Select Committee on Science and Technology Fifth Report



5.1  Having considered the demand for SET in Chapter 4, we turn in this one to its supply. Given the focus of our Inquiry, we address the SET base from the particular perspective of regional economic development and, thus, the interrelationships with the RDAs.

5.2  Technological innovation springing from a vigorous SET base is the seed corn for economic growth. SET research ranges from discovery for its own sake (largely done in universities) to research that is applied to the needs of industry and commerce (largely done in the private sector). The two communities interact to advance both SET and its exploitation. They communicate through international networks, conferences, research journals and collaborations. The SET base thus spans the public and private sectors, and is international.

The public sector SET base

5.3  Public sector SET is widely acknowledged as critical in the process of technological innovation. As a source of new knowledge, it is the springboard for the successful development of SET-dependent companies in every field — biotechnology, pharmaceuticals, microelectronics and aerospace, to name a few. It is also important for competitiveness more generally — not least by training the scientists, engineers and technologists that maintain the life blood of development. Arguably, the most important contribution made by the education system is the nearly 190,000 people who gained SET-based qualifications from British HEIs in the academic year 2000/01[37].

5.4  The United Kingdom has an extensive SET base, resulting from an annual public investment of nearly £8 billion[38]. The SET base encompasses pure (or "blue skies") and applied research. It operates through various channels such as university departments, Public Sector Research Establishments, and contracts placed with third parties by Government Departments and Agencies such as MoD, DEFRA and the NHS.

5.5  Recognising the need to ensure that the critical mass in SET was maintained and developed, the Government's 2002 Spending Review announced the largest sustained growth in science expenditure for a decade — £1.25 billion by 2005-06. That increased investment has been widely welcomed.

5.6  Public sector investment in SET occurs in two main ways.

(a)  Funding from the Research Councils and the HE funding councils is distributed on a national competitive basis. There is never enough to meet the aspirations of all. Each competition can result in significant funding losses or gains for individual universities. Regions with a strong university base are thus at a considerable general advantage.

(b)  Funding goes direct from the Government or Research Councils to various specialist public sector SET research centres. Although, their presence can be very helpful to the regions that happen to have them, their location and funding is generally the result of national rather than regional considerations.

5.7  The result from the regional perspective is essentially random, as illustrated in Box 5. This shows the wide disparities in R&D spend between regions in 1999, the latest year for which full information was available at the time of writing (and about the time the RDAs were being established). The business spend was clearly much larger than that by either the Government or HE.


Source: 1999 data from the Office for National Statistics

5.8  The aggregate inter-regional disparities are in part attributable to substantial size differences between the regions, as discussed further in paragraph 5.11.

5.9  However, we cannot move on without calling particular attention to the very low proportionate Government R&D spend in the four northernmost English regions. As shown by the business and HE spend, these are not scientific deserts. In anticipation of the Government's response, we acknowledge that these data are now four years old, predating both the boost to science funding noted in paragraph 5.5 and any impact of RDAs' activities.

5.10  A principal thrust of our Report (and, in particular, of our recommendations in paragraphs 5.26 and 6.38) is to establish a better process for handling national SET investment with not only the present regard to high quality but also an eye to regional impact. As an adjunct to that, we recommend that the Government should urgently publish the latest possible information about its R&D spend per region, and keep this up to date as a measure of its performance in supporting regional economies through nationally-provided SET.

5.11  Box 6 shows regional GDP and R&D spend, in both cases calculated on per capita basis. Again on 1999 data, per capita GDP varied by nearly 50% between the different English regions. The variations in per capita R&D spend were very much greater, correlating only weakly with per capita GDP. In some cases, it may be that R&D was not located in the same region as the industry it supported and thus had a minor effect on GDP in its own region. In addition, the required level of R&D spend will vary considerably from industry to industry. Variations between regions may be partly explained by the nature of their main industries.

5.12  The Centre for Urban and Regional Development Studies (CURDS) at the University of Newcastle upon Tyne noted:

"There is an uneven geography in national science policy, in which historical patterns of investment have favoured the core regions of the UK, London, South East and East of England. National SET policies reflect this view, and so there is strong congruence between national priorities and the areas of SET in which these core regions have expertise, such as biotechnology and motorsport." (p 275)

Similarly, SURF noted that half of publicly funded R&D goes to London and the South East (p 270), underlining an often expressed concern that public investment in the science base was apparently made without particular reference to regional issues or regional needs.


NOTE: For ease of comparison, GDP per capita is plotted as one hundredth of its true value.

