Select Committee on Defence Seventh Report

5  Research and technology


52. Section A5 of the DIS considers defence research technology and innovation and Section B11 considers the technological priorities to enable defence capability and considers the "critical underpinning and cross cutting technologies that need to be sustained in the UK in support of sectoral strategies".[96] The DIS acknowledges the importance of defence Research and Technology (R&T):

    to support the industrial capabilities identified across the sectoral analysis there are a number of areas in which the UK must sustain existing technological strengths or where we should, resources permitting, consider developing our expertise. There are other technologies showing promise across a range of defence applications that may have either a large impact on specific defence capabilities or a more widespread impact across many aspects of defence. These are provisionally identified in the DIS, but we recognise we will need further work in 2006 to inform our research and technology priorities.[97]

53. Sir John Chisholm, Executive Chairman of QinetiQ, told us that "we have counted that there are some 600 mentions in the DIS to the words 'research, technology and innovation'".[98]

54. Table 4 provides examples from the evidence we received of the comments and concerns about defence R&T.

Table 4: Comments and concerns about defence research and technology
Comments and concerns about defence research and technology
QinetiQ "there is a disparity in the treatment of the research supply base compared with other sectors. Although the importance of research and innovation is mentioned throughout the document, the implications of the continual decline in research are not addressed".[99]

"The Committee should look carefully at how MoD intends to take forward DIS implementation to ensure the research supply base is treated strategically like the other market sectors addressed in the White Paper, and should seek to gain assurance that fragmentation will not cause existing, relevant defence centres of excellence to become non-viable".[100]

Society of British Aerospace Companies "It was a key element of industry's case for the DIS that there needed to be enough investment in Science and Technology to support the future needs of the Armed Forces. As Section C2.5 of the DIS shows, there is a good deal more work to be done before the UK has a full analysis of the resources needed to acquire the technology and to match it to future capability plans. Industry has always suspected that more resource is needed to sustain our Armed Forces".[101]

"Arguably, the R&T aspects of the DIS are the least joined up with industry, which is surprising given the regular dialogue between Government and industry. Industry would like to see a more overt commitment from Government to nurture the UK's industrial capability to undertake science and technology and also its links with the universities, which can be a fruitful source of innovation".[102]

Defence Manufacturers Association "The DIS notes that R&T is "critical to the delivery of battle winning capability" and then goes on to make a powerful business case for R&T investment. It is disappointing, therefore, that there is then no commitment to increase defence research spending".[103]
EADS UK Ltd "the DIS is not definitive about the MoD's R&T strategy, with much of the detail to be fleshed out over the next 12 months".

Funding of Defence Research and Technology

55. The DIS acknowledges that "well targeted investment in R&T is a critical enabler of our national defence capability".[104] The DIS notes that many nations with growing economic wealth are now investing heavily in R&T. It states that:

    Although UK investment in [the total of defence and civil] R&T has risen in cash terms, it fell as a proportion of GDP from 2.3% of GDP in 1981 to 1.9% now. There exists a risk that in the coming decades the UK could fall behind both our key allies and emerging economies in our ability to support sophisticated and competitive technology based industries. We could become increasingly dependent on defence technology solutions generated by other countries, including those developed from civil applications.[105]

56. A study sponsored by the MoD analysed eleven major defence capable nations and showed a highly significant correlation between equipment capability and R&T investment in the last 5-30 years.[106] The DIS states that the study showed that:

    there is a simple 'you get what you pay for' relationship between R&T spend and equipment quality, with a sharp law of diminishing returns, and that R&T investment buys a time advantage over open market equipment.[107]

The UK is currently in a relatively good position, reflecting high R&T expenditure in the past, but the gap with the US is growing.

57. The National Audit Office reported that the MoD's spending on research in 2001-02 had fallen by 30 per cent in real terms since 1994-95.[108] Sir John Chisholm argued that R&T expenditure should be increased and that, if it were not, the consequence would be lower quality equipment in the future.[109] He called for a 25 per cent increase in defence research funding:

    We have done a calculation and it runs along the lines that if defence expenditure has reduced by 50% in real terms over this period of time and it was that defence expenditure which gave us the equipment today which we feel satisfied with, you might argue that you need to increase defence expenditure back to where it was. We could mitigate that a little by saying that surely we are more efficient now than we were 15 years ago, but an increase of the order of 25% is what we believe would be a sensible policy decision.[110]

