Select Committee on Science and Technology Appendices to the Minutes of Evidence


Supplementary memorandum submitted by The Centre for Urban and Regional Development Studies University of Newcastle upon Tyne


  1.  In 2000, CURDS submitted a memorandum of evidence to the Commons Science and Technology Committee Inquiry "Are We Realising Our Potential?". The central thrust of that memorandum was to illustrate the weaknesses in the UK's system of scientific governance which inhibited regional representation into Science Budget decisions. The case of Daresbury was used to illustrate how this meant that decisions ostensibly taken in the best interest of the UK could actually work directly against other policies and strategies decided upon by departments and agencies outside the scientific policy network.

  2.  Thus, whilst the North West Development Agency had predicated their Regional Innovation Strategy in part upon the continued survival and indeed growth of the Daresbury public laboratory, no account of this was taken in the decision to locate the new Diamond synchrotron at Rutherford Appleton Laboratory in Oxfordshire. Indeed, it was deemed necessary to provide some £25 million funding to the North West Science Review Team to ameliorate the effects of the decision, thereby illustrating the great public cost of a failure to join up science governance into broader government interests.

  3.  In a letter dated 28 November, it was announced that the Science and Technology Committee was broadening the remit of their Inquiry to encompass the recent Science White Paper and the medium term Science Budget1 set out in the 2000 Spending Review (SR2000). The White Paper certainly claims to address the issues of the regional economic problems directly resultant from long-term imbalances in scientific expenditure in the UK. Indeed, in his introduction, the Secretary of State for Trade and Industry states "we need scientific excellence and business innovation in every region, not just a few areas." The Science Budget explained from where the resources would come to meet the commitments laid out in the White Paper.

  4.  However, it is our contention that neither the White Paper nor the Science Budget offer a commitment to changing the system of scientific governance which has systematically concentrated resources, expenditure and benefits in a few regions of the country in the pursuit of scientific excellence for the nation as a whole. In this memorandum, we offer an analysis of the two documents which seeks to highlight the foregone opportunities as well as the fundamental mismatch between the claims made and the policies offered for using science to promote regional economic development. In our analysis, the problem arises from a conflation of two separate aims of science expenditure, and we argue that a rather naïve conception of the innovation process leads to the omission of the regional dimension to science and technology (S&T) expenditure in pursuit of national competitiveness.


  5.  Although the aim of this memorandum is to widen the purview of the regional analysis offered in the initial response to cover the latest policy developments, we believe that the White Paper has a number of weaknesses from whence originates the failure to adequately engage with the regional S&T dimension. The model of innovation used is extremely simplistic, a linear flow from basis research to commercially viable innovative products2. However, innovations may actually reduce the "technology" involved in a product or a system—the clockwork radio or solar power eliminates the need for power generation and transmission systems in remote areas. There is thus no simple linear relationship between scientific advances and commercial innovation, and although in sectors such as the pharmaceuticals industry, competitive advantage derives from technological advance, there are many industries (especially capital goods) in which advantage derives from continuity of product and maintenance rather than technological advance.

  6.  There is also the highly problematic assumption that it is possible in some way to separate out commercial innovation from basic research, and that this is something in which the private sector has great expertise. We would argue that the private sector has already acknowledged that separation of conception and execution in R&D is extremely difficult to manage, and that a firm's innovation base is dependent on more than just those activities which directly in new products being marketed. Best practice in R&D in leading companies such as BT and Glaxo Wellcome encourages professional staff to engage in research for reasons additional to the generation of competitive products. Research activity acts as an incentive to attract the most highly skilled staff as well as to signal to stakeholders (including investors, customers and prospective staff) that they are companies which place research and learning at the heart of their ethos. Similarly, there are many micro-businesses in which individuals perform routine consultancy to fund their own research which is motivated more by their desire as hobbyists to learn rather than the rational commercial benefits3.

