7.This Chapter explores the rationale for a new UK research funding agency, in the form of a UK ARPA, and considers whether there is a need for it. It does so by assessing the existing UK research and innovation system and the perceived gaps that a new research funding agency might fill.
8.The UK research and innovation landscape has changed significantly in recent years:
9.In the March 2020 Budget, the Chancellor announced that public investment in R&D would reach £22 billion by 2024–25. The Royal Society welcomed this “significant increase” in R&D investment, as did the membership organisation CaSE (the Campaign for Science and Engineering). Eight months later, the 2020 Spending Review confirmed that the Government would invest £14.6 billion in R&D in 2021–22. CaSE Assistant Director Daniel Rathbone stated that this level of investment would keep the UK “on track” to reach the Government’s £22 billion goal.
10.The Government’s 2017 Industrial Strategy white paper set out a “long-term plan to boost the productivity and earning power of people throughout the UK”, including R&D investment. It used a ‘blended’ approach combining (i) horizontal, (ii) sectoral and (iii) mission-based policies. ‘Horizontal’ policies address market-wide issues; ‘sectoral’ (or ‘selective’) policies address a specific sector of the economy; and a mission-driven strategy uses economic policy to pursue solutions to particular public policy challenges. The Five Foundations—‘horizontal’ policies that underpinned the strategy—sought to have an impact on all sectors of the economy.
11.In addition, the Industrial Strategy set out four ‘Grand Challenges’ which aimed to “put the UK at the forefront of the industries of the future, ensuring that the UK takes advantage of major global changes”. They were:
12.The Industrial Strategy Challenge Fund (ISCF), which is managed by UKRI, provides funding for projects that fall within these four themes. As of 23 November 2020, around £5.6 billion (£2.6 billion of public money and £3 billion in matched funding from the private sector) had been invested in projects through the ISCF. UKRI’s former CEO, Professor Sir Mark Walport, described the ISCF as a “completely new form of funding” that has “a number of ARPA-like features”.
13.Six months after the Government published its Industrial Strategy, UKRI was formed (in April 2018). It was formally established through the Higher Education and Research Act 2017 following Sir Paul Nurse’s Review of UK Research Councils in 2015. The Research Councils and Innovate UK operate across the UK. Funding of higher education institutions, however, is a devolved matter. As such, Research England effectively replaced the Higher Education Funding Council for England, while the devolved equivalents remained in place.,
14.The purpose of UKRI was to create a joined-up, cross-disciplinary funder of research and innovation in the UK. The Government argued that its creation offered “an opportunity to strengthen the strategic approach to future challenges and maximise value from the Government’s investment of over £6 billion per annum in research and innovation”. It sought to deliver:
It was intended that the establishment of UKRI would “help to maximise the effectiveness of the system” and “remove unnecessary duplication across the research funding landscape”. UKRI’s aim of reducing bureaucracy has been built on by its recent ‘reducing unnecessary bureaucracy’ drive as part of the 10 September 2020 Reducing bureaucratic burden in research, innovation and higher education BEIS policy paper.
15.UKRI is a non-departmental public body (NDPB) sponsored by the Department for Business, Energy and Industrial Strategy (BEIS). The Secretary of State for BEIS allocates funding to UKRI and constituent Councils through grants. UKRI cannot change these allocations.
16.As set out in the Higher Education and Research Act 2017, when allocating funding the Secretary of State must have regard to:
If the Secretary of State does not ‘have regard’ to the above principles, parliamentarians can question them.
17.The dual support system comprises two ‘pillars’:
18.Sir Paul Nurse’s Review of UK Research Councils in 2015 characterised the research and innovation system as providing three main ‘types’ of research:
a)discovery research (also known as ‘pure’ or ‘basic’ research), which aims at acquiring new knowledge about the natural world and ourselves;
b)applied research, which is goal directed and aimed at achieving specific objectives and outcomes; and
c)translational research, which aims to bridge discovery and application research, i.e. research carried out with the expectation that it will produce a base of knowledge likely to form the background to the solution of current or future problems or possibilities.
19.Unlike other parts of UKRI, Innovate UK is not subject to the Haldane principle, and works with businesses to fund business and research collaborations and drive business investment into R&D. Since being founded in 2007, Innovate UK has invested around £2.5 billion to help businesses across the country innovate. This figure increases to £4.3 billion when ‘match funding’ from industry is included.
