EXAMINATION
OF WITNESSES
(QUESTIONS 1-19)
MALCOLM WICKS,
MR CHRIS
NORTH AND
MR JAMES
HUGHES
7 JUNE 2007
Q1Chairman: Good morning. Mr Wicks, it is very
good to see you here. Thank you very much for being with us and
for bringing your staff.
Malcolm Wicks: We feel full attendance is important.
Q2 CHAIRMAN:
As you know, this has been a matter of some concern to us. You
will have seen the report we published with Baroness Warwick's
evidence and so on. We are also aware that you will soon be attending
the meeting of the Competitive Council in Brussels on 25-26 June
and the proposal will be discussed there and, as I understand
it, the objective is to come to a general agreement. If you are
going to make a statement, a very brief reminder to us of what
the words "general agreement" mean in terms of the progress
of something through the process of European agreement would be
useful. We only have three-quarters of an hour with you, which
is a bit shorter than usual, so we are trying to be brief and
concise. The session is open to the public. A verbatim transcript
will be taken and you will have a chance to correct it, if necessary.
As the session is shorter than usual, we would be grateful if
you could give us written answers to those questions which we
cannot cover. I think there has been contact between both sides
on that matter. I think you want to start by making a short statement.
Perhaps you could also introduce Mr North and Mr Hughes for the
record.
Malcolm Wicks: Thank you very much indeed. We
certainly welcome this inquiry into this interesting initiative.
I am joined by two colleagues: on my right, Chris North from my
Department, the Office of Science and Innovation, and also James
Hughes from the Department for Education and Skills. If I could
spend a couple of minutes introducing the subject from our point
of view, and of course, the suggestion of responding to you in
writing on any questions we may not reach is entirely welcome.
What I would like to do is first outline the Government's broad
approach to this negotiation and second, to bring your Committee
up to date on progress, as you are indicating, and the likely
future timetable for decisions. I would characterise our position,
the Government's position to the Commission's proposal as one
of cautious support: support for the Commission's analysis of
the innovation gap in Europe certainly, an endorsement of the
general objective of the EIT in terms of integrating the so-called
knowledge triangle, that is, education, research and innovation
dimensions. Thanks in no small part to lobbying by the United
Kingdom, the concept of the EIT has evolved substantially over
time and indeed in the right direction. In particular, we have
moved a long way from the initial Commission proposal for a single
bricks and mortar institution with the power to award degrees.
The Commission now agrees that the correct approach for Europe
is to build on the existing excellent institutions within Member
States to enable them to better link up with each other and indeed
with business and so ensure that we build the critical mass in
Europe to generate innovative solutions to our most pressing economic
and social challenges. However, since the EIT model is untested,
we have also been arguing successfully that it would be sensible
to start on the basis of a few pilot projects. This will allow
evaluations to be conducted and lessons learned before we move
on to any future expansion of the proposed Institute. In line
with this, the UK has been arguing for a scaled down initial budget.
We have consistently made clear our concerns with the proposal
to draw funding for the EIT from the margins of the European Community
budget. The Government's approach is also, frankly, influenced
by our assessment of political realities. The current EIT proposal
does have a very large measure of support across Europe at the
highest political levels and the European Parliament appears on
the whole to favour the proposal. In our view, our national interests
are therefore best served by working constructively with our partners
to achieve an outcome which improves the chances of the EIT becoming
a useful addition to the range of instruments available to support
European innovation and indeed competitiveness. Let me emphasise
that no-one is pretending that the Institute will be the single
panacea to Europe's relative weakness in the area of innovation.
It needs to be seen in the broader context of the Lisbon strategy
for growth and jobs, where the primary responsibility clearly
remains with Member States but where European level action can
potentially add value to these individual national efforts. Turning
now briefly to recent developments in the negotiations, the pace
has accelerated in recent weeks, both at official and ministerial
levels, following a number of meetings in the Council working
group. An initial exchange of views on the Commission proposals
took place at the informal meeting of the Competitiveness Council
in Wurzburg, which I attended in April. The Presidency was encouraged
by the large measure of support for the broad objectives of the
EIT proposals. However, it did recognise the need for further
discussion on the detailed legal text, in particular on governance
and budget aspects. In the light of various comments received
from Member States, the Presidency subsequently produced a compromise
text, which was the subject of an exchange of views at the Competitiveness
Council on 22 May, which I also attended. This compromise text
was seen as a significant improvement by most Member States, including
the UK, though still needing further amendment. Intensive discussions
have continued at official level in Brussels in the intervening
weeks—I think they are still going on—and the Presidency
has arranged a special Competitiveness Council on 25 June, which
I will be attending, at which it hopes to secure, in the Brussels
jargon, a "General Approach". That is where the Council
indicates its agreement to the Presidency compromise text. This
could then potentially pave the way for an agreement with the
European Parliament in the autumn.
