House of Commons - Trade and Industry

Select Committee on Trade and Industry Eighth Report

5 Knowledge transfer and exploitation

55. The 1998 Competitiveness White Paper noted that successful knowledge driven economies needed to have: "strong universities which have creative partnerships with business"[101] if they were: "to be more successful in the commercial exploitation of technology".[102] Higher education institutions, including universities, and other research organisations (research base) are an important part of the innovation system as they produce: "new ideas, instruments, problem solving techniques, networks, and skilled people".[103] However, the outcomes from knowledge creation (intellectual property) themselves do not create successful new products and services. For invention or discovery to be turned into commercially successful innovation, and wealth creation thereafter, there has to be an exchange of knowledge between the research base and business. This process is known as knowledge transfer. Without the knowledge transfer process, public money supports a research base but society does not benefit from the useful products or the economic development which occurs when new products and services are created and sold.

56. In his Report on the competitiveness of the UK economy, Professor Michael Porter found that the UK was relatively poor at commercialising the output of its research base.[104] Our witnesses generally agreed with this analysis. QinetiQ told us that knowledge transfer was a part of innovative success where the UK had had a poor performance record in the past and that in the future the UK must: "urgently transform its ability to translate research and knowledge into innovative products and services that can provide profits."[105] The Royal Academy of Engineering told us that they had found that all too often: "UK educational sector R&D is often not turned into commercial success".[106] They believed that outputs from the research base needed to be combined with marketing and other commercial skills so that ideas could be effectively developed into successful products which would create wealth.[107]

Commercial exploitation of the research base

57. There are a number of ways in which knowledge can be transferred from the research base to business and on into the marketplace. These include:

Collaborative research: focused around the creation of new knowledge through business sponsorship of research projects and collaboration in research projects between employees of higher education institutions and business;

Spinout businesses: including encouraging higher education institutions' employees and graduates to establish businesses from their ideas and provide support for infrastructures such as science parks and incubator units for new businesses; and

Commercial exploitation of existing knowledge: incorporating the application of knowledge in the form of patents and licensing of intellectual property (IP) to business.[108]

58. The form which knowledge transfer will take in any particular case depends largely on the type of business concerned. Businesses which introduce products and services new to the market, where the potential for high growth and high added value is greater, are more likely to access new ideas directly from the research base. Other businesses, which mainly concentrate on improving existing products and services, acquire new knowledge indirectly through various diffusion mechanisms, for example through labour markets and international sources.[109]

COLLABORATIVE RESEARCH

59. The research base and business collaborate through the funding of research in higher education institutions by business, through contracts and grants (business sponsored research) or through business and/or public funding of joint research projects between employees of higher education institutions and business.

Business-sponsored research

60. A significant amount of research in higher education institutions is funded through competitive grants and contracts, mainly provided by the public sector, but with a proportion from business. Research contracts are usually projects which occur in response to a specification by the funding body, often through a process of tendering, where the terms and overhead rates are negotiated on a project by project basis.[110] Although the majority of research grant and contract income is derived from public sector budgets, evidence suggests that business sponsored research is developing in most advanced economies. The proportion of UK higher education institutions' research grant and contract income which was sourced from business increased from 11 percent in 1995/96 to 12 percent in 1999/2000 but has since fallen back to 10 percent in 2001/02. However, this decrease has been matched by an increase in the proportion of research income accounted for by UK charities (from 21% in 1995/96 to 25% in 2001/02).[111] It is difficult to make international comparisons of research grant and contract income due to differences in public sector support for research by higher education institutions and differences in accounting practices.[112] However, as a proxy, the proportion of higher education expenditures on R&D (HERD) financed by business (BE-HERD) increased in all G7 countries between 1991 and 2002, with the exception of France. During this period, the UK ranked third behind Germany and Canada amongst the G7 countries in terms of BE-HERD[113] but it is worth noting that in 2000, BE-HERD in the UK fell for the first time since 1992, a trend which continued into 2001 and 2002.[114]

