Lord Sainsbury of Turville

THE ROLE OF THE MINISTER FOR SCIENCE AND INNOVATION IN THE KNOWLEDGE ECONOMY

Major advances in science and technology and globalisation have meant that science and technology have taken on a new importance in our economy and society. There was a time when science policy was seen simply as a subset of our educational policies. Today it is becoming of central importance to our economy and wealth creation, and in many areas of our society such as health, the environment and the developing world it is seen to have a major role to play in providing solutions to the problems we face.

As a result, a range of policy areas have moved from the periphery of Government policy-making to nearer the centre. The funding of basic research in our universities, incentives for researchers to transfer their knowledge into industry, support given for collaborative, applied R&D, the supply of graduate scientists and engineers, intellectual property rights, the public’s confidence in the government’s handling of emerging new technologies, and the role of science and innovation in regional policy and foreign policy, all these are becoming policy areas of increasing interest and importance politically.

At the same time, science policy is both academically and politically an undeveloped area. There is little guidance for a Minister of Science and Innovation as to what he should do. New policies have to be developed and inevitably there is an element of trial and error.

What I want to do this evening is to describe how I think my job as Minister of Science and Innovation has been evolving in recent years and the new policies that we have been adopting in order to realize the enormous benefits which science and technology can bring to our society.

In tackling these issues I have two advantages. Firstly I am a Minister in a Progressive Government which wants to create a dynamic market economy, but also believes that government needs to make investments in public goods in areas such as education and science which are so essential to a knowledge-driven economy. We don’t think government should try and manage the competitive process but we do believe that governments should invest in improving the assets companies draw on in competing, and build the institutions for advanced competition. This is a huge advantage compared to the previous ideologically-driven Conservative government which was hampered by a belief that markets arise spontaneously, and that any action by government to provide better conditions for companies to operate in, is inherently undesirable.

Secondly, I have the advantage of being the only Minister in Europe, and probably in the world, who is Minister of Science and Innovation. This is due to the Office of Science and Technology being made part of the DTI in 1995 by the last Conservative Government as part of a re-shuffle and to my making a successful takeover bid for the innovation parts of the DTI after the election of 2001. This means that I am concerned not only with the production of scientific and engineering knowledge but also with its use to create wealth and improve the quality of our lives.

I make this point because we seem to have stumbled on a useful way to link science and innovation policy together in government, and I would hate to see it dismantled in the future because people didn’t realise how effective it is.

I would like to say that when we came into government we produced a single, comprehensive White Paper which set out our new policy ideas. But the world is not like that. Where a policy area is academically and politically underdeveloped, it is not immediately clear where the opportunities are or where one can find the solutions to the problems one faces. As a result we have produced a number of policy papers as the opportunities and solutions have become clearer, and we have learnt what works and what doesn’t.

In 2000 we produced a White Paper “Excellence and Opportunity- A Science and Innovation Policy for the 21st Century”. In March 2002 we produced a “Cross-Cutting Review of Science and Research”, followed shortly by “Investing in Innovation”. In 2003 we produced an Innovation Report “Competing in the global economy: the innovation challenge” and in 2004 a “Science and Innovation Investment Framework 2004-2014”. Each of these I like to think built on the previous policies and took them a step forward.

The science policies set out in these documents cover many subjects because science policy has many different dimensions. There are some areas such as the funding of the research councils or the Patent Office and Intellectual Property Rights which are the direct responsibility of the Minister of Science and Innovation. But there are other areas which cut across the structure of Whitehall departments such as the contribution of science and innovation to regional policy, the role of science and innovation in other Government Departments and our science and innovation relationships with other countries. There are also science policy areas, such as fiscal incentives for small, fast-growing high-tech businesses or science education, which are clearly the responsibility of other Government Departments.

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 under-funded. That is why our first priority as a Government was to fund properly the science and technology base.

In 1997/98 when the current Government came to power, the science budget was £1.3 billion. As a result of substantial increases in a number of spending reviews, the science budget will have more than doubled in real terms to £3.4 billion by 2007/8. This currently includes £500 million a year for the renewal of scientific facilities in universities, and we now produce a 15-year roadmap for large facilities so we can provide our world-class scientists with a world-class scientific infrastructure.

The Government has also set itself ambitious goals for the future in a 10 year Science and Innovation framework. The Government’s long-term objective for the UK economy is to increase the level of knowledge intensity in the UK as measured by the ratio of R&D across the economy to national gross domestic product, from its current level of around 1.9 per cent to 2.5 per cent by around 2014. If achieved, this would put the UK in a position to secure a leading place among the major European countries and substantially close the gap between the UK and the USA, the best performing, innovation-driven major economy.

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.

