Select Committee on Innovation, Universities, Science and Skills Minutes of Evidence

Examination of Witnesses (Questions 1-19)


21 NOVEMBER 2007

  Q1 Chairman: Could we welcome this morning, to our very first oral witness to the new Innovation, Universities and Skills Select Committee, Lord Sainsbury discussing his publication of The Race to the Top. You are very welcome to this Committee and we are grateful to you for coming at such incredibly short notice; it is greatly appreciated. You stood down as science minister, having done an excellent job, and secured significant additional resources for science and innovation. How did your involvement with this Review come about?

  Lord Sainsbury of Turville: It came about because when I told the then Chancellor of the Exchequer that I was leaving government he said he would like me to do one last thing, which was to do this report as part of the Comprehensive Spending Review. I was delighted to do that because there were issues which still needed thought. The Chancellor also said that he wanted to have a look at science and innovation policies in the context of how we compete against countries like China and India which have 5% of our wage costs. He is very concerned that if we do not have a clear strategy for competing with them then the call for protectionism will rise and will be very difficult to resist, and you can see this happening now in America. I was very delighted to do it in that context.

  Q2  Chairman: You have always been noted as a fairly radical thinker within your portfolio and yet when you launched this report you made it clear that you had consulted widely on the report and you had taken a lot of views together. Is this a consensus report and, if so, were their areas where you would have liked to be more radical? Is this a summary of the lowest common denominator or is it the radical report which you would have liked if you had a totally free hand?

  Lord Sainsbury of Turville: I do actually believe in participation, particularly in policy making. I do not think it is actually a very good procedure to have review groups like this which just call for evidence and then go off, make up their mind what should happen and then say these are the answers. I just do not think one has enough knowledge of the practicalities to do that. Therefore, I was very keen that not only do we have meetings with all the actors but that we actually told them what we thought the problems and opportunities were, agreed with them what they also saw, and then involved them in the policy making. I think that has two advantages: one, it means what you put forward is better because it is more grounded in reality; and, secondly, when it comes to implementation you have buy-in from the people who are going to implement it which is hugely helpful.

  Q3  Chairman: When you launched the report at Downing Street it was very evident that virtually all the stakeholders were universally supportive of what you recommended and that is quite unusual.

  Lord Sainsbury of Turville: It was a very good report. The question you asked is did I want to do some other things and did I temper that to get consensus, and the answer is no; there is not anything that I would like to have done and proposed which is not in this report.

  Q4  Chairman: You used the term, which is being widely quoted, of an innovation ecosystem, which was an interesting concept early on in the report. It differed significantly from, if you like, the old innovation framework which was of a linear single line continuum from research right through to delivery of product. How did you come to hit on that as an idea? Why was that so important? It is a very significantly different way of looking at the innovation system.

  Lord Sainsbury of Turville: Basically because I think it is the right way to look at it.

  Q5  Chairman: It is radically different.

  Lord Sainsbury of Turville: Let me say why I think it is the right thing and then why it appears to differ from what sometimes we have said in the past. Everyone now agrees that the kind of linear model, where you put technology and science in one end and product and services come out the other, is not a good representation of what happens. It is much more like an ecosystem. There are all kinds of interchange of knowledge, a lot of feedback and so on. If you want to characterise this, ecosystem is a much better term. At the same time, you have to be practical about how government intervenes in these situations. The reality is you cannot get involved in trying to make the ecosystem work better other than in two contexts: one is the supply side. You can help on education, venture capital, which is the supply side, and you can also help in terms of at least the demand side as far as government is concerned. While I think it is right to call it an ecosystem, the practicalities are you, in fact, intervene at the two ends. I want to make it clear we saw it as an ecosystem but equally it is not the role of government to try to get in there and intervene in very complicated processes which go on with innovation.

  Q6  Chairman: It is interesting that the minister for science said this was simply fine tuning. There seems to be a great difference between what you saw as quite a significant change in actually looking at the innovation chain as an ecosystem rather than fine tuning a system that is working perfectly well. Is there a contradiction there?

