APPENDIX 56
Supplementary memorandum submitted by
The Centre for Urban and Regional Development Studies University
of Newcastle upon Tyne
INTRODUCTION
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.
GENERAL COMMENTARY
ON THE
WHITE PAPER
AND SCIENCE
BUDGET
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.
THE REGIONAL
PROBLEM, SCIENTIFIC
CAPACITY AND
THE WHITE
PAPER
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.
THE
NEW POLICY
AND FUNDING
ARRANGEMENT POST-2000
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).
REGIONAL
INPUTS TO
THE SYSTEM
OF SCIENTIFIC
GOVERNANCE
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.
CONCLUDING
REMARKS
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.
|
