Select Committee on Science and Technology Minutes of Evidence

Examination of Witness (Questions 1 - 19)




  1. Secretary of State, welcome to the Science and Technology Select Committee. Thank you for finding time in your very busy diary to be with us. I know how difficult it was to find a mutually convenient date. We are delighted to have you here with us now. You have been before this Committee twice before. The first time you came to see us was to help us with our inquiry into innovation and the physical sciences; the second time you came to see us we tried to help you on the Synchrotron. I am sure we confused you rather than helped you; it was a very difficult decision for you to make at that time. Now we would like to talk to you in the context of a report we are doing, which we have entitled, "Are We Realising Our Potential?", going back to the report that was presented by the Minister, who is now Lord Waldegrave, entitled, "Realising Our Potential". We would also like to talk about science policy in general. I suppose at this time for Parliament it is also a little bit of a round up of what has happened in the last four years and what is likely to happen with science policy in the future. I wonder if I may just start by asking you how you have found your role in relation to science and technology and what it means to be the Cabinet Minister with the responsibility for science? Not only do you have the Chief Scientific Adviser, and OST, within your department but you do have a scientific responsibility across all government departments. How do you handle that? What impact has that had on science by having a co-ordinating Secretary of State or a minister?

  (Mr Byers) Can I say, first of all, I welcome the opportunity of appearing before your Committee again. It is not many Secretaries of State for Trade and Industry in the recent past who have had the opportunity of appearing three times before your Committee—largely because they did not occupy the post for very long—but I am pleased to be in front of you today. Can I say in relation to the Synchrotron, it was a very difficult decision but I did find both the giving of evidence and the advice from the Committee very helpful on what was a very difficult decision. First of all, it is very important for science in the United Kingdom that there is a Cabinet member with responsibility for science. I think that is very important because it does mean there is a voice at the Cabinet table on behalf of science and the science community. That is particularly important at times like the Comprehensive Spending Review, when the case has to be made for science. If there was not a Cabinet member with specific responsibility then I think the case could go by default. There is a very strong case to be made for science in the United Kingdom. I would like to think that the last two spending rounds have demonstrated that having science as the responsibility of the Secretary of State for Trade and Industry has actually worked in the interests of the sciences and the science community in terms of the funding which we have been able to achieve in the last two spending rounds. It has been a significant increase and it is partially due, at least, I think, to the fact that there is a Cabinet Minister with specific responsibility. In terms of the co-ordinating role across government, the Chief Scientific Adviser both advises myself and also has direct access to the Prime Minister. I think that is very important. Most members of the Committee will know that in 1995 when the decision was taken to move the Office of Science and Technology out of the Cabinet Office and into the Department of Trade and Industry there was an issue about it being downgraded potentially in some respects. I would like to think that the way in which we have been able to operate may have allayed some of the concerns that people had about the importance and the priority that we attach to science. As you know Lord Sainsbury is the Minister with day-to-day responsibility for science and innovation. I, as the Cabinet Member responsible for science, deal with the strategic overview of the direction in which science policy should be going. As you are aware from the White Papers that we have published, in particular, I am personally committed to supporting science, but also ensuring that we can use the excellence that we have in science here in the United Kingdom, perhaps, in a broader way than it has been used in the past. Making the links between academic research in science with commercial exploitation and development and innovation is very important. We have given a new impetus to developments in those particular areas. I hope I do not sound complacent, Chairman we have structures in place which I think are working well, and I think the results of that have been shown in the Budget outcome, which I think has been good for science and, hopefully, in the way in which the science community itself recognises that it is valued and has a very important part to play. There are at least a couple of announcements in the budget this afternoon which I think demonstrate, yet again, the importance that we attach to science.

  2. I was going to ask you later on, but since you have opened up the subject I will ask you now. You refer to the important role that science plays in our society in general for the quality of life, wealth creation, and so on. You alluded to the fact that science can add to wealth creation, which is something that all governments should want for their population. Do you recognise, Secretary of State, that one should not just see science as a wealth creator, although it is pleasing that you do and if, as in so doing, we should not take our eye off fundamental research, which is the seed-corn for wealth creation at a later time?  (Mr Byers) I absolutely agree with that point. I think it would be a terrible mistake if we were simply to see science and, indeed, fund science in terms of applied science and science that can be exploited commercially. The reality is, as you have just said, that we only get to that stage if we have the grounding in pure science. I think the trick that we need to play really is to recognise that the two are not mutually exclusive but actually one complements the other. We have to have a strong science foundation in order to be able to have the opportunities to exploit the ideas that come out of that pure research, if you like.

