Examination of Witnesses (Questions 160
- 179)
MONDAY 1 NOVEMBER 2004
RT HON
PAUL BOATENG
MP, DR KIM
HOWELLS MP AND
LORD SAINSBURY
OF TURVILLE
Q160 Chairman: Three Ministers, singing
in tune we hope! Thank you very much for coming. It is nice to
see some of you again and to welcome someone from the Treasury.
I think this is the first time, so welcome. Hopefully we will
have short, sharp questions, with short, sharp answers. Thank
you very much, Paul. Would you like to say something?
Mr Boateng: Chairman, thank you
very much. We very much welcome the opportunity, as three Ministers,
to appear before you and your colleagues this afternoon—three
Ministers from three departments, whose collaboration is responsible
for the production of this document, Science and Innovation
Investment Framework. That collaboration was overseen by a
ministerial committee, which I drew together, together with colleagues
from the DfES, Alan Johnson at that time, and from the DTI, David
Sainsbury, hence my appearance before you this afternoon. The
lead of course for the responsibility of implementation lies with
my colleagues from the DTI and the DfES, who answer to a ministerial
committee that is chaired by the Secretary of State; but it was
felt useful for the purposes of this afternoon's hearing that
I should be present, not least to explain why it was that the
Treasury took the responsibility it did for co-ordinating delivery
in this area, because as the Chancellor himself has made clear,
it is very much the view of the Government that the future of
the British economy depends on the future of British science.
In today's competitive global environment, the nations that will
thrive will be those which attract and retain the highest skilled
people and the most innovative companies, and which take on board
the need to ensure that the national investment in science, technology
and innovation is of the highest quality and at a level sufficient
for the purpose. Hence it made sense, not least in the context
of the overall spending review, for which I have responsibility,
for us to take the opportunity that was presented by the spending
review to have a longer term view, to co-ordinate the response
of government across the departments, and to highlight science
and technology above many other spending priorities for the treatment
that this document reflects, hence the production of a ten-year
framework for building British leadership in science and innovation
in order to prepare Britain for the challenges ahead. That is
the background, Chairman. My colleagues and I stand ready this
afternoon to assist the Committee in any way we can, and to put
on record if we may the significance and importance that we attached
to the Committee's own deliberations on this subject in the past,
as we drew together this document. It is a document that represents
input from a broad cross-section of stakeholders, all of whom
gave us a valuable insight and input into the document, and foremost
amongst those was of course the work of this Committee.
Q161 Chairman:
Thank you very much for that introduction. We will be taking up
some of those points. Of course, we welcome the ten-year plan,
and we think it is amazingly good and so on, but we want to penetrate
it to get some detail and smoke that out. You said that you drew
it together and co-ordinated: there is an ugly rumour, of which
there are many, that the other ministries or other departments
only heard about this from the Treasury late in the day; that
the Treasury drove this and made it happen, and that was necessary.
Please deflect the question to somebody else if—
Mr Boateng: Let me say at the
outset that David Sainsbury needs no driving in the promotion
of science, technology and innovation; so the DTI certainly was
not driven. The DfES under Charles Clarke and indeed before him
under David Blunkett, has always recognised the significance and
importance of this area, and investment in it. It is undoubtedly
true to say that the Treasury believe it right that we should
ensure that we play our part within the context of the spending
review, to deliver to this agenda, because we are talking about
a framework that delivers a commitment to £1 billion of extra
funding for the science base from 2004-05 to 2007-08. That is
a 5.8% average annual growth in real terms, alongside an undertaking
to increase investment here at least in line with the growth of
the economy over the next decade. A commitment of that sort could
only properly be given by a process that had the Treasury at its
heart.
Lord Sainsbury of Turville: It
is not correct to say we heard it at the end. This process started
at the beginning of the year when I saw the Chancellor, and he
said, "would it be a good idea to have this 10-year investment
framework?"
Q162 Chairman: It was his idea for
10 years, was it, not five but 10?
Lord Sainsbury of Turville: No,
his idea was that there should be a 10-year investment framework
and that we should work together on this. It seemed to me that
that was an extremely good idea, because we need to plan it over
that horizon, and it seemed a good way to bring all the arguments
together.
