Examination of Witness (Questions 1 -
19)
WEDNESDAY 7 MARCH 2001
THE RT
HON STEPHEN
BYERS MP
Chairman
1. Secretary of State, welcome to the Science
and Technology Select Committee. Thank you for finding time in
your very busy diary to be with us. I know how difficult it was
to find a mutually convenient date. We are delighted to have you
here with us now. You have been before this Committee twice before.
The first time you came to see us was to help us with our inquiry
into innovation and the physical sciences; the second time you
came to see us we tried to help you on the Synchrotron. I am sure
we confused you rather than helped you; it was a very difficult
decision for you to make at that time. Now we would like to talk
to you in the context of a report we are doing, which we have
entitled, "Are We Realising Our Potential?", going back
to the report that was presented by the Minister, who is now Lord
Waldegrave, entitled, "Realising Our Potential". We
would also like to talk about science policy in general. I suppose
at this time for Parliament it is also a little bit of a round
up of what has happened in the last four years and what is likely
to happen with science policy in the future. I wonder if I may
just start by asking you how you have found your role in relation
to science and technology and what it means to be the Cabinet
Minister with the responsibility for science? Not only do you
have the Chief Scientific Adviser, and OST, within your department
but you do have a scientific responsibility across all government
departments. How do you handle that? What impact has that had
on science by having a co-ordinating Secretary of State or a minister?
(Mr Byers) Can I say, first of all, I
welcome the opportunity of appearing before your Committee again.
It is not many Secretaries of State for Trade and Industry in
the recent past who have had the opportunity of appearing three
times before your Committee—largely because they did not
occupy the post for very long—but I am pleased to be in
front of you today. Can I say in relation to the Synchrotron,
it was a very difficult decision but I did find both the giving
of evidence and the advice from the Committee very helpful on
what was a very difficult decision. First of all, it is very important
for science in the United Kingdom that there is a Cabinet member
with responsibility for science. I think that is very important
because it does mean there is a voice at the Cabinet table on
behalf of science and the science community. That is particularly
important at times like the Comprehensive Spending Review, when
the case has to be made for science. If there was not a Cabinet
member with specific responsibility then I think the case could
go by default. There is a very strong case to be made for science
in the United Kingdom. I would like to think that the last two
spending rounds have demonstrated that having science as the responsibility
of the Secretary of State for Trade and Industry has actually
worked in the interests of the sciences and the science community
in terms of the funding which we have been able to achieve in
the last two spending rounds. It has been a significant increase
and it is partially due, at least, I think, to the fact that there
is a Cabinet Minister with specific responsibility. In terms of
the co-ordinating role across government, the Chief Scientific
Adviser both advises myself and also has direct access to the
Prime Minister. I think that is very important. Most members of
the Committee will know that in 1995 when the decision was taken
to move the Office of Science and Technology out of the Cabinet
Office and into the Department of Trade and Industry there was
an issue about it being downgraded potentially in some respects.
I would like to think that the way in which we have been able
to operate may have allayed some of the concerns that people had
about the importance and the priority that we attach to science.
As you know Lord Sainsbury is the Minister with day-to-day responsibility
for science and innovation. I, as the Cabinet Member responsible
for science, deal with the strategic overview of the direction
in which science policy should be going. As you are aware from
the White Papers that we have published, in particular, I am personally
committed to supporting science, but also ensuring that we can
use the excellence that we have in science here in the United
Kingdom, perhaps, in a broader way than it has been used in the
past. Making the links between academic research in science with
commercial exploitation and development and innovation is very
important. We have given a new impetus to developments in those
particular areas. I hope I do not sound complacent, Chairman we
have structures in place which I think are working well, and I
think the results of that have been shown in the Budget outcome,
which I think has been good for science and, hopefully, in the
way in which the science community itself recognises that it is
valued and has a very important part to play. There are at least
a couple of announcements in the budget this afternoon which I
think demonstrate, yet again, the importance that we attach to
science.
2. I was going to ask you later on, but since
you have opened up the subject I will ask you now. You refer to
the important role that science plays in our society in general
for the quality of life, wealth creation, and so on. You alluded
to the fact that science can add to wealth creation, which is
something that all governments should want for their population.
Do you recognise, Secretary of State, that one should not just
see science as a wealth creator, although it is pleasing that
you do and if, as in so doing, we should not take our eye off
fundamental research, which is the seed-corn for wealth creation
at a later time? (Mr Byers) I absolutely agree with
that point. I think it would be a terrible mistake if we were
simply to see science and, indeed, fund science in terms of applied
science and science that can be exploited commercially. The reality
is, as you have just said, that we only get to that stage if we
have the grounding in pure science. I think the trick that we
need to play really is to recognise that the two are not mutually
exclusive but actually one complements the other. We have to have
a strong science foundation in order to be able to have the opportunities
to exploit the ideas that come out of that pure research, if you
like.