A third major objective for the Government has been to encourage more applied or user-driven research, as an increase in it is essential if we are to reach our goal of total public and private research reaching 2.5 per cent of GDP by 2014. To help us achieve this objective we have developed a Technology Strategy Programme to provide a business-driven framework for identifying emerging technologies where the UK has the research capacity to create a competitive advantage. This is the funding we have used to support the rapid developments taking place today in areas such as ICT, biotechnology, stem cells, nanotechnology and aerospace.

We have allocated £320m over three years to this Technology Strategy, and have set up an industry-led Technology Strategy Board to manage it. We have also introduced R&D tax credits for small and large companies to incentivise them to do more research and these are now worth £600m per year to businesses. And we have developed 17 Knowledge Transfer Networks. These are intermediate organisations which act as a link between universities in key areas of technology, such as bioprocessing, grid computing, medical devices and healthcare, and photonics. We are also looking at setting up new ones in Cybersecurity and Biometrics, the Modern Built Environment, Electronics and Imaging.

A fourth and very interesting area on which I have had to spend a great deal of time as Minister of Science and Innovation is the public engagement with science. When the present Government came to power the trust of the public in the way government handled scientific issues had been badly shaken by the BSE crisis.

At that time the prevailing approach to these issues taken by both scientists and the government was called ‘the public understanding of science’. This was based on the idea that people had lost confidence in new developments in science because they did not understand them, and that if scientists explained the science to them their confidence would be restored. This proved, however, not to be the case, and it became clear to me that if we were going to maximise the benefits from our plans for science we would have to do some new thinking about how to restore the public’s confidence. We, therefore, have adopted a new approach which we call ‘the public engagement with science’.

This is based on the idea that people in Britain generally support science and innovation but are concerned about the speed of advances in science and technology, and whether the government is in control of the situation. We believe that these concerns need to be taken seriously, and that the best way to respond to them is for scientists to engage in debate with people about the regulatory issues which new technologies raise before new products and services reach the market. We need to look at the ethical, health, safety and environmental issues produced by the new technologies, but we should not seek to decide whether a science or technology is good or bad as this is impossible to predict.

Early on in the Government’s life, therefore, we set up two new biotechnology commissions, the Human Genetic Commission and the Agriculture and Environment Biotechnology Commission to facilitate debate in these two controversial areas. The Human Genetics Commission in particular produced some excellent reports on issues before they developed into ones of public concern.

In 2003 the Government also asked the Royal Society and the Royal Academy of engineering to look at the regulatory issues raised by nanotechnology and to do so in full consultation with the public. This they did and a team of civil servants from across Whitehall is now drawing up a programme of research to examine the few areas of concern the Royal Society and the Royal Academy of Engineering highlighted, as well as looking at whether there are any regulatory changes we need to make. I see this as a model for what we should do in the future when major advances in science and technology look like raising ethical, health, safety or environmental concerns.

In the last year we have also set up the Sciencewise programme of public engagement, and this has recently announced its first set of public dialogue projects to enable constructive, open and informed debate between citizens and experts on a range of topics, such as nanotechnologies and climate change.

Finally, of course, I have had during my time as Minister of Science and Innovation to wage an endless battle against animal rights extremists. At first I thought that this was an issue which could be solved by public dialogue. But over the years it became clear that we were dealing largely with a small group of fanatics who are prepared to use violence and appalling acts of harassment to stop scientists doing key pieces of research. While we have set up a new centre for the three “R”s in order to further reduce and improve the use of animals in experiments, our main efforts have had unfortunately to be focussed on stopping up gaps in the law and increasing the level of police resources going into tackling this problem.

All the areas I have mentioned so far are ones which come directly under the responsibility of the Minister of Science and Innovation. But there are also a number of areas which cut across the structure of Whitehall departments and in which a Minister of Science and Innovation needs to take an interest. These are the contribution of science and innovation to regional policy, the role of science and innovation in other Government Departments and our science and innovation relationships with other countries.

In the case of regional policy we have put a greater deal more emphasis on science and innovation through the Regional Development Agencies, with them strengthening research activities essential to regional growth, supporting knowledge transfer form universities, encouraging high-tech clusters, and providing financial support for new high-tech firms. All RDA’s now have Science and Industry Council, and it is encouraging the RDA’s are planning to spend £360m on supporting science and innovation this year.

I think it is also worth mentioning in this context the £50m we gave to RDA’s early on in the life of the Government to encourage the setting up of high-tech incubators. This had a surprisingly powerful effect. In 1996 we estimated that there were about 25 incubators for high tech firms in the country. By 2000 this had risen to 100 and today reckon that there are over 270. Over the same period there has also been a significant increase in science parks. In 1998 there were 39. Today there are nearly 100 with almost 1,700 tenant businesses. These figures are exciting because they show that if Government sets innovation right, across the country, cities and universities are responding to the need to create new industries and new jobs.