Q163 Chairman: In terms of the money
that will be allocated—and millions have been suggested—who
determines the purse strings? How does that come about? Is it
the Treasury that just says, "we are only going to put this
money in, so sit down and think what you are going to do with
it"; or do other people make suggestions, and you have to
find the money within your greater budget?
Mr Boateng: No, the process of
the spending review is one in which there are inputs from all
the departments in terms of their submissions. Of course, that
was supplemented and complemented on this occasion by the work
of the ministerial steering group, but also a series of events—seminars
and working breakfasts and the like—in which the Secretaries
of State, with the Chancellor, myself, David and colleagues, all
participated. From that, you have the settlement that was announced
in the course of the comprehensive spending review, and the context
for that settlement which the framework provides. I and my colleagues
are quite happy to share with you the figures there, but I have
given you the ball-park figure of £1 billion for the UK science
base. You can see within that an increase in the OST science budget—£3.3
billion in 2007-08, in comparison with £2.6 billion in 2004-05;
a DfES investment in university research in England of £1.7
billion in 2007-08 compared with £1.3 billion in 2004-05.
The most useful guide to the allocations, which you and your advisers
will be aware of, is on page 9 of the framework. It is a substantial
investment. I referred in my opening remarks to the input of stakeholders,
and one of the most important stakeholders is the charitable sector.
It is the Wellcome Trust's expectation, assuming current levels
of investment return, to commit at least £1.5 billion in
the UK over the coming five years, especially for clinical health
research projects and infrastructure. What we have done with this
spending review—and you can see that in the context of all
those since 1998—is to deliver the largest sustained increase
in the science budget for a generation, so it will reach £3
billion in 2007-08, double that of 1997 in cash terms.
Q164 Chairman: Suppose Kim Howells
comes to you and says, "I want more science learning centres.
We have got a few and we are doing well, but we need more."
Then David Sainsbury says to you, "I want more money for
the Aurora Project"; who makes that decision? Who decides
the priority, or does it happen by ballot?
Mr Boateng: Fortunately, David
Sainsbury and Kim Howells have substantial allocations under this
particular spending review, and in the context of this framework;
and it will be for them to decide within those allocations how
the spending will be delivered. Having said that of course, the
Secretaries of State will take into account the ongoing work of
implementation, which Patricia is presiding over with the science
and innovation and knowledge economy ministerial group, upon which
not just the Treasury but all relevant Government departments
are represented; and I have no doubt in their allocations and
the sort of decisions and trade-offs they have to make, the Secretaries
of State and their ministers of state will be influenced and affected
by the ongoing work of implementation.
Lord Sainsbury of Turville: In
the previous spending review we had some allocations which were
rather specific against particular programmes for the research
councils. That was very necessary because we wanted to make clear
that we wanted to use the increased funds in certain categories.
In this particular spending review, that was not the case at all;
there were allocations to the research councils, with no detail
about which programmes should be done. That will be done by the
Director General of Research Councils in March, when he comes
to make allocation between departments.
Q165 Paul Farrelly: I wanted to ask
a wide-ranging question, Chair. Recently, I had the daunting task
of giving a speech at the British Embassy in German on nano-technology,
alongside their Secretary of State. She was a very impressive
Secretary of State for Education and Skills. They made it quite
clear that they thought it sensible that science was where the
money was, which was in higher education funding. David Sainsbury,
should you not be hot-desking to Kim Howells in Education, rather
than the DTI; and to what extent was the position of science within
departments considered as part of this review?
Lord Sainsbury of Turville: As
you will know, the history of these things is that science in
different parts of the world gets put with different ministries.
In this country, originally it was with the Department of Education
and Science; it was then moved to the Cabinet Office, and finally
it has been put with the DTI. The argument for putting it with
education is because it has a lot to do with supporting universities.
The argument for putting it in the centre is that science applies
to all government departments. The argument for putting it in
with the DTI is that it is very related to wealth creation. In
different countries, this is changed around on a fairly regular
basis, because you can make all three arguments very convincingly.
