Science and Technology: Economy
(3 weeks ago)
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Viscount Stansgate
That this House takes note of the contribution of science and technology to the UK economy.
Viscount Stansgate (Lab)
My Lords, to say it is a privilege and an honour to open a debate of this kind is an understatement. I have been in the House for just three years, and this is the first time that we have had a general debate about the contribution of science and technology—including engineering, research and innovation—to the UK economy. I welcome everyone in the Chamber today. A very impressive range of expertise shines through the speakers’ list, which includes my noble friend the Minister, for whom this is his first debate as Minister. In fact, we will hear from several other distinguished former Ministers of Science, whose experience in some cases stretches back over 30 years.
I am sure that there will be a bipartisan spirit this afternoon, but I begin by paying tribute to the noble Lord, Lord Waldegrave of North Hill, whose 1993 White Paper, Realising Our Potential, was the first time that science policy emerged in the modern era, having been ignored by Governments for far too long. The title of that White Paper remains very relevant today.
I welcome the range of attendance in this debate, and I am sorry that noble Lords have only four minutes to speak. I will highlight the maiden speaker. I made my own maiden speech three years ago this month, and I know just how the noble Baroness, Lady Freeman of Steventon, feels right now. I thank her for choosing today in which to make her own maiden speech, to which we all look forward.
When we begin our speeches, we often make reference to our register of interests, and I am proud to be president of the Parliamentary and Scientific Committee, which is Parliament’s oldest all-party parliamentary group by a long way—85 years this year. That is not in any way a financial interest. I am very pleased that our former chair, Stephen Metcalfe, is with us in the Public Gallery watching the debate. In his own parliamentary career, he also chaired the Science, Innovation and Technology Committee in another place. Now that the Parliamentary and Scientific Committee has been reformed for the new Parliament, I very much hope that Members from all sides of the House will take advantage of the activity we undertake. For example, noble Lords should come to the STEM for BRITAIN event held in March and see the astonishing work of our early-career researchers who represent the future. If they cannot come, they can read about it in Science in Parliament, which is available in the post room and in their pigeonholes.
One of the great benefits of initiating the debate is that it has triggered a wealth of informed briefing from a wide range of scientific societies. Sadly, I cannot possibly make use of most of it in the time available, but it is important that Parliament understands what a formidable array of expertise exists in the country. My profound thanks go to the Royal Society of Biology, the Institute of Physics, the Royal Society of Chemistry, the Physiological Society, the Geological Society, Cancer Research UK, the Institute of Cancer Research, the University of Leeds, the Russell group of universities, the Microbiology Society, the Royal College of Pathologists, the Campaign for Science and Engineering, the Society for Experimental Biology, the Royal Astronomical Society, the Society of Chemical Industry and the Royal Society—not to mention, of course, POST and our own House of Lords Library. With the leave of the House, I intend to place a copy of all the briefings that I have received in the Library, so that it can be of use to Members.
Today is an excellent time to have this debate because of yesterday’s Budget, which referred to our
“extraordinary strengths in science and innovation”.
It also follows the investment summit earlier this month. Both events stressed the Government’s aim to create the long-term stability that is needed to use science and technology to grow the economy. This is a Government who are openly committed to growth and the core message from today’s debate will undoubtedly be to emphasise just how much science and technology contribute to the UK economy. Science is a long-term enabler of opportunity. Scientific advances underpin all areas across our economy and are essential to the Government’s five missions.
I forget who coined the phrase “punching above our weight” to describe the UK’s record in science. The basic statistics are well known. For example, we have about 1% of the world’s population and yet produce 16% of the most highly rated scientific papers. Our scientific research is truly excellent. The Government spend over £20 billion a year on R&D. Oxford Economics has estimated that, in 2023, the life sciences sector alone contributed over £13 billion. DSIT estimated in 2022 that the value of the digital sector, which includes everything from information technology to digital content and media, was over £158 million. In March last year, DSIT also estimated that the value of the UK’s AI sector was already £3.7 billion and growing. In February, the Energy and Climate Intelligence Unit reported that the gross value added of the UK’s net-zero sector, which includes renewables, carbon capture manufacturing et cetera, was already £74 billion.