Joint research

61. In joint research, higher education institutions' and businesses' employees work alongside each other on shared projects.[115] The benefits for each party from collaborating depend on their contribution to the project: "the company may provide long-term secure funding along with company data, staff and equipment. In return, the university department will offer access to skilled researchers and an international network of academics".[116] A recent study found that joint publishing, used here as a volume measure of joint research between higher education institutions and business, has increased in the UK. There was a three-fold increase in joint publications between the period 1981/85 (3,000 papers) and 1996/2000 (8,400 papers). The study also found that joint publications also increased as a proportion of all higher education institutions' research publications over the period, from 2.8 percent in the period 1981/85 to 4.5 percent in 1996/2000. The three disciplines which accounted for more than half of all higher education institution and business joint publications were chemical, medical and biological sciences.[117] This may reflect the UK's academic advantage in these disciplines, as recognised by the Lambert Review[118] and discussed in the previous section of this Report.

SPINOUTS

62. The Government aimed, through the measures announced in the Competitiveness White Paper, to: "increase by 50 per cent the number of businesses spun out each year from the public sector science and engineering base by 2002".[119] 'Spinouts' are businesses in which a higher education institution, or one of their employees, possesses an equity stake. They differ from higher education institution 'start-up' businesses in that they have been created to enable the commercial exploitation of knowledge arising from academic research (intellectual property); while start-up businesses may be formed without the direct application of higher education institution-owned intellectual property (IP).

63. In 1997/98, the UK had an estimated 500 spinout businesses where there was some form of higher education institution equity or IP ownership involved.[120] The rate at which spinout businesses were being established by higher education institutions was around 70 per year.[121] At the end of the 2001/02 financial year, the UK had just over 1,000 spinout businesses and spinout establishment rates had increased to just over 200 businesses a year, achieving the Government's Competitiveness White Paper target of a 50 percent increase in spinouts by 2002.[122] However, the rate of spinout establishment in the UK was just over half that of the US in 2002, where 400 businesses were established. Research expenditure per spinout in the UK (£15 million) was just under a third of that in the US (£48 million) suggesting that UK higher education institutions may be more entrepreneurial than their US counterparts.[123] However, the data does not include measures of the quality and value of spinouts, which may both be higher in the US. As the Lambert Report suggested, in the UK: "there are signs that […] too many spinouts are now being created, some of low quality".[124] Echoing a conclusion we had already arrived at during our inquiry into the UK biotechnology industry.[125] Nevertheless, UK higher education institutions appear to be making a respectable contribution to the formation of new businesses.

COMMERCIAL EXPLOITATION OF EXISTING KNOWLEDGE

64. Higher education institutions can seek to secure the rights to exploit their IP through patenting, and by licensing that IP to business. At the outset of a project, researchers within a higher education institution generate innovative knowledge, ideas and concepts, which may have a commercial potential and which can be protected through some form of legal IP.[126] Usually, a higher education institution will have an office or department (technology transfer office),[127] which provides advice to employees about how to protect these ideas. The technology transfer office may record an idea in the form of a brief description, which can be disclosed (disclosures) to potential users, patent agents or others while the commercial potential of the idea is judged.[128] A technology transfer office may decide that more formal IP protection should be sought for an idea and an initial patent application is filed. There may then be a delay before the patent is granted, subject to the decision of the patent office that the idea is novel and not precluded by the prior existence of another patent or existing knowledge.[129] Patents provide higher education institutions, or those deriving title from them, with the right to prevent others from manufacturing, selling, distributing, importing or using their idea, without licence or authorisation, for a fixed period, normally 20 years from the application date. Once a patent has been granted, higher education institutions can then seek to earn royalties on their IP by licensing their patent out to business.[130]

PATENTS

65. The number of patents filed (and granted) by higher education institutions in the UK provides an indicator of how successful they are at exploiting the generation of potentially commercially valuable goods and services. In 1998/99, higher education institutions filed an estimated 1,300 new patents in the UK. This was just over 10 percent of new UK patent applications.[131] In 2001/02, this number had fallen to just under 1,000 new patents filed, representing just under eight percent of all new UK patent applications.[132] The actual number of patents granted to higher education institutions is much smaller as a consequence of various filtering processes. In 1998/99, UK higher education institutions had 160 patents granted by the UK Patent Office. By 2001/02 this number had risen to just under 200, suggesting that although the absolute number of patents filed by higher education institutions in the UK has fallen, they have become more proficient at getting patents granted.