3. It is almost a circle. Wealth creation finds
the funds for research and development, and research and development
provides the knowledge for wealth and creation. (Mr Byers)
That says it very well.
4. During the course of a week or a month do
you get personally involved in discussing scientific matters or
is that all left to the Chief Scientific Adviser and the Minister
for Science? If you do get involved what sort of time do you spend—an
hour a week or an hour a month? (Mr Byers) Certainly
more than an hour a week. I hate thinking along these terms because
it makes me think how many hours a week I actually work—I
am sure it would be the same for most Members. I have regular
meetings with the Chief Scientific Adviser on a bilateral basis,
he will brief me on issues that are relevant, probably every month
we have a session together. There are many submissions that come
up affecting science which, obviously, I consider along with Lord
Sainsbury. It is difficult to put a time on it. When there is
a big strategic decision like the Synchrotron there would be many
hours in a week.
5. Let me put it another way: do you think that
many weeks go by without you discussing a science matter at some
time? (Mr Byers) No, no.
6. OST is within your department, could an argument
be made, do you think, for having OST as an independent office?
If the argument could be made that way, what would the pros be
for that argument and what would the cons be against it? (Mr
Byers) I am sure there are arguments that could be made to
support a freestanding OST. I think what we have been able to
achieve is that it has the support of a strong department, which
is good in terms of cross-government discussions and debates about
priorities, particularly spending priorities. It has meant that
we have been able to make links between science innovation and
the university sector. I think we have been able to achieve that
without in any way downgrading the pure research that needs to
go on as far as science is concerned. One of the things that I
am particularly proud of is that, through the collaboration and
the joint partnership with the Wellcome Trust and the money we
have been able to put through the Joint Infrastructure Fund, we
have been able to put in about £1 billion in the last three
years into basic infrastructure in our universities, which is
not applied in any way, which is not exploited commercially but
which is the foundation stone from which we are unable to put
in other forms of funding to develop and exploit commercially.
We have been able to do that because it has been part of the Department
of Trade and Industry. I know there is a view that to have an
area outside the department on its own means that greater priority
and attention is given to it. I think there is also a danger that
it can actually weaken in terms of the discussions and the debates
around Whitehall, where to have a strong department can be useful.
I think, Chairman, it is probably for others to judge whether
being part of the Department of Trade and Industry since 1995
has been of benefit or a detriment. My own view, from my own experience
now of two and a half years as Secretary of State, is that we
have been able to add to what the OST has been able to achieve.
Mr Taylor
7. I am fascinated, because the language you
have just used was the language I was using when I was Minister
for justification. What, in your view, is the counter-argument
about the Cabinet Office, from which my government moved the OST
and, of course, earlier, the Department for Education and Science?
Are you satisfied with your experience now that the DTI is a better
repository of the OST than either of those other two departments? (Mr
Byers) I believe so. I am not someone who says that has to
be a given. I think a lot of it depends on having a commitment
to support science, and we have that. Wherever the OST is, there
has to be a clear commitment to support science, otherwise it
is going to be very vulnerable. What we have been able to achieve
is making very important links within the DTI. With the very good
working relationship we have with the Department for Education
and Employment we are then able to bridge the link with the university
sector as well. We have been able to ensure that the OST is not
isolated and we have been able to support it and we have been
able to make some very important links with other bodies. Having
said that, I can understand there will be arguments that there
is somewhere else within Whitehall where it would be better placed,
I cannot, as we sit here this evening, think where that might
be. I think the idea of having a freestanding OST would put it
in a vulnerable position.
8. Would you agree that raising uncertainty
about where the OST should be keeps opening up the problem of
whether it is being taken seriously? I now reverse the question;
would you make a determined, personal commitment that the OST
is now well bedded down in the DTI and ought to stay there and
gain strength from that department? (Mr Byers) I would
like to think that from the results people would recognise that
it has been successful, that is the best way of judging it. If
one looks back at what we have been able to achieve over the last
three or four years or so, once it was bedded into the department—I
understand you may know better than I do, there may have been
teething troubles and difficulties, as there always is when there
is a structural change in the Government—I would like to
think, certainly in my time, in two and a half years we have been
able to move forward and there have not been those difficulties.
