UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 384-i

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

INNOVATION, UNIVERSITIES, SCIENCE AND SKILLS COMMITTEE

 

 

TECHNOLOGY STRATEGY BOARD

 

 

Wednesday 1 April 2009

IAIN GRAY, DAVID BOTT and DAVID GOLDING

Evidence heard in Public Questions 1 - 48

 

 

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Oral Evidence

Taken before the Innovation, Universities, Science & Skills Committee

on Wednesday 1 April 2009

Members present

Mr Phil Willis, in the Chair

Mr Tim Boswell

Dr Ian Gibson

Dr Evan Harris

Dr Brian Iddon

Ian Stewart

Graham Stringer

________________

Witnesses: Iain Gray, Chief Executive, David Bott, Director, Innovation Programmes, and David Golding, Head of Strategy, Technology Strategy Board, gave evidence.

Chairman: Welcome to our second panel of distinguished witnesses this morning, David Bott, Iain Gray and David Golding. Thank you very much for coming this morning. Iain Gray is the Chief Executive of the Technology Strategy Board, David Bott is the Director of Innovation Programmes and David Golding is the Head of Strategy. We are very grateful to you. I am sure it will be far less controversial than our last session. I am going to start with Graham Stringer.

Q1 Graham Stringer: Can you explain to the Committee what role Government has when you set your priorities, and can you give us some examples?

Mr Gray: Thank you very much for the opportunity to be here this morning. As you are aware, the Technology Strategy Board is a relatively new organisation. Indeed, a lot of the programmes that we are currently running are programmes that we inherited through previous DTI or collaborative R&D programmes. It is only over the last 18 months that we have been able to set an agenda out which is a new direction for the Technology Strategy Board. Probably one of the biggest changes the Technology Strategy Board has made is the introduction of what we have called the challenge-led approach. The challenge-led approach plays directly into a government framework in terms of societal changes, low carbon industrial strategies, ageing populations and sustainability issues. I think the way I would see the Government role panning out is very much setting a policy framework within which we operate. The Technology Strategy Board is an independent arm's length body that is determining the appropriate projects to move forward within that policy framework. I can use an example like the low carbon vehicle programme where we have launched what we have called an innovation platform, we have pulled business and other government departments together, the regions together, and created a framework underneath which we hang collaborative R&D programmes, we look at regulatory frameworks and move it forward in that regard. For me, the Government sets a policy framework and the Technology Strategy Board is putting in place a series of programmes underneath it.

Q2 Graham Stringer: That is very clear. How would you compare your independence to a Research Council? Are you more or less independent than a Research Council?

Mr Gray: I would say we are a very different organisation from a Research Council. We operate in a different space in terms of the technology exploitation. We have an independent governing board chaired by Graham Spittle who, unfortunately, could not be here today, he has a family bereavement. We work very closely with the Research Councils in terms of an alignment of the translational research, but I would say our priorities are being set very much by what we are hearing from business. I would come back very much to this challenge-led societal and market-led pull through and that creates a completely different type of model from the Research Councils.

Q3 Graham Stringer: I understand it is a different model, I am trying to look for some way for you to explain to the Committee your independence and I thought Research Councils were a good comparator. Do you think you are as independent as a Research Council or not?

Mr Gray: In that context I think the Technology Strategy Board is a very independent body. It is operating within a policy framework. Our governing board is made up of representatives from academia, somebody from the Research Council, from the regions, from business. I do not see a direct analogy to the governance of ourselves and the Research Councils, but I would say as an organisation we have a very independent approach and the real added value of the governing board that we have is the business outlook that is brought to the decision-making process.

Q4 Graham Stringer: How do you deal with that advice to Government? How do they ask for advice and how do you give it? How do you monitor whether that advice has been taken up and used effectively?

Mr Gray: It is an interesting question for us as an organisation. Whilst we are an independent NDPB and our sponsoring department is quite clearly DIUS, we have a remit that sits very much across government departments. It was interesting listening to the previous debate and some of the scientific advisor type committees. One of the key relationships is with the Chief Scientific Adviser community right across different government departments and the heads of innovation across different government departments, and our advice is being sought all the time on specific issues in the innovation, technology exploitation area, and there is very strong evidence of that advice being taken on board by other government departments. Again, as an example I would come back to the low carbon vehicle innovation platform that we launched where we are working very closely with the Department for Transport, with their innovation department and with their CSA to make sure the programmes we are putting in place line up with the overall direction of that particular department as well.