Source: 1999 data from the Office for National Statistics

Regional perspectives on the SET base

5.13  RDAs take forward their Regional Economic Strategies within the national policies and investments in SET. Past national investments have left each region with a SET legacy. This may or may not be of critical mass — either generally or, more particularly, in relation to the business sectors or clusters the region has identified as growth areas. The public sector legacy may have been enhanced by private sector investment, principally by large companies.

5.14  The collaborative strength of the universities in a region is generally recognised as a vital component of achieving critical mass in SET. Each region contains a number of universities, ranging from five in the North East to 40 in London. Whilst all regions have regional university associations, other collaborations exist — such as Yorkshire's White Rose Consortium of Leeds, Sheffield and York Universities (p 159). Generally, university collaborations, like those of private companies, are motivated by a desire to improve their national position rather than to satisfy any particular regional agenda.

5.15  The importance of SET for Regional Economic Strategies places increasing pressure on RDAs to do what they can to coordinate and support the SET resources in their regions. They have to recognise that SET expertise is global, as is the commercial competition. The challenge for RDAs is to decide where and how to access that expertise, and where and how to strengthen capacity regionally.

RDAs and SET investments

5.16  RDAs are faced with achieving the right balance between:

(a)  helping to develop the SET base, because of its potential for strengthening economic growth; and

(b)  exploiting SET, wherever it is, for regional advantage.

Their primary interest is in exploitation — turning SET into economic value. To do that, however, their SET base must be vibrant and accessible.

5.17  A number of RDAs have begun to map out the geographical availability of SET expertise within their regions. Some of that mapping is undertaken in relation to clusters, but the interrelations are not simple: for example, expertise in one discipline may relate to a number of clusters.

5.18  In their mapping exercises, RDAs tend to concentrate on university provision of research expertise and strength, often defined by performance in the national Research Assessment Exercise (RAE) the outcomes of which determine the Funding Councils' allocation of research funds to universities. Indeed universities with research groups that have been highly graded in the RAE tend to be fertile sources of new SET start-up companies.

5.19  However, in allocating funds through the RAE, the first priority of the Funding Councils is to ensure that those university research groups that are internationally competitive are adequately funded for their role, wherever they may be located. This policy means that there is often little funding left for groups that are judged to be below that level (i.e. Grade 4 and below on the current RAE scale). Although outstanding research achievements undoubtedly add strength to the science base in a region, many of the important problems that face business on a day to day basis may be solved with less stratospheric levels of expertise.

5.20  Some of our witnesses were concerned at the extreme levels of selectivity that were applied to funding on the basis of the 2001 research assessment exercise. This meant that many University departments that could offer valuable support to local business were facing a bleak future on reduced funds. We share this concern and believe that, where this is the case, it may be for RDAs to help support university departments in SET exploitation that is important for economic growth[39].

5.21  ONE (p 167) and the University of Newcastle upon Tyne (p 332) were far from alone in raising concerns about present funding arrangements, where national investments concentrated primarily on world-class research (RAE grades 5 and 5*) and proportionally reduced funding for research achieving national excellence (RAE grade 4). In the longer term, it is for consideration that the RDA should contribute to the support of vulnerable university activities that they believe to be of importance to the SET base of the region.

The HE White Paper and regional SET capacity

5.22  The January 2003 HE White Paper[40] addressed research and knowledge transfer issues, and made proposals that have important implications for the regions. For example, HEFCE pointed out that "the White Paper indicated that funding in research as a whole is likely to be further concentrated around world-class excellence and thus increase the regional disparity" (p 283).

5.23  This has led to concerns — such as those articulated by the panel of HE knowledge-transfer professionals (QQ 158-163) and ONE (p 167) — that the SET base of the regions would be undermined through both under-funding and the drain of top-class scientists, engineers and technologists to more highly-rated research departments. It would reduce the opportunities for universities in some regions to build the critical mass necessary to underpin the growth of high-tech SET-dependent industries.

5.24  Furthermore, the NorthWest Science Council noted that, although the North West's private sector R&D was above the UK average, the public sector investment was much lower. Whilst welcoming the nationally increased public science investment[41], the Science Council believed "that this further investment should be applied to building capacity in the regions" (p 146).

5.25  We generally welcome the HE White Paper's support for research developments and knowledge transfer. However, we share concerns such as those voiced by Professor Diana Green (Q 158) over the simplistic classification of universities as either research-intensive or non-intensive. In any event, the broad position taken by the White Paper now needs to be evaluated in the light of the review of Research Assessment under way as we finalised this Report[42], the variety of funding streams now contemplated for university research[43], and the proposed allocation criteria.