Certainly talking to the two Chief Scientific Advisers I have
known they have been very supportive of where OST is and actually
welcome the fact that they have regular meetings with myself and
also have access to the Prime Minister if there is something which
is particularly pressing.
Dr Kumar
9. Secretary of State, you have been a very
strong advocate of a knowledge-driven economy, especially if we
are to compete globally. I have heard you say many, many times
this is a road we must go down. Do you think that as a country
we spend enough on research and development compared to other
countries in the world? (Mr Byers) The figures are
interesting, and it was one of the issues the Chancellor touched
on in the Budget statement earlier today. I have looked at some
figures in terms of R&D spend by the business sector. It is
quite interesting to note that the United Kingdom business sector
spends 1.2 per cent of GDP on R&D, where as the business sector
in the Japan spends 2.2 per cent; in the United States 1.9 per
cent; in Germany 1.6 per cent and in France 1.4 per cent. Certainly
in terms of business spend on R&D we need to do more and we
need to encourage that. The announcement we have had of the R&D
tax credit being extended to larger companies and the consultation
that will take place around that is going to be very good news.
There is also the issue about R&D spend by government itself.
I think through the Spending Review we have now got to a situation
whereas there had been a decline we have now managed to stop that
happening. In a number of major departments we will see government
spending on R&D increase over the next three years. We have
stabilised the position but there is clearly more that needs to
be done.
10. Do you have an ideal figure or a percentage
that you would like to tell us where you think our spending should
be considered adequate or sufficient for R&D? I am trying
to get a figure from you, if you have one in mind. (Mr
Byers) There is a danger of coming up with a precise percentage
of GDP. We should not be trailing other industrialised countries,
and the figures that I have just run through show that we are.
I think if we could up the level to be closer to our major competitors,
whether it is Japan, the United States, Germany or France that
would make a significant difference. I would like to think—looking
at the figures it is quite interesting, we have seen improvements
in the R&D spend in the last two years. We need to encourage
that. The tax credit that we have given to SMEs has been of help
in doing that. If we can extend that to larger companies then
that will make a very real difference. The thing that worries
me is what we are seeing at the moment, because we are in global
competition for R&D, is some major companies who traditionally
have had a high level of R&D spend in the United Kingdom looking
at other countries. Rolls-Royce is an example, they are considering
moving some of their R&D from the West Midlands over to Canada,
because the Canadian Government has a very attractive regime as
far as R&D spend is concerned. We must be vigilant. We are
in a global competition here and we have to make sure that we
have the framework in place and the tax regime in place which
is very supportive of R&D spend.
Dr Turner
11. Does the Prime Ministers's recent speech,
promising a green industrial revolution in the United Kingdom—certainly
press reports stated £100 million input—have any strong
implications for government spend in R&D in areas of green
technology? (Mr Byers) Potentially it does. I think
when we have a chance to look at the details of the Chancellor's
speech today he indicated there that there would be support for
R&D in green technologies. That is part of the consultation
which has now begun as a result of the Budget statement. There
is huge potential here. We have done a lot of work in the department
now looking at new technology, and the green industrial revolution
which the Prime Minister referred to yesterday. There is no doubt
that if one looks at the overall spend globally on environmental
technology it is worth in value about the same as the spend on
pharmaceuticals worldwide. It is already a huge industry. We do
not actually have much of it here in the United Kingdom but we
do need to look at ways in which we can support it. The statement
made by the Prime Minister yesterday and the announcement from
the Chancellor today in the Budget potentially will have a big
impact as far as R&D spend is concerned in this particular
area.
12. You would wish to be proactive in that? (Mr
Byers) I think we are. We have been very positive from the
Department of Trade and Industry's side with the OST and with
the new Chief Scientific Adviser, who has great personal interest
in this area. There will be many opportunities in the months and
years ahead.
Dr Kumar
13. Secretary of State, in the last Spending
Review there was an announcement of increases in the Science Budget,
and that was very welcome by the community out there. Will you
be seeking to strengthen the Government's investment in science
engineering in the future and what level of funding do you have
in mind for that? (Mr Byers) I agree. The settlement
we managed to achieve was one which was widely welcomed by the
science community. It was a good settlement. Building on the first
Spending Review we saw round about £1 billion extra going
into science over three years. We have managed to secure a similar
level of funding in partnership with the Wellcome Trust, so about
£1 billion of new money for science over the next three years.
It is a seven per cent increase in real terms for each of those
three years, so there are significant improvements there. There
is no doubt when the next Spending Review comes round, and they
come round remarkably quickly, we need to be in a strong position
to argue for further funding for science. We have to be able to
demonstrate that—to be in a strong position, a point the
Chairman made—we benefit enormously from spending on science.
