Lord Sainsbury of Turville

UK RESEARCH BASE FUNDERS' FORUM PLENARY CONFERENCE

We are all rightly proud of the UK's outstanding world-class research record. Second in the world only to the USA on most leading measures. But we face two major challenges, the sustainability of our research base and improving our rate of knowledge transfer.

When the present Government came into power in 1997 it was after a period when science and innovation had received very little political attention and had been badly underfunded. That is why our first priority as a Government was to put the funding of university research on a sustainable basis.

Since 1997 we have invested almost £3 billion with Wellcome and DfES in our university research infrastructure, and SRIF, our Science Research Investment Fund, is now worth £500 million a year. These are very large sums of money, and we need to make certain that they are used as effectively as possible.

We should also be aware that we are dealing with a very complex system. We all talk about the Dual Support System of funding for the UK Research Base, with funds flowing from both the Funding and Research Councils, but this is of course, in reality, a multi-stream system of funding with businesses, charity and the EU now big funders of university research.

If we are to put university finances on a sound basis within this complex funding environment it is vital both that universities know what is the full economic cost of their research and that funders accept an obligation to pay universities the full economic cost of the research they do.

We recognise that this is not a goal that we will be able to achieve overnight, and in some cases it may never be possible, but we want to move as far as possible in that direction.

From 1 September this year, Research Councils will be funding the research that they support on the basis of 80 percent Full Economic Costs as the next stage towards this goal. This is the culmination of eight years hard work between HEIs, Funding Councils and Research Councils, and is I believe a major step forward.

There will of course be some challenging negotiations between business and universities, but we would expect these to be on a commercial basis and to recognise the quality and excellence of the research of UK Universities.

Universities need to recover FEC across the broad range of their activities taking one year with another – that provides some room for negotiations, but the objective must be for all to pay a fair and proper value for the research they commission.

A second major objective of the Government has been to increase the amount of knowledge transfer from our science and engineering base. This has been a great weakness of the UK’s innovation system in the past, and the Government has introduced a number of schemes to improve our performance.

These have included: University Challenge, which provided universities with seed corn funds; Science Enterprise Centres which have provided access to entrepreneurial skills to science and engineering undergraduates and graduates, and the Higher Education Innovation Fund which provides incentives for universities to transfer knowledge to the economy.

These programmes have been very successful in stimulating more knowledge transfer from universities in terms of licensing, patents, spin-off companies and contract work for industry. To take two figures, the market value of university spinouts floated on the Stock Market in 2004 was £604 million, £100 million more than the Government’s total investment in Knowledge Transfer to date.

Today 24,000 science and engineering students are receiving enterprise training, whereas the figure in 1998/99 was 3,000.

We have also set up the Public Sector Research Establishments Fund to promote the commercialisation of research undertaken by Research Council institutes, NHS Trusts, Government Laboratories and major museums and galleries. The first round of the fund was launched in 2001 and provided £10m to support the commercialisation of PSREs’ research, with a second round, launched in 2003 providing an additional £15m. A third round of the competition - which will provide up to £25m - was launched in August 2005.

We have also set knowledge transfer targets for our Research Councils, and we have introduced a version of the SBIR scheme in the USA. This requires that all Government Departments allocate 2.5% of their R&D funds to small high tech companies. This was started on a voluntary basis but was made mandatory by the Chancellor of the Exchequer in the 2005 Budget.

At the same time we are encouraging our universities to work with smaller businesses that have not traditionally worked with higher education, to help them become more innovative. This is an area where RDAs have a key role to play in stimulating demand for innovation.

De Montfort University's Improving Business by Design Programme links academic design expertise with design and manufacturing companies to design and develop new innovative products. For example, the development of a wheelchair that can be used with standard gymnasium and sports equipment, with a potential first year market of £5.5m.

Overall, Improving Business by Design can demonstrate a 14:1 return on public sector investment through the development of new markets for UK design and manufacturing companies. Improving Business by Design is funded through HEIF2 and the Leicestershire Economic Partnership.

We're also seeing scientific excellence acting as a magnet for inward investment - Kodak in Cambridge, Boeing in Sheffield, Sharp in Oxford.

Eastman Kodak announced in June this year that it had opened a European research division in Cambridge. This facility will ensure that Kodak continues to be a world leader in developing the most technologically advanced digital imaging, display technology and healthcare.

The manufacture of Boeing's new passenger plane, the 7E7 Dreamliner, is backed by researchers at Sheffield University's Advanced Manufacturing Research Centre.

Sharp Laboratories of Europe based in Oxford is a research centre for consumer electronics. Sharp create new technology in liquid crystal displays, semi-conductor lasers, language and encryption software and consumer bioscience.

So I think we can claim to have made a great deal of progress in recent years. But we are encouraging a major change to our economic life, and the question is, are we doing enough and could we do things better? Knowledge transfer will, therefore, be the focus of the presentation this afternoon.

Science and innovation is a key priority for this Government. We want to make Britain the best and most attractive location for science and innovation in the world. Science and innovation is key to ensuring the UK’s long-term competitiveness in an increasingly knowledge-driven global economy, and to improving the quality of our lives.

The Government has set out ambitious goals for the future in the ten-year ‘Science and Innovation Investment Framework’. This is the first ever long-term vision for the future of science in the UK, with the ambition to increase public and private sector investment in R&D as a percentage of GDP from its current level of around 1.9 per cent to 2.5 per cent by 2014. I hope all of us here today are committed to achieving this objective.

The Funders’ forum in bringing together representatives of the key funders of the research base to consider a wide range of issues impacting on the research base, can, I believe, play a valuable role in helping us allocate funds for research in this country. Today provides an opportunity for you all to participate in these debates. I look forward to some stimulating discussion.