66. The UK's overall performance, not just that of its higher education institutions, in patenting against its main competitors can be measured by looking at OECD data. The OECD has developed 'patent families', which are defined as a set of patents taken in multiple countries to protect a single invention, because of the propensity for countries' inventors to file patents at their own countries' patent offices. The patent family indicators compiled by the OECD relate to patents applied for at the European Patent Office, the US Patent & Trademark Office and the Japanese Patent Office. These are often referred to as 'triadic' patents and are used as an indicator of those inventions where commercial value is likely to be highest.[133] Against the other members of the G7, the UK performs relatively poorly. The UK was ranked fifth in 1995, when population differences are taken into account, a position which it still held in 2001.[134]

LICENSING

67. Having devoted resources to the protection of their IP, higher education institutions earn income from their knowledge through licensing that IP. The search for licence partners seems to be a more commonly undertaken activity in-house than the filing of patents and the majority of higher education institutions have in-house licensing capabilities.[135] In 1998/99, UK higher education institutions exercised just under 500 licences accounting for revenues of £19 million.[136] In 2001/02, they exercised just over 600 licences accounting for revenues of £33 million.[137] International comparisons are difficult to make due to a lack of comparable data. However, the small amount of data that is available suggests that while US higher education institutions generate licence income of 2.8 percent of research expenditures, the income generated from licences by UK higher education institutions is lower at 1.1 percent.[138]

68. The evidence suggests that higher education institutions and businesses are collaborating more frequently in research projects in the UK. Both the proportion of public sector R&D funded by business and the number of papers produced jointly by employees of higher education institutions and business have increased since the Competitiveness White Paper. The UK's higher education institutions have also improved their ability to exploit the intellectual property they create through the creation of spinouts and by transferring that knowledge to the wider economy through the greater use of intellectual property rights such as patents. However, since the White Paper the UK's knowledge exploitation performance against its main competitors has been disappointing. The UK's relative position against the rest of the G7 has remained unchanged, while emerging competitors' relative performance has improved. The proportion of higher education R&D expenditure sponsored by business in the UK is falling, the quality and value of spinouts from the research base remain in question and the UK's poor patenting performance in its main commercial markets has persisted. These are all areas in which we believe the Government has a greater role to play in raising the UK's relative performance.

Intellectual property rights (IPR)

69. Within developed economies, increased policy pressure on higher education institutions to commercialise their intellectual property (IP) through collaboration with businesses has led to tensions between higher education institutions and business.[139] In the UK these concerns have focussed around which of the partners should own the rights of control over the IP (IPR), which is created from collaborative research projects.[140]

70. Negotiating the ownership of IP from higher education research projects funded through a single route, such as traditional public funding or through grants or contracts from business, is normally straightforward. IPR are usually assigned to the higher education institution when a project is publicly funded or to the business in the case of a business sponsored project. However, when research is funded jointly by the public sector and business together, the question of IPR ownership is more difficult to resolve and negotiations can become protracted. The Lambert Review of business and university collaboration concluded that finding agreement between universities and businesses on the distribution of IPR was a major barrier to greater collaboration and knowledge transfer between the research base and business: "both business and universities report significant difficulties in agreeing IP ownership terms for research collaborations"[141] and later: "IP ownership is often strongly contested in these research collaborations, because the sponsors have different interests in the rights to exploit and use the IP. Universities say that they need ownership to ensure that their future research is not held back. Industry often argues that it needs ownership to protect the investment which will be required to develop the IP into a commercial product".[142] More worryingly, the Lambert Review found that: "several businesses and universities have failed to reach agreement and walked away from collaborations because they found it too difficult to reach agreement on IP ownership".[143] Negotiations on ownership between the two sides can prove to be expensive in both time and costs, something which can be prohibitive to higher education institutions and businesses, especially SMEs with limited resources.[144]

