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At that time, Bradford was exceptional in its work with industry, largely national and international—there was little at the local or regional level. The university was badly affected by the 1981 cuts. The picture is vastly different today. According to Phil Coates, pro-vice-chancellor for research and knowledge transfer at Bradford, Bradford’s supply chain stretches from the personal to the local, to the regional and through to national and international levels. Its profile is one of being on top for graduate employment, widening participation and knowledge transfer, and it is also at the leading edge of science, including that of polymers and micro-technology and nanotechnology. It is also a driving force in the city of Bradford’s regeneration process. It works closely with Yorkshire Forward, which quickly recognised the contribution that the sector could bring to the regional economy.

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The 14 higher education institutions have a combined turnover of £1 billion per annum. As a percentage of the region’s gross domestic product, it is estimated that, directly and indirectly, the sector generates £3 billion of output and that, by 2010, nearly 10,000 new jobs will have been created, about half of which will be in the universities. As a percentage of the region’s GDP, Yorkshire and Humber is recognised as the largest sector outside London.

Co-operative working by Yorkshire universities in all its guises has changed enormously. I will give a few examples. First, on graduate retention, the Yorkshire scheme is recognised nationally as one of the best examples of collaboration. Secondly, the graduate enterprise scheme works on linked activities promoting enterprise and entrepreneurialism among students. Thirdly, Knowledge Rich brings together all universities with Yorkshire Forward in facilitating appropriate expertise for use in business and in developing clusters. Fourthly, Yorkshire Forward was the first regional development agency to set up the secondment of a senior academic to act as a translator between the RDA and higher education institutions and to have regular officer and vice-chancellor meetings.

Those examples do not just happen. Increased funding has facilitated the change and needs to increase even further, but there is a new enterprise culture that has replaced the ivory tower image and which provides a real buzz in our universities today.

3.40 pm

Baroness Valentine: My Lords, I join previous contributors in thanking the noble Baroness for securing this important debate. What can be more important to the future success of our country, economically and otherwise, than a thriving and responsive university sector where young people and others can explore their potential alongside the best students from around the world and where pioneering research takes place, with resultant opportunities for business and benefits for us all?

I declare an interest because London First, of which I am chief executive, counts many higher education institutions among its members, alongside some 300 of London’s leading businesses.

London is a centre of excellence in higher education in both UK and world terms. Some 41 of the UK’s 160 universities and HE colleges are in the capital. They attract £90 million of foreign investment in research and 83,000 foreign students. So the economic impact in London alone is substantial and positive, but it could be bigger and better. There is untapped potential which requires stronger partnerships between higher education and business.

I know that some educationalists think that universities need business like fish need bicycles and that private sector leadership and entrepreneurship might somehow wash away the high educational ideals upon which colleges and universities were founded. But that shows a lack of self-confidence. Business values the intellectual leadership presented

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in higher education. Intellectual leadership and knowledge transfer are the vital ingredients for an economy based on knowledge and high added-value business services. For the UK to retain a competitive edge over international rivals, we have to stay ahead intellectually and in pursuing and applying cutting-edge research.

“Knowledge is power” is the cliché. The real truth is that applied knowledge strengthens economic power. For UK plc to stay ahead of international competitors, we have to take advances quickly from the cerebral to the experimental, from research to development and from there to application. Some might say that it is time that we “sweated” our academic assets more. It is an ugly expression, but it is used in the commercial world to describe getting better value from underused premises, equipment or other resources. In the case of our universities and HE colleges, the assets to be sweated are mainly intellectual rather than physical. They represent the key to our future competitiveness.

How can we release all this potential, apply our knowledge and strengthen our economic power? We can do so by building much better practical working relationships at all levels between academia and industry. Both the HE sector and business need to be more open to each other. Those in higher education have to recognise that business must make profits and that it is not somehow dirty to do so. Our university sector must sell its intellectual assets, be it research, training services or graduates, in a competitive and globalised world. If they fail to be competitive, they will discover that UK businesses will not feel bound by patriotic loyalty but will buy elsewhere.