Also, there is no shortage of science sectors emphasising their own contribution. I will give a few examples. The Royal Astronomical Society says that the growing space sector is worth £19 billion a year. The Institute of Physics points out that the photonics industry, which is the technology of light, had an output of £15 billion in 2023, employing almost 80,000 people—as many as the automotive and aerospace industries combined. The Rolls-Royce small modular reactor programme is forecast to create 40,000 jobs and could generate an enormous export market of up to £250 billion by 2050. Meanwhile, the Royal Society of Chemistry points out that the chemical sciences sector generated £3.2 billion for the Exchequer. The Institute of Cancer Research says that its research has saved the NHS £68 million per year by updating clinical radiotherapy practice for cancer patients. Meanwhile, Cancer Research UK says that every £1 invested in cancer research in 2021 generated £2.80 of economic benefit, to the tune of nearly £1 billion.
In this Parliament and its successor, the life sciences sector holds enormous potential to drive economic growth and productivity, delivering goods, services, treatments, medicines and vaccines that are critical to the nation’s health and our resilience against—I hope not—any future pandemic. Overall, it is estimated that every £1 of public investment in R&D unlocks between £2 and £4 of private R&D investment in the longer term. I am pleased that the DSIT budget will increase from £12.5 billion for 2024-25 to £13.9 billion in 2025-26, which is real-terms increase of 8.5%.
So we have a lot going for us. We have world-class universities, not to mention places such as the Crick Institute, the Wellcome Foundation, the Catapult Network and so on. We have world-renowned public sector research establishments such as the National Physical Laboratory. I well remember a story told by a former Minister of Technology, to whom you might say I have a hereditary connection. He went to visit the NPL. When he was shown around, the director proudly said, “Here we can measure down to the smallest unit of measurement ever known, the POBA”. The Minister, being inquiring, asked, “What is a POBA?” He said, “Oh, Minister, it means point one of bugger all”. I hope that, when my noble friend the Minister next visits the NPL he will discover that it is still using the same unit of measurement today.
A word about the institutional landscape: the Government have been bequeathed a scientific landscape and institutional structure that can be made to work. Building on the science and technology framework published last year, the Government have just published an important industrial strategy Green Paper. This is central to the growth mission and its success will depend, crucially, on the application of science and technology. The Green Paper has identified eight sectors that drive growth: advanced manufacturing, clean energy, defence, creative industries, digital technologies, financial services, life sciences, and professional and business services.
We have UKRI. We have had the Nurse review. We have our world-class universities, a plan for a national data library and Project Gigabit. We also have ARIA, about which I hope we will hear more. We need to take advantage of the UK’s unique strengths to enable world-leading companies to grow and seize opportunities to lead in new and emerging industries. As yesterday’s Budget said,
“we are not doing enough to capitalise on these strengths”.
We must fund successful scale-up companies and not leave other countries to exploit our science to make millions for themselves.
I think our current structure will help. We now have a proper department in DSIT, with a Secretary of State at the Cabinet table for the first time in 30 years and distinguished Ministers in both Houses. We have a Cabinet committee chaired by the Prime Minister. Its job is to
“consider matters related to science and technology, to drive the United Kingdom’s economic growth and national security”.
Those are pretty much the same terms of reference as for this debate. We have a Chief Scientific Adviser and a network of advisers embedded in all departments, and we have a Science Innovation Network, which is embedded in all our embassies.
With a renewed commitment to an industrial strategy, we need to take advantage of the UK’s unique strengths to enable world-leading industries to grow and seize opportunities. If we match our undoubted research expertise with an industrial strategy that plays to our strengths, we can make an impact.
I will give the House an example. Your Lordships’ Science and Technology Committee, of which I am a member, is nearing the end of an inquiry into engineering biology, which is a very exciting new area of science. Put simply, in the future we will be able to make things by growing molecules and cells. Last week, the Government’s Chief Scientific Adviser, Dame Angela McLean, came to us and held up for the committee a handbag. It was not made of leather, nor of plastic; it was made of coconut oil that was processed by bacteria. The food industry is developing meat that is not real meat; it is grown in a laboratory. In the aircraft industry, there is real interest in producing synthetic jet fuel without using carbon or oil. All these new developments offer the additional benefit of recycling and helping us to reach our net-zero targets. That is why, incidentally, it is absolutely right for the Government to set up the regulatory innovation office to exploit these new areas.
