APPENDIX 11
Supplementary memorandum submitted by
the CBI
DEFINITION OF
MANUFACTURING
Earlier this year the CBI and the DTI together
sponsored a project to investigate the nature of modern manufacturing,
and in particular what we mean when we refer to "high value
manufacturing".
The report (available on the CBI website www.cbi.org.uk/manufacturing)
highlights that the manufacturing value chain includes a range
of activities from the conception to the delivery of a product,
including research and development, design, production, logistics
and after-sales service provision.
The value chain as described is growing increasingly
fragmented, with elements of the manufacturing process likely
to be carried out in different countries or by different companies.
Production itself is becoming less important as a defining factor
for manufacturing companies, many instead opting to focus on R&D
or service provision.
This extended definition of manufacturing has
significant statistical implications. The current measures of
manufacturing output and manufacturing employment are likely to
overlook significant proportions of the manufacturing sector as
defined above, It is vital that policy decisions are based in
future on an accurate representation of the sector.
Manufacturing as a process is broader in scope
than simply production, and the boundaries between manufacturing
and service industries are disintegrating. Government policies
that do not embrace this shift will address only a small part
of the problems facing manufacturing companies.
OFFICE OF
SCIENCE AND
INNOVATION
The CBI welcomed the creation of the Office
of Science and Innovation (OSI) earlier this year, and maintains
a close working relationship with senior officials. The CBI also
enjoys a close relationship with the Technology Strategy Board
(TSB), whom we believe should take a more central leadership role
in the determination of national innovation priorities. The recent
decision to increase the independence of the TSB by placing it
at arm's length from central government is therefore welcome,
But we urge government to remain ambitious when setting the detailed
remit for the enhanced TSB and to ensure that it receives adequate
funding: we estimate that an effective TSB should command a budget
of around £625 million a year (equivalent to the budget for
EPSRC).
It is conceivable that some of the functions
currently performed within OSI could be transferred to an enhanced
TSB. In principle, we would have no objections to the transfer
of responsibilities if they added to the Board's ability to steer
and deliver an effective strategy.
But for the sake of managerial and policy stability,
it is important that the Office of Science and Innovation avoids
significant changes in the near future, beyond any which might
arise from the extension of the TSB's remit.
Nevertheless, we continue to remind government
that, having brought science and innovation together, excessive
focus must not be placed on science and technology at the expense
of innovation. Innovation is broader than research and development,
science and technology, and the CBI will continue to lobby for
an appropriate focus on the full breadth of innovation.
I hope your discussion with the CBI Manufacturing
Council was valuable to your work in this area, and I trust this
letter has clarified the CBI position on the two issues mentioned.
I look forward to exploring these and other issues with you when
the CBI gives oral evidence to the Trade & Industry Select
Committee in January.
16 November 2006
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