  3. It is almost a circle. Wealth creation finds the funds for research and development, and research and development provides the knowledge for wealth and creation.  (Mr Byers) That says it very well.

  4. During the course of a week or a month do you get personally involved in discussing scientific matters or is that all left to the Chief Scientific Adviser and the Minister for Science? If you do get involved what sort of time do you spend—an hour a week or an hour a month?  (Mr Byers) Certainly more than an hour a week. I hate thinking along these terms because it makes me think how many hours a week I actually work—I am sure it would be the same for most Members. I have regular meetings with the Chief Scientific Adviser on a bilateral basis, he will brief me on issues that are relevant, probably every month we have a session together. There are many submissions that come up affecting science which, obviously, I consider along with Lord Sainsbury. It is difficult to put a time on it. When there is a big strategic decision like the Synchrotron there would be many hours in a week.

  5. Let me put it another way: do you think that many weeks go by without you discussing a science matter at some time?  (Mr Byers) No, no.

  6. OST is within your department, could an argument be made, do you think, for having OST as an independent office? If the argument could be made that way, what would the pros be for that argument and what would the cons be against it?  (Mr Byers) I am sure there are arguments that could be made to support a freestanding OST. I think what we have been able to achieve is that it has the support of a strong department, which is good in terms of cross-government discussions and debates about priorities, particularly spending priorities. It has meant that we have been able to make links between science innovation and the university sector. I think we have been able to achieve that without in any way downgrading the pure research that needs to go on as far as science is concerned. One of the things that I am particularly proud of is that, through the collaboration and the joint partnership with the Wellcome Trust and the money we have been able to put through the Joint Infrastructure Fund, we have been able to put in about £1 billion in the last three years into basic infrastructure in our universities, which is not applied in any way, which is not exploited commercially but which is the foundation stone from which we are unable to put in other forms of funding to develop and exploit commercially. We have been able to do that because it has been part of the Department of Trade and Industry. I know there is a view that to have an area outside the department on its own means that greater priority and attention is given to it. I think there is also a danger that it can actually weaken in terms of the discussions and the debates around Whitehall, where to have a strong department can be useful. I think, Chairman, it is probably for others to judge whether being part of the Department of Trade and Industry since 1995 has been of benefit or a detriment. My own view, from my own experience now of two and a half years as Secretary of State, is that we have been able to add to what the OST has been able to achieve.

Mr Taylor

  7. I am fascinated, because the language you have just used was the language I was using when I was Minister for justification. What, in your view, is the counter-argument about the Cabinet Office, from which my government moved the OST and, of course, earlier, the Department for Education and Science? Are you satisfied with your experience now that the DTI is a better repository of the OST than either of those other two departments?  (Mr Byers) I believe so. I am not someone who says that has to be a given. I think a lot of it depends on having a commitment to support science, and we have that. Wherever the OST is, there has to be a clear commitment to support science, otherwise it is going to be very vulnerable. What we have been able to achieve is making very important links within the DTI. With the very good working relationship we have with the Department for Education and Employment we are then able to bridge the link with the university sector as well. We have been able to ensure that the OST is not isolated and we have been able to support it and we have been able to make some very important links with other bodies. Having said that, I can understand there will be arguments that there is somewhere else within Whitehall where it would be better placed, I cannot, as we sit here this evening, think where that might be. I think the idea of having a freestanding OST would put it in a vulnerable position.

  8. Would you agree that raising uncertainty about where the OST should be keeps opening up the problem of whether it is being taken seriously? I now reverse the question; would you make a determined, personal commitment that the OST is now well bedded down in the DTI and ought to stay there and gain strength from that department?  (Mr Byers) I would like to think that from the results people would recognise that it has been successful, that is the best way of judging it. If one looks back at what we have been able to achieve over the last three or four years or so, once it was bedded into the department—I understand you may know better than I do, there may have been teething troubles and difficulties, as there always is when there is a structural change in the Government—I would like to think, certainly in my time, in two and a half years we have been able to move forward and there have not been those difficulties. Certainly talking to the two Chief Scientific Advisers I have known they have been very supportive of where OST is and actually welcome the fact that they have regular meetings with myself and also have access to the Prime Minister if there is something which is particularly pressing.

