This snapshot taken on 26/07/2008, shows web content selected for preservation by The National Archives. External links, forms and search boxes may not work in archived websites.
Lord Sainsbury of TurvilleParliamentary Scientific Committee - Science in the Knowledge-Driven Economy |
 |
|
| (Click picture for biography) | |
I am delighted to have been asked to talk to you this afternoon about the Government?s vision of science in the knowledge-driven economy. I believe that science has a key role to play in the Government?s objective of modernising the economy and modernising government, but I do not fool myself that the task is an easy one. Therefore, I welcome the opportunity to describe our vision for science, the targets we have set ourselves, the problems we face, and the progress we have made. Why is science so important for our competitiveness ? A few years ago Professor John Kay remarked, "Competitive advantage is based, not on doing what others already do well, but on doing what others cannot do as well. We know that this is true for us as individuals. We can see - with greater difficulty - that this is true for firms; that real corporate success is based on distinctive capabilities, not on imitating the successful. It follows that the focus of industrial policy should not be on what we do worse than other people but on what we do better." One of the things we do outstandingly well in this country is scientific research. The levels of scientific education and achievement in British universities are as high as any in the world and this is reflected in the success of British firms in industries which depend on élite science, like pharmaceuticals, defence electronics, biotechnology and computer software. In designing policies to enhance competitiveness we need to recognise we are very good at science, and find ways of encouraging our science and engineering base to transfer their knowledge into industry. How to build competitive advantage: the central principle The problem with industrial policies in the past is that they have pursued the opposite of Kay?s dictum. British industrial policy was based not on picking winners, but perversely on picking losers. Losers that we would have liked to be winners. Attempts to revive British Leyland, for example, through state intervention turned out to be a sorry failure, and predictably so. But while we should not seek to pick winners, we at the DTI should be vitally concerned to back successful British companies. The key is to focus on areas of activity where we know how to succeed, where Britain and British firms have real competitive advantages and understand the markets, and then to support them with the flows of skills, knowledge and entrepreneurial talent which they need if they are to build on the successes which have already been achieved. The list of Britain?s leading sectors is not particularly controversial; they include pharmaceuticals, chemicals, aerospace, telecommunications, hydrocarbons, biotechnology, electrical engineering, computer software, financial services ? all unequivocally knowledge intensive activities. In seeking to create a successful, knowledge creating economy, where should we look for lessons? I believe that California offers a better and more accessible model than many others. California has been amongst the most successful of western economies in restructuring away from old manufacturing industries into the industries which will dominate the first part of the 21st Century - software, Internet products, multimedia, entertainment and biotechnology. Similarities in the structure of its economy and culture should make it easy for us to learn from them. California offers not only an exciting model of the future but one which should be attainable by us. A few years ago the Californian economy was in recession, but it has recovered because it has had the agility to respond to downturn by building its position in the range of high-tech, high growth industries which will underpin its economy in the next decade and beyond. It is at the forefront of the new economy in which soft assets such as knowledge and ideas, creativity and branding will play a far more important role in generating growth than the physical assets of land, manual labour and machinery. Clusters or networks of supporting companies which often collaborate and share information as well as competing ferociously have grown up. In areas such as Silicon Valley, in Hollywood and in the biotechnology sector, staff are highly mobile, and as they move from firm to firm they carry ideas which in turn are cross-fertilised. Some of California?s creative culture has undoubtedly been promoted by political decision-making and public investment. Certainly in the 1990s, the state is reaping the rewards of a heavy investment in public university education in the 1960s, and many of the original firms which created Silicon Valley were spun out of Stanford University and the nearby Xerox research park. Mutually supportive networks of companies, research bodies and educational institutions are now the basic building blocks of its competitive economy. The edge in the activities in which California has taken the lead comes quite simply from the quality of ideas, and it is the capacity to generate ideas which we must strive to nurture in our society. In this country we are very good at science, both in absolute terms and in terms of the cost effectiveness of money spent in this area. With 1% of the world?s population, we do 6% of the world?s science, produce 