year make an attempt to cover all the figures.

I will not bore the House with the second set of figures. It is well known that our industrial production, our manufacturing, is lower now than it was in 1980. It has been creeping up again in the last couple of years, but it is still lower than it was seven years ago. This is in contrast to the performance of our rivals in world markets. We cannot draw a causal connection between the two sets of figures, but we cannot deny the coincidence of them, and the fact that they both work in the same direction gives us some cause for concern.

It is against that backdrop that I find the attitude of the Treasury, brilliantly exposed by the noble Lord, Lord Beloff, to be so inadequate and so pathetic—the idea that it is not possible to identify a link between industrial success and research and development expenditure. It was not just the noble Lord, Lord Beloff. The noble Lord, Lord Aldington, made the same point, as did the noble Lord, Lord Ezra, to quote only those who are still present. It is simply not adequate for government or the executive to make that sort of feeble excuse to try to get away from the responsibility for changes in policy.

The words used by the Minister of State in The Times today—that government policy should be to act as a catalyst—are simply nowhere near adequate to meet the gravity of the problems that we face. We must spend a moment or two looking at the causes of the problem.

My noble friend Lord Gregson set out the problem of our intellectual capability very clearly. It starts, as many noble Lords have said, at school with a school system where there are large numbers of unfilled posts in mathematics and science; where, even when the posts are filled, they are filled by people who are unqualified, or inadequately qualified, in the disciplines; and, even where the posts are filled by people who are adequately qualified in the disciplines, there is a concealed deficiency because there is not enough time-tabling going on in the schools for science and technology. That can hardly be an adequate basis for producing a higher education system which in turn will do the job which the country requires of it.

However, when we come to the higher education system the situation gets progressively worse. We have, as my noble friend Lord Gregson said, one of the lowest participation rates in higher education in the developed world. Within that low participation rate we have one of the lowest percentages of technologists in the total number of students. Even among those technologists who do graduate from higher and further education in this country a higher percentage do not go into industry or do not stay in this country. So in every way the whole process of our educational system militates against a large and adequate number of trained people in our industries.

Again as my noble friend Lord Gregson said, even if we accept that the entry qualifications are adequate, the amount of adult training available in technological subjects is simply not enough to maintain the capability of our workforce to deal with the changes in technology which take place throughout our working lives.

The failings of our industrial organisation were exposed in a devastating way by my noble friend Lord Gregson. The fact is that not only do we not have an adequate level of research and development—that has already been said—but there is no real incentive for large parts of our industry to have adequate research and development. I make obvious exceptions. The noble Lord, Lord Nelson of Stafford, quoted the figures from his own company. I think he will agree that there are comparable figures from Plessey which were quoted in The Times only today. There are other shining examples of adequate research and development.

However, it goes against the whole grain of our industrial strategy with pressures on our industrialists, who are all the time being forced to make short-term decisions, to push up dividends, to push up share prices and to resist all the pressures for take-over and merger which are considered far more important than the longer-term issues of industrial development. We do not have an adequate industrial society to encourage the research and development which we need for our survival.

Is the cure in the organisation of civil research and development? I do not in any way devalue the proposals made by the committee. My noble friend Lord Williams stated his support for many of the recommendations of the committee. Personally, I do not think that a Ministry for Science and Technology would be particularly effective. I agree with the noble Earl, Lord Halsbury, on that; though I think a Minister in a powerful position with that responsibility certainly would be valuable. I agree with the suggestion for a Council of Science and Technology. There is a great deal of difficulty in some of the suggestions as to what the UGC might do. Certainly it has improved its selectivity, and that means, inevitably, that it is moving towards centres of excellence; but there are doubts about the analysis method which is used by the UGC in producing that selectivity.

