Science and Innovation

HL Deb 11 October 2000 vol 617 cc405-22

7.32 p.m.

Lord Haskel rose to ask Her Majesty's Government what will be the effect on the economy, on knowledge, on the nation's health and on the environment of the Government's science and innovation policy paper Excellence and Opportunity.

The noble Lord said: My Lords, first, I should like to thank all noble Lords who are speaking this evening. Some may be seeking respite from debating the countryside. But I am sure all are speaking because they care about science and innovation. They care about the impact that science and innovation will have on our lives, on our economy and on the kind of world in which we live.

It is not my intention to make a diagnosis of what science and technology can do for us. The Government have done that in their White Paper. Few would disagree with the Government's vision of how science will change our lives. Few will disagree with the Government's view of the importance of science and innovation. We all want industry to prosper through innovation. We all want to improve the quality of people's lives through science.

The White Paper lays down ambitious plans to achieve those aims and objectives but will those plans achieve tangible results? How effective will they be? How will business view these proposals? That is what I would like to explore, and where better to begin than at the DTI itself.

In this White Paper, the DTI sees itself as a proactive partner stimulating economic progress through science and innovation. Fine. But many in business and industry see the DTI as the agent for intervention and regulation standing in the way of progress. Facilitating science is perceived as helpful; intervening with regulation is seen as a barrier. Perceptions are important. Should a single organisation try to achieve both of those objectives?

In his introduction to the White Paper, the Secretary of State says he will be looking at the structure of the DTI to see how it can be improved. I hope that he will somehow divide those responsibilities so that the one is not perceived as cancelling out the other.

The White Paper sees the DTI as being in partnership with business to exploit and encourage scientific innovation in order that British industry should grow and become more productive. Bravo to that. But a successful partnership depends on understanding each other's cultures and problems. As my noble friend Lord Paul knows, to businessmen, innovation means risk. More innovation fails than succeeds. Despite describing innovation as complex and needing good management, in the White Paper risk and failure are referred to only obliquely.

The White Paper assumes that innovation, once identified, will happen. It does not. Someone has to make it happen. One of the most difficult things in management is to persuade people to embrace technological change. That is especially difficult when those at the top are convinced that there is a huge investment in the existing technology and profits are flowing from it. Some hold the view that all you need is a research department and innovation flows from that. Would it were that simple. In fact, between 1994 and 1998, 35 per cent of our productivity growth actually came from good new firms entering the economy and replacing poor old ones which were leaving it.

The White Paper sees the universities as a major source of these new businesses. I agree. This is why I welcome the various challenge schemes and partnership schemes outlined in the White Paper to encourage those new entrants into the economy. But existing businesses need stimulating, too.

It is here that I think the Government's Foresight proposals are very helpful. Quite rightly, the White Paper points out that too many of our companies still lack awareness of the need for innovation or the ability to do it. Perhaps that is why we invest less in research and development than our competitors. But by giving each sector of industry a vision of its future, Foresight provides a framework within which better to understand the need for change. It provides a framework and a vision within which people in the company can see that the effort and disruption is worth while. It also reduces risk, because Foresight provides a framework in which to get risky decisions right. Indeed, a sign that this thinking is becoming accepted is that it is acquiring its own jargon; "technology roadmapping".

Next month, the Foresight panels will start reporting. I hope that the Minister will use those reports as an opportunity to persuade our less adventurous companies that innovation is less risky if done within the framework of a Foresight report. If he also reminds companies of the assistance given by the best practice sector of the Small Businesses Service, he should encourage more firms to be innovative and to reinvent and transform themselves for the future. And we can do it. More and more British industry is transforming and reinventing itself. We can see that from the growth of science and knowledge business quoted on the stock market. Despite the recent fall in the value of technology stocks, knowledge-intensive businesses are accounting for a growing percentage of the London Stock Exchange. The proposals in this paper should speed this up.

Five years ago, the Stock Exchange valued companies on their profits, assets and prospects for the future. In this new economy, companies are valued on their knowledge and expertise. The knowledge of scientists and engineers is central to a company's valuation. But these commercial pressures mean that more thought needs to be given to the professional standing and integrity of these scientists and engineers.

Nowadays, a scientific result can quickly make an enormous impact on the value of a company. Understandably, some people ask whether the opposite is true: do financial necessities have an impact on scientific results? The White Paper describes an excellent code of practice for the scientific advisory committees and other strategic bodies. Could not those high standards be applied to scientists themselves? They would certainly enhance the status of scientists, engineers and technologists.