5.26  It is important that national policies set out in Investing in Innovation[44] and the recent HE White Paper should be developed in ways that do not frustrate the Government's parallel emphasis on regional economic development. In view of the importance of SET in RDAs' Regional Economic Strategies, we recommend that the Government should establish a forum for OST (including the Research Councils), RDAs and other key players, that meets regularly to address the impact of and synergy between national and regional SET investments and, as far as possible, harmonise them.

5.27  As noted in paragraph 6.40, it may be that this forum should, with suitable extensions of the membership, be given oversight of the umbrella policy and strategy for the exploitation of SET recommended in paragraph 6.38.

Economic gains from SET investment

5.28  Businesses need to harness SET for commercial purposes, and the pressure on universities to make money out of their intellectual assets will, as Ms Quest noted (Q 127), ensure a continuing dialogue between academia and industry without intervention from others. However, successive Governments have sought to increase the economic return from the UK's national investments in the SET base by bringing the two sides closer together.

Commercial Exploitation of Public Sector SET

5.29  Traditionally, those in the public sector SET base were not expected to pay particular attention to the potential commercial value of their discoveries. They operated either mainly within an academic environment, challenging the bounds of existing knowledge, or in an essentially applied environment (such as defence or agriculture), addressing specific issues of national concern. It was not their job to find ways to develop those discoveries into commercial products.

5.30  With the increasing recognition of the importance of the public sector SET base as a source of commercial value, many policy initiatives have been taken to encourage such exploitation to bring benefit to the UK economy. For example, the Defence Diversification Agency was established to address the commercial exploitation of work undertaken for the MoD. The NHS has been encouraged to look at the commercial value of its work. Universities are also being actively encouraged to generate spin-out SET-based companies.

5.31  In short, the public sector SET base is increasingly expected to encourage the commercial exploitation of its SET discoveries and developments[45]. As a result, awareness, capability and capacity has increased in the public sector SET base, and more exploitation and application of SET is occurring.

Technology Transfer from Universities

5.32  Many national and European schemes to stimulate Technology Transfer from universities have been introduced over the last 30 years. The Teaching Company Scheme (now Knowledge Transfer Partnerships) and LINK are examples. Such schemes are now supplemented by regional initiatives. They share a similar overall aim of improving supply-side access and services for technological innovation, and typically involve high transaction costs.

5.33  Given the importance of knowledge transfer, enterprise and innovation for RDAs and others, it is essential that these schemes be simplified and rationalised. We therefore applaud the Minister's aim to reduce the number of schemes from over 150 to under 20 (Q 396) and encourage DTI, in pursuing the review, to pay particular attention to recent developments and imperatives in the way universities organise themselves and in their regions.

5.34  The business support infrastructure also has a role to play in technology transfer, and the SBS and their Business Links are thus key partners. However, universities often find it difficult to interact with SMEs. For those that have their origins as university spin-outs there is rarely a problem as the contacts and tradition of interaction are well established. In other cases where there has been no previous contact, universities may appear distant and daunting, or the university may simply feel that working with a particular SME is likely to be too difficult or too costly in time or resources.

HEROBAC, HEIF and "Third Leg" Funding

5.35  The "Higher Education Reach-Out to Business and the Community" (HEROBAC) Fund was introduced in 2000 by HEFCE, with DTI involvement, to facilitate a more strategic approach to the interface between HEIs and business. The long-term aim was to recognise and entrench a third core area of professional work in universities, alongside teaching[46] and research, that encouraged HEIs' engagement with business and the community to support the growth of a strong economy. This third core activity is now also known as the "Third Leg" or "Third Stream".

5.36  The Higher Education Innovation Fund (HEIF) followed[47], which combined a number of individual OST initiatives concerned with knowledge transfer (such as Science Enterprise Challenge and University Challenge) with HEROBAC. The January 2003 HE White Paper emphasised a more regional focus for HEIF to support economic development.

5.37  The corralling of various Government Department's schemes into an explicit funding stream for the development of Third Leg activity has certainly boosted HEIs' engagement with business. Indeed, the January 2003 HE White Paper[48] envisaged that, in a new and more diversified HE system, this relatively new explicit area of HEIs' activity would, for at least some institutions, become more important than basic research.