As far as the UK is concerned, it is probably in the right place,
because our issue is not to raise so much the quality of the research,
which would be a good argument for putting it with education,
but to make the linkages with the wealth creation and the innovation
going on in the DTI. My job of course, is Minister of Science
and Innovation, and I am very comfortable with that because I
think that is the main requirement and it is in the right place.
Q166 Paul Farrelly: This government
organisation point therefore was not considered as part of this
really.
Lord Sainsbury of Turville: No,
because it is working extremely well, and this is probably the
right place to put it anyway.
Q167 Dr Turner: Paul, Treasury is
not a totally altruistic body; you are presumably looking for
some payback from increased investment in terms of generating
more economic activity. Can this be taken as implying that you
want to see spending directed more towards applied research rather
than the basic research in which the country has traditionally
excelled? Is there any implication that basic research would suffer
by comparison with extra emphasis on applied research?
Mr Boateng: The Treasury's interest
and concern is an over-arching interest that we have in the productivity
agenda. We have sought in this piece of work, in co-ordination
with our colleagues, to make sure that we use the 2004 spending
review as a vehicle to take stock of current science policy, to
build on what was an increasing level of investment in science
in previous spending reviews to which I have referred, and importantly
I think to use the power and influence of the Treasury to bring
together and extend a range of existing policy initiatives, because
we had the Government's science strategy investing in innovation
in 2002, the Roberts review on the supply of scientists and engineers,
in which I was involved as a financial secretary; the Lambert
Review, the DTI innovation report, and the Greenfield Report.
All of those needed to be brought together. The Treasury does
that. You describe it, Dr Turner as being through a spirit of
altruism. That is one way of looking at it, but what we have to
do is make sure that all the resource that lies behind that is
spent effectively to maximum benefit for UK plc. However, it remains,
and should be the case—and we are very clear about that
and there is no blurring of the lines here—David and Sir
David King are also central to making sure that this remains the
case, with Kim and colleagues at the DfES—that decisions
on allocations to research councils will be made by the OST, based
on submissions from those research councils and the OST's assessment
of those. The process has to be science driven. It is nothing
if it is not science driven, and the last thing that the Treasury
seeks to do is in any way to prejudice or interfere with that
drive. Proof of the pudding will be in the eating, and research
allocations will demonstrate that very clearly.
Dr Howells: Mr Chairman, at the
start of the Science Innovation Framework Report there is a page
given over to Pasteur's Quadrant, and it has two axes: consideration
of use in quest for fundamental understanding; and then a box
which is slightly breaking away, which says there are no such
things as applied sciences, only applications of science. This
is by Louis Pasteur.
Q168 Chairman: He is dead.
Dr Howells: I am aware of that!
Mr Boateng: But whose legacy lives
on!
Dr Howells: Whose legacy lives
on—and he is quoted in this estimable publication. The point
I am making is that it is becoming increasingly difficult to differentiate
between pure research and applied research or the application
of science. To strengthen the earlier point, we are extremely
interested in knowledge transfer and what that means in terms
of where we are going in research. I do not think there is anything
to apologise for there.
Q169 Dr Turner: We are not seeking
apologies.
Lord Sainsbury of Turville: First
of all, I do not think any of this is to do with altruism; it
is about supporting science because science is incredibly important
both from an industrial point of view and in achieving some of
our public sector objectives, whether health or environmental
issues. The Treasury rightly looks to get value out of the funds
it puts into science. Where I think there might be a difference,
is that I do not think I would put fundamental science in a different
category. In terms of both public sector objectives and wealth
creation, it is very important to have a very dynamic science
base, doing basic research. There is a lot of evidence towards
this end. Then you also need to have some research that is more
applied pre-competitive research. What is interesting about the
spending review is that we have not only made very substantial
increases to the basic research, which is fundamentally the research
councils, but we have also got the technology strategy money,
which of course is pre-competitive applied research. That is also
very important in terms of getting some of the science and technology
into wealth creation. Fundamentally, you need both of these if
you are going to achieve the objectives we have.
Q170 Dr Turner: What performance
indicators are you using to measure the progress, and what difference
do you expect to see in ten years' time?