20.Innovate UK is responsible for the ‘Catapult’ network of R&D centres which connect businesses with research and academic communities. They comprise physical sites where UK businesses, scientists, technical specialists and engineers work collaboratively on late-stage research and development, transforming high potential ideas into new products and services. There are ten Catapult centres, with a total budget of around £100 million. Innovate UK also delivers the Small Business Research Initiative, which aims to address challenges faced by the Government using innovative solutions derived from business, and in turn improve the delivery of public services.
21.The vast majority of the funding allocated to UKRI’s individual councils comes from the BEIS Research and Innovation budget. There are significant differences between the funding allocations received by UKRI’s constituent parts. For example, in 2019/20, the Engineering and Physical Sciences Research Council was allocated over six times more funding than the Arts and Humanities Research Council.
22.The evidence to our inquiry highlighted a number of perceived gaps in the UK research and innovation system. The need for the new agency can in part be determined by its potential to address these gaps.
23.Many written evidence submissions argued that the current UK research and innovation system could be described as risk-averse and conservative in nature. For example, Universities Scotland, University College London and Cardiff University agreed that the criteria for UKRI funding schemes were risk-averse and that there was a gap in the system for innovative, high-risk, high-reward research. In her oral evidence, Professor Mariana Mazzucato, Professor in the Economics of Innovation and Public Value at University College London, made a similar observation: “[f]or that high-risk basic R&D, which is guided by mission-oriented thinking, there is currently a gap in the UK”. The University of Oxford’s evidence submission summarised this point:
[T]he UK lacks a mechanism to identify, build and deliver truly ambitious, high-risk/high-reward funding programmes with sufficient funding resource over the extended time-spans required to realise the benefits fully. Most current UK funding programmes tend to focus on incremental advancements, and highly ambitious investments are mostly considered too high risk for public funds.
However, former UKRI CEO Sir Mark Walport strongly disagreed with this characterisation, stating “I would not share it at all”.
24.Sir Mark pointed to UKRI’s “fellowship programmes” which “support the most talented researchers at the very earliest stages of their career”, arguing that these “are all about risk”. He told us that the current system and UKRI in particular did provide for high-risk research:
One of the things that worries me is the idea that an ARPA would be high risk/high return, where the implication is that UKRI is the opposite of that. That could not be further from the case.
The University of Manchester’s written evidence provided some support for Sir Mark’s comments:
Quality Related (QR) research funding, awarded to universities based on their success in the Research Excellence Framework (REF), and securing grants from charities and funding for PhD students, is intended to provide core funding including for research that might be too early or too risky to secure grants through standard pathways.
While this suggested that the current system did provide for some ‘riskier’ research, the University of Manchester’s submission went on to say that QR funding had “been eroded over time”.
25.Finally, UKRI’s current CEO Professor Dame Ottoline Leyser has suggested that the current research and innovation system could be considered conservative. She stated that UKRI’s “responsibility to make the whole system work” made it “harder to do the wild experimental things”, and that “the notion of an agency whose job it is to do that is very attractive”.
26.The research and innovation system’s risk-averse nature was linked to a perceived difficulty in securing funding. The University of Manchester argued that:
In the UK, the normal processes of securing funding are lengthy, extremely time consuming and, with relatively low success rates, often quite inefficient, requiring significant amounts of preliminary data and highly credible plans for success.
The lengthy and time-consuming nature of securing funding—in addition to its low success rates has, according to the UK Research Computing Committee, encouraged a “‘factory farming’ approach to grant writing where teams specialise in writing to deadlines rather than creating innovative proposals”. They argued that:
[The] typical time from starting to write a grant application to start of grant is a year. There have been initiatives to increase responsiveness but these have reduced the time between a call being issued and the proposal deadline. This increases pressure on researchers.
Not only does this system create pressure on researchers, CaSE suggested that it dissuaded private sector actors, particularly small and medium-sized enterprises because “application processes and decision times for public funding grants are too long to meet the needs of small businesses in particular”.