What of the future? There are one or two things we must try to do. First, there is no doubt that we need to start with education. It is absolutely vital that we enthuse and inspire the next generation, and it must start in primary schools if not before, opening young hearts and minds to the wonders of science. We must make use of all the many scientific role models that exist, whether it is Maggie Aderin-Pocock on astronomy, Hannah Fry on maths or Hamza Yassin on wildlife photography. Brian Cox’s latest TV series on the solar system has been watched by millions. Of course, David Attenborough remains our national treasure, inspiring us with his documentaries: everything from “Life on Earth” to the new series, next weekend, which I think is entitled “Asia”. I think I am right in saying that my noble friend Lord Winston recently went to a school in Northamptonshire and the head teacher reported an upsurge of interest in science after his inspiring visit.
Secondly, we need to create and sustain a public and society that understand the importance of science and technology and are supportive of innovation. Whenever I meet someone who expresses great scepticism about science or, in recent years, vaccines, I say to them, “Well, just look at your mobile phone. There is not one iota”—perhaps I should say one POBA—“of a feature of a mobile phone that isn’t the result of science. It would not exist without science”.
Thirdly, another key to the future is to be as international as possible. The UK must maximise all available international co-operation. We should join and collaborate with as many international countries as we can, including countries in the Indo-Pacific. We have rejoined Horizon Europe—good—but now we need to prioritise an expanded role in its successor, Framework Programme 10. I have lost count of the number of times that I have been told that we need a visa system, with its costs, that attracts talent rather than deters it.
Fourthly, we must not take our universities for granted. On the contrary, the House is only too well aware of the signs of stress in the HE sector and the funding of our universities. There was a breakfast briefing for Peers on this subject last week.
Fifthly and finally, although I mean no disrespect to my noble friend the Minister, science and technology is too important to be left to DSIT alone. We need nothing less than a sustained cross-departmental science strategy to attract foreign direct investment and the global scientific talent that we need.
By the end of this Parliament, when we use the phrase “science superpower”, I for one want to feel that it is a reality and not a slogan. I beg to move.
Lord Markham (Con)
My Lords, I thank the noble Viscount, Lord Stansgate, for securing this important debate. We on this side feel fortunate to have the Minister in his new role. His previous role in this area is very relevant and we welcome him to his first debate. We are delighted to have someone with such knowledge in his position.
I hope to conduct my speech in the constructive manner proposed by the noble Viscount. We all know and recognise the incredible impact that science and technology has in this country. The 4% that it is estimated to add to the economy is a massive boost. We can all point to massive scientific successes. One of the biggest illustrations of this is that, of the 10 Formula 1 teams, six are based in the UK. You cannot get more cutting-edge science and technology than Formula 1. We have those that noble Lords will know—great British names such as McLaren, Williams and Aston Martin—but also other well-known brands such as Mercedes, Renault and Red Bull. Yes, those foreign brands’ Formula 1 teams are located in the UK because they know that we are the best and most cutting-edge.
I will take the limited time available to talk about the area I know best from my former health role: life sciences. We have some fantastic examples in this field too. Google’s AlphaFold project will see many breakthroughs. The Government’s involvement in Covid and the Minister’s involvement in the Moderna deal that followed are a good example of putting long-term relationships in place.
But what I have seen all too often at first hand is what I call the UK disease: we are very good at innovation but pretty poor at the rollout. I saw this particularly in medtech. The joke I always heard is that the NHS has more pilots than British Airways. Those pilots were good in their innovation but so often fell down when it came to rolling out across the network. We would often see them lost to the US, which would come in with the funding and the rollout programme, and we would see a brain drain of our expertise.
One of the last things we tried to do was introduce what we called a medtech rules-based pathway, which tried to provide a pathway so that there was a way that exciting parts of medical technology could be rolled out through the NHS under a set of well-known rules. We were consulting on that around the time we left government. I would be pleased if the Minister could update me on the findings—it would be super to have that by letter if he does not have them to hand.
