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By using these modern knowledge technologies, we have changed the lifestyle of many people. That is the kind of lifestyle niche change to which my noble friend Lord Giddens referred. Yet according to official figures, the retail industry spends an infinitesimal amount of money on research. I could make the same point about the financial services industry. A report from the Manchester Business School last year indicated that many service firms did not think that they were doing research and development because they regard this as a manufacturing-related concept. A couple of weeks ago, Nesta made the same point. I think that there is a lot in this. I spoke of the international R&D scoreboard that was published on Monday. Banks and retailers made their first appearance this year thanks to the adoption in Europe of the new international financial reporting standards, which require more detailed analysis of spending in the annual accounts. That detail began to show what they were spending on R&D.
As my noble friend Lord Woolmer explained, the whole purpose of the seventh framework is to help us respond to globalisation. Our response to globalisation is to move up the value chain. As you do, the demands of the customer changes. Higher value products require higher value services, which require greater skill—not only in science and engineering but in the social sciences. This is a matter which needs more study in the seventh framework programme.
On the European institute of technology, the Commission’s more detailed proposals were made after we reported and the Government responded. The Commission’s proposal is to spend €2.4 billion to create a network of research centres which would be called the European institute of technology. Its concern is that Europe’s academic standards are slipping further behind those of the United States and risk being overtaken by standards in China and India. The hope is that by linking a number of research centres and universities located around the European Union, they would help each other to raise academic standards to a level that will rival MIT.
Like the noble Baroness, Lady Sharp, I am not sure about this. There needs to be more clarity of purpose in this arrangement; but there may be an alternative. In his report on climate change, Sir Nicholas Stern argues for a stronger focus on technological co-operation in energy R&D and in the low-carbon technologies. Co-operation in this between 25 nation states would be of great significance and could help Europe to stay in the forefront of the technology of climate change. With this firm purpose, the idea of a European institute of technology might be greeted with a bit more enthusiasm. Perhaps the Minister has more news about this institute, as my noble friend Lord Woolmer asked.
I found it gratifying that the Government’s response joined the committee in generally welcoming the proposals for the seventh framework programme.
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12.11 pm
Lord Dykes: My Lords, this has by any reckoning been a most interesting debate on a compelling subject. I thank the noble Lord, Lord Haskel, for making the very interesting suggestion towards the end of his speech about possible European institute of technology usage and function. I echo other speakers in congratulating most warmly the committee chairman, the noble Lord, Lord Woolmer, with all his university expertise and knowledge, and his committee colleagues on their excellent text.
This report encapsulates the critical decision made seven years ago that the European Union should catch up with or indeed overtake other high tech, high research and development areas of the planet in market-oriented research efforts. As we heard, the EU target is 3 per cent of GDP by 2010. It is now reduced to a more realistic figure but let us hope that those figures are left behind as the years unfold.
The member states deliberately chose a most ambitious target for FP7 to be 160 per cent of FP6, and the long-term aims are equally ambitious. This includes Euratom, which some people with more expertise than I have regard as already having a somewhat excessive budget, but that is a separate question. We have a wonderful new jargon phrase, ET platforms. The wonderful spawning of these acronyms when the Commission produces new documentation is always amusing. I phoned an official in Brussels to get advice. He told me, “It is very easy, my friend. The ETBs will function through the SRAs via the JTIs and the ERC will guide the UGs”. I said, “Thank you very much”.
The Government are generally very enthusiastic about these matters except for the Commission idea of setting up the technology institute, as has been mentioned. Of course, as we know, this must be done outside the military field, although dual usage remains an open question, as I believe the noble Lord, Lord Bowness, and others mentioned.
The 75 per cent for funding by 2013 is a very attractive notion for many people who may want to enter these fields for the first time and respond to the Commission’s challenge. I welcome the challenge that the organisers of FP7 will face in persuading industry representatives in the UK that such EU-based funding can produce competitive gains for us. We have many highly competitive, impressive international companies and an extremely impressive and competitive retail sector, but a perpetual trade deficit. Therefore, the scepticism of UK companies about these matters may be less than in countries such
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I thank my noble friend Lady Sharp for her comments. She has phenomenal expertise gained over many years. As I said, the noble Lord, Lord Bowness, mentioned dual use. That is still very much an open question. I hope that the Minister will have time to refer to it today.
These are early days but we need more examples from the pan-European representatives of industry and trade to give us examples of where EU-based, rather than national only, will give an extra dimension of competitiveness and productivity. The jury is out whenever a new FP starts, particularly this one where the financial base is much expanded. Therefore, the skill in setting up an effective monitoring and reporting-back system will be crucial. Considerable sums will be going to carefully selected projects and recipients. Does the Minister feel that the peer review mechanism will work properly? That question cannot be answered completely at the moment.
I would like to hear more also on what the EU8, plus the two islands, especially Cyprus with its distinct academic background since independence, think about these proposals. We wait to hear more from them. In the week of the Stern report we are bound to welcome the Commission’s inclusion of climate change research in the list of key priorities. Although the new elements in this seventh framework programme are by definition complex, the document establishing these modalities is itself reasonably short and straightforward. As the noble Lord, Lord Woolmer, said, for various reasons there was only one evidence session and a small number of written submissions, with the CBI sounding rather sceptical. However, there were a number of common themes in all the analyses. I hope that the Minister will have time to deal with some of those points.