Q5 Graham Stringer: This Committee has found the Government policy either opaque or contradictory when it comes to regional policy. The Government tell us that they do not have a regional scientific policy and then they tell us they specifically support projects in the regions because they are in the regions. Can you explain to the Committee how you interact with Regional Development Agencies, how important they are, and whether you have a regional policy, whether or not it matters that you are putting cash into Newcastle as opposed to Oxford?

Mr Gray: Again, the regions are very important to us in two regards. One is deployment of a national strategy through the regions, and the other is the listening in the other direction back, which is local needs of regions and how they play back into national policies. As the Technology Strategy Board we have been given a leadership role across the regions and quite specifically an accountability for delivering 180 million worth of aligned projects with the English regions. We work with the regions in a number of different ways. We have a governance arrangement with the regions. I chair a meeting with the chairs of the Science and Industry Councils which have been set up in each of the regions, which again pulls on business input. We have an operational group with the regions where we are liaising with the officials inside the RDAs to ensure alignment of their strategies with national strategies and to ensure their requirements are being played back and we have bilateral relationships with each of the regions. My view would be this is a journey that we are on as a relatively new organisation. In the last three to six months we have made very significant progress for the first time from what I can see in actually having an alignment map which shows what the priorities are within the regions and how those priorities line up with national priorities. The processes that are being put in place are now starting to work very well.

Q6 Graham Stringer: Just a final question. That answer is very much a structural process, and I understand that. The example I am going to give you never really happens in the real world but it is a good way of exploring the situation. If as part of your expenditure of 180 million there were equivalent projects in London and Newcastle and all the assessment was the same, would you spend that money in Newcastle because it was in the regions and had all sorts of social priorities, or would that not be a factor?

Mr Gray: To be specific about the 180 million that I quoted, that 180 million is an alignment target for the regions working with us, it is not the Technology Strategy Board's money in its own right. As far as the Technology Strategy Board is concerned, we evaluate projects on their own merits regardless of the particular region that they come from. In terms of a hypothetical situation where two identical projects in every regard came in, the implication of that is probably there are two centres of excellence in the UK and from a Technology Strategy Board point of view we would not be looking to choose one over the other. Our preference is always to be looking for the right projects for UK economic benefit rather than looking at it from a geographical basis.

Q7 Chairman: Can I just pick you up on that because you said UK-wide, so not simply the regions of England but also Wales, Scotland and Northern Ireland.

Mr Gray: Yes. If I could be quite specific on the issue, from an alignment point of view we have a very specific remit which looks across the English regions, which is the 180 million, but we have a UK national responsibility and we work very closely with the devolved administrations. The alignment project that I talk about actually covers the whole of the UK, but the 180 million is quite specific to the English regions.

Q8 Chairman: I thought it was important we put that into context. Just picking up from that, you have mentioned twice in your responses so far the issue of low carbon vehicles as being a major priority, yet when the car companies came to the UK Government during the current recession and said, "Woe is us, we need billions spending on us", if we take Chrysler at the moment and the impact that President Obama's decision might have on part of the UK car industry, why did they not come to you and say, "You are our Technology Strategy Board, everything comes through the TSB"? Why does that money not come through you to drive these new low carbon vehicles which post-recession may have a huge economic impact? You were not involved.

Mr Gray: In that regard we need to clearly separate out what are industrial business support issues from what are technology, R&D development issues. We need to separate out what are clearly product development issues from what are R&D technology exploitation type issues. In fact, the automotive business through SMMT and the industry representatives on what is called the Automotive Innovation Growth Team are working very closely with us to develop a technology roadmap to determine what the priorities for investment are in terms of technology. In the domain of technology development and technology exploitation, the industry itself is working very closely with us and, indeed, is coming directly to us working hand-in-hand with the automotive unit in BERR. We do need to separate out the billions of pounds that people talk about in terms of industry support vis--vis the low carbon technology itself.

Q9 Chairman: I ask the question, Iain, because clearly the Government made clear, and indeed Lord Mandelson and the Prime Minister made clear, that in terms of this investment in the motor industry it was really to drive the new technologies, but you were never mentioned in that chain, yet it seems to me your remit is very much at the heart of that R&D for new innovative technologies, new disruptive technologies to get into that space. Were you not very frustrated?