Business should in turn recognise the strength of the HEIs’ offerings that are often literally on their doorstep. Engaging with an American or Japanese university may seem more glamorous, but the knowledge and expertise that UK companies seek is very likely sitting in a UK university. Perhaps I may put in a word for some of the new universities. Some of Britain’s best graduates—those who have often triumphed over less than privileged backgrounds—emerge from modern HE institutions to find themselves unfairly discriminated against by employers.

Fruitful partnerships between UK business and higher education are already there, waiting to be developed, imitated or multiplied. Let me mention just one. The Praxis programme, founded out of the Cambridge-MIT Institute, brings together advisers from HE and industry to deliver thorough professional training in technology and knowledge transfer. It is creating a well-skilled interface to enhance business sector access to HE-generated knowledge and technology in the UK.

As in so many walks of life, if academia and industry do not work harder at hanging together, I am sure that our international competitors would be delighted to see them, and the UK economy, hang separately.

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3.45 pm

Lord Wilson of Tillyorn: My Lords, I should first declare an interest as master of a Cambridge college and as chancellor of the University of Aberdeen.

What does one say towards the end of a debate such as this one when there have been so many cogent and powerful contributions? Perhaps I could concentrate on two things. The first is what can be achieved by a major centre of research excellence such as Cambridge—not because Cambridge is unique in this, but just as an example. The second is the value of what one might call the community of scholars. Last year, a consultancy did a study called The Impact of the University of Cambridge on the UK Economy and Society. It is a mine of information on precisely what this debate is about. It would be quite wrong, and I think tedious, to quote extensively from that study, but I should like to pick out one or two points.

First, there is the astonishing fact that the University of Cambridge has been the home of 81 Nobel Prize winners. That is more than the number for any other country—country, not university—in the world except for the United States and, of course, the UK itself. Incidentally, four of those Nobel Prize winners came from my own Cambridge college albeit it is the smallest one, so size is not the only thing that matters.

Another point arising from Cambridge is the great story of the unravelling of the structure of DNA by Crick and Watson. The study which I quoted reckons that, worldwide, that has produced more than $100 billion of investment in biotechnology. That is some economic achievement. Then more recently, in February this year, there was the opening of the Li Ka Shing Centre, a splendid new facility for research into cancer. It has made Cambridge the largest cancer research facility in the whole of Europe.

What is so instructive in addition to those developments is how a great centre of research expands outwards into its surrounding geographical areas. Due to the “Crick and Watson effect”, as it were, Cambridge now has 200 biotech companies, the largest concentration in Europe. There is also the cluster effect in the larger area, 15 miles around the university, with 900 high-tech companies employing some 27,000 people and producing a massive annual income.

There is another cluster effect which I think is just as important: the cluster effect of having a community of scholars, or in the case of a university such as Cambridge—a collegiate university—a college community of scholars. I mentioned Crick and Watson and the unravelling of the structure of DNA. I was told earlier this week, by somebody who was there, about a dinner in my college, Peterhouse, where Crick and Watson were both present as young men. So too was a less well known Australian biochemist, Irwin Chargaff. During conversation Chargaff told the two of them about work he had been doing on DNA. It was the vital clue. The rest of what happened following that dinner in Cambridge is not just history; it is the double helix and everything that has changed our lives since. That is the value of a scholarly community.

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The scholarly community applies also at the other end of the spectrum—among students. Young people from all sorts of social and economic backgrounds and from many different nationalities live and operate together and talk across the barriers of different subjects and different cultures. All of this gives these highly talented young people, brought in simply because they are talented, a chance to develop their true potential.

Perhaps it is not possible to measure the direct economic impact of all this, and perhaps, as the noble Lord, Lord Giddens, said, one should not do so. The important point is that they make a great contribution to society here and around the world. I pick up on another point made by the noble Lord, Lord Giddens. I hope that the role played by great research institutions will be affirmed by the Government. That is not to undermine what my noble and right reverend friend Lord Carey was saying about the role of newer universities; just to affirm what is being done by research universities.