  7.  The lesson which Government should learn is that leading companies have acknowledged that research activity has two main outcomes, to which we alluded in the first memorandum, namely that research activity delivers outputs such as new products, processes and techniques, but also that research activity maintains a research capacity. Pharmaceutical companies have been quite explicit that the multiplicity of technological avenues being pursued means that they cannot expect to master all the latest technologies. They do have a need to determine which have some likelihood of future commercial success, and this requires a cadre of staff who share professional, linguistic and scientific norms with the research staff in new biotechnology firms. Similarly, in Silicon Valley, it has been observed that (prior to the 2000 downturn), venture capitalists were increasingly indistinguishable in their appearance and technological knowledge from those entrepreneurs in whom they invested.

  8.  This affirms the need for continued peer review in the allocation of research funds, but more importantly, that research activities encourage a culture from which new research activity can spring. Public sector research is not merely the delivery of services to highly-skilled buyers, rather it is about creating a cadre of staff with the knowledge, interest and opportunity to pursue new avenues of interest. Although the White Paper does state that "knowledge moves with people; people—not institutions or programmes—are the real science base", this comment is made as a coda in a section on the need for the free movement of scientists in Europe (para 2.39). Permeating the remainder of the White Paper is the belief that human capital is something purely reactive, that will move to areas of scientific excellence, rather than that human capital actually comprises, produces and sustains that excellence.

  9.  Before the issue of the regional dimension of human capital, scientific excellence and economic competitiveness is reprised, there is one other general observation which we would offer to the Inquiry, relating to one disparity between the second and fourth chapters of the White Paper. In chapter two, although the White Paper suggests that commercially confidential work and patents should be included in future within the compass of the Research Assessment Exercise, it overlooks the potential to use the RAE to encourage public understanding of science. Similarly, in chapter four, although the White Paper suggests a need for public debate of science, it appears to be suggesting "Gee-Whizz" theme parks to promote science rather than encouraging an altogether more serious scientific debate predicated upon a wider audience reading, digesting analysing a complex set of ethical and moral arguments. Although we would not propose a specific mechanism, we would strongly recommend that the Inquiry recommend that the funding councils and the DTI urgently consider liaising to best deliver both outcomes.


  10.  The root of the regional problem lies in the top-down approach to the determination of scientific priorities which in turn arises from the heavily centralised system of scientific governance which was established by Realising Our Potential. The last memorandum we submitted responded to this at some length outlining the need for the inclusion of a broader set of interests in the decision-making process through which scientific public spending was allocated. Indeed, the consideration of only national interests was perversely working against the achievement of scientific excellence, by concentrating research activities in particular regions of the UK, especially the East of England and South East. Although in its introduction the White Paper makes the claim that science is a vital part of regional development across all the English regions, the top-down approach adopted actually works to reinforce the existing patterns of expenditure with their inherent geographies of inequality.

  11.  In order to illuminate the problem we draw upon the idea of science expenditure having two elements, the delivery of a service and the creation of capacity to perform similar research in the future4,5. However, what is important to note (and this is alluded to in para 2.39) is that people are a critical component of each element, and thus buying a research service is necessarily contributing to the support of the capacity to deliver that investment. Therein lies the weakness of the current system for funding allocation in England—directing funding to areas of current research strength is in effect investing in those institutes and centres to form subsequent centres of excellence.

  12.  The problem we highlighted in the last memorandum was that the UK Science Budget had been stagnant or declining for a number of decades, and consequently, there was a concentration of funds in a comparatively limited number of locations. The corollary of this was that areas of the country lacking existing R&D were being denied the necessary investment to become future centres of excellence. Although worrying for those regions excluded from this scientific core, it poses more worrying questions for the economic competitiveness of the UK as a whole. If industrial competitiveness is predicated upon research activities and those research activities are being concentrated, then this increases the vulnerability of the UK economy to shifts in sectoral competitiveness. If the UK research base is too concentrated towards a few industrial sectors, then it may be insufficiently adaptive to future technological changes. Although the White Paper accepts the need for diversity, it appears not to accept that the current policy arrangement will not produce the requisite heterogeneity.

  13.  There are also scale problems which arise from over-concentration of activities in particular areas. Cambridge is an exemplar of where a high-technology and high-value economy has been built on the basis of locally-rooted innovation networks, but a local partnership in Cambridge has realised that there are limits to the sustainable growth possible in that one location. Cambridge University is currently experimenting with ways of geographically diffusing the success of the "Cambridge Phenomenon" through other universities in the East of England with a Regional Innovation and Technology Forum, but the importance of people to innovation-based economic success means that such diffusion is not simple. There is no reason to believe that resources channelled into the major provincial cities would not be as effective in raising UK competitiveness, but be more sustainable in providing the infrastructure to absorb related growth of knowledge-intensive industries through spin-off activities.