Mr Gray: I think if you asked the question today you would find we would be mentioned. That is maybe symptomatic of the journey that we have been on. The Technology Strategy Board has been in existence for about 18 months. We have proved our credentials and have delivered what we said what we were going to do. To realise the real benefit of a Technology Strategy Board it now needs a step change in how people use us. From a governmental point of view, I refer to some recent speeches that have been made, speeches David Smith of Jaguar Land Rover made at the CBI manufacturing dinner up in Birmingham, and Peter Mandelson was at the same dinner. Both of their speeches referred quite strongly to the Technology Strategy Board's role in the low carbon vehicle technology programme. The change from the Technology Strategy Board developing programmes and delivering programmes on a smaller scale to positioning itself into an organisation that now has the potential to deliver large-scale benefits, we are positioning ourselves to be able to make that difference. I think that is something we have seen probably only in the last three to six months, that big change in terms of our recognition. I would hope if you asked the question today you would get a recognition of the role that the Technology Strategy Board plays in this agenda.

Q10 Ian Stewart: In relation to the answer you gave relating to the automotive industry coming for billions and so on, it is a fact that some small innovative groups or individuals can come up with some really impressive new developments. For example, take the situation in my constituency. I have got two constituents who, with a boffin friend, have developed a new design for anaerobic waste digestion. They are past the research and development stage, which is your area, and you pointed out that you are restricted to that, and are at the point where they want to develop it commercially. They are terrified of going to the banks because they believe in three or four years' time the venture capitalists will own their business. Do you not accept that as a Government we are not good yet at helping at the implementation stage, particularly for that group which is small or even individuals?

Mr Gray: I would respond by saying the very fundamental reason for the Technology Strategy Board is quite specifically to help in that area, it is the translational area, getting through the valley of death, taking small companies who have got through the fundamental science and moving it into tomorrow's businesses of the future. The Technology Strategy Board's role is to do that. I cited the low carbon vehicle example because it is a very important issue for us and it is one that is a very high profile issue at the moment. The importance of supporting small businesses, initiatives that we manage through SBRI, for example, which is a procurement-led type agenda to try and stimulate R&D in small businesses, is one other example of how I think the Technology Strategy Board can support.

Q11 Ian Stewart: I was very impressed. I worked for six years in the DTI with the Secretary of State and I am very impressed with our assistance for research and development, but it is that grey area where you get a new innovative idea, it has been researched, developed, it is at the commercial implementation stage, that I am really worried about. I know of two instances where we have lost world-beating technologies to America because they have just left the UK and taken their package to America. One was a nitrogen engine that the automotive industry in America snapped up and we have never heard of it since because they have not screwed as much out of fossil fuels as they think they can. There are real downsides to this, Iain, do you not accept that, that you are restricted to the areas that you are restricted to?

Mr Gray: I do not see it so much as a restriction, but I do think there is an important issue about the resources that are available to us to be able to achieve what I see as the end goal. I do not feel constricted in that context. I see that the Technology Strategy Board has a role to play very much in identifying and supporting the types of businesses you have described, Mr Stewart.

Q12 Dr Gibson: I just wondered about the word "innovation". It is a word we never used to use a few years ago, it was "entrepreneurial". Suddenly, "innovation", like "going forward" is heard incessantly in speeches and so on. What do you mean by "innovation"? I notice in your strategy you have got challenge-led innovation, technology inspired innovation, the innovative climate, and 25 per cent of funding and 50 per cent of funding. Who the hell thought that up and what was the purpose of it? You probably!

Mr Gray: I think the use of the word "innovation" is interesting and there are probably as many definitions of innovation as there are people who are involved in the subject. For me, innovation is just about the ideas, conversion of ideas into UK economic benefit, and that is what we are about. It is taking ideas from business, from Government, and converting those ideas into real economic benefit.

Q13 Dr Gibson: That is the challenge, as Ian Stewart said, getting those ideas into the product and by trying to define it in this very specific way does that really help you create a climate where people who are doing things get on and do them and you encourage them?

Mr Gray: If you would allow me to give a little bit of background to the terminology there. That really is just a language for us to use. I would say one of the big issues we have had in terms of the exploitation of technology in the past has been too often it has been technology in search of an application. That is not to say there are not good blue-sky ideas that subsequently become the great businesses of the future, but we need to have different mechanisms to just technology push. We coined the phrases, "technology inspired innovation, challenge-led innovation and innovation climate", to do three quite different things. Technology inspired innovation is that underpinning technology.