I also think that the concept of Science Cities, which is beginning to be developed in a number of cities across the country, may prove to be a valuable way of bringing together government, universities and industry at a local level.

The role of science and innovation in Government Departments other than the Department of Trade and Industry and the Office of Science and Technology is also extremely important. More money is spent on R&D in other government departments than in the Office of Science and Technology, and if this spent well, it can not only improve government policies but also have a beneficial effect on industries which they sponsor. All Government Departments now have to have Science and Innovation strategies, and early on in the life of the Government we set up a Public Sector Research Establishments Fund to encourage knowledge transfer. We have also introduced a version of the Small Business Innovation Research (SBIR) scheme in the USA, which 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.

There are also our scientific and technological relationships with other countries. This is a difficult policy area because there are many dimensions to our relationships. We want to collaborate with other countries to maintain our scientific and technological excellence, to improve our innovation performance, as part of our diplomatic arrangements in areas such as climate change, and to help developing countries.

We have over the years greatly strengthened our efforts in this area. There are now nearly 40 posts in over 20 countries, with dedicated science officers plus other posts using science in support of bilateral relations. Before 2001 there were only 11 posts in 10 countries with science officers. Their activities were not co-ordinated but today the global network is co-ordinated through a new F.C.O. Department, the Science and Innovation Group. We have also vastly increased the number of International Technology Promoters in the DTI form 4 to 22, whose job it is to identify opportunities for UK firms to acquire technologies from other countries and create new partnerships across national boundaries.

There is also, of course, an important European dimension to our scientific and technological relationships with other countries. This mainly consists of negotiating the European Framework R&D programmes. The 7th Framework which is currently being discussed is proving to be a very creative process, and as part of our E.U. Presidency we are pushing hard for the setting up of an independent European Research Council, modelled on the National Science Foundation in the USA, which will give out grants for excellence on the basis of peer review. This, we believe, will not only be a better way of supporting basic research, but will enable the rest of the programme to be more user-driven and focused on creating competitive advantage for companies.

Finally, there are areas of policy which are of enormous importance for a Minister of Science and Innovation but where the policy lead is clearly in other areas. Science education and fiscal incentives for small, fast-growth high-tech businesses are obvious examples. Here too there are important issues and we have made some major improvements, but a Minister of Science and Innovation can only make input into the policy-making of other Government Ministers.

So I think the Government can fairly claim to have put massive extra resources into our science and innovation system and made many improvements to it. But one has to ask oneself two difficult questions: ‘is it enough to make a difference?’ and ‘are we moving quickly enough?’ I think there are increasing good signs that our policies are working. It is encouraging that there has been such an increase in the number of incubators and science parks, that our universities are transferring knowledge rapidly to industry and that industrial R&D after a long fall has stabilised, and is now growing slowly as a percentage of GDP.

But we should not underestimate the challenge we face or the need for speed. At no time since the Industrial Revolution has the restructuring of global economic activity been so great, with Asia moving from the fringes of the new world economic order to the centre; and at no point has the speed of technological change been so fast.

In 1980, less than a tenth of manufacturing exports came from the developing world. But today it is almost 30%, and in 20 years’ time the figure will probably be 50%. And almost all other developed countries can see as well as we can what is happening in the world economy, and are putting major resources into stimulating innovation. As China and India start moving up the value-added chain, as they will certainly do, we can stay ahead, but we should not fool ourselves that it will be easy.

As we enter the knowledge economy we have in the UK the advantage of one of the best science and technology bases in the world, and in the future I think we should take greater advantage of it in terms of wealth creation and improving the quality of our lives.

The Government’s vision for the UK is that we should be a key hub in the global knowledge economy. This means that the UK should be a country famed not only for its outstanding record of discovery but also for innovation, a country that invests heavily in business R&D and education and skills, and exports high-tech goods and services to the world. We also want to be a country with strong science and technological links with the best research around the world, so that we can always stay at the leading edge.

Finally, we should be a country to which talented entrepreneurs and world-class companies come from around the world to do research and set up high-tech companies, attracted by the quality of our research, by the strong links between universities, research institutes and industry, by geographic clusters of high-tech companies, by their ability to raise finance, particularly venture capital, and by our quality of life.

When I became Minister of Science in 1998 I had no idea that the job would prove as challenging and interesting as it has done. I did, however, believe that our entrepreneurs, scientists and engineers are as good as those of any country in the world if they have the right conditions. I hope, therefore, that I have convinced you this evening that the Government believes that science and innovation is of crucial importance to the U.K.’s future success, that we have made good progress in putting in place the best conditions for science and innovation to flourish, that universities and industry are rising to the challenges of the new Knowledge Economy, and that we are beginning to see the first benefits of our policies.