27.Further, the UK Computing Research Committee argued that the current peer review system “limits the success of more adventurous ideas”, pointing to “numerous reports of proposals not being funded” despite receiving “reviews with three top ratings” and only “one objection”. Sir Mark Walport provided some support for this view. He told us that “the peer review system can sometimes be rather unimaginative”. He pointed out that in the case of US DARPA (which the proposed new UK research funding agency is “broadly modelled” on) “peer review is done by the programme managers and project leaders”, i.e. “the most imaginative people”, which he described as “absolutely critical”. Former Science Minister Lord Johnson agreed with Sir Mark’s comments, stating that the peer review system “could be seen as overly conservative”. It should be noted however that the peer review system was valued for ensuring scientific and ethical rigour in research and fairness and transparency in funding decisions.
28.Several submissions argued that the current system did not fund enough projects that—as put by AIRTO (Association for Innovation, Research and Technology Organisations)—“drive delivery of a strategic UK imperative”, i.e. long-term research projects targeting transformational change. An example given included projects contributing to the achievement of the UK’s targets for Net Zero carbon emissions. The Royal Academy of Engineering agreed, arguing that the UK, despite being a “global leader in research”, is not particularly good at “exploiting innovation and delivering research driven by industry strategic needs”.
29.The University of Manchester argued that this gap could be filled by putting more emphasis on strategic research, i.e. research that “addresses a specific problem or class of problems” such as “defined ‘missions’”. Indeed, Professor Mariana Mazzucato stated that there was not currently “an agency that can oversee this challenge-based approach” in the UK. However, Sir Mark Walport challenged this assertion:
It is not true, as Mariana said, that UKRI has not been formed with challenges in mind […] the Industrial Strategy Challenge Fund was a completely new form of funding that UKRI took on from the very beginning and has a number of ARPA-like features and a number of lessons to learn from it.
30.UCL’s written evidence argued that the current research and innovation system suffered from “gaps in the research commercialisation pipeline”. The former Minister of State for Universities and Science (2010–2014) Lord Willetts agreed, stating that the UK was “weak” in the areas of “technology and commercialisation”. Professor Mariana Mazzucato made similar comments:
The UK’s national system of innovation is particularly strong in universities but weak compared to international competitors in translational or applied research, typically conducted in applied research centres and national laboratories.
31.Professor Dame Julia King (Baroness Brown of Cambridge) described this problem as a failure to get ideas out of the laboratory and into the world:
The gap I see in our research and innovation landscape is ‘science push’: helping great scientific ideas escape from the laboratory into applications which enable a step change in the way current technologies or processes work, or into applications no one has yet thought of.
AIRTO made a similar point arguing that there were too few programmes and projects funded in the UK with genuine market ‘pull’, i.e. those that will “lead more easily to successful exploitation of the results and the economic or societal benefit”.
32.However, existing parts of the UK research and innovation system are focused on this. For example, as Professor Dame Nancy Rothwell, Chair of the Russell Group, pointed out, the Small Business Research Initiative (SBRI)—a pre-commercial procurement scheme—was in part designed to address this issue by stimulating the development of innovative solutions, derived from business, to address challenges faced by the Government and in turn improve the delivery of public services. However, Dame Nancy stated that these schemes had “generally failed to be followed up with actual purchases”. Innovate UK—which delivers the SBRI—had its funding “heavily cut” in the 2015 Spending Round. Given that Innovate UK is—according to Lord Willetts—the “business-facing part of UKRI”, cuts to its budget have the potential to adversely affect the commercialisation and translation of research.
33.In addition, the University of Oxford argued that “many Innovate UK programmes are too short-term”. The Royal Academy of Engineering attributed this to the current research and innovation system incentivising the publication of papers in peer-reviewed journals over “[i]nvestment to turn research into real world solutions and successful businesses”. Further, it added that “late-stage development and demonstration”, which is “crucial to bring new products and services into use”—because “most need to be extensively tested and demonstrated at scale in real-world environments before they can succeed in application”—was neglected. Thus, the UK was, as a result, comparatively “poor at supporting this crucial stage of development”.
34.Finally, another perceived gap in the research and innovation system, which has implications for the commercialisation and translation of research outputs, was its scope for interdisciplinary research projects. AIRTO argued:
The ability to develop and fund projects across different scientific and non-technical disciplines that are necessary for the development of products and services that can readily be introduced and adopted for use in public and private sectors.