Q14 Dr Gibson: Iain, is that for your benefit or for the benefit of the punters out there to know how to address the problems to bring what you want to fruition? Does this really help them?

Mr Gray: I believe it does. The reason I was explaining what we were doing is technology inspired innovation is probably the bit that the DTI programmes were previously best known for. I would say challenge-led innovation is the biggest step forward that we as an organisation have made. What I think is really interesting for me is how much that term, "challenge-led innovation", is now being used by third parties. We are seeing overseas governments coming across to understand what we are doing in this area of challenge-led innovation. It is the market challenge, the societal challenge, and it is a language.

Q15 Dr Gibson: I suggest to you it is a conference language that is used in big speeches all the time but it does not get down to the people at the grassroots, at the bench, who are trying things out, your inventors and so on. They do not really know what it means and they can access that type of support because they do not think of their work as challenge inspired innovation, it is just getting up in the morning and doing something and then going to bed at night.

Mr Gray: I think it is more than conference speech. You are right to say it is the next level of detail down that is more meaningful to people. I could ask David to describe challenge-led innovation.

Q16 Dr Gibson: Give us an example, David.

Mr Bott: It comes from the fact that most of us come from industry so we think about what you want to sell as a product or service. If you are in industry what you want to know is where the market is going and what the challenge to the market is. It came from that. Because we had already started working on the concept of using government policy and we understood they do change markets we put a generic phrase in as a challenge, and it is something people need or want but cannot get yet. That is what drives researchers, the ability to make something they cannot do at the moment. That is what we mean by "challenge-led". It is giving people a personal challenge to deliver a piece of science, a piece of technology, to reduce it to a product or service that at the moment cannot be got.

Mr Gray: If we take low impact buildings, the challenge is how do we get net zero carbon housing in 2016, that is the challenge. Get business together and say, "That is now a regulation. That presents the challenge. You are the guys who know what the potential solutions to that challenge are, what are they and how can we help you achieve those challenges, and as a consequence of that how can you create business benefit by doing that?" It is a high level challenge that engages business in terms of identifying solutions but then helps to create UK economic benefit.

Chairman: I do not think we have any doubt that you, as a trio, know exactly what you are talking about. The point that Ian Gibson and Ian Stewart have made is we find we are struggling with it and if we are struggling with it therefore some of the people Ian Stewart mentioned, who are these new, small innovative businesses may also be struggling with it. Could we perhaps implore you to have a translator who makes this into what we call ordinary speak because we are just ordinary, simple Members of Parliament.

Q17 Dr Harris: As an archetype of that, I would like to ask you have you been successful, in your view, in terms of what you have done. Have you had an impact compared to someone else spending the hundreds of millions of pounds you have been given or you have attracted?

Mr Gray: Yes, I would unambiguously say for me this is about impact in business and it is what businesses are saying back to us that counts. There are a number of different measures that we would use. We recently had a survey that has come back from businesses that we deal with about what the impact has been and we can quantify it in measurable terms: four times return in respect of costs that they have incurred. There are a number of different metrics and it is a very difficult subject. Are we having an impact? The businesses that we deal with say we are and the businesses that we are not currently supporting say they want to work with us.

Dr Harris: What is the comparator? What is the control group in that? If it was not for you those businesses would not disappear, the money would not disappear, it would be put through another way. Do you recognise that asking people who are receiving money from you whether they are pleased to receive money from you is not actually a controlled comparator.

Q18 Dr Gibson: The control is where they have not got the money, you have to ask them.

Mr Gray: The people who have not got the money are a check and balance. Just to be clear, it is not us who have asked these questions. I just cite that as an example of information.

Q19 Dr Harris: Do you feel that you need to demonstrate that you have had an impact already?

Mr Gray: Yes, because I believe that as an organisation we can do so much more. To do so much more we need to be able to get messages across quite quickly. The problem and challenge, not for us but for every country involved in innovation, is it is a long-term game.

Q20 Dr Harris: I was attracted by what you wrote in your strategy for business innovation where on UK innovation trends you said it is very hard to tell what impact you have had on that because measuring your impact is so long-term and the very nature of innovation makes it difficult to do that, it will take time for you to be able to measure that. I think you were forced to say that anyway because it is true, and I thought that was quite honest, but very few organisations can just say, "No, we can't really tell and I am not going to sit here in front of you and cite some business survey that purports to do that because we have to develop the metrics, establish the baseline and then check on a long-term basis". Can you see why I am a little disappointed that you leapt straight in somewhat defensively with your view "we are having an impact" instead of sticking to your guns and what you wrote here?