8% of the world?s scientific papers and receive 9% of the world?s citations of scientific papers. In terms of internationally recognised scientific prizes, scientists in the UK have steadily claimed around 10% of all awards throughout the century. The Cambridge Newton Institute?s recent tally of two Field Prizes has helped keep our percentages up. If this total is rescaled for population size, the UK has been the leader throughout the century. We are very good at science and we should exploit it to create competitive advantage for our companies. But we haven?t been backing it as strongly as it deserves, or indeed as we should in terms of our economic interests. An analysis by Robert May in Science of the twelve countries together accounting for 80% of the world?s total investment in R&D, put the UK among the bottom four in terms of science spending relative to GDP. In recent years while Governments elsewhere have been increasing the amount they spent on science, the British Government has been reducing it. The Conservative budget of 1995 imposed swinging cuts across the science base - capital funding for university research was cut by 30% in 1996, projected to become 50% in 1998. On entering office, Labour inherited a science budget that was due to fall by 5% over the next two years. It was immediately clear that if the situation was not reversed we would soon see a decline in the excellence of our science base. We needed to increase our spending on science, and in particular increase our spending in some of the new areas which will underpin the performance of successful British companies in the future. Science in the Comprehensive Spending Review The comprehensive spending review, therefore, gave science the largest percentage increase of any area of public finance ? a public/private package with the Wellcome Trust of £1.4 billion over three years. The government?s contribution alone has the result, in real terms, of increasing the 2001-02 science budget by some 15% above this year?s level. There is £600 million for repairing as quickly as possible the research infrastructure within the universities ? so that we can produce first class science from first class laboratories. There is £400 million additional funding for high priority new programs for example in the biosciences where it is vital to exploit the information coming from the decoding of the human genome. There is an extra £300 million to finance university research through HEFCE. And the minimum stipend for PhD studentships through the Research Councils has been increased by £1000 over and above the adjustment for inflation - the first increase in real terms since 1966. The CSR also reflected the fact that we are on the verge of a new era in the life sciences and it is a field in which British science is especially strong. The recent rapid advances in genetic analysis and manipulation techniques, together with the major advances in information technology, novel synthetic and combinatorial chemistry, and in other areas, has opened up major new opportunities. Specifically, it anticipated that the human genome will be fully sequenced by around 2005, although it looks as if we will have a rough draft by next year. That is why we were particularly keen to direct CSR money into molecular, biomolecular and biomedical research. The Medical Research Council received an extra £90 million - a 6.8% income increase; and the Biotechnology and Biological Science Research Council an extra £52 million - a 4% increase. The Wellcome Trust funded £100 million high intensity x-ray source will provide an additional research aid in many of these fields. In addition to increasing the amount of public spending on science, the government also believes we need to improve the mechanisms of knowledge transfer. There has been an improvement in recent years with more spin-offs from universities, and the appearance of more business angels, but we still need to capitalise fully on the strength of our science base and our venture capital industry. This does not, however, necessarily mean spending more on applied rather than basic research. The proportions of responsive and directive research funding are I believe broadly correct.. The reasons for this are simple. First, there are many examples of revolutionary applications arising out of advances in basic research ? lasers, x-rays, and semiconductors are obvious examples. A belief in the value of pure research is one of the factors behind Microsoft?s extraordinary success story. According to Richard Needham, head of Microsoft?s new European research laboratory in Cambridge, the guiding principle behind the project is not directed, applied research for the Microsoft market. Rather the pure research interests of the scientists themselves - which the Microsoft corporation will then try to apply for the company?s commercial projects. The second argument for the value of basic research is that there is plenty of evidence which suggests it generates high returns. America?s Committee for Economic Development has calculated that returns to R&D investments in the US, taking account not only the private return but the "spill over" benefits from improvements to productivity in other industries, have been of the order of 20-30%, or roughly double the average historical return to stock market investments. The profound economic benefits arising from a strong research base are recognised around the world. In America, the land of less government, a bipartisan National Research Investment Act has