Perhaps I may conclude by quoting Confucius. After all, he has been around a great deal longer than even the oldest of British universities. That great Chinese classic, the Analects of Confucius, starts, freely translated:

I believe that the universities of the UK, all of them in their different ways, provide the opportunities for just that.

3.50 pm

Baroness Sharp of Guildford: My Lords, I join other noble Lords in thanking the noble Baroness, Lady Warwick, for stimulating this timely debate. I also declare an interest as an honorary fellow of Sussex University, of Birkbeck, and, recently, as an associate fellow of Newham College, Cambridge.

This wide-ranging debate has celebrated the success, diversity and importance of the university sector in the UK. The noble Baroness, Lady Warwick, began by referring to a document produced by Universities UK, The Economic Impact of Higher Education Institutions, which gives the total value of higher education institutions’ impact on the UK economy as £45 billion. That may seem a large sum but is only 4.5 per cent of UK GDP. I think that the report underestimates the value of universities to this country. I admit that it uses input/output analysis and takes account of indirect effects but, essentially, it presents a static photograph of the impact of universities. Our discussion today illustrates that the impact is dynamic over time rather than one that can be captured by a still photograph at one point.

I illustrate that with some work that, I confess, I did 15 years ago at the University of Sussex. We considered a question posed to us by the Treasury: what do we get from spending money on basic research? We began by looking at a lot of surveys, which considered how far industry uses university research. The answer was that it did use it and that, the longer the term for which you look at it, the more use it made of it. The pharmaceutical and electronic

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industries—the high-tech industries—and the motor car industry, in design, and even the low-tech industries, such as mining and agriculture, are thoroughly dependent on the output of ideas from universities. That was captured in work by an economist called Mansfield. His reckoning—I must say that I think that it was rather a back-of-an-envelope reckoning, but it has been widely cited—was that the long-term rate of return on basic research was 38 per cent on average.

That is where our work started. As we delved into the matter, we recognised that the key benefit to the economy from basic research came from the training of individuals. The concept is simple. Less than 10 per cent of the scientific publications in the world come from the UK; therefore, about 90 per cent come from other countries. If we are to make use of that contribution, we must have scientists working at the leading edge of science and technology so that they can understand the ideas in those publications, use them and apply them in the areas in which they are working. Those highly trained scientists and engineers must be the receptors of that knowledge and the translators of it for industry. Technology transfer therefore depends crucially on individuals.

The dynamic effect of that over time is considerable. If we did not have those trained people working at the leading edge of technology, the innovation potential of the UK would be very little. We need to look at the university sector far more widely than the document does. Let us take teaching, for example. I was much taken by what the noble Lord, Lord Giddens, said about simply having to have many people trained to higher educational level in a knowledge-based economy, because we need the creativity and lateral thinking that come from that education. The noble Baroness, Lady Deech, also made that point. In my preparation for the debate, I went back to the report written by the noble Lord, Lord Dearing, in which he quoted from Ernest Boyer’s article on the scholarship of teaching, which we considered in 1990:

Picking up again the Dearing concept that at the centre of education must be the student, surely the greatest output of our universities is training young minds to think for themselves so that they can hold down jobs where they are required to take decisions and to hold substantial responsibility for those decisions. This is why the CBI says that 60 per cent of future recruitment will be of graduates, because this is what industry wants from our graduates. However, as the noble Lord, Lord Morris of Handsworth, said, we should not forget that we are also training students to be work-ready. Universities increasingly fulfil that function. If we think about it, professions such as accountancy, business, medicine and its allied professions, law, engineering, information technology, media and communications, and teaching and education, all of which provide a great deal of our

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GNP, are now graduate professions. Our universities also deliver a good deal of our vocational training.

It is acknowledged that basic research in universities provides the seed corn for innovation, and in turn that innovation underpins our competitiveness. For a long time, the universities were seen too much as ivory towers, tied up in their own ideas and not sharing them with others. However, as the noble Baroness, Lady Lockwood, said, this is no longer true. The Lambert report documented a sea change in the culture of our universities, which are now positively seeking out industrial partners. The problem, as the Lambert report also documents, lies with the reluctance of British industry to do its part and invest the resources necessary to develop and exploit these new ideas.