Q3 CHAIRMAN:
That is very helpful. Thank you very much indeed. If we can go
briefly back to the need for the whole thing, we in particular
recognise that there is a need to do across the European Union
what several Member States have been doing rather successfully,
including our own, as an individual state. I do not think we would
quarrel with that at all but we were concerned that the whole
thing was too big, too top-down, and I wonder whether you could
just expand a little bit on what you have said to see whether
or not we have actually managed to achieve that reductive effort
and make it rather less pompous and more practical, to use informal
rather than correct language.
Malcolm Wicks: Yes. Obviously, the starting
point here is the need for innovation in Europe, including the
United Kingdom. My title in the UK Government is Minister for
Science and Innovation. I think we all recognise that there is
a traditional story to tell about Europe and Britain, but certainly
in the UK, that we are very good at pure science. That is certainly
true. We have not been so good in the past at the appliance of
science, and innovation, and we are now trying to correct that,
I think with some success, in the United Kingdom but, of course,
this is a story across Europe. In terms of productivity, we are
not where we should be if you benchmark against many of our competitors,
not least the United States. My judgement would be that innovation
is not just something that one tier of government should concern
itself with—regional development agencies or the nation
state. It is entirely appropriate that all should have a concern
about this and, in terms of critical mass, if we are to compete
effectively with the United States, with China, with India, I
think there is a need for an initiative at a European level. It
should not seek to duplicate the nation state in terms of small
projects. It should be about critical mass and it should be about
developing centres of expertise in the European Union. That is
why we are supportive of the overall proposal but it is an ambitious
project. As I said in my introductory remarks, we have, I think,
successfully taken the idea away from some great building somewhere,
some great monument to someone's ambition. We want to test it
and see, and it is entirely appropriate when we are talking about
a new scientific institute that we pilot it. Let us test the ideas,
and test the hypotheses in two or three areas. That has been our
approach, with therefore a complementary argument on our part
about some modesty when it comes to the finance that should be
made available to this.
Q4 CHAIRMAN:
The suggestion was made to us about starting with a few KICs and
building up to the full EIT. Is that afn option which is still
a possibility or is it just not going to work like that?
Malcolm Wicks: Given the widespread support
for this proposal—and when I have attended the Competitiveness
Council meetings, both the so-called informal and the more formal
one, I have been struck by the fact that, while there are some
sceptics and people asking the kinds of questions that we have
been asking, there is quite broad support for this—our judgement
is that the EIT will happen, but we think it should happen on
a modest basis, with two or three of these so-called KICs being
developed. They should be carefully monitored to see how successful
they are before we try to build a larger institution.
Chairman: Thank you. That was very helpful.
Q5 LORD
MOSER: Minister, good morning.
It is difficult to forget the origins which you have referred
to, which was a sort of European MIT. That is how it all started.
I think it is great that the Government has managed to push that
aside. Then there was a sort of phase two, which was a minor MIT,
a research institution, but now we have this, which is still called
EIT, which I have a problem with but never mind that. This is
really a sort of introductory question from my point of view,
because there is something I still do not understand. Europe has
a number of very good universities, as you know better than anyone,
and some of them are very good in science. It must be a good idea
to have more links between universities and the business sector—I
think that is all admirable—and the stress on applied science.
What I have not understood is, is this new animal, this EIT, purely
a sort of middle man? It will not, I am happy to note, give degrees.
Is it a thing with 60 people in it, board and staff but no students
and no academics, so it really is a middle man that gets other
institutions, worthy institutions, to advance?
Malcolm Wicks: I would say yes, broadly speaking.
As I say, we have argued against the idea of a great building
with a huge establishment. We see it more as an Institute, yes,
with a headquarters—and there are two or three nations bidding
to house the Institute—with a relatively small staff. I
think the Commission are talking about 60 staff. We feel that
at the outset it probably should be a smaller number than that
but with actually a very high-powered governing body of maybe
15 or so people. I think, Lord Moser, you are right to imply that
the actual work, the actual research, would not be done in that
building.