secured the doubling of federal funding for basic scientific, medical, and pre-competitive engineering research over the next ten years. In Japan, despite recent economic difficulties, the Government is giving a 12% rise in public funds for basic research in the financial year 1999-2000. Finally, if we look at the USA we see that many of the universities which have been most successful in basic research have also been very good at generating spin-off companies. MIT, Stanford, and Berkeley are three obvious examples. MIT has had a major impact on the economy of greater Boston, where numerous-knowledge based companies are located. There are now estimated to be more than one thousand MIT-related companies located in Massachusetts with world-wide sales of $53 billion. About 125,000 workers are employed by these companies in Massachusetts, and almost 353,000 world-wide. In the UK, all the new activities around Cambridge show that we are starting to follow the US example in this respect. While we don?t need to change the ratio of basic and applied research, we can do more to improve the mechanisms of knowledge transfer. A first class science base is not enough, we also need world-beating scientific entrepreneurs. We have, therefore, taken some important steps to encourage knowledge transfer, though this is an area where I think much remains to be done. The most significant of these initiatives is University Challenge. The very early stage of turning research outcomes into marketable products, processes and services is a critical and particularly difficult phase, and the University Challenge Fund is targeted very specifically at providing support at that point. We expect it to help scientists and entrepreneurs develop their ideas, ease their path to commercialisation and ensure that their products and processes are successfully exploited for the benefit of the UK. The Fund was set up in July 1998 and in March I announced the award of £45m to fifteen university based consortia spread across the country which included £4.5m to the White Rose Consortium of Leeds, Sheffield and York, £3.75 to a consortium of Bath and Bristol and £1m to Aberystwyth and the Institute of Grassland and Environmental Research. The quality and strength of the bids was so great that the Chancellor announced extra money in the Budget to allow more bids to be supported in the first round, and to fund a second round of the scheme. I have also launched the Science Enterprise Challenge, a £25 million competition, to establish up to 8 centres of enterprise in UK universities. The centres will be world class establishments for fostering the commercialisation of research and new ideas, for scientific entrepreneurialism and incorporating the teaching of enterprise into science and engineering curricula. We have received twenty eight stage one bids which involve 55 Higher Education Institutions and I expect to announce the winners shortly. There will be some people who will, of course, say that it is impossible to teach entrepreneurialism, and in one sense that is, of course, true. The ability to sense opportunities and take risks, to pursue an idea tenaciously in spite of overwhelming difficulties, and to persuade people that they should back what seems a maverick idea are not skills that can be taught in the classroom*. At the same time anyone who wants to set up a new high-tech business would be well advised to learn how to write a corporate plan, the basics of corporate finance, how to read a balance sheet, and to know something about intellectual property rights before they started. * MIT Entrepreneurship Center - "The pursuit of opportunity beyond the resources currently controlled" Howard Stevenson. A third important initiative which the Government has taken is the creation of the Higher Education "Reach Out" Fund to reward and incentivise universities for interacting with business. For me, one of the strengths of the "Reach Out" Fund at this stage is the freedom it affords institutions to come forward with innovative proposals for establishing links with business - everything from a programme of staff exchange to the development of business incubator units. I do not want to overdo the expectations for the "Reach Out" Fund. The level of funding in the first phase is modest, certainly in comparison to the level of funds available for teaching and research. But nor should we underplay the significance of what the fund is trying to achieve; a sustainable, systemic change in the culture of our knowledge base, in which the value and esteem accorded to working with business is comparable to the recognition academics receive for research and teaching. With "Reach Out" we are talking about a sustained programme of funding. This is not a "one-off" scheme. We also plan to increase the number of Teaching Company Scheme programmes running at any one time to over 1,000. TCS have been shown to be highly successful in facilitating the transfer of technology and knowledge between the science and engineering base and business, and has also been shown to be highly successful in helping to forge lasting collaborative partnerships. The key to achieving this new target is the willingness of even more academics to participate. A national network of Faraday Partnerships will also encourage Universities to work with companies on innovative projects. The original Faraday Partnerships which were established in 1997 were supposed to be funded with DTI and EPSRC money. But only EPSRC money was forthcoming, and as a result they