Dr Kumar

  9. Secretary of State, you have been a very strong advocate of a knowledge-driven economy, especially if we are to compete globally. I have heard you say many, many times this is a road we must go down. Do you think that as a country we spend enough on research and development compared to other countries in the world?  (Mr Byers) The figures are interesting, and it was one of the issues the Chancellor touched on in the Budget statement earlier today. I have looked at some figures in terms of R&D spend by the business sector. It is quite interesting to note that the United Kingdom business sector spends 1.2 per cent of GDP on R&D, where as the business sector in the Japan spends 2.2 per cent; in the United States 1.9 per cent; in Germany 1.6 per cent and in France 1.4 per cent. Certainly in terms of business spend on R&D we need to do more and we need to encourage that. The announcement we have had of the R&D tax credit being extended to larger companies and the consultation that will take place around that is going to be very good news. There is also the issue about R&D spend by government itself. I think through the Spending Review we have now got to a situation whereas there had been a decline we have now managed to stop that happening. In a number of major departments we will see government spending on R&D increase over the next three years. We have stabilised the position but there is clearly more that needs to be done.

  10. Do you have an ideal figure or a percentage that you would like to tell us where you think our spending should be considered adequate or sufficient for R&D? I am trying to get a figure from you, if you have one in mind.  (Mr Byers) There is a danger of coming up with a precise percentage of GDP. We should not be trailing other industrialised countries, and the figures that I have just run through show that we are. I think if we could up the level to be closer to our major competitors, whether it is Japan, the United States, Germany or France that would make a significant difference. I would like to think—looking at the figures it is quite interesting, we have seen improvements in the R&D spend in the last two years. We need to encourage that. The tax credit that we have given to SMEs has been of help in doing that. If we can extend that to larger companies then that will make a very real difference. The thing that worries me is what we are seeing at the moment, because we are in global competition for R&D, is some major companies who traditionally have had a high level of R&D spend in the United Kingdom looking at other countries. Rolls-Royce is an example, they are considering moving some of their R&D from the West Midlands over to Canada, because the Canadian Government has a very attractive regime as far as R&D spend is concerned. We must be vigilant. We are in a global competition here and we have to make sure that we have the framework in place and the tax regime in place which is very supportive of R&D spend.

Dr Turner

  11. Does the Prime Ministers's recent speech, promising a green industrial revolution in the United Kingdom—certainly press reports stated £100 million input—have any strong implications for government spend in R&D in areas of green technology?  (Mr Byers) Potentially it does. I think when we have a chance to look at the details of the Chancellor's speech today he indicated there that there would be support for R&D in green technologies. That is part of the consultation which has now begun as a result of the Budget statement. There is huge potential here. We have done a lot of work in the department now looking at new technology, and the green industrial revolution which the Prime Minister referred to yesterday. There is no doubt that if one looks at the overall spend globally on environmental technology it is worth in value about the same as the spend on pharmaceuticals worldwide. It is already a huge industry. We do not actually have much of it here in the United Kingdom but we do need to look at ways in which we can support it. The statement made by the Prime Minister yesterday and the announcement from the Chancellor today in the Budget potentially will have a big impact as far as R&D spend is concerned in this particular area.

  12. You would wish to be proactive in that?  (Mr Byers) I think we are. We have been very positive from the Department of Trade and Industry's side with the OST and with the new Chief Scientific Adviser, who has great personal interest in this area. There will be many opportunities in the months and years ahead.