58. We sought to examine further the impact of the reduced level of funding of defence R&T. Mr Ferrero said that as he looked at QinetiQ's laboratories today he could "see a constant reduction in government investment in these [key] technologies and, ultimately, a reduction in the level of innovation that is coming out of the labs".[111] Sir John Chisholm stated that the decline in research funding had resulted in less resources for the laboratories. Once funding fell below a critical level, QinetiQ had to stop doing some types of research.[112] Sir John told us that:

    In recent years what we have seen is that the remaining funding has gone as a proportion more to shorter-term research which supports more urgent needs and therefore the larger cutbacks tend to fall upon the longer term, more generic research which is the area from which many of the more profound developments in technology eventually emerge.[113]

59. We found it worrying to hear that one of the areas where there had been reductions in research funding was sensor systems, which in the past had produced important innovations such as thermal imaging.[114] It is also of concern that reductions in R&T funding have made it more difficult to recruit and retain high quality researchers.[115]

60. QinetiQ saw itself as providing an important link in the chain between MoD, the customer, and the supply base, which included SMEs and universities. The company recognised the importance of SMEs in relation to R&T and was developing SME partnerships and university partnerships to capture efficiently these niche capabilities.[116] In contrast, the Chairman of the DIC considered that very little R&T took place in SMEs, although he acknowledged that they did participate in some R&T programmes.[117]

61. We asked the Minister what further work, following the publication of the DIS, needed to be undertaken in relation to R&T and when this work would be completed. Lord Drayson emphasised that the UK was the second biggest spender on defence research, but recognised that the MoD could improve "the value" it got from the defence research undertaken. He also acknowledged that the MoD needed to improve the performance in bringing through the outputs of research to making a difference to defence capability.[118] The MoD would publish a Technology Strategy in 2006 which would seek to address these issues, and would "look at the balance of where we are making our research spending". The MoD would open up more of its research spending to competition.[119]

62. We asked the Minister about Sir John Chisholm's proposal that funding on defence research should increase by 25 per cent. Lord Drayson said he wanted the MoD to make decisions based upon data and that "what we are going to be prioritising this year is more emphasis on excellence".[120] He considered that before thought was given to how much money should be spent on defence research, it was important to make sure that the money was spent wisely. The MoD's policy was to increase its defence research spending in line with inflation, but the MoD would "look at whether we have got that balance right".[121]

63. We are concerned that the decline in defence research spending will impact upon the quality of future equipment for the armed forces. We look to the MoD to address the level of spending on defence research in its Technology Strategy to be published this year. It would be useful if the Technology Strategy could set out clearly the level of defence research spending by Government and industry over time.

64. We look to the MoD to make a strong case for increased funding of defence research during the discussions with HM Treasury on the Comprehensive Spending Review. We see this as a key investment for the future.

Centres of Excellence

65. QinetiQ's submission identified a gap in the DIS which is the role played by Research and Technology Organisations (RTOs). In addition to QinetiQ's businesses, the RTOs included: Roke Manor, ERA, AEA, PA Technology and Government organisations such as Dstl. QinetiQ's submission pointed to a risk that fragmentation of the research supply base could result in defence research "Centres of Excellence" becoming non-viable.[122]

66. Sir John Chisholm considered that it was important to encourage the Centres of Excellence rather than undermine them by spreading the available resources too thinly.[123] Lord Drayson acknowledged that the Centres of Excellence in military research worked well and was a model which had been used very successfully in the pharmaceutical industry. He told us that "Centres of Excellence are definitely working for us. It is an example of a new approach to the management of R&D which is giving benefits".[124] We expect the further work on Research and Technology to encourage and maintain the Centres of Excellence for defence-related research.

96   Cm 6697, pp 38-45, pp 122-124, paras B11.1 Back

97   Cm 6697, para xxxxv Back

98   Q 184 Back

99   Ev 78 Back

100   Ev 80 Back

101   Ev 82 Back

102   Ev 83 Back

103   Ev 92 Back

104   Cm 6697, para A5.2 Back

105   Cm 6697, para A5.7 Back

106   Cm 6697, p 39, Figure A5(i)-Capability Advantage from R&D Investment Back

107   Cm 6697, para A5.8 Back

108   National Audit Office, The Management of Defence Research and Technology, HC 360, Session 2003-2004, Table 4, page 9 Back

109   Q 185 Back

110   Q 198 Back

111   Q 136 Back

112   Q 192 Back

113   Ibid Back

114   Q 193 Back

115   Q 197 Back

116   Q 208 Back

117   Q 272 Back

118   Q 300 Back

119   Ibid Back

120   Q 301 Back

121   Q 302 Back

122   Ev 79-80 Back

123   Q 210 Back

124   Q 304 Back

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