The noble Lord, Lord Dainton, in an excellent maiden speech, made a strong case for a national science foundation. I know that it works well in the United States and I know that it includes both the physical and the social sciences. There may be some mileage in that. Certainly there appears to be general agreement that disclosure of research and development expenditure by companies would be a valuable addition to public awareness and would put pressure on companies not to skimp on research and development. There are also other valuable suggestions such as the use of public purchasing power.

But, when it comes down to it, what must lie behind all this is the question of how we are to get the level of effective expenditure closer to that of our industrial rivals. How shall we go from 1.6 per cent. to, let us say, 2.5 per cent., as in Germany and Japan? It is not just Mr. Gosling of Plessey and the noble Lord, Lord Nelson. Sir Peter Swynnerton-Dyer said that it is not a question of the balance between the channels of funding, but a matter of there not being enough money going into any of the channels, and that is the problem.

The preference of my party on this matter and the policy that I urge on your Lordships mean fundamentally that increased and more effective expenditure must be pulled by demand for the products of research and development rather than pushed by technological possibilities. It must be very closely associated with industry rather than thought of as an extension of academic subjects. Of course, we could increase the science Vote. We could almost certainly add another £400 million or so to the science Vote by approving all the alpha projects instead of only 75 per cent. of them. We could certainly do better by providing competitive salaries in international terms to those working in research and development. There are some things that we could do in government research and development in energy, the environment and so on, and we could perhaps spend another £200 million in those fields, but I do not see them as being of central importance.

In order to achieve 2.5 per cent., we must talk about an additional £4 billion spent by industry on research and development that is encouraged and partly financed by government. I do not understand the distinction made by the noble Lord, Lord Mottistone, between fiscal measures and grants, because in effect both of them involve public expenditure, whether foregone or made directly. In order to spend that amount of money it is quite clear that there will have to be very great controls over the effectiveness of the expenditure. It is also quite clear that there will have to be improvements in manpower, and that in order for the expenditure on research and development to be of any value, there will have to be the possibility of investment in the results of research and development, and that must represent a very much larger amount than the amount spent on research and development itself. The gearing is absolutely critical.

We are not talking about something that is outlandish or outrageous; merely an additional £600 per employee in manufacturing industry possibly. That is a far smaller increase in expenditure per employee than there is already in the more advanced of our industrial sectors.

If we have learned one lesson from Dr. Bruce Merrifield, President Reagan's adviser on this matter, it is that the need for technological advance and change will apply increasingly in all industrial sectors and not simply in those that are thought of as high technology sectors. In terms of the achievement that is needed in order to bring us up to international standards, we are not considering something outrageous but something which is manageable and which ought to be within the sights of government.

At this time of night I shall not go into the economic arguments about where the money might come from or what other expenditure or tax cuts might be used to finance it. I come back again simply as a last point to Dr. Merrifield. Unless we are making a decision to make technological research and development the highest priority, we are making a decision, Dr. Merrifield says, not to be in business in five to ten years". That is what it comes down to, my Lords.

11.34 p.m.

Lord Lucas of Chilworth

My Lords, I have found the past few hours to be one of the most interesting and exciting experiences that I have had the pleasure of in your Lordships' House. It has been that kind of debate. Perhaps I should say straight away that, in common with other noble Lords, I am sorry that the events of the day's proceedings meant that we started a good deal later than we should have wished. I shall certainly ask my noble friend Lady Hooper to convey the feelings of your Lordships to those who are normally described as the usual channels.

In the preparation of the Government's response, we shall want to consider most carefully everything that has been said today. I take note of the general tenor of the remarks of the noble Baroness, Lady Seear, in that context, although we believe that our education policies are moving in the direction that she would like, as indeed are some of our other policies.

It is difficult to answer the noble Lord, Lord McIntosh, with his broad sweep of the issues that the debate has covered. Were this 4.30 p.m. or 5 p.m., I should have liked to have followed him down the path along which he tempted me when he set out his party's views, but I do not think that your Lordships would like me to spend what little time we have today on that.