It is plainly one of our great strengths in the United Kingdom
in the first place, because we are hugely strong so far as science
is concerned. I was looking at some figures yesterday evening,
one per cent of the world's population are in the United Kingdom;
we fund 4.5 per cent of the world's science; we have 8.0 per cent
of the world's published scientific papers; we have 9.0 per cent
of citations and we have 10 per cent of internationally recognised
science prizes. That is a position of strength. What we then need
to do on the basis of that position of strength is to find ways
in which we can, through funding, make sure that we secure that
position and that we get the benefits from it in terms of wealth
creation, and so on. There is then the potential to get the virtuous
circle, which the Chairman referred to, having a strong Science
Base, commercial exploitation, wealth being created, more money,
which we can then use to underpin the Science Base further. What
I am acutely aware of is when one goes to the Chancellor arguing
for more money, being a very prudent Chancellor the first thing
he says is: "What are we going to get for it and what are
the results going to be?" This is one of those areas where,
after the first three years Spending Review, we are beginning
to be able to show good results coming through and I am confident
that in a year or two years' time when the Secretary of state
for Trade and Industry goes to the Chancellor for more funding
he or she will have to be able to show the beneficial results
of the funding that we have put in so far.
14. Picking you up on the effectiveness of the
funding, do you actually show him specific examples, where you
say: "This has been a successful idea, and this has been
the outcome". Do you take real life examples? How do you
decide that? How do you convince him? (Mr Byers) With
the Treasury we do have public service agreements, which are targets
we have to achieve. In some specific programmes, like University
Challenge, then there are requirements to try and get a number
of companies spinning out from the universities. There are some
specific requirements there as well. It is almost a contract,
if you like, between the department, the OST and the Treasury.
15. How much of the pressure that you bring
about on the Chancellor is your own belief in science and the
advancement of science and the sciences budget, and how much of
it, do you think, is pressure from the grass roots emerging from
the scientific and technological community? I am just trying to
assess whether if there was another Secretary of State they would
passionately believe as strongly as you do, or whether it is the
pressure from outside that is created for you to fight in the
budget? (Mr Byers) I am not a scientist by trade or
profession but what I do know is how important science has been
actually to our economy here in the United Kingdom, going back
to the days of the Industrial Revolution, and it is going to be
increasingly important as we move into this knowledge economy.
Science has a huge role to play. I remember the first time I spoke
at the Lord Mayor's Trade and Industry banquet in 1999 I identified
four areas which were priorities for me as the Secretary of State,
one of them was science and the importance of science, which I
think surprised a number of people there. What struck me afterwards
was the number of captains of industry who came up to me and said:
"It was wonderful to hear a Secretary of State for Trade
and Industry having science as one of his top four priorities".
There is a case that has to be made. Essentially the position
is that the science community, because they are in a position
of strength, provide me with the bullets and it is for me to fire
them to the best effect, and hopefully I am on target. That is
a good relationship to have.
Mr Taylor
16. I am just passing a remark; it is quite
interesting that William Waldegrave, now Lord Waldegrave, who
was an excellent Science Minister, I was his PPS at the time before
I then became the Minister, and he was quite a good Chief Secretary
of the Treasury subsequently. I remember the spending round, where
I was trying to remind him of his enthusiasm in science, I think
you went the other way round. I will also put on record that no
doubt this Government has achieved many of the things we failed
to achieve before 1997, there are much better settlements for
science and also the Treasury is much more proactive in supporting
it, again today. Why is it in your references earlier to industry
that industry itself, even if they like your speeches, do not
necessarily follow through in devoting more money to the R&D?
It is same sectors each year that are the jewels in the Crown.
A lot of other industries are still lagging well behind the international
competition in terms of the amount put aside for R&D, what
is it that has failed to help us change the culture, despite all
of the initiatives we have been taking for ten years? (Mr
Byers) I think it goes back to the short-term approach that
too much of British industry still has. We see that across the
piece as far as investment is concerned. Business investment is
improving, but there are areas where we do not have businesses
planning for the long-term. R&D is seen very much as a long-term
investment; that is part of the problem. It is a cultural thing.
It is also the fact that we place requirements in terms of company
law on directors to deliver for their shareholders in the short-term.
We have a financial regime—financial support—which
is very often short-term. We have not had until recently a tax
regime which offers incentives as far as R&D is concerned.
