Examination of Witnesses (Questions 20-39)|
BENDER, KCB AND
24 OCTOBER 2006
Q20 Mr Clapham: Secretary of State,
picking up the point on innovation, I am looking at your Business
Plan 2006-08, section 2: Promoting World-Class Science and Innovation.
You go on to say that one of the things that could be done is
to increase business engagement and demand for knowledge and innovations.
It seems to me that this is a terrifically important area, that
engagement with industry, that stimulation for them to take on
knowledge and innovation, but precisely how will that be done?
Mr Darling: Brian Bender has just
mentioned the Technology Strategy Board which has been set up
for a couple of years and will now be an arms-length body precisely
because we want to bring business and what is happening with research
and development closer together; that is absolutely essential.
That is one level that is being done. There are also other levels
as well: universities, for example, are getting much better at
working closely with businesses. Some of the clusters that are
building up in places like Southampton, York, Glasgow, Oxford
and Cambridge, Imperial, you name it, they are doing an awful
lot more. The Government can stimulate that because we do support
that financially but the Technology Strategy Board is a high level
way in which we are doing that. I am very struck by the fact that
what has worked in places like America and other countries is
where you actually get the critical mass of business, science,
finance, design, the whole lot coming together.
Q21 Mr Clapham: Do the RDAs have
a part to play in that?
Mr Darling: Yes, they do. The
RDAs are very important. Obviously by definition they are focused
on the regions. It is very important that we do not become too
London-centric about these things. The RDAs work closely with
universities, they work closely with companies and others doing
research and they are very important.
Q22 Mr Clapham: Looking at British
business, many of the surveys that have been done over the years
indicate that we invest less in R&D than some of our main
competitors. What could we do to change that and what are you
doing to make sure that changes?
Mr Darling: There are a couple
of things here. One is the shape of our economy over the years
has changed. Nearly 70% of it is now services. There are two things
I would say about that. Our R&D tends to be slightly different
and I am not sure we are managing to capture that information
sufficiently because it ought to be reflected in what we do. In
relation to R&D generally, the single biggest thing I would
draw attention to is the tax credits. I was saying last night
to the Royal Society that over the last few years we have spent
£1.8 billion helping 22,000 companies helping their research
in science, helping them innovate and that is a huge help. It
would be a huge mistake, as some people suggest, to get rid of
tax credits. Of course there are always going to be arguments
as to what exactly is research and development and what qualifies,
but that is a very important way of encouraging it. We have nearly
doubled what we spent on Science and Innovation in the last nine
years and that is having an effect on universities. It also has
an effect on companies who can see good things are happening in
these universities. Rolls-Royce, for example, offers a number
of agreements with universities to do specific research. If you
create the right ambience, the right climate, it will be a result.
We have had years of underinvestment in this and we have done
a lot. Obviously there is still more to do but it is very, very
important. This is frankly where the jobs are going to come from
in the future.
Q23 Mr Clapham: It is fair to say
that there is a real determination to ensure that there is more
investigation in research and development and to do that by stimulating
industry in a way that it is going to be directed to invest.
Mr Darling: I think that is true.
Obviously this comes back to the point that was being raised right
at the start. Government can do so much but it will only work
if you have the universities, the research institutions, the companies,
all moving in the same direction. If you look at pharmaceuticals,
for example, or aerospace to give another example, these are areas
where we have made huge advances through research and these companies
themselves are alive to the fact that if they are going to compete
in the future they are going to have to do more research and development.
Companies need to focus on the fact that you can get by for only
so long if you do not do any research and development but sooner
or later it will catch up with you. I hope that what the Government
is doing complements what business is doing in a whole range of
areas but I am absolutely certain that this moneyover half
of what the DTI spendsis absolutely essential.
Q24 Chairman: You have said all the
usual things. Frankly, there is no answer to this, is there? It
has slipped through the fingers of successive secretaries of state.
Mr Darling: What has?
Q25 Chairman: The need to increase
expenditure on R&D. It is a worry to you surely?
Mr Darling: Obviously it is important
that we increase the amount of money being spent on R&D. What
is different is that over the last nine years we have doubled
the amount we spend. It is not possible for a government to pass
a law to say that company X ought to be spending more money on
research and development.
Q26 Chairman: You have a target in
the PSA for research but not for development.
Mr Darling: Yes, but development
is rather more difficult. If we had a target how would one expect
it to be enforced? Do we have to walk up to Rolls-Royce and say
"I demand that you develop a new engine"? We used to
in the old days and say "And we will buy the aeroplane you
make", but we cannot do that now.