Another area was the data for R&D. As we all know, AI is only as good as the data that it comes from. We are fortunate in the medical space to have probably the best data in the world, as I have been told by many people, dating back to 1948—primary care, secondary care and biobank data. We were working on a project to bring this all together to create the possibility of a Silicon Valley of life sciences. I would be delighted to hear where we are in the progress of that project.
I end on a note of caution. A £1 investment achieving a £3 to £4 return is a case of modern-day alchemy, but it requires deep pockets, long-term investment and hard work to achieve those rewards. Anything that diminishes those rewards will be a threat. My concerns about the latest Budget, dare I say, are the moves on tax increases. The crowding out of private finance that the OBR is concerned about puts this at risk, so I hope that we are careful and make sure that we do not kill the golden goose that we have in this space.
Baroness Northover (LD)
My Lords, I too thank the noble Viscount, Lord Stansgate, for securing this debate and for opening it so comprehensively. I declare my higher education interests. The Minister has rightly been welcomed to his position, and he has a major strategic task. He will need to reach right across government if science and technology are indeed to be at the heart of the Government’s industrial strategy and plan for growth.
I was a Minister in the coalition Government, latterly in DfID. Vince Cable as Business Minister developed an industrial strategy, ably supported by David Willetts—now the noble Lord, Lord Willetts—and others, analysing the UK’s strengths and weaknesses. They established catapults in promising areas and committed funds, for example, to the globally significant Francis Crick Institute, despite the post-2008 financial constraints. Universities were supported. We brought the aid budget up to 0.7% of GNI, with a proportion for research relevant to developing countries.
Chris Whitty, then DfID’s chief scientific officer, took me to Oxford and Cambridge to hear about ODA-supported research. In Cambridge, I learned about work in Vietnam that sought to improve the productivity of small-scale pig farmers and at the same time to reduce the co-living of humans and animals, risky markets and the use of bat droppings for fertiliser. Pandemics that cross species were already worrying scientists, post the SARS and MERS outbreaks, anticipating “disease X”, which was to hit us a few years later with massive effects on our society and economy.
In Oxford, I visited the Jenner Institute and learned about its vaccine work, so relevant then to the west African Ebola outbreak. Sarah Gilbert and Catherine Green, in their superbly readable book Vaxxers, noted the contribution that ODA money made to their work which was the groundwork for their Covid vaccine. Then what happened? Aid was cut, DfID was in effect abolished with no consultation, Boris Johnson spoke of cashpoints in the sky. Was that joined-up government? I think not. That was compounded by the huge damage done to our scientific and university sectors by Brexit, the failure to remain in the Horizon scheme and the barriers to continental students and researchers coming to the UK, barriers which persist.
The UK has certainly had an exceptional scientific and technological base, but that cannot simply be assumed to continue despite batterings. The new Government propose an industrial strategy again with science and technology at its heart, and that is very welcome. Science and technology have long underpinned economic development, such as in the Industrial Revolution, the chemical revolution which enabled Germany and the US to power ahead, and the green technology revolution which is right now powering China and needs to power us as well.
The noble Viscount, Lord Stansgate, effectively laid out the range of our strengths in science and technology, and we will hear more today about that promise but also that universities are under threat and that the UK’s growth depends on investment, skills, the removal of barriers and a willingness to take risks and to allow those risks to be taken plus assistance in scale-up, as the noble Lord, Lord Markham, said. Governments promise to be joined up. The Minister has a special responsibility to seek this in this Government. He will know how damaging it can be when one part of government fails to see the impact of its actions on another. I look forward to his response.
Baroness Greenfield (CB)
I congratulate the noble Viscount, Lord Stansgate, on drawing attention to this important issue. I declare an interest as CEO and founder of a small biotech company, Neuro-Bio Ltd, pioneering a novel approach to Alzheimer’s disease and spun out originally from Oxford University.
In the light of my experience over the past 10 years, I would like to focus on opportunities for the UK economy to benefit from its science and technology even more than is currently the case. For example, dementia is costing the UK £42 billion this year, rising to £90 billion in 2040, so the value of developing an effective therapeutic intervention would be enormous, and not only for the huge saving. Such a treatment developed in this country would provide an incalculable boost to our national pharma industry.