An important test of people's attitudes towards the integrity of scientists will take place on 26th October. The press believes that on that day the Government will present to Parliament the results of the BSE inquiry chaired by the noble and learned Lord, Lord Phillips. I understand that that report will name politicians, officials and scientists who should be criticised. I hope that above the voices of the politicians who defend themselves will be heard those of the scientists whose advice they did or did not take. That will be an important opportunity to speak up not only for the status and integrity of scientists but also for the political independence of scientific data. If the public lose faith in the impartiality of their scientists they are likely to lose faith in science and innovation, which will make the Government's task more difficult than it is already.

I have said little about research at universities because it is a world about which other speakers, such as my noble friend Lady Warwick, the noble Baroness, Lady Sharp, and the noble Lord, Lord Dahrendorf, know far more than I. However, I am aware that business and industry welcome the proposal in the White Paper to give greater balance to research assessment exercises now that they will include work done for industry and research into basic technology. That is the nub of the relationship between business and the universities. That equal credit given to applied work at the universities must encourage more collaboration between businesses and universities and lead to greater investment and innovation.

I had the privilege to work on the report of your Lordships' Select Committee entitled Science and Society. I am delighted that many of its proposals are supported in chapter 4 of the White Paper. I believe that the proposals of the Government understand, and do not underestimate, the public. The public are generally aware of the existence of risk and uncertainty. That may make them more critical of science and less deferential to scientists but that should not be mistaken for being anti-science. For that reason, the White Paper is right to insist that science takes the public into its confidence and shares its doubts, uncertainties, knowledge and information—for we need to convince people that the business of science is to serve society.

7.43 p.m.

Lord Paul

My Lords, I thank my noble friend Lord Haskel for initiating this debate. I add my congratulations to the Government for the outstanding science budget and my right honourable friend Stephen Byers on the comprehensive nature of the science and innovation policy. I declare an interest as chairman of Caparo Group, a manufacturing company. I am also Chancellor of the University of Wolverhampton and Thames Valley University.

The commitment to invest long term in the science base of this country demonstrates confidence in our universities and industries and their ability to work in partnership to achieve economic growth and prosperity. There is, however, one area of research and innovation which may not have been given sufficient priority: support for SMEs, particularly in the traditional manufacturing sector. As an example, I refer to the shock waves resulting from the Rover crisis and the excellent work of the Rover task force. This work revealed the vulnerability of some of the supply chain manufacturers that use traditional manufacturing skills. Often that sector is characterised by lack of investment and relatively low technical skills.

However, it is vital to innovate and diversify, and that requires a special type of science research funding. It is not about national excellence but regional support from local universities. There have been effective schemes to encourage local support for SMEs, and I hope that the new investment in science does not overlook this vital part of our economy. I also have in mind the need to ensure that access to the global knowledge economy is not restricted to our largest blue chip companies through their partnership with top-flight research universities. The future economy of the country depends critically on finding ways to develop small and innovative high-tech organisations that can respond rapidly to new opportunities and markets. Often these micro-organisations require considerable local care and support which is best achieved by effective partnership with local universities.

7.46 p.m.

Baroness Warwick of Undercliffe

My Lords, I too thank my noble friend Lord Haskel for introducing this timely debate. In my brief comments I should like to concentrate on those aspects of the White Paper which affect universities. I declare an interest as chief executive of CVCP, the representative body of universities in the UK. Universities have universally welcomed the science and innovation White Paper which rightly acknowledges that the excellence of UK research has been sustained, but at the cost of running down buildings and equipment and lack of reward for staff because of under-funding in previous years. That could not continue. It is good to see that progress has been made towards addressing that challenge, and the White Paper shows clearly that the Government have listened.

Universities enthusiastically embrace the challenge to reach out for and stimulate innovation in the local and national economy, as my noble friend Lord Paul indicated. That is a third mission alongside teaching and research. Therefore, we welcome the additional support announced in the White Paper for knowledge transfer. The list of schemes for this purpose, all of which are welcome, is now rather long. I hope that the new HE innovation fund also announced in the White Paper will provide an opportunity for the rationalisation of schemes for knowledge transfer. Certainly, I applaud the intention that it should become a permanent funding stream. I believe that universities will contribute more effectively if allowed the freedom to develop their own creative approaches rather than respond to narrow or over-prescriptive criteria.

We can now begin to debunk the myth that universities are good at research but poor at exploiting it for the public good. The return achieved from research commercialisation in UK universities now matches the US, and I believe that the survey of university/industry interaction announced in the White Paper will confirm that. Nevertheless, we can all benefit from sharing good practice. That is why CVCP is happy to collaborate with a variety of public bodies. We do it on university consultancy, the management of intellectual property, research careers and improving the participation of women in science.

However, a major challenge now is industry pull. As my noble friend Lord Haskel said, companies need to value better knowledge and expertise. The latest figures show that UK industry is raising the level of its investment in R&D, but there is still some way to go to meet the levels achieved by our major competitor countries. The White Paper will help, but this area will need sustained attention.

