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
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
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
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.