We noted the scepticism of industry and commercial sources expressed by the CBI and others—the fear of excessive bureaucracy and an absence of that operational simplicity, which is the hallmark of the Lisbon mark 2 ethos. It is important to note that that was adopted by politicians and officials as a philosophy. However, industry has also responded in tangible areas; an obvious one is pharmaceuticals. Even to a layman such as me, that seems ideally suited to the public-private syndrome of research oriented innovation.
In the evidence the Minister also emphasised knowledge transfers, but the concomitant limits thereon if companies seek to protect their findings from competitors is an open question that needs further examination. Those who read the evidence, as I did, will have noted the matters enunciated by the noble Lord, Lord Sainsbury of Turville, such as licences, patents, trademarks, spin-off efforts and contract research. Perhaps the noble Lord, Lord
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In future the Government aim to lay stress on more applied research from these efforts, but will the machinery be in place to achieve this at the often more cumbersome European level? Does the Minister also expect that Community 50 per cent funding will be applied in most instances, or will that be only a maximum from time to time? I recall that the sixth framework programme went only to 35 per cent. Are the officials preparing these programmes still thinking of 15 per cent going through via the European Research Council mechanism, or could it be a higher figure? Equally, would it not be a good idea to increase the ratio for mobility and capacities beyond the mooted 20 per cent?
I imagine it is accepted everywhere now that single teams can come from single countries for ERC funding. That seems to be generally agreed. But the encouragement of what my noble friend Lady Sharp described as young researchers from various countries with experience of previous FPs coming together must be even more important than single country teams.
Is the budget line for civil space and security research still at the reduced figure? That has become clear from the debate, but will the Minister confirm it? Then again, repeating for the third time the question of dual-use research, will that rule out excessive slippage into military areas, perhaps even by accident?
It was hard at the start to secure much enthusiasm from the CBI, as I said earlier, but that has improved in recent months in view of assurances given by Her Majesty’s Government on things such as genuine ERC independence. However, they were understandably keen on the Marie Curie fellowship scheme structure. Will this therefore stand alongside the ETP and the JTI segments for priority support?
Incidentally, does the Minister also feel that the broad single market objectives of the entire single market policy range will be tangibly enhanced by all these new programmes? If so, could he give a putative example of that—perhaps excluding pharmaceuticals, which might be what one would seize on as a potentially good example?
Finally, on the immediate practical outlook, is the EP on track to achieve the FP7 second reading in its November plenary and fit in with the Competitiveness Council’s December meeting for final approval by member Governments? If the over-complicated bureaucratic temptations are alleviated in the application procedures and the subsequent steps, like cost reporting models, does the Minister feel that the Lisbon agenda is going to look increasingly realistic to doubtful industrial and commercial managers, many of whom are resident in
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As the six initial JTI projects go forward, will the public be able to glean through the public media both the initial decision approved by the Commission and the machinery underneath the Commission, and the developmental steps showing, effectively, work in progress?
These new policy areas always take some time to put into action, but I hope the Minister is optimistic that the seventh framework programme, much more dramatic and interesting in appearance already, will open up an exciting new era of a united Europe catching up with higher research countries such as the United States, Japan and Germany, which has a leading economy in the European Union. This will give wonderful opportunities for United Kingdom and other EU scientists, technicians and researchers—the younger the better.
12.22 pm
Lord De Mauley: My Lords, I congratulate the noble Lord, Lord Woolmer, on securing this debate today, and apologise to him and to your Lordships for my delayed arrival. I add my thanks for the work he, as chairman, and his sub-committee have done in producing this very useful report. It has exposed some serious issues, many of which have been referred to by noble Lords today, and on which we look forward to the Minister’s responses. This debate is particularly appropriate so shortly after a study by the DTI, to which the noble Lord, Lord Haskel, referred, that showed that Britain is losing ground against countries both within and outside the EU in the R&D race, casting doubt on the effectiveness of government policies to incentivise research spending.
This debate has enabled your Lordships to consider the Commission’s detailed plans for the seventh framework programme for research and their potential implications. This is an important framework programme, particularly because of its focus on energy and, in light of the Stern review, climate change. I am sure noble Lords will agree that climate change is one of the key challenges we face, and we need technological developments to help us tackle it.
Inextricably linked to climate change, and one of the foundations of our economy, is electricity generation. We need new technologies to provide new, cheap, clean electricity generation. I am pleased that funds have been allocated to Euratom-related research. The European Atomic Energy Commission is carrying out research to demonstrate the viability of fusion as a future energy option to meet the needs of a growing world population. The relative abundance of fuel resources, the inherent safety aspects and the environmental friendliness of fusion are all reasons why Europe and the large nations of the world are so interested in it. In the area of energy more generally, I am also pleased to see hydrogen and fuel cells being specified by the Government as among their priorities for joint technology initiatives.