Let me say straight away that the Government are aware of the value of civil R&D in wealth creation and the generation of benefits to the economy and to the social environment in which we live. My noble friend Lady Hooper outlined the major developments initiated by the Government in the five years since the Select Committee's Report on Science and Government. These actions reflect this awareness. We cannot, however, agree (I say this to the noble Lord, Lord Sherfield) with the committee's conclusion that: The overall picture conveys an impression of turmoil and frustration". On the contrary, government policy has scored some notable successes. Universities continue to be world leaders in many areas of science. I note, for example, that we must congratulate Sir David Phillips, who while being chairman of the Advisory Board for the Research Councils continues to be a working scientist. He, together with Professor David Blow, has been awarded the prestigious Wolf prize in chemistry for work on protein X-ray crystallography.

British industry, although still having a great deal of ground to make up, is becoming increasingly involved in Europe and other parts of the world in high technology developments with major commercial potential, such as that on high definition television. There are a number of sure signs of success.

The House will probably accept from me and recognise that with 40 recommendations in the report, all of which address fundamental issues involving several departments, careful consideration is required. Such consideration necessarily takes time. The noble Lord, Lord Sherfield, acknowledged that we hope to be able to reply fully before the Summer Recess. Noble Lords will understand if I do not anticipate our response to specific recommendations in the report but try to concentrate on the general issues which the report raises and some of the points which have been raised this afternoon.

One of the major questions to which the Select Committee addressed itself and to which many noble Lords have spoken is how the Government should organise themselves to support and promote civil R&D to the national benefit.

The committee's proposals for a Cabinet Minister to be responsible for science and technology and the promotion of R&D and for a council on science and technology need careful analysis. I rather enjoyed the comments of the noble Earl, Lord Halsbury, on that. I suspect that my sympathies lie somewhere alongside his.

The Government fully recognise the importance of ensuring that science and technology receive proper weight in all our deliberations. As my noble friend Lady Hooper described, there has been considerable evolution in the role of the exisiting advisory bodies such as ACARD and in the role and office of the Chief Scientific Adviser in the Cabinet Office.

I listened carefully to what my noble friends Lord Mottistone and Lord Butterworth had to say in that direction. I see no sense in demolishing what we have because there may be gaps in its effectiveness. What we have to do, and what we shall do—I give this assurance—is to consider whether further changes in that structure would be advantageous and if so what form such changes should take.

Another major issue addressed by the Select Committee is the functioning of the research councils and the ABRC in supporting the science base of the country. Again, we recognise the importance of strong management, clear decisions about priorities between the councils and for the science budget as a whole. Significant steps have been taken. In recent years, despite the science budget growing by more than average inflation, the increasing real costs of undertaking research and the growth of scientific opportunities have meant that difficult choices have to be made. Selectivity between areas of science, building up centres of excellence, giving proper weight to the economic contribution which advances in science and technology can make, are essential. I know that my right honourable friend the Secretary of State for Education and Science welcomes the strong guidance given by ABRC in this direction.

As Minister in the Department of Trade and Industry I welcome the emphasis that the Select Committee have placed on the industrial research and development contribution. I felt that the remarks of my noble friend Lord Nelson of Stafford in this direction were pertinent. Indeed, the committee pointed out that within R&D the main responsibility for D—the development—rests with industry. They also rightly emphasise the major role which must be played by the financial institutions in the City if there is to be sufficient investment for our future technological advance and growth. There has been support for this aspect of the committee's report from the noble Lord, Lord Gregson, and my noble friends Lord Bessborough, Lord Nelson and Lord Blakenham.

The Government accept that they also have a role to play but I believe that the committee—indeed, perhaps noble Lords here—have under-estimated the significance of the measures that the Government have taken. We have indeed given strong signals to industry and to shareholders of the importance of research and development in a number of ways of which I shall mention two. I mention these two because the noble Lord, Lord Williams, made this point. The scientific research allowance has been retained when other capital allowances against corporation tax were cut. Research and development has been included as a qualifying activity for the business expansion scheme. Those are just two of a number of measures.