Increasingly, it is also realised that, in the world of the knowledge economy, universities provide a dynamic nucleus for regional economic growth. Noble Lords have cited many examples today of the contribution made by universities in this respect. The noble Baroness, Lady Bottomley, talked about the contribution made by the University of Hull, and the noble Baroness, Lady Blackstone, talked about the regenerating effect in the Thames Gateway. Universities are now playing this vital role in their regional economies. They are big employers in their own right in all sorts of labour. They provide high- and low-skilled jobs, and are a focus for training in higher-level skills. They act as incubators for new enterprise and provide expert advice and consultancy for existing enterprise. I was very pleased that the noble and right reverend Lord, Lord Carey, mentioned the Arthur D. Little report, because it is not only our research-intensive universities that are doing all this. The report found that the 35 less research-intensive universities levered three times more contract income from public research funding that they received than the more research-intensive universities. That illustrates so well the fact that universities actively support a whole range of industrial and business services in their local areas by working with their RDAs and providing a dynamic nucleus for those economies.

Finally—we have heard a great deal about this—universities contribute a great deal to the international balance of payments. We hope that the students who are trained in this country and by this country overseas retain good feelings towards Britain, and through those links go on to work with service providers and equipment manufacturers who can meet the needs in their own countries. Put together, the impact of these dynamic influences is enormous and is talked about in the regional economy. Increasingly, the picture that emerges is that our universities provide the dynamic nucleus for this country as a whole.

I should like to add a slight caveat to what I have said on two issues. First, the success of our British university system has happened because we have been able to individualise education for personal needs. Overseas students come here because they get contact with senior members of staff. The success of teaching comes from knowing individual students and being

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able to help them to know themselves, which is part of the creativity. It is vital that we retain that tradition. I endorse wholly the request of the noble Baroness, Lady Warwick, and other noble Lords that we maintain the current unit of resources. Teaching is stretched to the limit. We need more resources, if possible, to maintain teaching levels. We cannot squeeze them further.

Secondly, universities have grown up within a collegiate system, which has contributed a great deal to the open discussion of ideas and, therefore, creativity. The collegiate system is not part of the market system and it would be dangerous to make it too much a part of it. We can go so far in developing business methods of running universities, but, in so doing, we should not lose the creativity that comes from collegiality.

4.02 pm

Baroness Verma: My Lords, we on these Benches welcome the Universities UK report into the impact of higher education institutions on the UK economy and the Leitch review. We recognise the enormous contribution made by the higher education sector and the need for it to remain healthy for the growth of wealth and development of the UK’s skills base and economy.

As the noble Baroness, Lady Warwick, pointed out, the higher education sector not only generates revenue greater than UK pharmaceutical companies but directly employs more than 330,000 people, which equates to 1.25 per cent of total UK employment. In addition, 276,000 people in other sectors are also dependent on the higher education industry. The sector directly spent £15.4 billion on goods and services produced in the UK and, through direct, secondary or multiplier effects, it generates £42.5 billion in the output of the economy.

Future learners believe that by going to university they will increase their potential to earn, to get better life skills and to enjoy better health. They therefore must not be deterred from committing to further education because of fears of rising debts through tuition fees and the general rising cost of living. The 2001 census shows that UK birth rates are falling: 600,000 fewer young people will enter the workforce between 2010 and 2020. At the same time, the Chancellor’s targets for economic growth need another 1.3 million people to join the workforce. An additional 1.9 million people are needed to secure economic growth and to provide industry with resources to remain competitive.

The Government must bear in mind that declining numbers of young people in the UK will result in a natural decline in numbers applying to UK universities and, therefore, an increasing need to attract overseas students. Are there any plans to increase university marketing in countries such as China and Hong Kong, where recent figures show a decline? If we are to compete effectively with developing giants such as India and China, we cannot allow qualifications, especially in vocational subjects, to decline, as has happened with third-level

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qualifications, with the number achieving them dropping from 42,000 in 1999-2000 to 28,000 last year.

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