71. The Lambert Review identified a number of objectives for improving the management of IP in research collaborations which included:

— The establishment of a simple set of ground rules for IP ownership, which would be the default position on which to build negotiations;

— Companies should have secure rights to the IP they want to commercialise it; and

— Ownership should be proportionate: the party which makes the biggest contribution to the project, intellectual as well as financial, should have first rights on the IP ownership.[145]

72. The Review recommended that the most appropriate way to meet these objectives was to introduce an 'IP Protocol', based on examples of best practice, which would provide simple 'ground rules' for negotiations: "the Funding Councils and Research Councils, in consultation with universities, the CBI and other industry groups, should agree a protocol for the ownership of IP in research collaborations".[146] The main features the suggested protocol should take included:

— The common starting point for negotiations on research collaboration terms should be that universities would own any resulting IP, with the business free to negotiate licence terms to exploit it;

— But if the business made a significant contribution it could own the IP;

— On all other terms the protocol should recommend flexibility where possible to help ensure that the deal is completed; and

— The Funding Councils and Research Councils should require universities to apply the protocol in research collaborations involving funding from any of the Councils.[147]

73. Dr Mears, Technical Director for QinetiQ, agreed that the protocol proposed by the Lambert Review would be an 'agreeable' solution to the problem of IP ownership disputes. He told us: "Richard Lambert, of course, struggled with this issue in his report and what he came through with was a successful compromise. How he has positioned the UK places IP more in the universities, and the purpose of that is to avoid it being locked up […] The disadvantage of giving intellectual property to a company is that it tends to think just about its own use of the IP, and as a result the IP may not get widely exploited. So what Richard Lambert came to was the right compromise."[148]

74. A further problem surrounding IPR that we were made aware of during our inquiry was the problems faced by IPR owners in defending and enforcing their rights once they had had a patent accepted. In a review of the effect of IP on the UK science base,[149] The Royal Society found evidence that owners of IPR were experiencing difficulties in enforcing their patents, in particular the costs of defending against a patent infringement through the Courts were deemed excessive: "high costs of dispute resolution are essentially anticompetitive since they discriminate against those with few resources, including academics, lone inventors and SMEs".[150] The belief that enforcing IPR will be a costly and time consuming business can act as a barrier to knowledge transfer as it can deter higher education institutions from adopting IPR, especially when these costs are added to those involved in negotiating IPR ownership and getting a patent granted. The Royal Society recommended that the Government should seek: "cheaper effective methods of dispute resolution"[151] and suggested improvements to the current regime could include: using a European model of dispute settlement where written evidence was accepted in place of oral evidence; and the compulsory arbitration of disputes. This view was shared by our witnesses. Mr Earnshaw, of the Royal Academy of Engineering, told us that he believed: "there are things that can be done to create simpler ways, maybe model schemes, for agreeing the commercial relationships to underpin the transfer of intellectual property".[152]