Q6 LORD
MOSER: No research and no teaching?
Malcolm Wicks: That is right. It will be done
in other institutions, and I think that is the right model, and
with no degree awarding powers, although my colleague from the
Department for Education may want to come in here. I think there
is a suggestion that if the degree awarding body wants to partly
badge that as the EIT in the future they may be able to do so.
Mr Hughes: That is the case. You may wish to
touch on that later in the session.
Lord Moser: I think that clarifies it. I think it
deserves a different name in the end because it is not in any
sense an institute, but maybe that is a minor point.
Q7 LORD
TREFGARNE: You mentioned in your
opening remarks that this institution would be funded, I think
you said, from the margins of the EU budget. I suppose that means
it does not have a proper budget at all; it is going to be found
from wherever there is a bit of under-spend, which does not say
much for the efficiency of the rest of the process, does it, if
there are sufficient funds for this sort of activity available
from other budget. Is that satisfactory?
Malcolm Wicks: What would not be satisfactory
would be a situation where the Commission demanded huge sums of
money to fund this and felt that by, as it were, raiding the budget,
this thing could be funded, which is why, as part of our cautious
approach, we have been asking these questions and voicing disquiet
about the funding proposals. It is why we would feel that financially,
as complementing our strategy of a couple of KICs or two or three,
there should be relatively modest funding in the first phase.
Q8 LORD
TREFGARNE: This is an innovative
approach to public funding, is it not, where the budget for some
new institution is acquired by raiding other budgets? I will not
say any more about it.
Malcolm Wicks: Perhaps my colleague Chris North
could come in here. It is certainly raiding a budget but it is
raiding a kind of reserve fund, as I understand it. It is not
saying "Here are other things where we have allocated funding,
for research or whatever, and we are going to take that money
away." It would come from a reserve budget.
Mr North: The Commission have proposed that
€308 million should be found from the unallocated margins
of what is called heading 1A of the European Union budget. That
has caused quite a lot of concern, not just to the UK Government,
and indeed, we heard very recently that the European Parliament
themselves are expressing concern as well. We in the UK Government
have taken the view that, if we are to move to a smaller scale
start-up phase, with just two or three KICs, the budget should
be reduced correspondingly, but this really is the major outstanding
issue. I would say, at the moment, in the run-up to the Council
on 25 June, the question is are there alternative sources of funding
that the Commission can legitimately find to fund the start-up
phase of the European Institute of Technology?
Malcolm Wicks: To give some idea on this, it
might be helpful to the Committee, I understand the Presidency
compromise paper currently on the table has a figure of some €308
million, in square brackets, as they say.
Q9 CHAIRMAN:
It is over a period of years, is it not?
Mr North: Six years.
Malcolm Wicks: Yes. In our minds, something
more like €100 million at the outset, in the early phase,
would be appropriate.
Q10 CHAIRMAN:
For the initial period of six years?
Malcolm Wicks: Indeed, we have mentioned that
figure in the Council.
Chairman: Thank you. That was very helpful
Q11 BARONESS
HOWARTH OF
BRECKLAND: You have argued quite
clearly that we need politically to be on board if we are going
to have any say on all of this, whatever the view is of taking
the idea forward, but how successful do you think you are going
to be in ensuring that there is a smaller budget and staggered
staffing? My first question is how successful do think you are
going to be? Secondly, even if the money is being found from the
margins—and I think Mr North was indicating this—what
other priorities might be lost in terms of what the UK Government
might wish to do by the alternative diversion of this funding?
Malcolm Wicks: On the first question, how successful
are we going to be, we will see in a few weeks' time.
Q12 BARONESS
HOWARTH OF
BRECKLAND: It depends on what
your colleagues think.
Malcolm Wicks: Yes. I think we have already
been very successful, as we indicated earlier, in moving the thing
forward—and I do think it is forwards, not backwards, from,
as I say, the bricks and mortar edifice to something which seems
more appropriate in terms of working closely with existing research
institutions and universities, as I said to Lord Moser, but also
in terms of our arguing for a more modest start. Much will depend
on informal discussions going on in the coming days and, of course,
the outcome of the Competitive Council. I do not think I am able
to judge that. In terms of the other priorities that could be
threatened, I am not sure how specifically I can answer that—I
do not know if my colleague Mr North can—but what I would
say is that this reserve funding, if I can call it that, is important
as a reserve and that is why we think it would be irresponsible
to raid or over-raid that budget for this particular idea, because
there will be other priorities that may well come along. Do we
know any more on that, Chris?