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I share many of the committee’s views and concerns. I join them in applauding the intention to simplify the programme, reduce bureaucracy and deliver genuine improvements for the participant, including the academic community, while at the same time increasing the involvement of, and support for, industry. The dynamism of the European economy is increasingly dependent on investment in education, R&D and innovation. However, while understanding the assertion that the encouragement of experimentation in research can be undesirably frustrated by demands for justification of every cent of expenditure, there is on the other hand a considerable danger that the remoteness of decision-making on spending from the ultimate provider of funds, the hard-pressed taxpayer, can lead to insufficiently rigorous justification of such spending decisions. Indeed, there has been agreement in the debate today that it is essential that FP7 is transparent and accountable.
While I join the sub-committee in welcoming the increased funding for FP7, then, I do so with an important caveat: increased funding needs also to be efficient funding. One way of trying to form at least a partial judgment on that is to look at historical performance. As the noble Lord, Lord Woolmer, asked, what work have the Government done to gauge the efficiency of the use of money in FP6 and earlier frameworks, and what plans exist to review regularly the use of FP7 money?
Among other serious questions the CBI asked, it mentioned its concerns at increasing the budget so dramatically over FP6 without a sound cost/benefit analysis. We share its concerns that some areas of industry believe that no competitive gain for UK business has been attributed to EU research programmes. We note the Government’s response to that. Will the Minister give an assurance that there will be regular reviews of the extent to which the Commission’s assurances in this regard on FP7 are honoured? What consultation do the Government plan to undertake with regard to concerns expressed in the report and its evidence about national mobility programmes? Subject to that, and to the resolution of certain industry concerns, we welcome the proposal to reinvigorate the Marie Curie fellowship scheme, and would like to see it given equal priority with European technology platforms, joint technology initiatives and the European Research Council.
Will the Minister update the House on the joint technology initiatives, and in particular on whether Research Councils UK has held discussions with the UK industrial and academic communities about the demand for technology platforms, as suggested in paragraph 35 of the report? Also, as the noble Lord, Lord Woolmer, asked, have more concrete plans now been made to put in place monitoring and reporting systems to safeguard these projects?
The CBI mentioned its concern that the European Research Council must serve scientific priorities, as opposed to political ones. It must concern itself with challenges that cannot be tackled at national level, and place a strong emphasis on supporting business needs. The Government’s response to the report
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I turn briefly to the space and security programme discussed in chapter 3, over which, as my noble friend Lord Bowness mentioned, there are some serious concerns. I look forward to the Minister’s response to them. I note that both the committee and the Home Secretary accept that Commissioner Verheugen’s letter is a,
Has that letter been placed on the official record in the European Parliament?
I note in paragraph 77 the rather interesting wording that the budget line for space and security under FP7 has not yet been agreed but will need to be reduced. What progress has been made, and what steps do the Government plan to take if they are not happy with the outcome? The Government’s response to the report accepts the recommendations made on this issue in paragraph 78. What cross-departmental discussions have been held in Government to date? After all, a joined-up approach is essential on this issue.
The Government said that they were sceptical of the Commission’s proposal to establish a European Institute of Technology. We shared that scepticism, as did the noble Lord, Lord Giddens, and other noble Lords. Nevertheless, the Commission adopted the proposal on 18 October. The proposal, as the noble Baroness, Lady Sharp, mentioned, has changed to a more virtual concept than that which was originally proposed, but it will still involve considerable investment. The EIT must demonstrate beyond any doubt that it adds value, creates new projects, and does not either reinvent wheels or divert funding from other valuable research.
As regards a time frame for FP7, previous framework programmes for research have run for five years, whereas this one is proposed to run for seven years. I would be interested to hear the Minister’s views on the merits of that proposal. Seven years has the advantage that it provides a longer-term investment framework for businesses, but there may be other considerations. There can be no doubt, as the report states, that efforts to strengthen the research base and activity are important for the competitive position of the European Union and of course the United Kingdom, as a member. But we cannot talk about competitiveness without discussing productivity. Redesign of the nuts and bolts of an organisation or an industry is in some eyes just as important as innovation. It increases productivity and thus competitiveness. Blue sky thinking and research need to go hand in hand with improved efficiency of processes and a serious look at the burden of regulation, which can depress productivity. I hope
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Finally, in my quest to highlight poor use of English, I draw attention to the phrase “non-report”, which appears more than once in the letter from the then-Home Secretary on page 22. I am sure that this phrase has been used for many years, and I understand the meaning attributed to it, but seen in the cold light of day one surely must agree that it has a certain flavour of Edward Lear, or perhaps more relevantly Hilaire Belloc, about it. I am pleased, however, that there have been no non-speeches today. I thank the noble Lord, Lord Woolmer, for initiating this valuable debate. We on these Benches will be keeping a careful eye on the progress of the FP7 discussions. I look forward to hearing the Minister’s comments on the many questions raised and the assurances sought today.
12.33 pm
Lord McKenzie of Luton: My Lords, I start by thanking my noble friend Lord Woolmer for introducing his report and for the wide-ranging way in which he did so. I thank all noble Lords who participated in this debate and in the work of the sub-committee. The Government have given their formal written response to the recommendations and conclusions of the sub-committee.
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