have tended to focus more on research than knowledge transfer. We will now be providing them with money from the DTI so that they can introduce "technology translators" who can work with SME?s on problem-solving and the introduction of new products and processes. I also believe that the Foresight Programme has a key role to play in knowledge-transfer. Foresight promotes collaboration, not just between industry, scientists and government, but between firms in the same sector and across sectoral and disciplinary boundaries. It brings together people who know about markets with people who know about technologies. The latest round of the programnme began in April and the current panels will run until November 2000. We are broadening the basis of participation, drawing in views from different age groups - particularly younger people - all regions and the widest possible range of organisations. Finally, in the March 1998 Budget, the Chancellor announced a package of tax reforms to encourage enterprise, including the introduction of the Capital Gains Tax taper, and an enhanced Enterprise Investment Scheme. And in the most recent 1999 budget, he announced his intention to introduce a new R&D tax credit for SMEs next year. This is currently the subject of consultation in which we are proposing that it should take the form of a 150 percent allowance for eligible current expenditure on R&D against corporation tax. But, it goes further than this. We are proposing that SMEs not yet in profit would be able to claim a discounted tax credit equivalent in value to the tax saving they would probably have made when eventually profitable in the future. This should help such "tax exhausted" companies to sustain their R&D efforts and exploit the results achieved. Treasury and DTI estimates suggest that the R&D tax credit will lead to additional R&D spending of £150 million per year by thousands of small firms. The third area I would like to discuss this afternoon is the public?s confidence in government use and regulation of science. This is I think the most difficult part of my job, but arguably one of the most important. If Britain is going to prosper in the knowledge-driven economy of the future, it is essential that the public have confidence in government?s use and regulation of science, and that they believe that science is vital for wealth creation and improving the quality of their lives. In this area as in others we have taken some important steps but we have a long way to go. I am therefore highly encouraged that the House of Commons Science and Technology Committee is conducting an inquiry into the advisory system and I look forward to their findings. I am equally interested in the findings of the House of Lords Science and Technology Committee who have been considering public confidence as a part of their inquiry into Science and Society. The advisory system in this country is based upon a straightforward set of common-sense principles which were issued by the Chief Scientific Adviser - Sir Robert May - in March 1997. These guidelines, which have now been adopted by all departments, advocate a progressive, open, and objective approach to commissioning and evaluating scientific advice, and are based on the following basic principles: 1. Individual departments and agencies should ensure that their procedures can anticipate as early as possible those issues for which scientific advice or research will be needed, particularly those which are potentially sensitive; 2. once a potentially controversial issues has been identified departments should ensure that they draw on a sufficiently wide range of the best expert sources, both within and outside Government (hence the need for a high quality science base); 3. there should be a presumption towards openness in explaining the interpretation of scientific advice; The guidelines were designed primarily to provide guidance when evidence is inconclusive or controversial, and in this respect they complement the Regulatory Impact Unit?s ongoing work on risk. In order to increase people?s confidence in government?s use and regulation of science we have taken a number of important steps:
These are, I believe, valuable steps but we should not underestimate the size of the task ahead of us. The impact of the BSE scare on public opinion and the difficulty of the issues thrown up by the revolution in biology currently taking place means that our task is immense. Finally, it is essential that the excellence of our science is recognised abroad. The extent to which the UK is viewed as a nation still capable of producing top rank science and technology for today?s markets is vital. It influences key decision makers in the fields of procurement and overseas investment and, at another level, the millions of people overseas who buy products in our shops. For too many people, Britain has a proud science and technology heritage. We need instead to build up knowledge among trading partners of contemporary British high-tech achievements, and this is an area where Sir Robert May and I are working hard. I hope this afternoon I have given you an understanding of the Government?s vision of science. I hope I have also convinced you that we are systematically putting in place the practical policies and programmes to turn that vision into a reality. I have not sought to minimise the size of the task we have set ourselves, but I hope you feel that we are moving forward rapidly and with a common purpose. |
|
|
|
|
Other speeches by Lord Sainsbury of Turville
| |