  Lord Sainsbury of Turville: No. I think in terms of changes of policy it makes very little difference except in one regard where I think we have probably moved our views. If you go back four or five years when we were first trying to get people to think about supporting high tech clusters, we went along with the then conventional view that there are clusters which are very industry focused and perhaps RDAs and other bodies could do more to support specific hi-tech clusters. I certainly feel that now is not the right approach and actually a rather more general kind of policy, which is just to encourage hi-tech clusters around universities, is a better approach. What one sees is that actually hi-tech clusters actually change over time. Whether it is Cambridge or Silicon Valley, they are not just about one industry but about an innovation ecology and they change. Both Cambridge and Silicon Valley started in electronics, both of them at a particular time became much more focused on biotech and both of them are now moving more into the internet field. I think that is rather significant because it shows these are ecologies, they do change, and you can support the conditions for those but you should not try to get involved to the extent of saying we are supporting a particular kind of technology.

  Q7  Chairman: One of the critical voices was the TUC who said that you had not followed through the logic of your report and that really you ought to be picking winners, if I can summarise their position. What is your response to that? You made it very clear that government should not be in the job of picking winners and it is up to the market to do that. There seems to be a problem with the TUC, the two ends of the continuum: one of letting the market rip and one of being able to put your resources specifically into key areas that you think are going to create jobs and wealth.

  Lord Sainsbury of Turville: There are three kinds of positions that you can take on this issue of micro-economic policy. One, you can say, is a right-wing view which is simply it is all up to the market, nothing to do with government, the market should just get on with it. There is another view which really says that governments should get involved in commercial decisions and try to steer industry in particular directions. My own view, and I think the government's view, has been there is a role for government but it is about creating the right conditions for industry, and government should not get involved in any way in commercial decisions. What that means in practice is it is right for the government to give incentives to universities to do knowledge transfer. That is not saying you should transfer a particular piece of knowledge or support a particular company but it is giving the right incentives. In the case of technology, it is right for the TSB to support technology in new areas which it thinks is commercially very important but it should not be getting into this is the kind of product which should be actually developed. If you are going to get involved in applied research, which I would prefer to call user-driven research to make the point clear, then it should be user-driven research and should be driven by industry and industry needs not by government saying this is the kind of product you should develop.

  Q8  Chairman: You started your remarks this morning, and you have made this point very, very clearly in the report, that we cannot compete with a low wage economy which is working at incredibly low wages in China and India and that the race to the top is really about developing a higher value-added knowledge intense economy in the 21st century. What happens when India and China also get to the top, because they are racing even faster than we are to move out of low wage economies into high value-added knowledge based economies too? What happens when we all get there?

  Lord Sainsbury of Turville: This is an interesting point. We described the point in the report as a race to the top because in some aspects it is a race but it is a rather important kind of race. First of all, it is not a zero sum race; it is a race in which everyone can have prizes.

  Q9  Chairman: That is my kind of race.

  Lord Sainsbury of Turville: Chris Woodhead would be really upset about this. Everyone can be winners. China and India can grow very rapidly, we can grow very rapidly and, on the other hand, you can also be a loser. If you do not go into high value-added products and services and India and China are coming up, you can actually be a loser. The other thing is there is not a finishing line. There is not a point at which you can say this is the end of the race so we will be moving ahead and other countries will be moving ahead. China and India will be coming forward but they may not catch us up and there will be a changing pattern, as there has been a changing pattern throughout economic history. There was a moment when Holland was the leader then the UK and then in due course America took over. This a changing pattern and there is not a finishing line. I do not think we all get to the top and that is the end of it is a realistic scenario.

  Q10  Chairman: People often fall off the top, as I remember from my climbing days.

  Lord Sainsbury of Turville: The problem is there is not a top and there is not a finishing line. This will be a process which will go on with different countries taking the leadership role probably indefinitely.

  Q11  Dr Blackman-Woods: You will know, largely because you were very involved in this, the government has been trying to improve knowledge transfer for quite some time. Can you tell us what your view added to that and why is it strategically important at this time?

  Lord Sainsbury of Turville: For eight or nine years we have been putting in place policies to encourage knowledge transfer: University Challenge, science enterprise centres and then we put it all together to simplify it into HEIF. I hope the report makes it clear that this has been very successful. We are now getting knowledge transfer from our universities which is comparable to the situation in America and probably, in that sense, ahead of most other countries in the world. I think we should not rest there. There are some opportunities to go further and we suggest four areas: we want rather more specific targets for research councils; we think there is a big opportunity with the business facing universities; we have seen a situation where the world class research universities are doing very well in knowledge transfer. There is a big opportunity for other universities to do knowledge transfer. We think FE colleges could be brought into knowledge transfer. That would be good both for the teaching and also for their morale and the feeling they can contribute particularly to those areas where there is not a university around. We want to double the number of knowledge transfer partnerships and introduce mini-KTPs. Those were all good ways of taking this agenda forward.