Mr Boateng: We set out a framework
in Annex B, which contains a range of metrics we will be monitoring
to track progress against the ambitions set out in the framework,
and these build on the metrics underpinning the DTI's PSA target
on science and innovation, but they go wider than this in order
to cover my colleagues' contribution in the DfES and the totality
of the framework. Departmental spending takes place within the
context of public service agreements. They set out what the public
expect the Government to deliver within the resources being invested.
The science innovation PSA is supported by clear targets, which
the Government and others can track performance against, whether
it is measures such as research citations, patents per capita,
spin-out capacity—all of those are there. I think you will
find the range of metrics in Annex B the most helpful.
Dr Howells: Can I answer Dr Turner
in a different way? We are also looking for more people to be
studying science, and that means that we have to watch very carefully
how many people are coming out of schools and further education,
and how many people become interested in science, because one
of the problems that I know you are very much aware of Dr Turner,
is that very often young people in school are not choosing to
do science and mathematics. Even though they may well be able
to do it, it is considered to be a difficult subject. That is
a big problem for us, and we have to turn that around. That is
a very basic measurement, but it is a very important measurement.
Q171 Dr Turner: One of the performance
indicators is traditionally our share of global publications.
The UK is slipping a bit in relative terms. It has gone down and
fallen behind Japan. Are you worried at the fact that our share
of publications, this output of science measure, seems to be slipping
behind that of competitors? Do you think that we are not adding
investment as fast as our international competitors?
Lord Sainsbury of Turville: This
is an issue where you have to look at the total amount of science
funding taking place. People tend to not appreciate that with
more and more countries becoming developed and therefore putting
more and more money into science, the likelihood is that in terms
of the amount of science, it is likely to be a declining amount
simply because more and more countries are becoming wealthy. It
is rather like looking at Nobel Prizes over 75 years. You will
find that the number we get as a proportion has gone down, but
if you go back 75 years there were only two or three countries
in Europe that had strong science bases—ourselves and the
Germans. I think therefore you would expect that. What comes from
the figures is that our remarkable performance remains incredibly
good by any standards. In fact, the number of citations we are
getting, which is probably more important than the number of papers
produced, has increased. In terms of scientific productivity,
we are the highest in the world; so I do not think we need worry
if our proportion of scientific papers has marginally gone down.
I do think though that if we had not started putting more money
into the science base in 1998, we would have been in a position
where in due course we would have been seriously at a disadvantage.
Q172 Dr Turner: I totally agree with
that. Do you think we have reversed the investment decline which
had been going on in time, and do you think we have injected enough
already in time to maintain our absolute if not our relative position?
Lord Sainsbury of Turville: The
amazing thing was that we continued in the late eighties and nineties
to still turn in a remarkable performance, at a time when other
countries were increasing the amount of money going in, and ours
was flat, and we were doing it in facilities that were getting
increasingly out of date. We appear to have gone on doing very
good science throughout that period. Whether, because there are
terrible lags in these things, it will be discovered that we did
not have quite such a good performance during that period remains
to be seen. The remarkable thing is that we did go on doing such
good science. As I say, if we had not put that extra money in,
we would now be beginning to see the really serious effects of
it.
Q173 Dr Turner: The consultation
exercise you carried out did not start until March, and did not
last very long. Just how useful was the consultation process in
drawing up the paper?
Lord Sainsbury of Turville: I
think it had some value, and it was important to do that when
doing an exercise of this scale. Of course, the fundamental debates
on this were about what was the target that we should be aiming
for, and how we should think in terms of reaching that target.
That is a very difficult thing, to get very much value out of
consultation, which always tends to be people highlighting particular
individual problems. I think it was useful, but the major debate
was on this overall framework. That was not really addressed in
the consultation.