Dr Kumar

  13. Secretary of State, in the last Spending Review there was an announcement of increases in the Science Budget, and that was very welcome by the community out there. Will you be seeking to strengthen the Government's investment in science engineering in the future and what level of funding do you have in mind for that?  (Mr Byers) I agree. The settlement we managed to achieve was one which was widely welcomed by the science community. It was a good settlement. Building on the first Spending Review we saw round about £1 billion extra going into science over three years. We have managed to secure a similar level of funding in partnership with the Wellcome Trust, so about £1 billion of new money for science over the next three years. It is a seven per cent increase in real terms for each of those three years, so there are significant improvements there. There is no doubt when the next Spending Review comes round, and they come round remarkably quickly, we need to be in a strong position to argue for further funding for science. We have to be able to demonstrate that—to be in a strong position, a point the Chairman made—we benefit enormously from spending on science. It is plainly one of our great strengths in the United Kingdom in the first place, because we are hugely strong so far as science is concerned. I was looking at some figures yesterday evening, one per cent of the world's population are in the United Kingdom; we fund 4.5 per cent of the world's science; we have 8.0 per cent of the world's published scientific papers; we have 9.0 per cent of citations and we have 10 per cent of internationally recognised science prizes. That is a position of strength. What we then need to do on the basis of that position of strength is to find ways in which we can, through funding, make sure that we secure that position and that we get the benefits from it in terms of wealth creation, and so on. There is then the potential to get the virtuous circle, which the Chairman referred to, having a strong Science Base, commercial exploitation, wealth being created, more money, which we can then use to underpin the Science Base further. What I am acutely aware of is when one goes to the Chancellor arguing for more money, being a very prudent Chancellor the first thing he says is: "What are we going to get for it and what are the results going to be?" This is one of those areas where, after the first three years Spending Review, we are beginning to be able to show good results coming through and I am confident that in a year or two years' time when the Secretary of state for Trade and Industry goes to the Chancellor for more funding he or she will have to be able to show the beneficial results of the funding that we have put in so far.

  14. Picking you up on the effectiveness of the funding, do you actually show him specific examples, where you say: "This has been a successful idea, and this has been the outcome". Do you take real life examples? How do you decide that? How do you convince him?  (Mr Byers) With the Treasury we do have public service agreements, which are targets we have to achieve. In some specific programmes, like University Challenge, then there are requirements to try and get a number of companies spinning out from the universities. There are some specific requirements there as well. It is almost a contract, if you like, between the department, the OST and the Treasury.

  15. How much of the pressure that you bring about on the Chancellor is your own belief in science and the advancement of science and the sciences budget, and how much of it, do you think, is pressure from the grass roots emerging from the scientific and technological community? I am just trying to assess whether if there was another Secretary of State they would passionately believe as strongly as you do, or whether it is the pressure from outside that is created for you to fight in the budget?  (Mr Byers) I am not a scientist by trade or profession but what I do know is how important science has been actually to our economy here in the United Kingdom, going back to the days of the Industrial Revolution, and it is going to be increasingly important as we move into this knowledge economy. Science has a huge role to play. I remember the first time I spoke at the Lord Mayor's Trade and Industry banquet in 1999 I identified four areas which were priorities for me as the Secretary of State, one of them was science and the importance of science, which I think surprised a number of people there. What struck me afterwards was the number of captains of industry who came up to me and said: "It was wonderful to hear a Secretary of State for Trade and Industry having science as one of his top four priorities". There is a case that has to be made. Essentially the position is that the science community, because they are in a position of strength, provide me with the bullets and it is for me to fire them to the best effect, and hopefully I am on target. That is a good relationship to have.

Mr Taylor

  16. I am just passing a remark; it is quite interesting that William Waldegrave, now Lord Waldegrave, who was an excellent Science Minister, I was his PPS at the time before I then became the Minister, and he was quite a good Chief Secretary of the Treasury subsequently. I remember the spending round, where I was trying to remind him of his enthusiasm in science, I think you went the other way round. I will also put on record that no doubt this Government has achieved many of the things we failed to achieve before 1997, there are much better settlements for science and also the Treasury is much more proactive in supporting it, again today. Why is it in your references earlier to industry that industry itself, even if they like your speeches, do not necessarily follow through in devoting more money to the R&D? It is same sectors each year that are the jewels in the Crown. A lot of other industries are still lagging well behind the international competition in terms of the amount put aside for R&D, what is it that has failed to help us change the culture, despite all of the initiatives we have been taking for ten years?  (Mr Byers) I think it goes back to the short-term approach that too much of British industry still has. We see that across the piece as far as investment is concerned. Business investment is improving, but there are areas where we do not have businesses planning for the long-term. R&D is seen very much as a long-term investment; that is part of the problem. It is a cultural thing. It is also the fact that we place requirements in terms of company law on directors to deliver for their shareholders in the short-term. We have a financial regime—financial support—which is very often short-term. We have not had until recently a tax regime which offers incentives as far as R&D is concerned. If we begin to change the climate, if business has the confidence that we have economic stability, we have inflation below target, at target, and we have interest rates at their lowest level for many years then that should give them the security to be able to invest knowing they are not going to be suddenly hit by a big increase in inflation or interests rates going up dramatically. That could begin to change the climate or environment within which business takes those decisions and decisions about spending on R&D. If we can combine the economic stability with a tax regime which is supportive of R&D spend we may begin to improve the relative performance of industry in the United Kingdom.