LINK, which has been mentioned, will be a major force in further increasing collaboration between science, industry and commerce. This will generate a constant stream of new industrial technologies, products and services. I should perhaps say that through LINK the Government will support up to half the cost of collaborative programmes between the scientific community, industry and government laboratories with the Government's contribution planned to reach £210 million over the next five years. Overall, this initiative will, we expect, generate a total expenditure of some £420 million over five years.

Perhaps at this point I may respond to some of the points that were raised. On the exploitable areas of science, and its relationship with LINK, I notice that the noble Lord, Lord Sherfield, nodded his approval when my noble friend referred to this in her opening speech. I should like to say no more than that, but welcome the support that the noble Lord, Lord Swann, gave for this process. Perhaps I could write to the noble Lord further. I should quickly say—since he asked me specifically about the Bide report, IT 86—that we have just received this document. As the noble Lord, Lord Sherfield, said, it was published at the end of last year. We are currently canvassing views and we shall issue the Government's response once this consultation is completed. I suppose that will be in a few months' time.

A number of noble Lords, including the noble Lord, Lord Sherfield himself, my noble friends Lord Aldington, Lord Mottistone and Lord Nelson, and indeed the noble Lord, Lord Gregson, all referred to the level of spending on research and development. The Government share the Select Committee's concern at the overall level of civil R&D expenditure in the United Kingdom. We do consider that the way the sourcing of funding is carried out and the extent to which the private sector's commitment is engaged are as important as the level of funding itself. In particular, public support of civil R&D for economic growth and productivity is unlikely to be effective if industry is not adequately engaged.

Government funding of civil R&D expenditure is comparable with other technologically advanced countries. It is higher as a proportion of GDP than the civil R&D spending of the USA and Japan. Despite the fact that the Government support R&D in industry to a substantial degree, it is in the performance of the private sector that the United Kingdom compares poorly with international competitors. I make no secret of that. In 1983, only 63 per cent. of R&D expenditure by industry was funded from industry's own resources in the United Kingdom. This compares with 73 per cent. in France, 82 per cent. in West Germany, and 98 per cent. in Japan.

I should like to refer to the reports recently published by the ABRC on spending on British science compared with major competitors. The reports, I accept, leave no room for complacency. However, the picture painted by them is not as black as suggested. Again I say that United Kingdom government spending on the science base is in fact higher as a proportion of GDP than that of Japan and the USA. The Royal Society study for the ABRC shows that in 1982 the number of scientific papers published by United Kingdom scientists exceeded those of other countries.

The noble and gallant Lord, Lord Carver, raised the matter of skill shortages resulting from defence R&D. It is difficult to quantify an issue such as this, but we do accept that defence R&D is competing for skills, particularly in terms of numbers and quality of manpower. This is a major reason why it is government policy to seek to obtain economic benefit from defence R&D. In fact the Ministry of Defence is a partner in a LINK programme.

Turning to public purchasing, I broadly agree with what the noble Lord, Lord Williams, was saying on the question of public purchasing. I should like to assure my noble friend Lord Nelson of Stafford and the noble Lord, Lord Ezra, who emphasised the importance of exploiting public purchasing as an instrument for stimulating R&D in the private sector, that I agree with this view. It has always been this Government's policy that public purchasing should continue to enjoy a high profile as a means of stimulating innovation. Indeed it should be used to improve the competiveness of British industry. I believe that this does not necessarily mean always going for the cheapest price. Cheapest is not always best in the long term. There are the longer term considerations to take into account; I believe these were points made by noble Lords. We have to ensure that we get the best value for the taxpayers' money. That is why the central unit on purchasing, set up 18 months or so ago, is looking at this sort of issue and I have little doubt will be spurred in its work by what has been said in your Lordships' House.