Mr Boateng: Can I give you one
area, Dr Turner, where for me personally the consultation was
of particular use? At every event that we had at Number 11, without
exception—and we had seminars, breakfasts and other working
occasions when people came together in the Treasury and elsewhere—at
least one person, and more often than not several people, raised
an issue that has a bearing on references colleagues have made
to Germany and Japan, where there has clearly been perhaps a greater
emphasis on the role of technicians in underpinning a science,
technology and innovation capacity than has traditionally been
the case in this country. I was very impressed by the way in which
that became a recurring theme. Therefore, certainly when I was
reflecting on the spending review priorities—and colleagues
from the DfES will confirm this—I came back again and again
to the role of FE alongside the role of HE, because sometimes
in relation to this area we forget the importance of FE. We forget,
for instance, the very interesting work that the Committee will
be aware of which has come out of the US, in terms of the role
of community colleges and their links with some high prestige
universities in the US, and the way in which community colleges
have been a driver of productivity in US IT. I think they are
lessons that we need to learn about the relationship between FE
and HE, and ensuring that we invest in the skills base that produces
technicians to work in this area. The insights there came from
the process of consultation.
Q174 Mr McWalter: My question is
about research and development, and there are two contexts. First,
I simply do not agree with Lord Sainsbury at all that it is all
going swimmingly and "steady as she goes". If I thought
that, I probably would not be on this Select Committee because
I think there is a tendency for things to go very badly wrong
in science policy. The second issue is that research and development
in the UK is about a third of the level per employee of that in
the US. Midway through the framework report it says that the low
investment in defence in the 1980s and the low level of investment
in public services in the 1990s produced historically pretty low
levels of research and development quite generally. What we have
here is a plan which says, "currently it is 1.9% of GDP and,
discounting the private sector, it is going to go up to 2.04%
over 10 years". That is 8% of the current level over a 10-year
period. Do you honestly think that this is remotely ambitious
enough to redress the deficiencies of the system that the report
itself draws attention to?
Mr Boateng: I share with you,
Mr McWalter, your sense of urgency in this area, and I think we
all do. There is no sense of complacency in that regard. We have
set out an ambition for total R&D expenditure in the UK economy
to reach 2.5% of GDP by 2014, comparing, as you rightly say, to
a current level of 1.9%. It is a challenging target. It will stretch
us. We believe it is achievable. It would, I suppose, have been
open to us to go for the EU target, which is 3%, but to be frank
with you, that in our view is not a realistic one. This was a
judgment call, and to achieve the target that we set ourselves
it is important to remember that public and private expenditure
on R&D will have to rise faster than the trend rate of GDP
growth over the period, if it is to be achieved. We have made
resources available in the SR 2004 spending review, in line with
this objective, including the extra billion for the UK science
base by 2007-08 to give us that real term increase of 5.8%, but
reaching the target as it is, is an ambition.
Q175 Mr McWalter: Is that because
you are putting most of the emphasis upon the private sector,
which has three times more to do than the public sector?
Mr Boateng: It is not a certainty.
It will rightly require a strong partnership between business
and government, and what this—
Q176 Mr McWalter: It might require
strong government committed to science in a way that this document
pretends there is a commitment to science, but in actual fact
most of the work is going to be done by the private sector.
Mr Boateng: David will give you
his take on it, but it seems to me—and it is not just because
I am Treasury—"and I suppose he would say that, wouldn't
he, because he is Treasury?"—a real term increase of
5.8% is a lot of taxpayers' money. We are committed to working
with this to ensure that the long-term public investment in raising
R&D is matched by a similar effort in the private sector.
No doubt you will want to come on to how we go about doing that,
but 5.8% in real terms increase, is a lot of taxpayers' money.
Lord Sainsbury of Turville: First,
I did not say everything was going swimmingly well; I was responding
to a question about the quality of British science and its productivity,
which remains as good as anywhere in the world. Clearly, we have
a problem about the amount of R&D we are doing in this country.
That is mainly though a problem about the amount of business R&D
that we are doing. This plan sets out that we will go from 1.9
to 2.5. That will require both the private sector and the public
sector to increase spending by 5.8% per annum in real terms,
which is a pretty demanding target to go for. That is against
a background where R&D and business is going up above 4.1%
in real terms per annum. These are very demanding targets.
If we were to achieve those over this ten-year period, we are
talking about an extra £16.5 billion per annum going
into the science base, in real terms a 75% increase. I would have
thought that was realistic. If you start going more than that,
it is simply not a realistic target. This would get us up to about
2.5%, which will put us among the leading nations in Europe. I
am doubtful how many of the big countries in Europe will get to
the 3%. You have some of the Scandinavian countries getting to
that figure, but that tends to be because they have for their
size rather large numbers of very big international corporations.