Mr Gray: That is a good bit of counselling.

Dr Harris: You cannot win obviously!

Dr Gibson: Whatever you say you are dead!

Q21 Dr Harris: Do you feel under pressure to say you have already made an impact? Some people who want you to be long-term, or at least medium-term, are disappointed two years from your founding that you are already thinking about your short-term impacts.

Mr Bott: We need to show progress. If you are starting on a journey you might not have reached your goal, but if you have gone in the wrong direction you should definitely rethink what you are doing. We are confident that we are moving in the right direction. Some of these programmes where we have acted as the focal point for other government activity, for RDA activity, and for increased business involvement I suggest tells people we are doing the right things.

Q22 Dr Harris: A couple of quickies off that subject. Mr Gray, I think you were at the speech that John Denham gave at the Royal Academy of Engineering about the new regime, the new Government proposals. Without commenting on the merits of the proposals, because I think that is going to come in a different question, do you think the debate is how we do this picking areas of strength and concentrating public funding in those, or are we debating how to do it? Is that now the Government's approach in your view and is the debate about how we do it or is it whether we are going to do it?

Mr Gray: My belief is it is how we are going to do it. It is about focus, identifying areas that we are going to make a big difference in.

Q23 Dr Harris: So the decision has been made that we are going to go down that path?

Mr Gray: Just to be very clear, I was not at the Denham Royal Academy speech. I am familiar with the Denham speech. For me, from a Technology Strategy Board point of view, laying down the priority areas ---

Q24 Dr Harris: I do not want you to go into that because someone else is going to ask you about that. You have answered my question which is it does look like we are going to do this but the question is how. My last question is about venture capital specifically. I do not want you to think in terms of the recession necessarily, because you are going to be asked about that, but in 2008 NESTA called for there to be a fund to provide VC to these businesses and that was some months ago now. Has anything happened? Are you envisaging something happening in that respect?

Mr Gray: I cannot answer the specific question. As an organisation, we have lent our support to the concept of the fund. It is not something the Technology Strategy Board is directly involved in.

Q25 Chairman: Just before I pass on to Tim, I was interested in your earlier comment and in the background information you gave us that you were morphed out of the DTI. I know you are a different organisation from the one that left the DTI, but you did say that you inherited a lot of their programmes. If you are really independent, as you claim, why do you not just ditch those and say, "Right, these are going to be our programmes"? It is a bit of a cop-out, is it not, to say, "Well, we have not been able to make as much progress because we inherited these programmes and they are not very good really"? That is the implication.

Mr Gray: I did not say they were not very good. I said we inherited a significant number of the DTI's programmes.

Q26 Chairman: That sounded like a bit of a whinge.

Mr Gray: It was not a whinge, it was a recognition of the fact that investment in R&D programmes and collaborative R&D programmes by definition is a long-term game and, therefore, inheriting a series of programmes provided some constraints to me in terms of the amount of headroom I had to do new things.

Q27 Chairman: What I was hoping you would say is that it restricted you even more and as an organisation you have got to be very real in terms of saying to people, "No, we aren't going to do that, this is what we are going to do". When I last met you, you were quite clear about that, that you were going to have to be really blunt to some companies and organisations and say, "Sorry, that is not our priority, this is".

Mr Gray: In terms of new decisions moving forward that is clearly the case. I think what we are touching on is how you handle programmes for which there are contractual commitments.

Q28 Chairman: How you close them down.

Mr Gray: We, as an organisation, are being much more hardnosed in terms of looking at those previous commitments. I do see it as a constraint.

Q29 Mr Boswell: Perhaps I can ask my question and then apologise for having to leave, but it will not be a consequence of the answers you are about to give me. In the interests of time, I take it as axiomatic that you see the TSB as having a significant role in responding to and recovering from the recessionary climate we are now in. Can I ask you about a number of relationships. The first one is with the private sector and its investment. Are you finding that there is a significant impact of the recession in terms of the venture capital investment, private sector investment, which is available, and is it in fact leading either to some retrenchment or the need for reshaping of your existing collaborative research projects?

Mr Gray: The general answer has got to be yes, it is having an impact. I would not say it is having the same impact on every sector and I would not say it is having the same impact on every type of business.

Q30 Mr Boswell: And it is not the end of the world.