Mr North: If I can just expand briefly on that,
we are aware that there are already massive pressures building
up on the reserve. For example, the Galileo programme is often
mentioned in this context. If I could refer to the question of
the staffing levels, what the Commission are saying, their working
assumption is that the number of people supporting the governing
board will grow gradually, so we will not be starting with 60
people from day one, by any means. It is 20 in the first year,
possibly moving to 40 in the year two to three and ultimately
to 60 at the end of the period, but it still begs the question:
if you have fewer KICs, do you need as many in the staffing as
is proposed?
Q13 BARONESS
GREENGROSS: Going back to the
funding, if you think about our universities—and I cannot
talk about the rest of Europe—we do not have the scale of
work that would make us a world centre as the Americans do, because
they do put so much funding into their big institutes, not just
MIT. That is something that many people would like to see, and
we do have some initiatives now which are going that way but it
is extremely difficult. Have you thought that business itself,
as in the States, might make a huge contribution towards turning
this in some way into something which could not rival MIT but
would almost be something more like a Nobel awarding body for
Europe, as opposed to the world?
Malcolm Wicks: I think any attempt to simply
try to replicate MIT, which I had the opportunity of visiting
recently to talk about their knowledge transfer work and in a
sense just to look around that area, with all the companies associated
with it—would be foolhardy. I do not think it could work.
There are peculiar circumstances there in Massachusetts. The important
things, however, as you have indicated, are that we need to develop
and encourage the links which are developing quite rapidly in
this country, as you know, between the university and the business
community, with the spin-out companies and all the other things
that are now on the agenda. I am seeing some really remarkable
developments. They are building small satellites in a spin-out
company at the University of Surrey, for example, and in bioscience
and so on there is quite rapid change. That university-business
link is one key theme. The other key theme for us—and when
I say for us, it could be for the nation state or for the EIT
perhaps—is the idea of clusters. Despite it being the age
of the Internet, physical proximity is almost becoming more important,
it seems to me. We talk about the golden triangle of Oxford, Cambridge
and London, and there are now a number of developments regionally,
and some here in London, to try to build up that cluster of expertise,
and I think that is important and how that will translate in terms
of the early years of the EIT I think it is difficult to say.
I think you are absolutely right, of course, that when we talk
about innovation, this is not a need for the academics, the scientists,
to become more entrepreneurial in terms of the appliance of their
basic work but it is also a major issue for business as well,
which is why here in the UK we have established the Technology
Strategy Board with a budget of some £200 million a year
to encourage industry here in Britain to innovate. So there is
a good deal going on.
CHAIRMAN: We
have really got on to Lord Wade's question about industry and
the role of industry and business in this matter.
Q14 LORD
WADE OF
CHORLTON: I should explain that
I have an interest in this matter because I have been involved
in these activities for the last 12 years. I am concerned about
some of the issues that you raise. My concern about the proposals
for the EIT is that they bring in a lot of bureaucracy without
getting to the heart of the problem, which is a local issue; it
is about getting right the relationship, as you rightly say, between
the business community, who are going to provide the finance,
and the commercialisation of the ideas. We are not talking about
innovation, because innovation can happen without anybody commercialising
it. It is getting that link between somebody seeing a market opportunity
and putting resources into it. What I find odd is that there is
money now being allocated from the EU to do these activities,
yet at the same time the EU is reducing the amount of money available
in the UK for venture capital activities. We are now getting extremely
short of money in the venture capital field for start-up technology
businesses, yet at the same time the EIT will be putting in resources
for something which is far removed from the front end, where it
is really wanted. Although I agree entirely with you that there
is a serious need for activity and that Europe as a whole could
do a lot more on commercialising its ideas, it does not seem to
me that a centralised organisation along the lines described is
actually going to deal with the issue. What we could do with,
in my view, is much more of a major venture capital-type organisation
that can bring in mentoring skills, give skills to the companies
that need it, give financial support, and actually have money
available for start-up businesses. I am finding it more and more
difficult now to raise money for start-up venture capital in the
technology businesses because money is going so much into equity
activities rather than start-up. I do not quite see how the EIT
is going to solve those problems. What are your views?
Malcolm Wicks: My view is the EIT is not going
to solve all our problems. I said earlier that it is not a panacea.
There is a good deal in your question. One aspect of it is that
I understand what you are saying, Lord Wade, about venture capital.