I do not think you will see very many other countries getting
the 3%, which in any case is a target for the whole of Europe
not for each individual country, because it is accepted that not
all countries will get to that.
Q177 Mr McWalter: Are you not astonished
that this figure includes actually a decline in government R&D
other than the science base? Presumably, the NHS needs an increased
level of research and development. It looks from the figures,
going down—
Lord Sainsbury of Turville: That
is essentially a level field. Of course, it is going up very substantially
because it is going up in parallel with the increase in GDP and
inflation. The big figures are the science base and the private
sector in terms of the total cash.
Q178 Mr McWalter: One of the other
issues here obviously is this. What is the capacity of the private
sector to be able to make these extraordinary improvements? Do
you have research that suggests they have the capacity to grow
at that rate?
Lord Sainsbury of Turville: As
I said, the figures are that they have been growing at about 4.1%
per annum in real terms, and after a period of fairly steady decline
from the eighties, when it was about 1.5% down to 1.16% in 1997,
it has begun to come up again and is now 1.24%. We have turned
the corner on this, but I have no doubt that this is an ambitious
target to go to and that is why a lot of the schemes on knowledge
transfer and the actions of DTI are about trying to get businesses
to put innovation at the centre of their corporate strategies.
Mr Boateng: Mr McWalter, UK business
cannot afford not to place innovation at the heart their competitive
strategies. Many world-class businesses already do this, including
a number that are based here in the UK. The CBI has given a very
clear lead in this area—the recent reported comments of
Digby Jones that innovation is the key to the UK and its competitive
advantage and the welcome he gave to the ten-year plan in that
respect. You asked earlier about the nature, effect and impact
of the consultation. The R&D business community was very much
involved in the consultation and sent a very clear message that
a 2.5% target would be stretching, but that it was achievable.
When you look at the range of incentives that we have put in place
to encourage greater business investment—the R&D Tax
Credit Scheme, and, as David mentioned, the DTI's Technology Strategy,
incentives to research councils to work collaboratively with businesses,
encouraging innovation from research undertaken by Government
departments—and the leadership that Sir David King has given
in terms of getting the chief scientists in all the Government
departments to take a good, long, hard look at R&D within
each of those departments and see what they can contribute to
the piece is important. I would also make the point that in giving
RDAs greater responsibility for promoting regional innovation
and the promotion of the UK with all its constituent parts as
a global location for R&D investment, that is all playing
a part in creating a context in which R&D spending by business
is supported and encouraged. I am more hopeful than you will be
in that regard.
Q179 Mr McWalter: You mention tax
credits, and we welcome those, but how can you ensure they do
not just benefit those sectors that are already investing heavily
in R&D such as the pharmaceutical industry, which is trotted
out very regularly? I note, for instance, that the Taylor report
recommendations on nano-fabrication facilities seems to have gone
completely missing in all of this strategy, and I wonder whether
you are taking current industries and giving them a tweak, rather
than looking at capacity for radical new initiatives of the sort
that will guarantee the future economic prosperity of this country.
Mr Boateng: I am not sure that
that is fair, Mr McWalter. The reality is that over 11,000 tax
credit claims received from small and medium size enterprises
since the scheme was introduced in April 2000 have produced at
least £600 million since the inception of the credit. It
is early days yet for the large company credit. That was only
introduced, as you know, in 2002. However, early indications indicate
significant interest in the credit by eligible firms there. The
take-up has been good, and it has made a difference. You will
have your own view, but as one gets out and about and talks to
firms at the cutting edge, you do get a strong sense from them
that R&D tax credits have made an enormous difference.
Lord Sainsbury of Turville: R&D
tax credits have been probably most favourably received in the
small, hi-tech businesses. In some of the biotech companies, this
has been enormously helpful to them because they can get the cash
even if they do not have profitability. This has been hugely helpful
to those small biotech, hi-tech companies, which would be just
the kind of people we would want to incentivise.
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