  14.  There appear to be four elements offered by the White Paper and Budget which have the potential to alter the geographical pattern of investment in Science, ensuring a more geographically-balanced distribution of investment whilst ensuring that particular projects are based with those with the expertise to deliver. These are:

    —  Investment in capital infrastructure, through the Joint Infrastructure Fund and the successor Science Research Investment Fund,

    —  Reach out funding (HEROBAC) which will be rolled forward into a new Higher Education Innovation Fund,

    —  New programmes through the existing research councils and the cross-council research programmes (genomics, e-science and basic technology), and

    —  The Regional Investment Fund (which is not in fact part of the Science Budget) to fund the implementation of regional innovation strategies.

  15.  This suggests that a significant proportion of the science budget will be available for investment to support existing, and create new, centres of excellence; the total allocated in 2001-02 appears to be £235 million (13 per cent of the total), rising to £438 million by the end of the period (20 per cent). However, there are significant limitations to the methodologies being adopted to spread the investment resources to maximise the national diversity and expertise of the regions' base.

  16.  The first is that excellence criteria (ie through peer-reviewed bidding) are being adopted for the allocation of a proportion of the investment funds in higher education. Although the SRIF will allocate £675 million on the basis of quality-based formula, a further £325 million will be allocated on the basis of competitive bidding, either of top-rated bids unsuccessful in the JIF, or from a further round of competitive bidding. It must be appreciated that much of this derives from the unwillingness of the Wellcome Trust (who are contributing £150 million to the SRIF) to take regional economic development priorities rather than research excellence into account in allocating resources6. It is therefore absolutely vital that the criteria for the £675 million (which are to be consulted upon) meet the DTI's stated priority that it needs to "build on the excellence of the Joint Infrastructure Fund, but will ensure that the benefits are more widely spread" (p.i.).

  17.  The second weakness is the differential impact of the Reach Out funds—current Reach Out funding is not provided to directly strengthen regional research capacity, but to encourage universities to deliver those services in which they excel, which varies in turn with the particular institutional mission. Research-based universities tend to use the funds to win new industrial research contracts, which strengthens their own research base, in contrast to more teaching-based universities, whose reach-out work has significant elements of consultancy and graduate employability (winning little quality research investment). Because research-based universities are concentrated in the South East of England, Reach Out is implicitly supporting this uneven pattern of investment in research capacity. If universities are to act as "drivers of growth in the knowledge economy", then some account should be taken of the regional portfolio of services available and the impact this has on the longer-term investment pattern for region's scientific bases.

  18.  In this sense, the funding provided for the North West Science Review Team is a particularly welcome break with the current funding principles. It has attempted to ameliorate the negative consequence of concentrating research activity in the South East of England, by creating new research capacity in the region where the misfortune occurred. More importantly, it has some resources (£25 million) with which to achieve this (unlike regional innovation strategies for which no new money was provided). The North West ranks sixth of the twelve UK regions for gross investment in R&D per capita, and this suggests a justification for similar measures for each of the more poorly performing regions. If the £50 million proposed for the RIF were to be restricted to the implementation of RISs in those English regions whose GERS level was at or worse than the North West, then this would provide a similar level of resource to the investment provided by the NWSRT (See Annex).


  19.  The White Paper recognises that the system of UK scientific governance has been transformed through the programme of constitutional change in which various responsibilities for science policy have been devolved to territorial bodies. The White Paper states that "this White Paper is a strategy for the UK, insofar as policy and management of some aspects of science and innovation are reserved to the UK Government" (para 1.32). The measures outlined which apply to the regional aspects of scientific policy are however extremely top-down in their approach, which simultaneously treats all the regions as equal and hence by virtue of the gross geographical imbalance in expenditure, unequal. There are three sets of policy measures outlined in the White Paper which have an explicitly regional dimension:

    —  Clusters policy, through a Ministerial Clusters Policy Steering Group (3.29) and encouraging RDAs cluster strategies (3.30),

    —  Stimulating business innovation through the fiscal framework (3.13), and

    —  Whitehall departmental science and innovation strategies, and the Ministerial Science Group (3.31).