75. We asked the DTI what the Government had done since the Lambert Review was published to reduce the barriers to greater higher education institution and business collaboration.[153] They told us that the Lambert Working Group on Intellectual Property, under the chairmanship of Richard Lambert and comprising representatives from higher education and business, had been set up at their request. Its remit was to provide a range of model collaborative contracts that higher education and business partners could use when negotiating research agreements. The working group has produced its draft agreements and guidance for partners to decide which is the most suitable agreement for their particular research project.[154] Work is currently underway to make these available on the internet and the working group aims to have completed its work by spring 2005.[155] The Intellectual Property Advisory Committee (IPAC) has been set up as an advisory Non-Departmental Public Body to advise DTI Ministers and the Patent Office and identify problems with the way the IPR system works by looking for early signs of potential risk and challenges to the system. The DTI told us that the IPAC was currently subject to a performance review. The provisional conclusions from the review suggested: "IPAC has not adequately fulfilled its role and has largely disappointed the expectations of both its members and other stakeholders. It has not produced enough substantive output. Its investigations into some issues have been too protracted. It has operated with insufficiently robust or clear business processes".[156] The DTI told us that the final review was likely to recommend changes to the committee's role and the way it operated as an advisory NDPB.[157]

76. The DTI also told us that the Government had introduced a number of pieces of legislation to reduce the perceived cost of protecting IPR. These included: a Statutory Instrument,[158] due to come into effect on 1 April 2005, to extend the jurisdiction of the Patents County Court as a lower cost alternative to the High Court; and the Patents Act 2004 which allows anyone to ask the Patent Office: "for an opinion on a question of patent validity or infringement".[159] Although non-binding, the opinion offers both parties involved in a dispute over patent enforcement a quick, balanced and affordable assessment of the main issues, thus helping with negotiations and decisions over whether to litigate or settle. The Act also modernises the patents system by making changes to help with enforcement and dispute resolution.[160]

77. We look forward to the results of the Lambert Working Group on Intellectual Property and the review of the Intellectual Property Advisory Committee. We believe that the working group, combined with the introduction of legislation to resolve disputes over intellectual property, are the first steps in reducing the barriers to knowledge transfer through higher education and business collaboration. However, these measures should be seen only as a starting point. We are convinced that further intervention in this area will be required in the future as we are unsure that these initiatives will be sufficient to remove all the barriers which inhibit collaboration. More work needs to be done to enhance knowledge transfer and exploitation, especially in improving businesses' awareness of the benefits of collaborating with the research base.

Public sector support for knowledge transfer and exploitation

78. The 1998 Competitiveness White Paper committed the Government to introducing a number of programmes aimed at improving the UK's knowledge transfer and exploitation performance. These included: a new 'reach out' fund to reward universities for strategies and activities which enhanced their collaboration with business; and the Science Enterprise Challenge (SEC) to create up to eight enterprise centres at leading UK universities.[161] The White Paper also committed the Government to extending existing programmes such as the Faraday Partnerships, Teaching Company Scheme (TCS) and SMART schemes.[162]

79. Following the White Paper public funding was provided for the establishment of 12 Science Enterprise Centres through the SEC. They were introduced to provide a focus for commercialisation and entrepreneurship and were aimed at the academic staff and students of higher education institutions. Associated with this programme, Cambridge University and the Massachusetts Institute of Technology joined to establish the Cambridge-MIT Institute (CMI) to promote the international transfer of expertise in commercialisation. In parallel, the University Challenge (UC) initiative was established with funding from HM Treasury, the Wellcome Trust and the Gatsby Charitable Foundation. UC awarded grants to a limited number of institutions, establishing rolling funds to support spinouts through seed funding.[163]

80. The number of Government programmes aimed at supporting business has grown since the White Paper. Many of these programmes have been expensive to administer; difficult and confusing for businesses attempting to use them; and some have been on such a small scale that they have had very little impact. At the time of the Innovation Report,[164] the Government reviewed and changed its approach to business support. As a result: "the number of schemes to assist business are to be reduced from over a hundred to around ten".[165] The funding options available for enhancing the research base's knowledge transfer and exploitation activities is one area where this process can be seen most clearly.