  Q12  Dr Blackman-Woods: Could I ask you to comment on the various sectors and tell us what you think was critical in your report in terms of changing the direction or giving them a different focus? Could we start with the Technology Strategy Board which you mentioned earlier?

  Lord Sainsbury of Turville: The Technology Strategy Board has been a success. It has done what we asked it to do in terms of the knowledge transfer partnerships and collaborative R&D. I think it has now a lot of goodwill behind it from industry and the research community. We feel that now it is an executive non-departmental public body it could have more of a leadership role because the system of supporting technology development is very fragmented across government. We are very keen it brings together the work done by RDAs, research councils, particularly it has an important role in terms of working with government departments because that is an area where we still have a long way to go. The innovation platform is a very good way of pushing that agenda forward. Also in emerging technologies, bringing together the various arms of government in areas like standards and metrology research is very helpful. Then in a rather broader sense you find that all the different bodies, if you are not careful, start saying we must have a strategy for biotechnology. North East Regional Development Council say they need to know what a biotechnology strategy should be so they go off and do some consultancy and get it done. The consultancy goes and talks to the biotech industry and the report is produced. Then the South West Regional Development Agency say they need a biotechnology strategy and invariably they go to the same consultancy who changes the name on the top, presents it, and they get fees for that. Then UKTI say they have to have a strategy for biotechnology and they go and talk to industry. Industry is getting rather fed up by this point so we are rather keen that the Technology Strategy Board has responsibility for putting in place those things and other bodies feed off that overall view of technology development.

  Q13  Dr Blackman-Woods: If you see the Technology Strategy Board having this leadership role, how would you summarise the role of the higher education sector the research councils and the RDAs?

  Lord Sainsbury of Turville: They all have clear but different roles. The role of the Technology Strategy Board is to have a clear view of what is happening in different high technology industries and what is the kind of support that can be given to technology development in those areas and to pool that all together.

  Q14  Dr Blackman-Woods: Can you say something more about what you think the key direction of higher education and the research councils and the RDAs are to that core process of knowledge transfer?

  Lord Sainsbury of Turville: They all have different roles in that. Obviously it is absolutely central to what the TSB is doing. It is one of the three objectives now of universities: teaching, research and now the third stream of knowledge transfer. Research councils are basically focused on funding research but I think in some rather specific areas they have a responsibility for knowledge transfer, particularly in their own research institutes. Of course RDAs have a number of responsibilities which we have given them which also relate to knowledge transfer.

  Q15  Dr Blackman-Woods: Do you think RDAs are equipped to do that? We all have experienced difficulties in our regions of the RDA knowing what to fund and when?

  Lord Sainsbury of Turville: There are a number of schemes which are about supporting innovation in companies which have been devolved to the RDAs. This is wholly right because trying to do all at the centre of Whitehall is not necessarily sensible. I do think the whole situation needs to be put on a slightly more organised basis in the sense that there should be a standard. This work is now going on because we really have far too many schemes out there. There is now a lot of work going on to reduce this to maybe 10 or 20 schemes and actually have a national specification of what the scheme should be. It is then up to the RDA as to which one of these it funds but they fund it on the basis not of their own scheme they have made up but on a nationally specified scheme so that companies know that when they are talking about a particular scheme it is the same one across the country. Equally, we cut the down the number of schemes because it is an absurdly high number. This is an important area because when the decision was made to devolve it the view the civil servants took was saying it is nothing more to do with us so we throw it over the wall and the RDA get on with it. I think it is right and proper that you should have an overall national policy within which RDAs have the decision as to where they put their money but not what kind of schemes they put it in.