My one concern about the White Paper is that an emphasis on science and technology can crowd out other areas. At times the White Paper appears to regard knowledge and innovation and their contribution to the economy and the quality of life as solely to do with science and technology. But many of the innovative ideas in the knowledge economy will come from the social sciences, business and management and the arts and humanities. I know the Minister recognises that.

My main concern, however, is with the wider funding of universities. There remain major needs in the teaching infrastructure, especially in science, and in resources to enable universities to recruit and retain high-quality staff. The White Paper includes welcome measures here, but I fear much more will be needed. It is good to be able to look forward to refurbished laboratories but we also need to be able to recruit and retain staff to teach.

Finally, the Minister for Science and Innovation deserves our congratulations on a stimulating White Paper. It certainly gives universities support they greatly need and also sets them challenging targets. Working together, I am confident that we can meet those targets for the good of the country.

7.51 p.m.

Lord Dahrendorf

My Lords, this is a welcome debate on a welcome White Paper. I agree with the points made in the White Paper and made by the noble Lord, Lord Haskel, about translating excellence into innovation and also, incidentally, with the thesis that the United Kingdom has shown a curious weakness in translating excellent research into business practice or generally into management.

However, I want to address myself to the issue of excellence and make two points. First, we do not really know what conditions and circumstances produce excellence. But we do know what conditions and circumstances impede it. Bureaucratisation impedes excellence. In my view, the research assessment exercise has in no way contributed to the excellence of research and science in this country. Over-regulation impedes excellence. It is difficult to quote from the White Paper as there is confusing numbering. However, I understand paragraph 26 of Chapter 1 to state that, Science must be our servant and not our master", and the role of government should be as a regulator. But it is as important that government and everyone involved remain guardians of the freedom of research. The outrageous may be more creative than the totally normal.

Over-emphasis on access can impede excellence. I am reluctant to say this. I have fought throughout my adult life for education as a civil right, but excellence is something different. Paragraphs 35 to 38 of Chapter 2 on improving opportunities for women are fine. I agree with them. But they are not related to the issue of excellence.

Over-emphasis on application can impede excellence. There are many fine statements in the White Paper about curiosity-driven basic research. They are funding promises of co-operation between government and some of the great foundations. Perhaps there is a little too much of the other theme of making sure, as is stated in paragraph 1 of Chapter 1, that we have the facility to quickly transform the fruits of scientific research and invention into products and services that people need to improve their well-being and quality of life". Leaving the split infinitive on one side as one kind of excellence, I believe that it was in fact a climate of freedom, of purposeless inquiry, coupled with the commitment of bright inquirers and a degree of eccentricity which accounted for the great achievements of British science. Are we living in a time in which only the great American research universities provide this kind of freedom, a kind of freedom which takes account of the desirability and the needs of application, but which initially is geared just to advancing our knowledge?

My second point is brief and simple. It echoes the statement made by the noble Baroness, Lady Warwick of Undercliffe. It is a mistake, intellectually as well as in policy terms, to single out science in the narrow sense and forget the wider context of human inquiry, humanities and the social sciences. Creativity knows no boundaries. Few great scientists have not crossed into history or philosophy or the social sciences. Our understanding of how the world works requires a broader view than the White Paper conveys. Indeed, one begins to wonder whether in the end the DTI is the best place in government for making sure that we keep an outstanding and comprehensive research base.

7.55 p.m.

Lord Hunt of Chesterton

My Lords, I am grateful to Lord Haskel for introducing the debate on the recent White Paper on Excellence and Opportunity.

I should like to comment on this important announcement of increased investment and new policy initiatives for science, engineering and technology, and make a few suggestions about their implementation. These are based on my experiences. I am here declaring my interests as an academic scientist and engineer and founding director of a small science-based company. I was chief executive of the Met Office, a senior position in the Civil Service, and I have visited government agencies and universities in the USA, Japan and Europe.

I would say that the same six issues affect all scientists from the Minister, who is a scientist, to the researcher on the bench: excellence, education, ethics, explanation, exploitation and existence. For many individual scientists existence is the most critical as they eke out their modest salaries. They will welcome the recent steps to raise salaries, but more must be done, and not just for high flyers. Better salaries and recognition schemes for technicians are also essential.

Excellence in research and education, which requires financial and human resources, will be furthered by the White Paper policies. One has seen comments in Nature and elsewhere on that.

As the president of the Royal Society has emphasised, the ethical aspects of science are now at the forefront of science policy and are becoming more difficult. Perhaps governments should recognise that before long an appropriately empowered science minister will have a position as important and politically fraught as that of the Home Secretary. The White Paper commends our open procedures and encourages further steps to ensure that these ethical and practical issues are properly considered and explained so as to give improved public confidence. For example, Le Monde recently commended the role of the Human Fertilisation and Embryology Authority.