  20.  Just as in the previous memorandum we highlighted the weaknesses of the top-down Foresight approach, the continuation of that approach works directly against the creation of a diverse and complementary scientific base at which the White Paper is aimed. RDAs are developing their own cluster development strategies alongside the DTI exercise, and in order for cluster policy to succeed, it will be necessary for the DTI to eventually fund those strategies which the RDAs formulate for themselves7. RDAs have demonstrated a capacity for identifying those local business linkages which comprise a cluster which are not necessarily financial in nature nor correspond to existing definitions of industrial sectors. Where DTI have a contribution to make is ensuring that the RDAs' cluster strategies are well-researched and reflect genuine regional strengths rather than a nationally-defined set of sectors.

  21.  The fiscal framework policies are non-spatial in the sense that they offer encouragement to business wherever they perform their innovative activities in the UK. However, they are spatial in the sense that there is a highly unequal geography pattern of R&D in the UK, and consequently the uptake of these support measures is likely to follow this pattern. Although business R&D is not as unequally distributed as government R&D, the fiscal measures outlined represent an implicit subsidy from general taxation, and without measures to stimulate demand in peripheral areas, these represent a highly regressive form of investment in R&D.

  22.  Finally, to reprise the main theme of our initial response, as the system of scientific governance has been altered by devolution, there is a new geography to the Ministerial Science Group. Whereas actions were hitherto taken in the best interests of the UK, there is now a degree of scientific decision-making formalised between England and the territorial ministries. By consolidating English interests into a single bloc, it has created pressures for the further concentration of expenditure around excellence within England. The English regions lack their own strong voices, and have to be represented by their institutions on the basis of English-wide excellence. Thus, those regions lacking powerful scientific institutions, which are principally located in London, the South East and East of England, are weakly represented in decision-making8.


  23.  There are clear commercial and economic pressures to diffuse the highly productive and internationally renowned science and innovation networks in exemplar UK regions across the rest of the country. Traditional manufacturing activities remain an important contributor to the national output, and firms in those regions can gain all the competitive benefits from innovation and skill development offered by knowledge networks which high-technology firms in core regions enjoy. There are diminishing returns to scale in a number of core locations, with wage and house price inflation, congestion and environmental degradation beginning to visibly demonstrate the limits to localised high-knowledge growth. Finally, overspecialisation in high-technology research is effectively mortgaging future national economic success upon the continued success of particular industries which may well now be entering maturity with consequently lower levels of profitability.

  24.  In this memorandum we have outlined that, despite the presence of notional commitment to spatial diffusion of scientific activities, and the inclusion of a limited number of specifically regional programmes such as the Cluster programmes and the associated regional investment funds, the fundamental problem perpetuated (although not created) by Realising Our Potential remains unaltered. The vast majority of publicly-funded research remains allocated according to patterns of expertise which, whilst geographically inequitable, reflect principally historical (and irrational9) funding allocations overlain with an asymmetrical political geography of devolution. Indeed, this allocation begets a perpetuation of this existing pattern, and although new centres of expertise have arisen, they must be seen as comparatively piecemeal in comparison with the sustained volumes of expenditure in the South East and East of England.

  25.  The single recommendation which we could offer to the Inquiry is the need to encourage government to adopt a long-term view of the process of investment in regional scientific capacity. The single greatest investment in research capacity comes through scientists performing high-quality research; under current arrangements, excellence begets excellence but physical concentration weakens the economic benefits through physical congestion and technological overspecialisation. The greater the diversity of the national scientific base, the more opportunity entrepreneurs across the UK will have to take advantage of emerging technological niches to the benefit of the competitiveness of the widest industrial spectrum. Government expenditure must be recognised as a key factor in the continuing science under-performance of the periphery.

  26.  We believe therefore that there is a compelling case to make fundamental changes to science policy and decision-making to reverse the funding allocations which underpin this unequal and wasteful over-centralisation of research in two English regions to the wider detriment of the UK's economic competitiveness.

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