I hear different reports on this, and it is not all doom and gloom,
but certainly in areas around bioscience, biotech, I hear concerns
that so-called venture capitalists are not all that adventurous
when it comes to investing in those territories. Indeed, we are
looking at some of those issues now, as a matter of fact, at quite
a high level. Here in Britain, of course, we have the R&D
tax credits, which I think have been very helpful; a number of
companies tell me how helpful they are. I have mentioned the still
relatively new Technology Strategy Board, chaired by Graham Spittle
of IBM, which from 1 July is going to be an executive agency,
so it will be at arm's length from government, with funding jointly
with industry to help promote innovation in industry. The EIT
is not the solution but, as I think I indicated earlier, it does
seem to me that while, obviously, much of the innovation will
be at a regional or local level, with the university hopefully
collaborating with industry, there will be certain projects, I
think I would argue, which need to be at such a scale in terms
of critical mass that the EIT could have a useful role to play.
But our cautious approach is about testing it and seeing, and
if we can kick-start—pun intended—the KICs at a fairly
modest level, two or three of them, and properly monitor them
to see their impact, I think that is the right approach for the
future.
Q15 LORD
WADE OF
CHORLTON: Are we going to be able
to ensure that some of these start-ups are going to be in the
UK and do not end up somewhere else in Europe?
Malcolm Wicks: I do not want to be too nationalistic
about this.
Q16 LORD
WADE OF
CHORLTON: I am!
Malcolm Wicks: I was beginning to get that impression,
sir. If you look at FP6, this is the European fund for research,
and the current phase, FP7, has a very significant budget, and
when we look back at the earlier phase, what we actually see—I
stand corrected but I think I am right about this—is that
British academics get more than their geographical share of the
funding and that is because we are very good at science; indeed,
we are excellent at science and in a bidding process on that mainstream
European research money, we do very well. So there is no reason
to think that with the EIT over time British researchers should
not do well.
Q17 LORD
WADE OF
CHORLTON: I agree with you that
UK universities do extremely well but UK business does not. UK
business is very much behind, say, German business or French business
when making use of European funding. I think if we are going to
go ahead on this, there is a role for the Government to take some
initiative to make sure that our business and our structures are
advised how to get their fair share of this new initiative.
Malcolm Wicks: I think that is absolutely right.
We are aware it is not an easy process to apply for some of this
money. I have discussed this with the Commissioner and we do need
to make it easier, whether it is for the academic or the business
person.
Q18 CHAIRMAN:
Somewhere in these papers it is clear that the Commission itself
is concerned about how to attract business funding into all of
this. Has that been discussed at all at these various meetings?
Malcolm Wicks: It has certainly been discussed
informally. Our view, to be blunt, is that at the moment business
is waiting to see. I cannot say to you that there are huge multi-national
British or European companies that are eager to get involved.
This is a fairly new-ish idea still for many businesses. Many
will not have even heard of it, understandably; they have their
business to run. I think they are waiting. It is very early days.
Q19 LORD
TREFGARNE: My question follows
on from that, about the involvement of industry. The fact of the
matter is in industrial concerns, rather as Lord Wade was saying,
they tremble at the thought of making an application to the EU
for funding. They know that these funds are generally disbursed
through the national government after they have been agreed. My
own experience actually relates to European funding for engineering
training purposes, which is not quite the same thing, but raises
so many hurdles and difficulties that firms, especially small
firms, just cannot be bothered. These are problems to be overcome,
not laid down in front of, and perhaps there are arrangements
or there could be arrangements for some kind of an advisory process
for firms, and especially, again, for smaller firms, to take them
through the labyrinthine processes of applying for EU funding
in these cases and also for administering the funds; I am thinking
in terms of after the funds have been disbursed and spent, there
is usually an audit process to ensure that they have been spent
properly. Nobody objects to that but it must be reasonable and
sensible. If there were a bit more central guidance, I think that
would be of great assistance. Perhaps the trade associations could
help. Perhaps the Engineering Employers Federation could help.
I have been mentioning engineering but in related industries as
well.
Malcolm Wicks: As I say, I do recognise these
problems and the Government is taking action. At the launch of
FP7 the Commissioner, Mr Potocnic, came over and he and I launched
the thing in the UK. We had many businesses there and so on. There
is a recognition of this issue. This is not really about the EIT
as such, although you are suggesting this could apply to the EIT,
but in terms of general monies and research monies, yes, we do
need to enable business to get involved.
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