The need for scientists as well as science ministers to explain their work openly, often and interestingly was emphasised by the committee of the noble Lord, Lord Jenkins, by Bob Worcester's MORI polling and of course by many journalists. A press survey when I was at the Met Office commended its practice of open access by journalists to the responsible scientists. Hopefully the study of communication mentioned on page 55 of the report could lead to improved guidelines for public and private institutions.

The Internet, emerging from basic physics, has shown that the exploitation of research for the benefit of society and for commercial ends is not only very satisfying and financially rewarding to individuals and institutions; but also, as the history of science relates, exploitation often leads to new questions and new scientific ideas. When I was at Cambridge I had a telephone call about a power station behaving like Moby Dick with jets of water 40 feet high. In helping to solve the problem new fundamentals came about, like bubbles in vortices. I can explain what that means in the bar afterwards if anyone wants to know.

As the Government recognise, they have three more direct roles, which might be described as facilitation, changing institutional arrangements and innovation. In each of these areas the White Paper describes new policies, new funding streams and new opportunities. As to the first, the White Paper argues—I am sorry that only one noble Lord is present on the Conservative Benches—as did Mr Heseltine in his provocative 1987 book on government and indeed as Harold Wilson did in 1964, that research and development and purchasing by government departments and agencies, which should have been included in the report, can, if exploited appropriately through good co-ordination and collaboration, stimulate the growth of science-based industries. We see how the very successful UK pharmaceuticals and defence industry benefit from the National Health Service and defence expenditure. To ensure that this policy is pushed harder, I would suggest that the job descriptions of the chief executives of agencies and managers should include, which they do not at present, the objective to collaborate with and act as ambassadors for UK industry and commerce, as is quite common on the Continent, in the USA and Japan. Industry has told me of many instances where such a commitment would have been more helpful.

The White Paper recognises that the commercial exploitation of science is not usually best done in research organisations. On that point I depart a little from what was said by the noble Baroness, Lady Warwick. Universities should perhaps be included. New arrangements for spin-off companies and sharing of intellectual property announced here should enable and accelerate exploitation in the future. As a scientist, I helped to form a company to develop and exploit university research, but outside the university. But mostly, as managers of scientific establishments know very well, scientists are not entrepreneurs, although generally they want their research to be useful.

So I would qualify the conclusion of the Baker report and agree with the White Paper that exploitation of government and university research should be considered equally via open dissemination of data and working with existing companies—the US route—via commercialisation initiatives by the institutions themselves. Furthermore, financial controls in government institutions need to be kept under review, especially to ensure that their core scientific roles are not adversely affected. In that respect, again, I differ from the Baker report.

The most difficult task of all for government policy for the exploitation of science is the identification and appropriate financing of innovations. I congratulate the Government and the Minister on the diversity of such schemes as they have suggested. I look forward to seeing how those are implemented over the next few years.

8 p.m.

Lord Turnberg

My Lords, I, too, am grateful to my noble friend Lord Haskel for introducing this important debate. I pay tribute also to the DTI for its document which summarises an impressive and welcome list of government-funded initiatives. But admirable as they are, these proposals could be frustrated if the public at large increase their indifference, and in some cases antipathy, to science. This issue is recognised in the report. I quote: Were a climate of distrust to build up around science, it could drive scientists away from the UK and in the long run impoverish us". I must declare an interest here as a long time medical scientist and as current scientific adviser to the Association of Medical Research Charities. Perhaps I may pick two specific examples of research activity which have caught adverse public attention with, I believe, detrimental effects for research and, consequently, industrial investment in the UK. They are two rather sensitive examples. The first is research involving animals. About 20 per cent of medical research is heavily dependent on animals. While a recent MORI report for the Medical Research Council appears to show most people supportive of such research where it leads to treatments of serious disease—especially cancer in the young—there is less support for animal research aimed at understanding the basis of human disease. More worryingly, most of those interviewed for the report were unaware of the very strict regulation and monitoring of animal research which is currently in place. Indeed, many of the controls are more stringent than those they asked for. But an adverse environment to such research is causing one of our most successful industries—the pharmaceutical industry—to consider withdrawing its investment in the UK and placing it elsewhere. There is an information gap, which needs to be filled, about the nature of, and necessity for, animal research and about the current stringent controls exerted on researchers by the Home Office so that the public can reach a more informed judgment.

The second example concerns GM crop research, which I know has been the subject of some interest in your Lordships' House. Public concern runs high. However, it is now almost impossible to undertake even the research which is so essential to see whether those concerns have any foundation despite a background of many years of experience in the US which have failed to yield any evidence of damage to the environment or to consumers.