5.38  In contrast to the traditional core areas of teaching and research, however, the Third Leg does not yet have sustained core funding (nor, as discussed in the next section, does it have national esteem measures[49] to recognise quality provision). Reflecting a common and generally positive view of our witnesses from HE, business and RDAs, Professor Sir Gareth Roberts observed that:

"the White Paper mentions the sum of £90m for this third stream of funding, which is less than ten per cent of money for research distributed via the RAE. This is still an inadequate counterweight, I suspect, to encourage people to focus principally on third stream funding. … I personally think it ought to be at least double the £90m to make people sit up and take notice … It should be additional." (QQ 172, 175 & 176)

5.39  This lack of incentives makes it difficult for the HE sector as a whole to realise its potential in regional economic development. We therefore encourage HEFCE, DTI, and DfES to complete the establishment of the Third Leg as a core area of HEIs' work.

National Metrics for Knowledge Transfer

5.40  While the various schemes to encourage knowledge transfer have the common purpose to exploit SET effectively for economic growth, there is no obvious coherence or overall prioritisation in the many performance measures. Such coherence and prioritisation is vital if the different schemes are to be optimally reinforcing.

5.41  In addition, concerns were expressed that current metrics for Third Leg activities do not link with the objectives of the RDA. As Ms Caroline Quentin noted, the main measure of HEIs' success in interactions with business was the Higher Education-Business Interaction Survey (HE-BIS). However, this had only three and quite minor questions relating to HEIs' links with RDAs. In addition, only two of RDAs' 15 core Tier 3 targets had any direct relationship to the universities' SET base (QQ 137-139 and p 84).

5.42  It will be no easier to judge the effectiveness of university support for local industry than it is to judge the outcomes of RDA support for SET in their regions. Nevertheless, it is essential to try to do so — and, as this becomes a more important strand of university activity, such judgements will become the basis of funding allocations. The aim of producing such metrics is to ensure sustained commitment by HEIs to supporting business so that they develop the motivation, capacity, capability and commitment to interact professionally and effectively with regional development in all its breadth. Those metrics should take a more strategic approach than at present. They should provide incentives for HEIs, working with others as necessary, to become excellent at engagement with the business sector, and generally give a clarity of direction to help focus activity where it will make a difference in economic development.

5.43  Professor Sir Gareth Roberts made interesting suggestions for "performance polygons" as esteem measures for knowledge transfer (Q 172 and p 92) and we recommend that HEFCE should work with the RDAs, the universities and other interested parties to develop strategic measures to assess the effectiveness of knowledge transfer and other interaction between universities and business, to complement the national quality measures for teaching and research. The measures should recognise that:

(a)  the interactions will be of many different types;

(b)  engagement must not be constrained by regional boundaries; and

(c)  meaningful assessment will require a long-term and, in part, subjective view.

Commercial Activities of Universities

5.44  Some universities have fostered collaboration with industry over many years —most successfully when there have been shared research objectives. In some cases, this collaboration has provided a valuable stream of income for the university over a period when funding from the public sector was decreasing.

5.45  Many universities also actively encourage the formation of spin-out companies by university staff. Those commercial activities support the innovation agenda generally and RDAs' work in particular — although a university will generally seek out the best research links, whether within or outside its own region.

5.46  Many individual universities, helped and supported through various schemes, have established R&D Offices or the like to interface with business and the region. In some regions, that network is partly coordinated through the University Associations and by the RDAs. There are also national networks. It is not clear how effectively these interfaces are coordinated with RDA activities to provide easy access by businesses to the university SET expertise — both within their region and nationally. Nor is it clear how they interlink with intermediary agencies described in paragraph 4.29.

Intellectual Property Management

5.47  Intellectual Property (IP) comprises ideas or inventions that may lead to useful products or services. The identification, protection, management and use of IP are key aspects of technological innovation. Many small businesses and some universities have little experience in managing their IP. Failure to do so effectively may lead at one extreme to the loss of the IP and, at the other, to its not being exploited at all. The need for greater professionalism in handling IP is common ground, although there are differences about whether this would be assisted by more standardised processes.

5.48  Whatever the mechanism, one issue is the skill base for managing IP. NWDA is developing a regional support process (p 159) and, as Professor MacIntyre noted, NorthSTAR (out of Science Enterprise challenge) provides expertise in IP management linked to ONE's five Centres of Excellence (Q 156).

5.49  Having considered similar issues during our recent Inquiry into innovations in microprocessing, we recommended[50]:

"that the Government should revisit general practice in exploiting intellectual property, with particular reference to the complex field of computing, and seek to establish principles that will lead to a greater uniformity of approach between Government Departments and Agencies, industry and universities."

The thrust of that recommendation remains valid in this more general context.