HIGHER EDUCATION INNOVATION FUND (HEIF)

81. The Higher Education Reach-Out to Business and the Community Fund (HEROBC) was initiated in 1999 as a third stream of funding for higher education institutions. HEROBC complemented the funding Councils' existing dual-support funding for teaching and research and was introduced to enhance higher education institutions' knowledge transfer activities through collaboration with each other and businesses. A new fund, the Higher Education Innovation Fund (HEIF),[166] amounting to £80 million between 2001/02 and 2004/05, was announced following the 2000 Spending Review to continue and develop the earlier work of HEROBC.[167]

82. The 2002 Spending Review announced that a second round of the Higher Education Innovation Fund (HEIF2) would take place, consolidating HEIF as a permanent third stream of funding for higher education institutions.[168] HEIF2 expanded the support available under HEROBC to incorporate funding for entrepreneur training in higher education institutions and early stage commercialisation of research activities which had previously been supported through the University Challenge and Science Enterprise Challenge funds. In June 2004, it was announced that a total of 124 HEIF2 awards would be made over 2004/05 and 2005/06, worth £185 million.[169] The range of knowledge transfer and exploitation-related activities funded by the awards included: promoting networking between higher education institutions and businesses; developing the infrastructure and capability to transfer knowledge from higher education institutions into business; seed funding to provide venture capital for early stage exploitation of ideas; a network of 22 new centres for knowledge exchange activity, which will be exemplars of best practice in skills development, training and how to engage with SMEs; and entrepreneurship training and continued professional development for students and academic staff.[170]

COLLABORATIVE R&D

83. The Collaborative R&D (CR&D) programme builds on the LINK[171] scheme and provides up to 75 percent of the eligible costs of joint research projects. The programme reduces the risks associated with R&D by aiding collaboration between different businesses and between business and the UK research base.[172] The LINK scheme dates back to 1986 and provides support for pre-commercial collaborative research between businesses and research institutions. The focus of CR&D programme, however, will be on broader strategic areas of technology likely to impact across sectors and thereby engage with a greater range of business partners.[173]

KNOWLEDGE TRANSFER NETWORKS

84. Knowledge Transfer Networks (KTNs) encourage the diffusion of new and existing technology. The programme builds upon the existing 25 Faraday Partnerships,[174] which connect the research base with business through the involvement of intermediate organisations, for example Research and Technology Organisations (RTOs) or similar.[175] While this type of networking will continue under the KTN programme, the new arrangements will focus on areas of technology which the Government believes have the greatest potential to maximise UK productivity.[176]

KNOWLEDGE TRANSFER PARTNERSHIPS

85. Knowledge Transfer Partnerships (KTPs) provide direct financial support for knowledge transfer by enabling the research base to work with businesses using recently qualified graduates to undertake specific knowledge transfer projects within a business.[177] The KTP supersedes the former Teaching Company Scheme (TCS). Successive reviews of TCS have confirmed the value of this type of scheme. 80 percent of businesses that have been involved have said that they: "believe that knowledge transferred during the placement was either new to the firm or represented a considerable advance of their knowledge base".[178] The KTP grant is jointly funded by a Government department and one of the Research Councils and is paid directly to the higher education institution or research organisation. The business also provides additional funding for the placement, and staff from the business and from the research partner jointly supervise the graduate and the project. Around 900 KTPs are in progress at any one time.[179]

CAMBRIDGE-MIT (CMI)

86. Associated with the Science Enterprise Challenge programme, the Cambridge-MIT Institute (CMI), a joint collaboration between Cambridge University and the Massachusetts Institute of Technology, was contracted to promote the international transfer of expertise in the commercialisation of higher education knowledge. The CMI is a limited company and was established in 2000 with a combination of public and private funding. In their own words, the mission of CMI is to: "enhance the competitiveness, productivity and entrepreneurship of the UK economy…By improving the effectiveness of knowledge exchange between university and industry, educating leaders, creating new ideas, and developing programmes for change in universities, industry and government …Using an enduring partnership of Cambridge and MIT, and an extended network of participants."[180]

87. The CMI has initiated a range of 'bold' experiments, particularly in collaboration with businesses in areas of emerging technology. In addition, the CMI has developed a series of mid-career educational programmes aimed at delivering skills to support innovation, entrepreneurship and the profession of knowledge transfer.[181]