Q27 Roger Berry: The DTI's Business
Plan on page six, last paragraph, says: "We will lead the
innovation agenda across government and the regions, establish
four Innovation Platforms across Whitehall with action plans to
promote UK wealth creation through linking innovation levers to
public procurement opportunities." What is that all about?
Mr Darling: We have just published
the transport part. What it is looking at is how we can help promote
or encourage people to innovate in different sectors that we think
are important. As I have said on a number of occasions, you cannot
do it all yourself within the DTI but there are things that government
can do. In Transport, for example, unless the Government spends
the money it is not going to come from other sectors although
there are things that we can draw on in terms of logistics, in
terms of technology and so on. What we are trying to do is to
see how government can complement the efforts of people from outside.
Q28 Roger Berry: How can public procurement
opportunities be used to encourage innovation? What plans do you
have in mind to use public procurement policy to promote innovation?
Mr Darling: Transport is a case
in point where the main driver that underpins Transport is what
the Government spends. Most of it is coming from there. For example,
were the Government to go down the road of road pricing, which
we are looking into at the moment, the Government will have to
procure various things to make that happen. That will clearly
influence the market and will clearly influence Transport development.
You raise a more general point on government procurement. The
Government has massive buying power. The Committee are probably
aware that Lord Hollick has been looking at how the Government
does use that power. One of the things that concerns me is if
you are not careful you can have all sorts of priorities in relation
to procurement: there is value for money; more energy efficient;
encourage innovation, and so on. If you spread the thing too wide
you will lose the impact. We need to concentrate on those areas
where we can make a difference, but government placing a contract
or causing a contract to be placed can hugely influence the rate
at which something is developed or something is brought on. We
need to do more to exploit that possibility.
Q29 Roger Berry: The other point
of this interesting paragraph is "four Innovation Platforms
across Whitehall". One has this vision of physical platforms.
What exactly are these four Innovation Platforms? What do they
Mr Darling: I have a lot of sympathy
about some of the words that are used. I have said to the DTI
officials that I will give a prize to the first person who can
write a submission that does not have the word "stakeholder"
in it. So far, the prize is still in my wallet despite my best
endeavours. When I too read "platforms" one has a vision
of stages being erected around Whitehall with people falling off
them. That might be the answer and perhaps we should try that
one. What you are looking at is you are bringing people together,
you are bringing policies together. It would have been far better
if we had phrased it that way. Your point is taken about some
of the florid language used in these reports and it is well made.
Q30 Roger Berry: What are the four
platforms? Why are there four and not six?
Mr Darling: The Transport one
we have just published. What we are looking at is how different
departments impact upon Transport policies and the development
of those policies, their impact on people. That is what it is
really talking about. It might be better if next year we actually
say that in plain language.
Sir Brian Bender: The origin of
the number and the thinking is the Technology Strategy Board itself.
This business-led board recommended these areas as ones that were
cross-government and would provide the basis for possible technology
development and business benefit. As the Secretary of State said,
the one that we have actually gone as far as launching is the
one on Transport.
Q31 Roger Berry: The other three
Sir Brian Bender: They are in
the Technology Strategy Board Report. We can provide the Committee
with a note on it.
Q32 Chairman: I welcome your comments
on language. It goes on about "innovation levers" and
goodness knows what they are. It is very difficult to read this
Mr Darling: Let me have a list
of the top 10 words you do not want to see in next year's report.
Q33 Mrs Curtis-Thomas: We have Transport
as one of the innovative platforms but you are not sure what the
other three are. Does Construction strike any bells? Have you
got an innovation platform around Construction?
Mr Darling: I do not think it
Q34 Mrs Curtis-Thomas: I can understand
Transport, Secretary of State, or understand enough of it, but
what about Construction and Manufacturing?
Mr Darling: Construction and Manufacturing
are things that cover an awful lot of technologies. Clearly they
are both very important. I understand too your interest in Construction.
Q35 Mrs Curtis-Thomas: Have we got
a specific platform for them?
Mr Darling: I do not think that
we do. You cannot have a platform for everything after all. There
are two things: one is presentational. When next year's report
and next year's Business Planfor which I shall be wholly
responsiblebeing that hostage to fortune I am prepared
to offer, we will try and write it with plain English. The most
serious point is that what we are trying to do working with business
and with others is to identify those areas where one of the by-products
of course is to encourage construction and other things, and those
areas where I think we can develop either procurement policies
or develop policies themselves in terms of what we do will not
just benefit this country, but benefit the companies in this country
Q36 Mrs Curtis-Thomas: What I would
like to do is to make a bid for Construction, given that we have
a huge public procurement process around Construction and built
environment and I am very keen to see many of the objectives around
sustainable energy delivered in our public Construction programme.