Many bodies have a particular interest in efforts to improve the public's confidence in scientific endeavours. I know that the OST and my noble friend the Minister have shown particular interest in this matter. Improved public awareness can be achieved only by a clear demonstration of the benefits of the research and a fully transparent discussion of the risks. But what is clearly missing is an understanding of what are the best methods of engaging the public, a point well recognised in your Lordships' report on science and society. It seems that more research is needed into what methods will best achieve an informed consensus. I feel sure that the Minister takes seriously the need for such research.

8.5 p.m.

Lord Brett

My Lords, I welcome the White Paper and the boost it gives to funding for research. However, it is primarily focused on the science budget of the OST component and mainly goes to the universities. The £100 million for Research Council Institute infrastructure is also welcome after two decades of neglect.

I should like to make my point in the debate on a Cinderella area, as I see it. Much funding for science, particularly in support of public policy—including the environment and quality of life issues—does not come from the OST but from government departments; for example, MAFF. This funding stream is still declining, as the Commons Science and Technology Committee report on research expenditure and the forward look pointed out. The decline in funding is combined with a litany of privatisations of government laboratories—the National Engineering Laboratory and the National Physical Laboratory in 1995, the Transport and Road Research Laboratory and the Laboratory of the Government Chemist in 1996 and the MAFF laboratories linked with ADAS in 1997.

That has led to a seepage of scientific expertise from within the government machine, weakening both the scientific dimension of general decision-making and making it more expensive to access specific scientific advice. That seepage will become a flood with the fulfilment of the PPP for DERA and the consequent privatisation of thousands of defence scientists. The problem arises not only in relation to the outsourcing of science but also the demoralisation of those remaining within the service. The White Paper is an endorsement of the Baker study and the creation of a more arm's length approach. That will lead to fear among many scientists within the government science laboratories that still exist and even greater demoralisation will follow.

Heads of profession in the DETR, which has no public sector research establishments except for the HSE, have made the point that there must be strong internal scientific support to act as "intelligent customers" for research. Professor Beringer of the Advisory Committee on Releases to the Environment told the Select Committee that there was insufficient scientific secretariat support in depth for his committee to evaluate evidence effectively. Although the White Paper briefly mentions the importance of the "demand" side in funding and exploiting R&D, there is insufficient emphasis on that dimension of the equation and very fewproposals in the White Paper to carry it through. I ask the Minister to rectify that weakness.

As other noble Lords have said, the White Paper concentrates primarily on knowledge transfer and innovation but focuses almost entirely on "commercial" exploitation and on maximising the "commercial return" from publicly funded university and PSRE research. It does little directly to deal with the prime responsibility of private industry. Private industry still does not invest sufficiently in R&D. The UK is still near the bottom of the league for percentage of GDP spent on R&D by both public and private sectors, as has been evidenced by the Royal Society.

By placing the major emphasis on "commercialisation" there is a risk of distorting the primary purpose of public sector research. The need to attract and retain commercial contracts also has an impact on scientists because they come under pressure to modify research results to please sponsors. That is true, whether it is in universities or government research establishments. Similar phenomena will be seen to a greater degree if we continue in that regard. This is not an attack on commercialisation or on the need to see a greater speed and greater efficiency from research to product. However, in terms of the PSREs and the universities, it helps to contribute to a loss of public confidence.

We are seen more and more to be hand in glove, arm in arm and in collaboration with the private sector. In terms of health and the environment—whether considering BSE or GMOs—this has led to a loss of public confidence. The White Paper deals with some of these issues in the final chapter, "Confident Consumers". I hope therefore that we can help to put that right.

Finally, what about the workers? Here I echo the sentiments expressed by my noble friend Lord Hunt of Chesterton: there needs to be a much greater understanding, not only of how to resolve the issue of the brain drain, where we need to attract back from abroad our top scientists, but how to provide a much better pay and conditions structure to attract the best scientists and technologists.

My final plea would be to ask the Government to look again at fixed-term contracts. Perhaps 1 per cent or even 10 per cent prefer to work with fixed-term contracts, but 90 per cent of scientists like the certainty of being able to pursue a career at a scientific establishment or in a university free from the fear that every two or three years their livelihoods are put in jeopardy. That issue needs to be taken on board.

In all, along with other noble Lords, I warmly welcome this White Paper.

8.10 p.m.

Baroness Sharp of Guildford

My Lords, I should like to join with other noble Lords in thanking the noble Lord, Lord Haskel, for having initiated this debate. I am only sorry that we have so little time in which to discuss the subject. Many speakers have raised points that I should have liked to have spoken on. The noble Baroness, Lady Warwick, spoke of the problems of staffing at universities. My noble friend Lord Dahrendorf discussed the dangers of over-bureaucracy and the noble Lord, Lord Brett, covered some of the problems afflicting the public sector research establishments as well as touching on the issue of contract researchers. All those matters are dear to my heart.