KNOWLEDGE INTEGRATION COMMUNITIES (KICS)

88. Taking areas of emerging technology where the UK has or could have a major international interest; the CMI has created five Knowledge Integration Communities (KICs). These are in the areas of aviation (The 'Silent' Aircraft Initiative), biology (Next-Generation Drug Discovery), communications (The Communications Innovation Institute), computing (Pervasive Computing) and innovation management. CIM has gathered together partners in the KICs to: "craft, own and run coordinated programmes of research with a consideration of use, education reform, and outreach to industry and to public bodies".[182] CMI has asked the KICs to undertake new forms of knowledge transfer, and has a team of assessors observing the communities in action.

89. Professor Michael Kelly, Executive Director of the CMI, told us that he believed that by engaging all those who were involved in taking an idea through to product, the KICs had a chance: "to accelerate the development of new products and services, and ideas will flow more rapidly from the bench to the market place".[183] The involvement of a range of experts from different disciplines had also helped guide technology choices towards greater eventual impact: "technologies which are, for any reason, unsuitable for mass deployment will be weeded out at a much earlier stage".[184] The CMI is currently seeking partners to create new KICs in sectors which it believes will have future importance to a UK knowledge-based economy. These include: financial innovation, the creative industries, product realisation, low carbon economies and future personalised healthcare systems. Professor Kelly told us that these new KICs had already started building a business community around them and he expected that in the future they would become self-sustaining through a public-private partnership.[185]

90. CMI is also in the process of developing a range of programmes aimed at transferring business knowledge into the research base and diffusing best practice amongst the higher education community in the UK. CMI has developed a short course for 'budding' student entrepreneurs, taught in part by practitioners, which has resulted in several businesses being set up by the alumni, mostly in the lower-technology sector. It has also developed a range of six taught Masters degrees, which have two-thirds technical content and one-third focuses on business, management and entrepreneurial content including a secondment within a local business. CMI is also involved in diffusing best practice. 'Model' programmes in education, research and industrial outreach are being made available to other universities within various academic networks, including their own National Competitiveness network of enterprising universities. CMI has committed itself to working with other universities to ensure that the lessons which are learnt from their experiments are made available for others to adopt and adapt as appropriate.[186]

91. The present contract with CMI extends to September 2006. Professor Kelly told us that "we are clear that the full impact of the experiments and projects upon which we are embarked will not be complete at that time, and indeed the ultimate impact of our work on the UK economy is likely to be on the 10-15 year horizon".[187] In a recent report into the CMI, the Committee of Public Accounts recommended that the contract with CMI should be continued so that the investment to date is fully exploited: "Much of the value of CMI may depend on its key activities being sustained for some time beyond the six-year funding period. There is currently no guarantee of public funding for CMI after 2006, and the Department and CMI have started to work on the sustainability of specific activities. This work needs to be accorded a high priority to give sufficient time for all available options to be creatively explored and developed."[188] In reply, the Government stated the: "DTI shares the Committee's view that, where appropriate, key activities should be sustained to ensure full value. DTI is working with CMI and other Government departments to identify opportunities for public and private sector funding to further develop the activities and models developed during Phase 1. There are for example, established government funding channels, run through competition, through which CMI can bid for resources".[189]

92. In our opinion, the Cambridge-MIT Institute (CMI) project represents a unique innovation in UK higher education. Although the Government has recognised that developing and disseminating models from the CMI is a long-term project, it has not yet committed itself to extending the contract with CMI or committed resources for the future. The Government has suggested that the CMI could bid for established Government funding through open competition. We do not believe this is the best way forward. We have no doubt that the CMI project would prove successful in bidding for such funds. However, this could preclude other research institutions from gaining valuable funding for projects which could be of equal benefit to the UK economy. We recommend that future funding for the CMI project to continue its work be committed by the Government as soon as possible. However, we do not believe that this funding should be committed over the 10 to 15 year time horizon the CMI believes it will take for the full impact of its work to be realised. Funding for the next six-year period would seem appropriate, at which time the project should be reassessed.