If we begin to change the climate, if business has the confidence
that we have economic stability, we have inflation below target,
at target, and we have interest rates at their lowest level for
many years then that should give them the security to be able
to invest knowing they are not going to be suddenly hit by a big
increase in inflation or interests rates going up dramatically.
That could begin to change the climate or environment within which
business takes those decisions and decisions about spending on
R&D. If we can combine the economic stability with a tax regime
which is supportive of R&D spend we may begin to improve the
relative performance of industry in the United Kingdom.
17. As you said earlier, we are in a knowledge-based
society but, again, industry does not seem necessarily to value
those intangible assets—the ability internally to produce
R&D. You are stimulating them. There was an announcement today
which you may want to comment on later on intellectual property
which I think is very welcome, R&D tax credits being for larger
companies who work to help drug companies even more. It is the
rest of industry, however, particularly certain areas of manufacturing
industry, which is simply not doing this. Do you sense that these
challenges that we set them—the University Challenge, the
Foresight Challenge, the Faraday Partnerships—have penetrated
sufficiently into those areas? (Mr Byers) I think they
have not, to be frank, and we need to do more. We can do more
in a couple of ways, one of which is a specific announcement in
the Budget today which I think most members will not have picked
up on because it is buried deep in the Red Book and I will briefly
refer to it, but firstly we need to simplify some of the initiatives
that we have. There is a great danger that we, as Secretaries
of State, have bright—or we think they are bright anyway—ideas
and suddenly there is a new initiative, a new challenge launched
and a new programme is announced. That can be confusing, particularly
for people running businesses who say: "Well, you have a
Faraday, you have a University Challenge, a Science Enterprise
Challenge, what are all these balls up in the air?". We need
to be more focused and I have been trying through the Higher Education
Innovation Fund, to pull together some of these streams of funding
to have a substantial amount of money which is going through the
university sector, but with a requirement that universities look
outward and—hopefully—engage the sorts of companies
you have referred to. I think the idea of having almost a third
stream of funding going into universities—not just for teaching
and for research but for innovation—will be a very important
development. We now have £140 million in the spending review
going into that third stream of funding, part of which will be
used to go out and advocate the importance of innovation, but
secondly we do need almost to do an audit of what the requirements
are as far as business is concerned, which is why we announced
this afternoon as part of the Budget statement that Sir Gareth
Roberts, who is Master of Wolfson College, Oxford, is going to
lead an independent study into the supply of skilled scientists
and engineers in the United Kingdom, and the aim of this will
be to see whether there are adequate mechanisms in place both
for businesses to identify their needs for scientific and technical
skills and to communicate them back to the higher education sector
and vice versa, and we have asked Sir Gareth to report by the
end of February 2002. I think this is a very important piece of
work; we are delighted that Sir Gareth has agreed to chair this
independent study, and it will go some way towards identifying
the sorts of problems you have just referred to.
Dr Turner
18. As you have already mentioned, the Budget
has made several provisions today to try and encourage R&D
and extend, in particular, tax credits to large industries as
well as to SMEs. There is still, nonetheless, a certain amount
of, I suppose, cynicism as to whether British industry—particularly
the engineering sector—will respond because they have shown
no great sign of responding to challenges in the past and I wonder
whether it is necessary to consider any other fiscal devices to
try and stimulate this, for example, setting a minimum level of
R&D as a percentage of turnover in order to qualify for tax
credits so if it is, say, less than 2—no tax credits; 2.1—they
get 2.1 per cent's worth of tax credits; and other devices like
that perhaps to kick start them into action. Have you considered
that? (Mr Byers) One of the reasons we are consulting
about extending the R&D tax credit to larger companies is
to look at precisely those sorts of variations that might be possible.
There is an issue about whether it should just apply to additional
spend over and above that which is presently being committed,
or across the board; whether it should be incremental in the sense
that you have just referred to. These are all going to be issues
we will need to consult on because the devil is going to be in
the detail and we need to have a package of R&D tax credits
which will achieve its objective—namely, to stimulate further
investment in R&D but also to encourage those companies—of
which there are too many in the United Kingdom—who at the
moment do not invest in R&D to provide incentives for them
to commit resources for the first time. It is going to be our
challenge to come up with a package that will achieve precisely
that, and I think the idea that you have referred to is going
to be one of those issues we will need to address in the consultation
exercise.
19. It is a sad commentary that you have to
think in these terms because if their culture was in favour of
R&D, as it is in other countries, this would not be an issue? (Mr
Byers) I know, but we are where we are and it is always surprising
to me how a little financial incentive suddenly changes people's
attitudes towards these matters!
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