I should like to make three main points. First, from these Benches I should like to say how very much we welcome the White Paper. Many aspects of it are excellent. The long-awaited recognition that science and technology constitute important parts of a system of innovation, where the relationships are not linear but rather where the feedbacks within the system are extremely important. I welcome also the emphasis placed on the science base itself, not only as a source of innovation but also as a vital trainer of skilled labour within the high-tech sector of the economy and as a catalyst for local community initiatives. I welcome, too, the fact that at last we have a Government who recognise that, in addition to promoting high-tech firms, we need to concentrate on the ordinary run of small and medium-sized enterprises and ensure that we help to improve their performance.

Secondly, having welcomed the White Paper, I should like to add how pleased I am to see the emphatic inclusion by the Department of Trade of Industry of the importance of the successful teaching of science in schools. The paper recognises the vital importance of the need to enthuse school students about science. However, I am worried that at present the Department for Education and Employment is underestimating the depth of the crisis in science teaching in our schools.

Recently I held discussions with the Institute of Physics. The number of those graduating as teachers in physics has fallen drastically throughout the 1990s. Seventy per cent of the profession are now aged over 40. Furthermore, we are not seeing sufficient graduates to replace even half of those who are retiring, and a disproportionate number of those going into teaching are those with third class degrees or worse. The same is true of mathematics and, to a somewhat lesser degree, of chemistry. If we do not have in place sufficient teachers in these core subjects, how can we hope to enthuse the next generation? Where will our next generation of scientists come from?

Thirdly, while I am delighted that at long last we have a Government who do recognise the importance of networks between firms, universities and colleges of further education, the sum allocated to them in the comprehensive spending review and echoed in the White Paper—£50 million—is derisory. One need only look at what is being spent by the German Länder to know that more is needed if regional development agencies are properly to be used as catalysts in this area.

Frankly, we on these Benches believe that the problem lies with the Treasury, which has never trusted local authorities of any kind or shape, let alone regional development agencies, to spend money. They must be given some leeway to raise capital in their own right. This country is the only one in the world that restricts the local raising of capital to such an extent. This issue should be considered because the RDAs need access to far more money than has been envisaged in this paper.

Finally, given the time limitations, I can say little more. I feel that this is an extremely important White Paper which raises many interesting issues in relation to our economy. It is a shame that we have had only one hour in which to debate it. I have discussed with the noble Lord, Lord Haskel, the possibility of raising the matter again in the new year as a Wednesday debate. If he does not do so, then I shall.

8.15 p.m.

Lord Northbrook

My Lords, I should like to thank the noble Lord, Lord Haskel, for initiating this important debate. We have had some excellent and thoughtful contributions. From these Benches, I should like to point out that the idea of government-industry partnerships within the fields of science and innovation are not original policies from the present Labour Government. Industry and university links were also encouraged before New Labour came to power. The Conservative government were keen to capitalise on opportunities generated through rapidly increasing technological change.

At the time of the last election, the party pledged £35 million in investment to help industry to take advantage of these developing areas. Also, in 1994 the last administration presented a paper outlining the dream of multiple competing and interconnecting superhighways, funded by the private sector but overseen by the administration's commitment to regulatory stability. The administration took a lead in developing superhighways in education and health. Furthermore, the technology foresight initiative in 1994 united industry and universities to recognise future enterprise opportunities and helped to channel the UK's strong scientific base into relevant research.

Moving on to the Government's White Paper, it describes Great Britain as having only 1 per cent of the world's population, yet generating 6 per cent of the world's research and development. These statistics were also true under the last government. Funding at that time for science and engineering was £2.3 billion, having risen 10 per cent in real terms through the period 1987–97. The Conservatives' commitment to science was emphasised by the 30 per cent increase in the government's science budget since 1979.

The White Paper states that there will be closer links between universities, businesses and industries through a range of measures such as the £140 million higher education innovation fund. Also included is the investment of a new £1 billion for a programme in partnership with the Wellcome Trust to renew the infrastructure for science, providing buildings and equipment for research. In addition, £250 million is going to boost research work into genomics, e-science, nanotechnology, quantum computing and bioengineering. I note also the annual £50 million regional innovation fund to enable regional development agencies to support "clusters" of science-related projects. Can the Minister tell the House how much of this is new money and how much has already been included in previous departmental budget announcements?