Mr Gray: The good news from our perspective is in some of our recent competitions that we have laid forward there is a good level of interest still coming from the private sector and, more than that, the willingness of the private sector to provide matched funding to programmes going forward. That is a very clear recognition.

Q31 Mr Boswell: They can still do it.

Mr Gray: Whilst some are in difficulties they still (a) want to do it and (b) can still do it.

Q32 Mr Boswell: That is helpful. Alongside that, let us look at the Government's role obviously taking up Dr Harris' line of questioning. Government policy making strategic choices about the overall balance of research funding, how is that going to impact on your work when you too want to make strategic choices? Will they be common objectives? Will they sometimes subvert things that you might prefer to do or can you work that relationship out?

Mr Gray: To use your words, I think we can work that relationship out. In terms of our own priorities, we have determined over the next 12 months what our particular priorities are going to be and it is no surprise to hear they are around the low carbon agenda, vehicles, buildings, retrofit, energy generation, healthcare, stem cell regenerative medicine, and it is around the digital economy. Those are the priority areas for us in the next 12 months. In terms of getting focus from the Research Councils, my personal belief is there is still a very strong need for a broad research and science base, but in those areas where we are working closely with the Research Councils I think we will achieve a strong level of alignment. So in the priority areas we have identified I am looking for very close relationships with the science base and the research base.

Q33 Mr Boswell: You did mention stem cell research and other areas of bioscience, there is now to be an Office of Life Sciences. Can you say a little bit about your relationship with them? Is that going to be something you have to manage? How will you work that? I do not think you have published your own strategies in the area of bioscience yet, but how do you see that coming out? Perhaps another way of putting this question would be convince me that you are not merely interested in engineering and, as it were, the conventional mechanical approach to these areas of innovation and technology.

Mr Gray: As a person who has a strong engineering background and strong industry background, I am constantly challenged to prove that I have a broader interest than that. Hopefully, the actions the Technology Strategy Board has taken in the creative industries and very, very different areas have shown that we are moving in a quite different direction. On the bioscience area, just to be quite specific, the Department for Life Sciences is a new department. We have already made contact and are looking at how we establish a close working relationship. Maybe I could ask David to say quite specifically where we are on the strategy documents in that area.

Mr Bott: The strategy will be published within the next couple of months, it is in its final stages of internal editorialising and such. Regenerative medicine came out very strongly through that. We have been working with the BBSRC and MRC on that. We have recently had a series of workshops and it plays to Ian Stewart's point that there are about 25-30 very good, small companies in the regenerative medicine area that are sitting around at the moment and the venture capitalists have gone walkabout because, sensibly from their point of view, they are waiting to see what the recession will do to weed those out and they will end up with one or two companies. We are looking to how we can support that sector so that we still have options in that area going forward because we do believe it is an integral part of the future of medicine and treatment.

Q34 Mr Boswell: Presumably you are implying you have an interest in a critical mass of independent players.

Mr Bott: Yes.

Q35 Mr Boswell: And if it just fell down to three or four that were snapped up?

Mr Bott: We would lose that as an option for this country in the future. We are after both supporting the individual companies but also binding them together into a community. We have a competition aimed for the back end of this year and we are working very strongly with those companies and Research Councils and anyone else who will work with us.

Q36 Dr Iddon: You have mentioned a number of programmes and some were inherited. Perhaps you could just give us a little more detail on how you select the programmes, particularly into the future, and whether you take any external advice? What are the selection criteria for the programmes and do you seek advice in the way that peer review works?

Mr Gray: In terms of the selection of broad themes, our governing board approves a 12 month look-ahead in terms of broad themes that we are going to address. The input to those comes from a number of different sources. Some of it is from the different government departments, some of it is from business trade bodies, some of it is as a result of recommendations that come from the Innovation Growth Teams, some of it comes from the Science and Industry Council members from around the regions and devolved administrations. The input to the board to help determine the broad themes comes from a variety of different sources. Once we have chosen a broad theme, the detailed topic areas, they are derived very much from the detailed strategy documents. We have just talked about the life science one. Again, those strategy documents have been developed in consultation with business using what we call the Knowledge Transfer Network mechanisms to engage a broader community. The key decisions are what are the themes that we are going to pursue, which come from a number of different sources, the detail once we have established a theme comes from business itself through either the strategy document or, coming back to the challenge-led approach, we bring business together and say, "That's the challenge, what are your ideas for specific topics that would fit underneath that?"