I would be very grateful if some consideration could be given
about this very important area.
Mr Darling: I can offer you some
encouragement there. In part of the Energy Review we are looking
at how we can reduce our demand for energy in the first place
which means we have got to look at buildings that are more energy
efficient. One of the things that we need to look at is that when
you consider the cost of construction of a building are you prepared
to pay more at this stage in order for it to be more energy efficient,
or should we go down the traditional route which is basically
we take the lowest price and the lowest price usually means that
you probably have to spend more on running costs. It is important
to encourage this. You are absolutely right to identify the fact
that there are many people in the construction field who have
very good innovative ideas of how you design buildings, how you
improve their efficiency and it is something that needs to be
encouraged. I repeat the point that just because you do not have
one of these platforms it does not mean that it is not important;
it is important. The White Paper on the outcome of the set-up
costs will have something more to say about that, as it will about
procurement, which of course is tied into it.
Q37 Chairman: Construction is something
to which the Committee may well return at a later date.
Mr Darling: Understandably so.
It is very important.
Q38 Mr Binley: The DTI has succeeded
in reducing the number and complexity of business support schemes
sponsored by the Department from about 170 to six, which is quite
a remarkable feat it seems to me. I do not know whether your involvement
has had that effect or whether it was the responsibility of your
predecessor. Business is still baffled in truth by the plethora
of schemes run by other departments, in particular local government.
The Minister for Industry has pledged a cull of the 3,000 remaining
schemes. How will you achieve this? What leverage do you have
over those other bodies who are presumably all attached to their
Mr Darling: Two things: firstly,
I cannot claim credit for those previous ones, although constitutionally
I am responsible for whatever my predecessors happen to have done
whether I knew about it or not, that is the way it is, even ones
in different parties. That is the way the constitution works in
this country. You are right that business frequently does find
itself baffled and even if you have good things if people do not
know about it or cannot work their way through all these things
you are not able to take advantage of it. We have said that we
want to rationalise it. I think we can do it. You correctly identify
the fact that I think of the 3,000 something like half of them
are the responsibility of local government. The Government does
have influence over local government, not least because it pays
for a very large part of it, but if you look at these schemes,
some of which appeared in a Financial Times article within
the last 10 days or so, some of them, for example, provided Christmas
lights in three towns and so on. That might be a very worthy thing
to do, but I do not know whether it is a business scheme as such
that appears to only apply in a few towns, I have my doubts. Whether
you are a national government or a local government you have to
keep it simple. You need to ask yourself what do we need to do?
What would actually make a difference rather than a whole lot
of stuff that might be nice to have but I am not sure advances
any of the things that we need to advance.
Sir Brian Bender: Our approach
towards this is trying to group what their purpose is and a starting
point is to say can we get them into a handful or maybe two handfuls
of subject areas like Environment, Innovation, Enterprise, Financial,
Skills and so on, and then bear down through each of the providers
whether it is a government department or with local government
through the RDAs and Government Offices, to see whether they can
brigade in that way. But this work is at a fairly early stage.
Q39 Mr Binley: Let me lead on from
that because your first answer on the subject we talked about
right at the very beginning: you said you do not rush in before
you analyse what the problem is, and yet this plethora of schemes
seems to suggest that there has been a lot of rushing in truth.
It is very easy to roll out projects but we often do not monitor
them and government particularly is not the best at monitoring
and understanding what those projects achieve. Can I ask what
evidence-based monitoring you have used to be able to concentrate
your projects down to the areas that are really going to make
an impact in the important areas you target?
Mr Darling: Two things: firstly,
it is self-evident that if you have 3,000 schemes supporting businesses
it is too many and you do not need much research to tell you that.
It is a commonsense approach. If you are a business somewhere
in the Midlands and you are looking for support and someone gives
you a list of 3,000 names you throw up your hands in horror. It
is not rocket science, it is commonsense and that is what politicians
are supposed to bring to this. It is true that once you start
going into them there is something called the Effluent Online
Club or something. As of today I am not in a position to let you
know whether this is a good or a bad thing. You do need to look
at these things because clearly there are various things that
have been announced over the years where they are announced in
response to a particular purpose. That does not mean you abolish
them; it may just mean that you make it simpler. As Brian was
saying, if you are a business and you say what help can I get
to become more energy efficient, it must be possible for us to
reduce down to a very small number things the Government can help
you with, or the RDA can help you with, so you say do I qualify
for that? Can I get it? You can answer it in 10 minutes and not
in 10 years.