Select Committee on Public Accounts Minutes of Evidence


Examination of Witnesses (Questions 20-39)

MR ROBIN YOUNG, DR JOHN TAYLOR OBE, PROFESSOR SIR GEORGE RADDA CBE, PROFESSOR JULIA GOODFELLOW CBE, AND PROFESSOR JOHN LAWTON CBE

MONDAY 11 MARCH 2002

  20. Yes. One accepts that we have to address the volume as well as the equality and we are falling behind there, but you would expect to in view of the resources that we have available? I was listening to the radio this morning and I heard someone from Edinburgh, you possible did, who has been doing stem cell research there in relation to diabetes and he was saying that now he has reached the stage where as much as he loves Edinburgh, he loves living there and he loves the university there, he is having to leave Edinburgh to go to Singapore because he cannot raise the—the figure he was quoting was £40 million needed to go to the next stage. Is that a fair description of the situation he has found himself in?
  (Professor Sir George Radda) Could I say that the individual you refer to, of course, works not in the academic environment but in a biotechnology company and has found a better opportunity in Singapore. If you talk to our academic researchers, particularly in the stem cell area, actually the conversation is the other way round, we have already attracted one of the top clinical stem cell researchers from the US to the United Kingdom. I am in conversation with a number of others, both at a junior and senior level, and they are all hoping to come to this country to do this sort of research, where the opportunities are excellent.

  21. You have this base between what the Chairman referred to as blue sky research and you have what they describe as a university achieving a sort of platform but not a product, how do we manage to finance between developing the intellectual platform and developing the base on which you hope to derive commercial products? How adequately would you deal with that?
  (Professor Sir George Radda) I can respond from the MRC's point of view. You obviously need seed funds at three different levels. You, first of all, need seed money, which we are providing to our commercial funds up to the tune of £1 million for what is called filling the development gap, that is going from the results of basic science to a stage where you realise that there are commercial opportunities. The second area that we have put in seed funds is what he we call the collaborative centre, which we set up many years ago at Mill Hill and also in Edinburgh. These collaborative centres carry on the research programmes to the stage where the product can be specifically identified. These, again, are now funded from the commercial income and not from public funds. Of course the third area where you need the seed money is when you set up a new spin out company. Our venture capital company, as I mentioned coming entirely from private funds, does that. We are covering the whole range of how to go from the basic science to a commercial product with different ways of putting in seed money.

  22. When we get to the stage of moving to commercial production is the quality of our work force at present adequate to meet the demands? We see in general industrial terms the problems of skill shortage, is there a problem of shortages in the relevant and appropriate workforce back-up able to turn the idea into a product?
  (Professor Sir George Radda) I am sure that is also sector dependent. Answering from the biomedical and the medical research point of view, I think we have the quality of people.

  23. In sufficient quantities?
  (Professor Sir George Radda) In sufficient quantities, in the spin-off companies and the biotechnology companies that we have set up. In many cases these people have been brought in from abroad.

  24. Why have we needed to do that?
  (Professor Sir George Radda) Movement in science is global, people move in both directions. People will move where the good opportunities are. We have certainly managed to move people round like that.

  25. It must also be a function of the reluctance of young people in this country to pursue the appropriate subjects at A-level and university?
  (Dr Taylor) I think, first of all, this whole question is being looked at very intensively by Sir Gareth Roberts, who is looking at a review of the whole question of the supply of science right the way through from schools to post graduates and post-doctorates. That is due to report in two or three weeks. I will just reinforce that science is a hugely international affair and, by the way, technology transfers wonderfully on the hoof. One of the most important technology transfer mechanisms is people moving round and coupling to each other the activities they know about. We only fund five per cent of the world's research in the United Kingdom and we need to make sure we tap into the other 95 per cent to find the pieces we do not have and to find the patents and the intellectual property we do not have. International mobility is absolutely crucial. We are not the only country by any means that has a deficit of people. As I said earlier, if you go to France, Germany, America and Japan if you go to any of those places they are intensively campaigning to fill their own deficits of talented people.

  Mr Williams: You come to use the term "deficit" rather different from the tone of your initial answer to me, where you omit there was a deficit. I do not want an answer to this, I understand where we are going. I find it a rather interesting transposition, your assessment of our innate capabilities.

Mr Osborne

  26. I thought the days when the DTI went round picking winners had long gone. Reading this Report, is that not what you are really doing through your various research councils?
  (Mr Young) No. If by picking winners you mean choosing between lame ducks and live ducks, if you are referring to that debate the days have long gone for that. What we are doing here is seeking to encourage the research council to stick to their core mission but also in order to get to that core mission quicker and better to maximise the opportunities for commercialisation here. We are encouraging them to maximise the opportunities listed here for all of the various things that can be commercialised without, in any sense, tarnishing their core mission.

  27. If I can look at a specific example in paragraph 2.3, the Babraham Institute, here is government money being used for a "Bio-incubator" site which attracts 19 fledgling companies to get going. Surely there, in effect, you are making a decision about which private companies you are going to use public money to help get off the ground, are you not?
  (Mr Young) I would say in general we are asking this particular research council, Julia's one, to maximise the opportunities to hit their core mission under the commercialisation heading. Whether we are hitting it or not I do not know.
  (Professor Goodfellow) Really very small amounts of money have gone in directly to the institute to set it up. Most of it has come through specific DTI initiatives to get it going. The idea is also to support science and innovation in the United Kingdom. They are performing a very important regional role in that area and they have been very successful. The Cambridge Science Park is more than full. They have planning permission in a difficult area of Cambridgeshire. They have been very successful and this allows them to take their science forward as well as supporting the local economy.