Q37 Dr Iddon: What are the selection criteria?

Mr Gray: David, could I ask you to run through the four selection criteria?

Mr Golding: In terms of the four selection criteria used which really cover everything that we invest in, the key ones are is there a particular UK strength that we can build on, so both capability in terms of the research base but also in terms of business to exploit what we are investing in, is there a large global market. We are not interested in investing in areas where it is a sunset industry, we are looking for is there growth in a particular area. We are then looking at is it timely, so it is something where the Technology Strategy Board has a particular role to invest in, it is not an area where the Research Councils will invest and not something which businesses naturally invest in themselves and take it through to market. It is an area where the Technology Strategy Board has a role to invest.

Q38 Dr Iddon: When you have chosen those programmes do you go for external advice anywhere, even abroad, and say, "We have chosen these programmes, do you agree that they are the right programmes?"

Mr Golding: All the programmes we select are through working with business, with Government, taking on a whole range of different inputs to say, "These are the areas we have selected, are they the right ones?"

Q39 Dr Iddon: That is not peer review, is it? I am looking for some independent advice, not the people who want the money to develop something.

Mr Gray: We have a different process from the Research Councils in terms of selection of projects, but we do have a process that involves independent assessors. It is not the internal operation team of the Technology Strategy Board that ranks projects, they are independent assessors.

Q40 Dr Iddon: That was what I was really asking. When do you expect the reformed Small Business Research Initiative to be rolled out more widely across departments, and what support have you had from departments for that initiative?

Mr Gray: I am expecting to roll that out over the next couple of months. We re-launched SBRI about 12 months ago and my commitment was to run a couple of pilots with the Ministry of Defence and Department of Health over the last 12 months. We have run those and they have been successful projects. We are now laying out for the next 12 months a series of programmes that will run across a number of different departments, the Home Office, Department for Transport, MoD and Department of Health. Those are the four departments we have targeted. In terms of that roll-out, we are weeks away from doing that. End of April, beginning of May is my target date for a broader roll-out of SBRI.

Q41 Dr Iddon: You have already mentioned low carbon technology research particularly with respect to transport initiatives, but we have also set up an Energy Technologies Institute and there are a number of other organisations interested in low carbon technologies as well. How do you interact with the other people who are pushing ahead in that area of R&D?

Mr Gray: The Energy Technologies Institute is one example, as you say, and there are a number of other areas. We see the Technology Strategy Board very much playing a leadership role across a very, very broad spectrum. Just to be quite specific, I sit on the board of the Energy Technologies Institute. The Technology Strategy Board is one of the two public sector funding providers into the Energy Technologies Institute's programmes and our technologists play a key role in the selection of projects that are being made. We support the Energy Technologies Institute in a number of very key areas, wind power and marine power being two examples. In those sorts of areas what we have developed with these organisations we are working in partnership with is a mapping exercise to show who is focusing on what in which particular areas. Wind and marine are two areas where the Technology Strategy Board's support is through the ETI type of involvement. In other areas, the low carbon vehicle, just coming back to that example, we are saying the Technology Strategy Board must directly lead that, we need to do things very quickly in that area so we are playing a strong leadership role. We see our leadership role coming through in a number of different guises. One is actually through leading programmes directly and the other is through directing and influencing our engagement with other establishments.

Q42 Dr Iddon: Could you tell us about your interaction with two other organisations, the Environmental Transformation Fund and the Energy Research Partnership?

Mr Gray: Again, I sit on the Energy Research Partnership and arguably one of the biggest deliverables from that was the establishment of the Energy Technologies Institute. The Energy Research Partnership I see more as a cross-government business leadership, almost a leadership council type role, between business, government and agencies to help determine an overall policy framework. The Transformation Fund is one that, to be honest, we are not very closely involved with from a funding point of view. It is now part of DECC and we are working very closely with DECC to show joined-upness in this whole energy arena. The Transformation Fund is looking much more beyond the area that we are involved in and it is much more looking at large-scale demonstration projects rather than the technology innovation projects that we are engaged in.

Q43 Dr Iddon: So there are clear boundaries and you do not feel that you are tripping one another up?

Mr Gray: There are overlaps and those overlaps are helpful in the sense that they bring different business models and different types of thinking to areas. There is also a very clear understanding of where the focus of different organisations is. Again, it is an evolving landscape. The Technology Strategy Board is very closely involved with ETI and Energy Research Partnerships.