RDA/University relationships

5.50  The newness of the RDAs means that their relationships with the universities are at a relatively early stage of development. In common with a number of witnesses, HEFCE stressed the need for RDAs to work even more closely with the HE sector at a strategic level (p 283). Their ability to do so is hampered by the "communication gulf between the language of science and the language of economic development" noted by Nottingham University (p 334).

5.51  Universities are well-established bodies, used to dealing with multi-million pound research contracts with both public bodies and the private sector. They have extensive networks and support organisations that manage their research and other contracts. It is to be hoped that this level of professionalism can be carried across into dealings with the RDAs, whose decision-making processes are seen by a number of witnesses as unnecessarily bureaucratic.

5.52  For example, the University of Newcastle upon Tyne noted:

"a distance between discussion with officers in the RDA and their project appraisal systems which introduces a high degree of challenge at the project level. Further, checks and balances are introduced through referral of major decisions to the DTI. This all adds up to a cumbersome and lengthy decision-making process compared with the research councils." (p 332)

As neatly summarised by Dr Douglas Robertson, RDAs should "stop being contracting agencies and start being collaborating partners" (Q 129).

5.53  To improve the strategic and operational links between RDAs and the University sector, we therefore recommend that each RDA should work with its regional university association to devise and put in place arrangements for closer strategic working that also minimise the bureaucracy of contracting arrangements.


5.54  As noted in paragraph 4.43, RDAs are encouraged to promote economic development through cluster policies. It is generally recognised that, proximity of businesses in the same general field (whether or not they are high-tech) can yield real benefits of mutual support. This is the rationale behind the science and technology parks that are to be found in many parts of the country, often supported or promoted by the RDA.

5.55  It is important that all clusters should derive the maximum benefit from the regional SET base, particularly but not exclusively that which is contained within the public sector. The public sector research base represents a huge knowledge and resource base in SET. Some of that science relates to business sectors or to key technologies for growth. Much of the specialist work that goes on in a region's universities is likely to relate to the RDA's key sectors. It is equally likely to be relevant outside the region, so a region's businesses may also need to look more widely for SET expertise.

5.56  As noted in paragraph 5.17, a number of RDAs have mapped the strengths of the SET base in relation to their clusters. There does not, however, appear to have been any systematic mapping of the national SET base in relation to the key business sectors and clusters. This would be a valuable resource for both RDAs and businesses, and would also help strengthen the networking between the national SET base and the regions.

5.57  We therefore recommend that RDAs should collaborate with their regional university associations to map the SET strengths of the universities in relation to key clusters, aggregating the results into a national resource by making them available on the web-enabled intelligence service recommended in paragraph 4.51. A useful starting point for this would seem to be the Scottish Research Information Service (SRIS) which, as noted by UUK, provides a central point for businesses to find out about Scottish HEIs' research expertise and opportunities (p 338).

37   Students in Higher Education 2001/02, Higher Education Statistics Agency (HESA), April 2003. Back

38   Planned net Government expenditure on SET (both civil and defence) in 2002-03 was £7.8 billion - UK 2003, the Official Yearbook of the United Kingdom of Great Britain and Northern Ireland, Office of National Statistics, 2002, ISBN 0 11 621552 6  Back

39   The proposals for new RAE methodologies (see paragraph 5.25) should also help research growth where there is potential. Back

40   The Future of Higher Education, January 2003, Cm 5735. Back

41   See paragraph 5.5. Back

42   The four funding bodies for UK higher education issued in May 2003 the report commissioned from Professor Sir Gareth Roberts, The Review of research assessment, seeking views by September 2003 on the review and the recommendations that relate to the process of assessment. The text of the report and details of the consultation arrangements are available from  Back

43   In May 2003, OST issued The Sustainability of University Research: A consultation on reforming parts of the Dual Support System seeking responses by 30 September 2003. The text of the document and details of the consultation arrangements are available from  Back

44   Investing in Innovation: a strategy for science, engineering and technology, July 2002 - text available on Back

45   This includes a more proactive approach to managing public sector IP - see also paragraph 5.47. Back

46   Which includes professional training. Back

47   A fuller map of these developments is provided in Table 5.1 of Investing in InnovationBack

48   The Future of Higher Education, January 2003, Cm 5735. Back

49   As noted in paragraph 5.18, there is the RAE for research. Teaching is covered by the Teaching Quality Assessment (TQA). Back

50   In paragraph 10.7 of Chips for Everything: Britain's opportunities in a key global market, 2nd Report Session 2002-03, HL Paper 13-I. Back

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