Finally, I should like to ask the Minister how the Government's policy on IR35 is consistent with their encouragement of science and innovation. I shall quote from a letter in The Times today from a disgruntled professional contractor. He states the effect that IR35 will have on him: short of getting a contract abroad [I] can only see a bleak future of living off benefits … Contract staff provide the core of specialist expertise in Britain's high-tech industries and a mobile, flexible and highly skilled work force. This system works well for client and supplier, and Labour are about to wipe it out in one go". No wonder there is to be a legal challenge to the measure. The Times again stated today that it is being bombarded with e-mails on the subject. Can I urge the Minister to stress to the Chancellor the seriousness of the situation? Among other things, his appointment was meant to demonstrate that the Government would show a friendly face to business. This measure has the worst possible effect on the new economy and I ask the Minister to see that it is scrapped.

8.19 p.m.

The Minister for Science, Department of Trade and Industry (Lord Sainsbury of Turville)

My Lords, I am delighted to respond to this excellent debate and to the many thoughtful and expert contributions made to it.

People often talk of the knowledge-driven economy as if it was still some way in the future, as if it applied only to certain sectors of industry, and as if it applied only to dot.com companies. In fact, it is here and it is now. It applies to all parts of the economy—manufacturing and services—and it has already brought unprecedented changes.

In the global economy, capital is mobile, technology can migrate quickly, and goods can be made cheaply in low cost countries and shipped to developed markets. This country cannot compete simply on low labour costs, the supply of raw materials or land. Now more than ever, business must seek competitive advantage by exploiting capabilities which its competitors cannot easily match or imitate.

These distinctive capabilities must be knowledge, skills and creativity—capabilities which help generate high productivity business process and high value goods and services. That is why it is so important that we have an excellent science and engineering research base and why we need to build in incentives to encourage knowledge transfer.

The excellent science and engineering research base that we have in this country is one of our most important assets in the knowledge-driven economy. With 1 per cent of the world's population we in fact carry out 4.5 per cent of the world's scientific research; we produce 8 per cent of the world's scientific papers; and we receive 9 per cent of the citations for world research.

It is encouraging that increasingly this research excellence is being turned into jobs and wealth. Britain is today home to strong science-based industries in aerospace and pharmaceuticals, as well as being a leading centre for optoelectronics, biotechnology, many design disciplines, computer games and mobile telephone software and services.

In 1998 the UK's high-tech exports per capita were the highest of the G7 countries and have grown by 9 per cent per annum since 1992.

We should also note that our universities have undergone a sea change over the past few years in regard to creating wealth from their undoubted excellence in science and technology. A survey for the Office of Science and Technology identified 223 businesses spun out from, and wholly or partially owned by, UK higher education institutions in 199798. Of course, many other businesses are spun off without universities retaining a stake in them.

There is a new spirit of enterprise taking hold in our universities across the country, from Southampton to Warwick, from Leeds to Dundee. Manchester and Liverpool universities, for example, are leading a boom in biotechnology and pharmaceuticals in the North West. Oxford University's Isis Innovation is developing a cluster of high-tech businesses in the Midlands. British universities are now following the example of American universities such as MIT, Stanford and Berkeley and becoming central to local and regional economic development. Cambridge University and the surrounding "Silicon Fen" cluster has produced already two billion-dollar companies in ARM and Autonomy as well as attracting the Microsoft laboratory.

The aim of the science and innovation White Paper, Excellence and Opportunity, is to aid and accelerate this transformation of the British economy into a knowledge- driven one and to help all regions to participate fully in it. It has three goals: first, to maintain and enhance the excellence of the science base; secondly, to increase the incentives for innovation; and, thirdly, to make certain that people have a confident relationship with science, that it is seen as an opportunity and not a threat. Against each of these goals we set out practical proposals, with sums of money attached to them.

I shall now deal with some of the points that have been raised. I am particularly grateful to my noble friend Lord Haskel for his thoughtful Question and for his contribution. I very much agree with him about the importance of striking the right balance in regulation. I believe, though, that with the right approach regulation can be a driver for innovation and new markets rather than a block.

My noble friend also raised the issue of the structure of the DTI. We are taking a fresh look at the DTI's broader business innovation agenda and the results will be announced in due course. As to the question of foresight—another issue raised by my noble friend—we shall be looking at how foresight can be put at the centre of policy making in the DTI.

He also referred to the financial impact of technology knowledge-intensive sectors. I should point out that they now account for 38 per cent of the value of the London Stock Exchange compared with 20 per cent 10 years ago. The high-tech sectors of British industry are no longer peripheral to the economy; they are absolutely essential to our economic future.

The noble Lord, Lord Paul, raised the question of SMEs. I hope that it is clear that we did not ignore them in the White Paper. The small business research initiative, which will help small businesses to take part in government research funding, is one part of the response; and the higher education innovation fund is aimed squarely at giving universities incentives to carry out knowledge transfer to smaller businesses.