We have spoken quite a lot about strategic research. The Government accept that support for such research is of crucial significance. The Government spending on this sort of civil research was £488 million in 1984–1985 and nearly a quarter of that—just over £2 billion in total—the Government spend on civil R&D. In part, that relates to what the noble Lord, Lord Sherfield, had to say. I noticed that the noble Baroness, Lady White, referred to Sir George Porter. The noble Lord, Lord Ezra, quoted the Royal Society's report as did my noble friend Lord Bessborough. Oddly enough, no one quoted Sir George Porter when he told the Parliamentary and Scientific Committee yesterday: We cannot blame the Government, because British firms received a much higher proportion of their R and D funds from government: 30 per cent. here compared with 16 per cent. in Germany and 2 per cent. in Japan". That is perhaps a rather telling remark.

I turn to tax incentives which were raised by my noble friend Lord Mottistone, in part by the noble Lord, Lord Ezra, and by the noble Lord, Lord Dainton, in his remarkable maiden speech when he spoke about personal taxation and the brain drain. I noted carefully what the noble Lord, Lord Williams of Elvel, had to say on this matter, because it bears a little on his own party's policy in this area. Therefore, I say to the noble Lord that I note what he had to say.

The issue of stimulating private research and development through the tax system must be seen in a wider context. After all, substantial tax relief is already available on research and development expenditure. I have mentioned the 100 per cent. first year scientific research allowances for plant, buildings and other capital expenditure. In addition, for development, there are allowances for capital spending on plant and buildings and most current spending on R&D is allowable as a deduction in calculating profits. It is not clear whether further tax relief would be effective in stimulating additional research and development.

It may not be necessary, but I remind noble Lords of the Government's achievements in lowering coporation tax. I also remind the House of what Sir Robin Nicholson said in his evidence to the Select Committee. I paraphrase: "How much of the £3 billion reduction in taxation resulting from the removal of the national insurance surcharge did industry invest in research and development? The answer is, depressingly little". Nevertheless, we keep options for tax relief on research and development under review as, indeed, we keep matters of tax generally under review. It is in that context that one has to see the reduction in personal taxation that has occurred over the last two or three years.

The noble Lord, Lord Sherfield, mentioned the 10 per cent. surcharge for Government contracts. For the record, I was very glad to have the views of the noble Lord, Lord Rothschild, relayed to your Lordships by the noble Lord. However, I think it would be best if I wrote further on that subject.

The noble Lord, Lord Swann, asked me a specific question about evaluation. My noble friend Lord Selborne also made some comments in this area. It concerns the Select Committee's recommendation that approximately 1 per cent. of all government R&D expenditure should be devoted to evaluation. It is helpful to have the committee's views on this matter. It is difficult to say what is the right figure. It depends, in part, on how much the administrative and decision-making process is classified as "evaluation". The new Science and Technology Assessment Office has the job of developing best practice among departments. It will most certainly be considering how much effort to put into the various stages of the evaluation process.

I do not think that I can add much on the subject of international collaboration, to which my noble friend Lady Hooper referred in her opening remarks. However, in connection with Euratom and the pay scales, I shall write to the noble Lord, Lord Williams.

I make one short comment to the noble and gallant Lord, Lord Carver, and to my noble friend Lord Blakenham with regard to the spin-off from defence research and development to the civil sector. The Select Committee's report rightly emphasises the importance of encouraging spin-off of this expenditure to the civil sector. While the primary role of the defence research establishments' programme is to support the procurement of equipment for the armed forces, the Government accept that they have an important contribution to make to the broader national economy. A number of initiatives have been taken in recent years, and in particular Defence Technology Enterprises Ltd. has rapidly established itself as an important channel between the work of the MoD scientists and engineers and civil industry.

Selectivity in university research, which was mentioned by both the noble Lord, Lord Flowers, and my noble friend Lord Butterworth, is perhaps worth mentioning further tonight. The challenge of allocating selectively the resources provided to the universities in support of their research is one which we have taken up. The grants committee has, for the first time, explicitly identified those university departments with particular research strengths and its new method of funding favours universities with good research records. The new method of distribution is an important step towards the more rational allocation of public funds to the universities, and its introduction within a relatively 'short time-scale is an important achievement on the part of the UGC.