SCIENCE AND INNOVATION INVESTMENT FRAMEWORK 2004/2014

93. The Government published a ten-year investment framework for science and innovation alongside the 2004 Spending Review. The framework set out the Government's ambitions for UK science and innovation over the next decade, in particular its contribution to economic growth, public services, and the funding arrangements for a research system the Government believes would be capable of delivering this.[190]

94. Budget 2004 set out that science spending would increase at least in line with trend growth (2.5% per annum) over the Spending Review period 2005/06 to 2007/8. The ten-year framework document extended this commitment over the ten-year period to 2014 and underpinned the Government's target for R&D as a proportion of GDP to rise to 2.5 percent from the current level of 1.9 percent. It set out that this goal could only be achieved if the Government's commitment to invest 'substantially' in the science base was matched by the private sector and leading charitable funders. The commitments made by the Government mean that public spending on science is expected to be £1 billion higher in 2007/08 than in 2004/05. This will include: additional science funding of £365 million through the Office of Science and Technology to cover: the creation of a central funding provision of £70 million to enable Research Councils to respond more quickly to emerging priorities and opportunities; additional funding of £80 million to improve the sustainability of the UK's research base; and additional support for knowledge transfer from higher education institutions of £110 million a year.

95. Innovation funding will be channelled through a new Technology Strategy, which will be designed to ensure businesses 'pull through' technology from the science base through collaborative R&D between businesses, higher education institutions and knowledge transfer networks. Additional resources will be made available to the DfES of £250 million for investment in higher education institutions' research and knowledge transfer and is aimed at strengthening the financial sustainability of the research base. The framework document also included a comprehensive set of measures to improve the teaching and learning of science, technology and engineering throughout the education system. New commitments to achieve these ambitions included: higher salaries for Advanced Skills Teachers in science; at least one science-specialist Higher-Level Teaching Assistant in every secondary school; an increase in the value of the teacher training bursary for science graduates; and an increase in the 'golden hello' for new trainee science teachers.

96. The Government has set out its investment strategy in programmes to enhance the science and innovation performance of the UK over the next ten years in its Science and Innovation Investment Framework 2004-2014 document. We recommend our successor Committee to revisit the progress which has been made towards the knowledge driven economy towards the end of the ten-year time frame set by the 1998 Competitiveness White Paper. As part of this work, we expect that our successor Committee will also wish to review the progress which has been made with regards to the ten-year science and innovation strategy.

101 DTI, Our Competitive Future: Building the Knowledge Driven Economy, Cm 4176, December 1998, page 24 Back

102 DTI, Our Competitive Future: Building the Knowledge Driven Economy: Analysis and Background, Cm 4176, December 1998, page 14 Back

103 DTI, UK Competitiveness Indicators 2003, November 2003 Back

104 DTI/Professor M.E. Porter & C.H.M. Ketels (Institute of Strategy and Competitiveness, Harvard Business School), UK Competitiveness: Moving to the Next Stage, DTI Economics Paper No. 3, May 2003, page 16 Back

105 Appendix 18, para 1.2 Back

106 Appendix 19, para 2.3 Back

107 Ibid Back

108 HEFCE, Higher Education-Business Interaction Survey 2001-02, January 2004 Back

109 DTI/HM Treasury/DfES, Investing in Innovation: A Strategy for Science, Engineering and Technology, July 2002, page 63 Back

110 HEFCE, Higher Education-Business Interaction Survey, December 2001, page 42 Back

111 Online publication updated tables from OST, Technology and Industry Scoreboard, June 2004, table 5.1, available on the OST website (23 February 2005): www.ost.gov.uk/setstats/5/t5_1.htm Back

112 HEFCE, Higher Education-Business Interaction Survey, December 2001, page 37 Back