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Good afternoon ladies and gentlemen.
I am delighted to be here at the launch of the Science and Industry Council for the North East. This is a very important initiative, bringing together as it does the private sector, universities and the Regional Development Agency One NorthEast in partnership, and placing science and innovation at the core of the region's Strategy for Success.
Evidence shows that innovation is one of the main explanations of the differences in GDP across the G7 countries and increasing innovation is central to the Government's objective of closing the productivity gap with other countries, and to the achievement of the region's target of closing the gap on the rest of the UK.
A strong science base is essential as the starting point for a successful innovation performance. That is why last week we announced that the science budget will rise by 10% a year on average in real terms over the 2002 Spending Review Period, compared with 7% over the 2000 Spending Review, and will grow from £2 billion in 2002-03 to £2.9 billion by 2005-06. This will fund both higher volumes and new areas of research, such as proteomics and brain science.
DTI funding to stimulate innovation and knowledge transfer across business and industry will also grow by £50 million by 2005-06 from its current level of £338 million, and as lead sponsor in Whitehall, DTI's contribution to the Regional Development Agencies will rise from £159 million in 2002-03 to £283 million by 2005-06. That represents an average annual increase of 18% in real terms between 2002-03 and 2005-06, and will equip the RDA's to work with local industry to stimulate innovation, develop key business clusters and sectors, and stimulate workplace development among local employers.
Finally, the Government will consolidate the Higher Education Innovation Fund as a permanent third stream of funding for universities, with investment rising to £90 million per year by 2005. This fund to encourage knowledge transfer from universities into industry has been enormously successful. Schemes like the Higher Education Innovation Fund, Science Enterprise Centres and University Challenge have helped to produce a real cultural change in our universities. For example in 1999-2000 there were 199 spin off companies compared with an annual average of 70 in the previous 5 years. And now we want to build on that success.
Government spending on science and engineering research is largely organised on a national basis, giving priority to funding excellent research and development, wherever it is found. This secures value for money, and is the most effective way of ensuring the UK's research capability remains internationally competitive.
But I believe very strongly that RDA's have an extremely important role to play in bringing together the needs of industry and the science and engineering capabilities in universities, and forming the networks, which are so essential for innovation. RDA's are developing and refining an understanding of the strengths and weaknesses of their regions, and are, therefore, best placed to identify mismatches between regional industrial strength and relative research weakness, or vice versa.
That is why the Government will be encouraging other RDA's to follow your example and establish regional science and industry councils, or equivalent bodies, to provide local leadership in strengthening regionally based innovation.
In the DTI there is also a new emphasis on innovation, and as part of the recent re-organisation of the Department a new innovation group has been set up, which will be managed by a new Director-General recruited from industry with both a science and commercial background. The mission of the group is to create a world-class climate for innovation in the UK.
I want the DTI to become and influential agent for innovation and change in the UK economy and to be internationally 'best in the class' for the quality of its people and the depth of its knowledge.
This will be achieved through a strategy of building up an unrivalled understanding of innovation - from the level of the company to national systems - and using this knowledge to encourage greater business innovations. This will be carried out in close partnership with, and by influencing, other organisations, nationally and regionally, in both the public and private sectors.
That is why I am pleased to be able to announce today a new £20 million LINK programme on Basic Technologies for Industrial Applications. DTI funding of up to £10 million will be available for commitment over the next 3 years to support collaborative research projects between the science base and industry in the application of leading-edge technologies such as nanotechnology, sensors and control, and simulation and modelling. As well as supporting applied research projects under LINK, additional funding of up to £500,000 per annum will be available to support complementary technology transfer projects and activities designed to increase industrial awareness and encourage uptake of these technologies. I am particularly happy to be able to make this announcement here as you are putting a lot of emphasis on nanotechnology and Microsystems in your strategy for the region.
The North East has put innovation at the heart of its regional development strategy, I believe that is absolutely right. The UK cannot in today's global economy compete on the basis of low cost labour or cheap materials. We can only compete on the basis of our knowledge, skills and creativity, and by being a 'moving target for the new industrialising countries. It is quite simple - our companies must either innovate or go out of business.
To make a success of that strategy you need the advice that the Science and Industry Council can give you, and in ten years time I think you will look back on the formation of the Council as an extremely imaginative and valuable act of industrial leadership.
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