While talking about universities, perhaps I may refer to one particular point of interest raised by my noble friend Lord Cranbrook. There has been criticism of the pay of our university scientists as compared with the salaries which they can achieve overseas. I believe that our policy of selectivity and concentration will increasingly improve the facilities available to our best scientists. Indeed the Government have also offered to make additional sums available to finance higher pay in return for a flexible salary structure. That will enable higher awards to be made available for appointments in shortage subjects and for those whose performance merits them. We believe that this is a positive step towards improving morale in the scientific community.

I took note of the point raised by the noble Baroness, Lady Seear, my noble friend Lord Beloff, the noble Lords, Lord Ezra, Lord Gregson and Lord Dainton, on the shortage of skilled personnel as regards earlier education and training. I believe that they know that we have this matter in mind.

Lastly, I turn to the comments of the noble Lord, Lord Williams. He asked for a kick start. We believe that we have done just that. We have done more. We have given industry the fuel on which to run by providing a stable climate with low inflation, low interest rates and low taxes. With inflation brought down and significant improvements achieved in company profitability, liquidity and capacity utilisation, companies should be prepared to plough back more of their gains from these substantial benefits into investment in future commercial success, including innovation and the exploitation of research and development. I have already indicated that the City can also be a major influence in creating the right climate for research and development. The Government agree with the Select Committee that disclosure of research and development expenditure in company accounts would encourage a valuable change of attitude to research and development.

I noticed that a great number of noble Lords—the noble Earl, Lord Bessborough, the noble Viscount, Lord Blakenham, and the noble Lords, Lord Nelson and Lord Gregson—urged this. I welcome the progress being made by the Accountancy Standards Committee in drafting a standard on disclosure. I hope that support from noble Lords in this debate will encourage early implementation of the work.

I am conscious that I have rattled through a great number of important points. I appreciate that perhaps I have not dealt totally adequately with some points that noble Lords have raised. If the noble Lord, Lord Sherfield, and others will allow me, may I read carefully what has been said and identify those areas where I have not been able to make a comment, or where perhaps I should make a comment before the official Government response. If that is so, I shall write to noble Lords, placing, as is the custom, copies of my letters in the Library.

To conclude, I should like to thank the noble Lord, Lord Sherfield, his committee, and indeed the secretariat, for their valuable work, and thank noble Lords who have taken part in today's debate. Perhaps I may leave noble Lords with the assurance that the Government will give the closest attention to everything that has been written and said, and we shall hope to respond before the Summer Recess.

Lord Sherfield

My Lords, at this very late hour I shall be brief. I must express my regret that the debate was shovelled down to the end of the day's Order Paper. I realise that this may not be the responsibility of the noble Lord and the noble Baroness on the Front Bench, and I appreciate what the noble Lord had to say on the subject. Nevertheless the Government must have realised that this was an important debate which would attract an impressive list of speakers. I just hope that the impression will not get abroad that the priority that they have given to the debate reflects the priority that they give to the subject matter.

I have three points. First, I want to express my thanks to the noble Lord, Lord Dainton, for his interesting and attractive maiden speech. His experience will be invaluable to the House and in particular to the Select Committee. Secondly, I should like to thank all noble Lords who have taken part and supported me in the debate and particularly those who have managed to stay the course. Thirdly, I should like to thank the Ministers for their speeches without at this stage commenting on them. We shall scrutinise their remarks and also their figures with the greatest care.

Let me make just one last point. At the end of the day—and I think this came out in the speeches of several noble Lords—the crucial issue in my view is the priority to be given to research and development in relation to other areas of government expenditure. My Lords, I commend the Motion to the House.

On Question, Motion agreed to.

House adjourned at four minutes past midnight.