Facilitating interdisciplinary research was a big part of the rationale for creating UKRI. Indeed, giving oral evidence, the former Science Minister Lord Johnson—who oversaw the creation of UKRI—argued that UKRI was successful in bringing “greater coherence” to the Research Councils and that they were “now working together much more effectively than they did before, to the benefit of interdisciplinary and multidisciplinary research”. The University of Oxford acknowledged this stating that UKRI had been “making progress” in this area. However, it also argued that “UKRI continues to struggle with cross-disciplinary research”. Professor Richard Jones, Chair in Materials Physics and Innovation Policy at the University of Manchester, agreed. He told us that the UK system “needs to have something that supports interdisciplinary research better” and that “in principle” UKRI “should do that” but it is “perhaps too early to see whether it is able to deliver it”. This reflects oral evidence from Lord Johnson and Sir Mark Walport, who both described UKRI as a “young organisation”.
35.Further, Cardiff University argued that the majority of research projects were “tightly defined within narrow remits or academic disciplines”. UCL stated that, as a result, certain “research areas” that “do not fit into traditional boxes” are “currently underfunded”. One means of stimulating “multi- or cross-disciplinary” research—according to Professor Mariana Mazzucato—was to organise research around ‘missions’, which should “incentivise mission-oriented collaboration between universities and other research institutions, and with commercial, health and charitable organisations”.
36.The creation of UKRI has established a more coherent framework for the organisation of Government funding for research and innovation. There are reasons to think that UKRI, following its initial period of being established, could benefit from refreshing its processes and ways of working, specifically to reduce bureaucracy, increase agility and make it easier for external organisations to engage with it in research involving translation and commercialisation of discoveries. The question is whether such changes would make redundant the role of an ARPA-like agency. We consider on balance that even in a better functioning system, there can be a role for a body that sits outside and operates in a different way to the established mechanisms, with a different culture and which is able to operate free of some of the structures that are necessary for the dominant research funding institution.
37.The written evidence submitted to this inquiry by the Department for Business, Energy and Industrial Strategy (BEIS) showed that its proposals for the new UK research funding agency were broadly aligned with the perceived gaps in the system outlined earlier in this Chapter. The Government suggested that UK ARPA would:
Indeed, giving oral evidence to this inquiry, the Science Minister Amanda Solloway MP stated, several times, that the Government wanted to provide “an agile and quick-to-use funding pot […] as if it were the private sector”.
38.In addition, the BEIS submission to our inquiry stated that:
The new funder, UK ARPA, will be an agile organisation […] it will take a novel approach to programmatic funding that includes the freedom to pursue rare opportunities in a responsive and flexible way, without undue bureaucratic constraints […] Setting up UK ARPA recognises the high cost of missed technological opportunity. These opportunities bring risks of failure–and some programmes will fail.
Much emphasis was placed on the importance of UK ARPA operating in an “agile” way, unburdened by “bureaucratic constraints” and there was explicit recognition of the fact some of the programmes it funds “will fail”. Minister Solloway reiterated the Government’s commitment to ensuring that UK ARPA’s “bureaucracy is as limited as it can be”. This contrasted with the perception—outlined at paragraph 23—that the current research and innovation system was overly conservative and risk-averse.
39.In his oral evidence to this inquiry, UKRI Chair Sir John Kingman stated, in reference to the proposals for UK ARPA, that “[t]here absolutely is a case for the sort of concept that is being advanced”. Giving evidence in the same session, UKRI CEO Professor Dame Ottoline Leyser welcomed the prospect of a “protected pot of money to experiment with alternative funding models”. Much of the written evidence was equally supportive, welcoming the Government’s plans to establish the new agency. The Confederation of British Industry (CBI), for example, claimed that creating UK ARPA—“if done right”—represents an “exciting opportunity to make the UK the envy of the world in research”. The Royal Society, too, welcomed the announcement of funding for the new agency as evidence of the Government being willing to “try new things”, but added the caveat that “further detail is required in order to make an informed assessment upon how its creation will affect the existing R&D system”.