Q44 Dr Iddon: Let me look next at the Framework Programmes in Europe. They are bureaucratic, difficult to get into, academics constantly complain about the amount of paperwork, and business seems to have lost interest in them now. I understand one of your responsibilities is to re-engage business in Framework Programme 7, for example. Are you having much success?

Mr Gray: Again, it is a journey that we are on. The UK benefits quite significantly from research funding but it is, as you suggest, predominantly through universities. Our role is to engage businesses. We are holding a very significant Technology Strategy Board meeting with the Commission at the end of April to look at ways and means of how we can get better business engagement in European programmes, help influence the agenda and ensure our businesses are getting a fair share. The other kind of mechanism that we are engaged in is we have done probably two examples now of small seed funding type proposals where we have put a small amount of money into a competition with UK businesses to help them prepare to submit more substantial bids in European programmes. We find that when we target specific areas and help businesses get themselves in a good position to apply for European funding that is a very good model for moving forward.

Q45 Dr Iddon: The Committee has just been out in the Far East and in Japan we visited a rather interesting institute where the large electronic companies, all the big names, Sanyo, Hitachi and all the rest, were brought together to research in that institute in the early stages of developing what looked like successful technologies and once the ball starts rolling they each go back and develop that technology in their own way. I guess my question is, are we doing something similar through the TSB or have you even thought about it yet across Europe?

Mr Gray: Across Europe or the UK?

Dr Iddon: I am talking about Europe and internationally.

Chairman: Because we do not have those great big companies here.

Q46 Dr Iddon: We do not have the big companies like they do and it would seem ideal to bring companies together to do the initial stages of development work.

Mr Gray: I am a great believer in centres and the importance of clusters. There are some really good examples that exist that we and the regions do support with capital infrastructure, but I do not believe we are joined up in the way that we do it and we could make a much bigger impact if we were joined up in our whole approach to centres and clusters. It is definitely something that we are thinking about, but it is an area where there is a lot more work to be done.

Q47 Dr Iddon: Not yet is the answer.

Mr Gray: Yes.

Q48 Chairman: Particularly with your background in terms of Airbus because that was an interesting area where people did come together and produced very successful products. Finally, could I talk about the Knowledge Transfer Networks which you have mentioned a few times during your evidence today. Currently there are approximately 40 of these Networks and you are going to drive them down to 20 by forcing them to collaborate. We have received evidence to say tht a lot of the individual names and brands will be lost in that. In the very key areas that you were talking to Ian Stewart about in his questioning earlier, grants will be reduced by 25 per cent by 2010, there will be a focus on cross-sector relationships and sometimes that is inappropriate for some of these smaller niche areas that are coming through. Certainly one witness has told us that this would be totally counterproductive to everything that in this case UKDL Knowledge Transfer Network has looked at. We looked at plastic electronics in our engineering inquiry, so this is an area where we have evidence. How did you consult the existing KTNs about this major shift in policy?

Mr Gray: Just as a very general response, I would be very happy to brief the Committee at some future point on the whole approach to Knowledge Transfer Networks because I think it is a really interesting subject in its own right. For the record, currently we have 24 Knowledge Transfer Networks and are looking to reduce them to 15. We need to be careful not to muddle up the financial side with the rationalisation side, but I would recognise that they are two separate issues. The rationalisation came from a business-led approach and it was business that was saying to us, "Look, it's quite a muddled landscape out there. For us, as a small business, there is a choice of four or five different KTNs that all appear to cover roughly the same sort of area". We employed an independent organisation to do a review of the KTNs and they came back with a number of recommendations. We have been working with business and the KTNs to try and help map the process forward. I recognise the specifics of the issue that you allude to. From my perspective, we are doing the right thing and we are doing things which business in the long run will see to have been hugely beneficial in providing the cross-fertilisation of market opportunities. For me, a Knowledge Transfer Network is about identifying, for example, opportunities about how display and lighting may see market benefits coming from healthcare or transport or the built environment. The Knowledge Transfer Networks are as much about creating networks that go across different areas as they are about very specific vertical knowledge transfer in a discipline. I believe that when we come to look in a few years' time at the changes we have made they will be viewed as beneficial. All change creates a little bit of a backlash and I think that is what we are seeing in one or two areas.

Chairman: On that note, can we thank you very much indeed, David Golding, Iain Gray and David Bott, for your evidence this morning. Thank you.