  17. As you said earlier, we are in a knowledge-based society but, again, industry does not seem necessarily to value those intangible assets—the ability internally to produce R&D. You are stimulating them. There was an announcement today which you may want to comment on later on intellectual property which I think is very welcome, R&D tax credits being for larger companies who work to help drug companies even more. It is the rest of industry, however, particularly certain areas of manufacturing industry, which is simply not doing this. Do you sense that these challenges that we set them—the University Challenge, the Foresight Challenge, the Faraday Partnerships—have penetrated sufficiently into those areas?  (Mr Byers) I think they have not, to be frank, and we need to do more. We can do more in a couple of ways, one of which is a specific announcement in the Budget today which I think most members will not have picked up on because it is buried deep in the Red Book and I will briefly refer to it, but firstly we need to simplify some of the initiatives that we have. There is a great danger that we, as Secretaries of State, have bright—or we think they are bright anyway—ideas and suddenly there is a new initiative, a new challenge launched and a new programme is announced. That can be confusing, particularly for people running businesses who say: "Well, you have a Faraday, you have a University Challenge, a Science Enterprise Challenge, what are all these balls up in the air?". We need to be more focused and I have been trying through the Higher Education Innovation Fund, to pull together some of these streams of funding to have a substantial amount of money which is going through the university sector, but with a requirement that universities look outward and—hopefully—engage the sorts of companies you have referred to. I think the idea of having almost a third stream of funding going into universities—not just for teaching and for research but for innovation—will be a very important development. We now have £140 million in the spending review going into that third stream of funding, part of which will be used to go out and advocate the importance of innovation, but secondly we do need almost to do an audit of what the requirements are as far as business is concerned, which is why we announced this afternoon as part of the Budget statement that Sir Gareth Roberts, who is Master of Wolfson College, Oxford, is going to lead an independent study into the supply of skilled scientists and engineers in the United Kingdom, and the aim of this will be to see whether there are adequate mechanisms in place both for businesses to identify their needs for scientific and technical skills and to communicate them back to the higher education sector and vice versa, and we have asked Sir Gareth to report by the end of February 2002. I think this is a very important piece of work; we are delighted that Sir Gareth has agreed to chair this independent study, and it will go some way towards identifying the sorts of problems you have just referred to.

Dr Turner

  18. As you have already mentioned, the Budget has made several provisions today to try and encourage R&D and extend, in particular, tax credits to large industries as well as to SMEs. There is still, nonetheless, a certain amount of, I suppose, cynicism as to whether British industry—particularly the engineering sector—will respond because they have shown no great sign of responding to challenges in the past and I wonder whether it is necessary to consider any other fiscal devices to try and stimulate this, for example, setting a minimum level of R&D as a percentage of turnover in order to qualify for tax credits so if it is, say, less than 2—no tax credits; 2.1—they get 2.1 per cent's worth of tax credits; and other devices like that perhaps to kick start them into action. Have you considered that?  (Mr Byers) One of the reasons we are consulting about extending the R&D tax credit to larger companies is to look at precisely those sorts of variations that might be possible. There is an issue about whether it should just apply to additional spend over and above that which is presently being committed, or across the board; whether it should be incremental in the sense that you have just referred to. These are all going to be issues we will need to consult on because the devil is going to be in the detail and we need to have a package of R&D tax credits which will achieve its objective—namely, to stimulate further investment in R&D but also to encourage those companies—of which there are too many in the United Kingdom—who at the moment do not invest in R&D to provide incentives for them to commit resources for the first time. It is going to be our challenge to come up with a package that will achieve precisely that, and I think the idea that you have referred to is going to be one of those issues we will need to address in the consultation exercise.

  19. It is a sad commentary that you have to think in these terms because if their culture was in favour of R&D, as it is in other countries, this would not be an issue?  (Mr Byers) I know, but we are where we are and it is always surprising to me how a little financial incentive suddenly changes people's attitudes towards these matters!

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