We want to see a diversity of excellence in our university system. Some universities should continue to be world-class research universities, but others have a role in working with local businesses and providing excellence in terms of knowledge transfer. The regional innovation fund is aimed also at the networks which will help small businesses.

I do not agree with the noble Lord, Lord Dahrendorf. I think many vice-chancellors will agree that the RAE has had an impact in driving up research excellence. The White Paper is very clear about the importance of basic research, and curiosity-driven research is extremely important to this. I would draw his attention to the sentence which reads The importance of excellent, curiosity-driven research cannot be emphasised too strongly. It is part of our culture but also of vital importance to industry". We want excellent basic research and excellent mission-driven research. Both are essential and should exist within the research base. I know that those who are keen on mission-driven research will say that the White Paper is all about excellence in basic research and there is not enough on mission-driven research. Those who are interested in excellent research will say it is all about mission-driven research and not about excellent research. We need both—and the White Paper is about both.

White Papers have to have a limited field. This is a White Paper about science and innovation—and "innovation" in this context is clearly about science and technology-driven innovation. It is not about creativity over the whole field of human endeavour—that is a much wider subject—but about the science base. I make no apologies; that is what it should be about.

I agree with the noble Lord, Lord Hunt, that the job of Science Minister is rapidly catching up with the Home Office in terms of difficult decisions. I agree that it will probably get worse before it gets better. However, the Baker report got it right; exploitation can sit alongside the role of the public sector research enterprises perfectly well in terms of giving independent advice.

So far as concerns the number of funding schemes—a point raised by the noble Baroness, Lady Warwick—I entirely agree with her point. This is an area where we are trying to simplify the number of schemes available to universities. I hope that the higher education innovation fund is a step in that direction. It replaces a previous scheme, the HEROBC fund, and puts it on a permanent basis. That is a step forward.

So far as concerns the noble Baroness's point about other research areas, funding of social sciences comes via the ESRC and can be expected to benefit, to a degree which is still to be determined, from the additional funds made available for the science budget.

I have no reason to believe that the science budget has benefited at the expense of funding for the DfEE or the Arts and Humanities Research Board, which is funded by the DfEE. I recognise that in the knowledge-driven economy the boundaries between the arts and humanities and science are becomingly increasingly blurred. The Council for Science and Technology has decided to examine this very issue. I very much look forward to its report, which I shall study with great interest.

I strongly agree with the noble Lord, Lord Turnberg, that much more needs to be done to communicate to the public the stringent regulations on animal experimentation and the many steps to improve the welfare of animals.

The noble Lord, Lord Brett, raised the question of the public sector research establishments. In this context, other government departments need to decide how research can contribute to their objectives. I do not agree that the Baker report has led to demoralisation. It was broadly welcomed as giving public sector research establishments more devolved powers and greater freedom. The £100 million to repair the impoverished infrastructure of research establishments should surely be seen as a statement of confidence in their future.

As regards short-term contracts, we are keen to reduce their number. There is an initiative to introduce more long-term contracts in universities.

I agree with the noble Baroness, Lady Sharp, that there is a problem in the teaching of physics. It is interesting that the number of children taking A-levels in science is rising faster than the general increase in A-levels. However, I strongly agree with the noble Baroness that we have the problem of teachers teaching subjects in which they have not been trained. I do not believe that you get inspired teaching in physics if it is done by biologists, or vice versa.

So far as concerns RDAs, we gave them £50 million for regional innovation funds. That was a promising start. We have also given them much more flexibility in terms of funding so that they can prioritise their plans. That is a good step forward as well.

The noble Lord, Lord Northbrook, raised a point about the performance of the previous government. I believe that what happened to universities in the period from 1995 to 1997 in terms of cutbacks in their capital expenditure, coming on a previously low figure, was an unmitigated disaster. It led to the appalling state that our laboratories were in when we came to power, and it has taken nearly £2 billion pounds over a six-year period to remedy.

The noble Lord also raised the case of IR35. All that does is to say that the normal rules on self-employment apply to people who set up companies but work essentially for one business. All it does is apply to those companies the same rules on self-employment as apply to everyone else.

Perhaps I may end with a word about the role of science in society. Work done by the Office of Science and Technology and the Wellcome Trust shows that the British people are not "anti-science". Three-quarters of them are amazed by the achievements of modern science and more than two-thirds agree that science and technology are making our lives healthier, easier and more comfortable.

I believe that science can bring huge benefits to our society, not only in terms of creating wealth and jobs but also in terms of improving the nation's health and providing a solution to many of our environmental problems. The measures set out in the White Paper provide a solid foundation for building a dynamic knowledge economy in the UK. They will ensure that we can harness the full potential of science to contribute to prosperity, jobs, environmental sustainability and the health of the nation.