  28. As a judgment as to which companies you support and which you do not, are they essentially commercial judgments that this company is going to be a great success or not commercially, or is it what we really need is a bit of this science done in the United Kingdom?
  (Professor Goodfellow) It is mainly companies that are in the area and companies that can benefit from the knowledge-base of Babraham. They are using the good quality science of Babraham and they also have access—they pay for their platform technology—to Babraham.

  29. Presumably more companies apply to you than you can cope with?
  (Professor Goodfellow) Not all Bio-incubators are successful, this one has been unusually successful and very clean. Of course what they are planning now is a public private partnership to go ahead to expand so that more people in the area can come in. That would be a public private partnership that is under discussion at the moment.

  30. The same is the true for the Medical Research Council with its venture fund, you are making a judgment about which companies to invest in and which ones not to?
  (Professor Sir George Radda) MVM Ltd, which has its own board independent of the MRC, will make the decision on the basis of a detailed evaluation and the proposals it sees, where they should put in their start-up fund, whether it is a spin-off company or not. Consideration will be no different from what any other venture capital company does. Officially the agreement with the MRC, because they largely use some of the MRC technology for spin offs, is that in the first agreement it was something like 75 per cent of their investment had to be to in MRC-related work. The second round of raising funds have been relaxed a bit more, they can actually give venture capital to any venture.

  31. The point I am getting at, Mr Young, is when should the public be investing in research that is of commercial benefit and when should private companies be putting that research in? Astra Zenica's headquarters happen to be in my constituency and they spend hundreds of millions of pounds a year on medical research, that is fine because they make money out of that, they are a private company. Why should I as a taxpayer be competing with Astra Zenica?
  (Professor Sir George Radda) You are not paying towards any of this because it comes from the commercial income that we made out of the company's licensing and also patents. The initial seed funds went in from public funds and then we have recovered those funds from the income that has been generated.

  32. Originally it was taxpayers' money.
  (Professor Sir George Radda) There was a small amount of taxpayers' money in setting up the MRC technology group and in setting up collaborative centres and providing initial seed funds. That has now generated the much expected income, it takes a long time of generated income to recover all of this, plus more.
  (Professor Goodfellow) The Bio-incubator, for instance, in Cambridge, the people there are paying commercial rents and they are paying for the service that Babraham can offer of very specific technical services which might not be found in other places. That is what they are paying for.

  33. I do not doubt this is extremely good work, I am just wondering whether the taxpayer should be paying for it all?
  (Professor Goodfellow) We are saying the taxpayer is not, in that companies are paying for services and our institutes are offering a service. There may have been a bit of money to set it up, they have development fund money, possibly through the local region or possibly from DTI for knowledge transfer/mentoring. Most of the money is coming in from these companies.
  (Mr Young) I do not know whether it helps but the missions of the research councils are set out on page 17, that is the published mission normally set out in the Royal Charter of these three particular councils. The issues we are discussing is the extent to which they carry out that mission solely supported by public sector funds or whether they seek to supplement that with carefully managed commercialisation techniques, and that is what this Report is about. It and the Baker recommendations have encouraged us to go further in supplementing conventional public sector finance with commercialisation exploitation, and that is what we are trying to do whilst taking your point. The basic mission is set out on page 17.

  34. Are there some commercial companies you would not work with, for example tobacco companies?
  (Dr Taylor) I think this is very much, again, a matter for the individual institutes and the individual research council processes. Their overall requirement is to operate something like the generic process, the diagram is on page 35, which says, first of all, choose publicly funded research topics in the public interest down the mainstream research agenda of your institute, and then we are enjoined by Baker and this Report to be opportunistic in understanding whether having done some research there may well be commercial opportunities and to run and police a process something along the lines of page 35, which hands off to the private sector and private funds just as quickly as possible and not to spend one more pound of public money in taking something to the point where private investment is willing to go with it.

  35. I quite like Table 4 because it says "without trying to pick a winner too early".
  (Dr Taylor) I would take a little more on ourselves than you would think. I think what we are asking the research institutes to do in the spirit of Baker and spirit of this Report is to make some choices, to focus very limited public funds which are available to take something to the threshold where it might be able to attract private investment, and to do that you have to make choices, you have to focus. If you spread it over every possibility you would not have much success.

  36. You do not make ethical choices, if that is the right phrase, about tobacco companies, to use my example. Maybe Professor Radda would like to answer that, would the Medical Research Council welcome tobacco companies?
  (Professor Sir George Radda) Ethical considerations will precede any commercial consideration. The Council will look at it very carefully and where there is an ethical issue they would not like allow commercialisation if they found there was something unethical or not right.

  37. Do you do any work with tobacco companies?
  (Professor Sir George Radda) We do not to my knowledge.

  38. You personally would not wish to see that happening?
  (Professor Sir George Radda) I personally would not wish to see that happen.

  39. Could I just pick up on something that both the Chairman and Mr Williams touched on, the retention of key staff, and brain drain to America, and so on, Professor Radda was optimistic about the fact we are encouraging people back, however in the Report on page 23, paragraph 2.24 it says there you are confident your retention problems have been resolved. What were the retention problems that were resolved?
  (Professor Sir George Radda) This is the retention of staff who are involved in our commercial activities, that refers to that. These are professional staff that we employ in MRC technology who having been trained to do a certain type of job in commercialisation are very open to offers from all sorts of sectors in the company. We have a salary structure within that because it has its own salary structure which is competitive on that basis.


 
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