  Q16  Dr Turner: I was personally very delighted when RDAs were first mooted because it seemed to me they might fill a gap that was missing in the innovation and commercial development process in this country. When you look at America where the State gets involved in funding spinout companies and all sorts of things, the German Landers, et cetera, France can do comparable things, I really thought that the RDAs were going to be able to step into this role and assist, in various ways, emerging technology companies. Clearly there has been a lot of variation in the performance of individual RDAs. What is your general impression of how successful RDAs have been in support of emerging companies? Do you think the RDAs themselves have sufficient knowledge to do the job properly?

  Lord Sainsbury of Turville: I think there has been variation across the RDAs in terms of the support they have been given and how well they have performed. Again, I think more could have been done to get them to work within a framework so they produce economic plans. I do not think those plans get a high enough level of scrutiny from the centre of government. Also because of where they came from, a lot of them come out of regeneration bodies, they have tended to focus too much on regeneration rather than science and innovation and support for projects which will really raise the economic performance of regions. As you can see, that is what we have suggested, that more resources should go to support for science and innovation. We have made it clear where we think that should go in terms of nationally specified schemes but they can decide which ones to support. When it comes to collaborative R&D, they probably do not have the skills to do this, besides which I think it is enormously unhelpful to have each RDA suddenly decide to support a scheme in intelligent transport systems when there should be a national scheme. That is why we have agreed with them that they will put aside money in individual regions to support the major collaborative R&D projects that TSB put forward. They can decide where they put their money, which obviously will be in relation to companies in their region, but the assessment of the schemes from companies, the whole administration of it, will be done by the centre, by the TSB, and it will be done on a national basis. That is a way of dealing with this problem.

  Q17  Dr Turner: Are you satisfied that this will not be too administratively cumbersome and that small companies will not be spending all their time writing 50-page proposals and ticking hundreds of boxes and in the end getting absolutely nowhere and getting bogged down?

  Lord Sainsbury of Turville: I hope not. It will be run by the TSB and the TSB is now a executive non-departmental public body. It has now a very good chief executive who has come from airbus and I think you will find that it works in a very efficient entrepreneurial kind of way. We will avoid what has happened which is both the RDA and the TSB reviewing individual projects. I think we can speed it up and make it more efficient.

  Q18  Dr Iddon: All the nine RDAs were asked to set up science councils which they have, the North West, the North East, SEEDA and so on, but it is very difficult, even though they set up science councils, to find out exactly what they are doing in the science and innovation area. I will give you an example. The Parliamentary and Scientific Committee at the moment are trying to set up three speakers to come from the RDAs and tell us what they are doing to inspire innovation and science in their regions and apart from George Baxter from the North West Regional Development Agency it has been extremely difficult to put this programme together. Why, when we have focused so much money on the RDAs and asked them to set up science councils, are we in this position where even members on the old S&T Committee could not find out what they were actually doing? There is no annual report, for example.

  Lord Sainsbury of Turville: Again, there is rather a lot of variation in how well the science and industry councils work. We are specifying some areas where we think they should be definitely involved, ie when it comes to advice where the RDAs should support particular projects of the TSB that should be something they should ask the Science and Industry Council to advise them. This is a case where one needs to specify more clearly what the role is of the Science and Industry Council.

  Dr Blackman-Woods: You recommend that the next round of HEIF funding should not be competitive. Can you explain why that is? Do you not get more value for money in the bidding process?

  Short break due to fire alarm

  Q19  Chairman: Roberta was just asking you about the HEIF funding.

  Lord Sainsbury of Turville: What I learned when I was a minister was if you start a new scheme there is a huge advantage in having the first round or two on a competitive basis because if you just give the money out what happens is people take the money and go on and do what they were doing before. You need to get them to really think. If it is competition, they really think about what they are doing and put it into the competitive process. That probably works for the first two rounds. The difficulty is they employ staff to do whatever it is that needs to be done. If they cannot be certain of long-term funding, then all those people are put on short-term contracts and that is not a good way to do it. Also, if you have a competition you have to accept that sometimes people get a lot of money and other times they get no money or very little. That is not really very productive because someone has built up a team of people, they have just got started and are beginning to do it and suddenly the money is cut back or suddenly they get a lot more money. If you are not careful what you find yourself doing is trimming the thing down so no-one can lose or gain more than 20%. You have all the business of competition, and so on, which is difficult. I think after a period it is better to go to metrics and say the money will be given out and in those metrics the amount of work you do with small businesses counts for double. That is a good way of incentivising to perform well.

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