40.UKRI’s former CEO Professor Sir Mark Walport and former Science Minister Lord Johnson were more circumspect. Sir Mark argued that UKRI would be “perfectly capable of running ARPA-like programmes”. As outlined earlier, the Industrial Strategy Challenge Fund—which is managed by UKRI—has “a number of ARPA-like features”, he said. Lord Johnson agreed:
Sir Mark mentioned the Industrial Strategy Challenge Fund. This is a £2 billion vehicle, approximately, with many of the missions that you would expect ARPA, when it is eventually formed, to be focusing on.
Sir Mark told us that the Industrial Strategy Challenge Fund personnel—the ‘challenge directors’—were “based on the model of DARPA”. However, he noted two important differences, the first being that while DARPA’s challenge directors were “extremely well paid”, this “has not proved possible with challenge directors for the Industrial Strategy Challenge Fund”. Second, one of their “frustrations” was that “they have not had that degree of freedom in being able to run their programmes” which, he said, was “a challenge UKRI faces”. Thus, Sir Mark argued that the levels of freedom and pay enjoyed by US DARPA staff currently could not be replicated inside UKRI. The Government recognised this challenge: BEIS’s Deputy Director for UKRI Sponsorship and Advanced Research Projects Agency Sarah Hodgetts told us, in relation to recruitment for senior roles in UK ARPA, that “remuneration will be key”, adding that appointments will likely be made “outside the normal pay restrictions”. In addition, Dame Ottoline cast doubt on UKRI’s ability to give staff the “extraordinary freedoms” they needed to carry out ARPA-like activities, explaining that “novel and contentious” activity requires “a whole raft of extra sign-off measures, through Government”.
41.Sir Mark expressed concerns that UK ARPA could threaten the coherence of the research and innovation system, telling us that “UKRI was created to bring together the ecosystem”. Lord Johnson added:
There is a risk that we start fragmenting the coherence of funding and oversight that UKRI was intended to bring to our system if we start creating new bodies left and right that reduce UKRI’s ability to act as an overall strategic guide to where we need to invest more and where we need to increase our capacity and capabilities as a country.
42.In addition, Lord Johnson argued that the creation of UK ARPA carried a risk of duplication of effort that the research and innovation system—even in the context of increased funding—could not afford:
The bigger issue is how we clearly define its [UK ARPA’s] mission so that it is complementary rather than duplicative of other activities, whether through the Industrial Strategy Challenge Fund, in Innovate UK or in other bits of our publicly funded research system, or indeed the charitable sector.
43.Former Science Minister (2010–2014) Lord Willetts has made a similar point, stating that Innovate UK “was supposed to be—and indeed for a while functioned—as the home of strategic horizon scanning on new technologies emerging from the UK research base”.
44.In addition, Lord Johnson called on the Government to clearly set out why a new funding agency was needed and what it was for, highlighting that more than a year had passed since the agency was announced in the October 2019 Queen’s Speech and there had not been much detail on the proposals:
To say “high risk, high reward” is not a clear enough mission statement. It is not a clear enough defining purpose. We need to know how it [UK ARPA] is going to be different from the mission that is funded by the £2 billion Industrial Strategy Challenge Fund and how it is going to be different from the nearer-to-market innovation support provided by Innovate UK and its network of Catapults, for example.
The National Audit Office’s written evidence underlined this point. With respect to its guidance on creating new public bodies, it stated that “[t]here should be a clear advantage in establishing a new organisation”. Giving evidence to this inquiry in mid-November, Minister Solloway was unable to say when the agency would be established, and admitted that “we are still working our way through quite a few particular questions”. The July 2020 UK Research and Development Roadmap suggested UK ARPA would be established in the autumn of 2020, however, it was reported on 22 November that it had been delayed further. Professor Richard Jones called for more clarity, stating that he was unsure if the Government had “thought through what the agency is for”. The 2020 Spending Review added to this uncertainty, allocating £50 million (of £350 million given to UKRI) for “high-risk, high-payoff research”, but failed to mention anything about a new UK research funding agency or ‘UK ARPA’.
45.It is strange that more than a year after its inclusion in two successive Queen’s Speeches, the Government has not clearly articulated the need for, or intended remit of, the proposed agency. To date, it seems to be a brand in search of a product. That said, evidence that we have taken does provide a case for an ARPA-like institution and in this Report we set out the guidance that our witnesses have given. We note that it is unusual that, having proposed a new body, it has been left to others to fill in the gaps as to its intended function and form.
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