But there are unnecessary headwinds. SMEs are now losing out by some 50% compared to 2023 for R&D tax credits. If we factor in the significant amount of time required, new administrative rules and the risk of HMRC inquiry, smaller companies may abandon making a claim altogether. The recent changes, including those in subcontracting rules, may provide a negligible uplift in the tax revenue but come at a great cost.
R&D tax credits should be a UK co-investment, hand in hand with the company, into innovation happening on its shores, creating jobs and value immediately, followed by an incredible dividend when resulting in a globally competitive technology. These credits should be restored to at least previous levels. Big multinationals might then expand their footprints in the UK, rather than divesting as they do now.
Today, UK public investment in R&D of 0.44% GDP needs to be 50% higher just to reach the average OECD spend, let alone to be ahead of the competition. It could be argued that, pound for pound, we already outcompete most other countries, but the UK is heavily underinvesting in itself, banking on the high innovation input of our academia and industry—after all, it is an easy short-term win on the budget line.
Why would we not see this as a brilliant reason to invest even more, rather than as an excuse to get away with less? True, there are government loans and schemes and grants, but the former places a stressful burden on repayment within a fixed period while the latter may entail a time-consuming amount of effort that is more than likely to be wasted. The latest Innovate UK competition saw a success rate of a mere 4.5%. As with claims for tax credits, many may feel that applying for a grant is just not worth the time that could otherwise be spent progressing the science itself.
Then there is the question of gender. Less than 2% of total VC funding goes to female founders. Earlier this year, a Women in Innovation grant offered some 50 awards for a very modest £75,000 per project. Less than 4% were funded. Programmes levelling the playing field for women should go a distance towards changing the present blatant inequality, not entrenching it further.
More generally, it is the baked-in and oftentimes biased decision-making that stifles the otherwise great economic impact of our entrepreneurs. It is safer to fund small, transitional technologies, at the cost of truly disruptive innovation, because there is very little in the way of incentives or protections if an investment does not work out. There is much willingness to charge capital gains on investments where success can be shared but no appetite for sharing the consequences of a failure—hence the mindset to back only cautious advances at a cost of truly transformative ways of thinking.
This lack of support often forces disruptive scientists into looking further afield for funding to grow. Once they enter, say, the US ecosystem, it is that economy which will ultimately benefit from the stimulus provided by innovation which the UK has fostered in its infancy. Too often this country is seen as a feeder ecosystem into the US, not giving full rein to its homegrown ingenuity.
STEM innovation is the crown jewel of our economy. It is high time we invest at least as much as others to show the world what the UK science and technology sector can achieve. But without an improved national strategy and support, R&D-stage companies such as mine will have no choice but to consider M&A overseas. It is high time we think of innovators and the Government as partners in building the economy of tomorrow, the foundations of which should be laid today.
The Lord Bishop of Newcastle
My Lords, I thank the noble Viscount, Lord Stansgate, for bringing this important and timely debate. I look forward to the maiden speech of the noble Baroness, Lady Freeman, and welcome her to your Lordships’ House.
I want to focus my remarks on the north-east region’s rapidly growing science and tech sector as a huge asset to the UK economy, attracting skills and investment from across the world. At the heart of the sector in this region are its five distinguished universities: Durham, Newcastle, Northumbria, Sunderland and Teesside. This month they announced their new partnership, known as Universities for North East England, that will strengthen their collaboration, making a greater contribution to everyone who lives, works, and studies in the north-east and driving regional economic growth.
In his opening remarks, the noble Viscount alluded to the urgent need for cross-departmental work in government, as did the noble Lady, Baroness Northover, in her excellent speech. I think this point demonstrates that. Access to skilled workers is a vital component of a flourishing science and technology sector. With 67,000 people studying STEM subjects across these universities, the region has the highest proportion of STEM students in the country, resulting in a plethora of highly skilled and employable graduates. There is a clear partnership between the universities and businesses within the region, demonstrated by the increasing number of spinouts from universities. In 2023, spinouts from Newcastle University alone raised £40 million in investment.
One development that is demonstrating innovation in the region is the Newcastle Helix—a 24-acre site in the city centre bringing together industry leaders, businesses and top researchers in an internationally renowned innovation cluster. What makes this development stand out is not only its world-leading research but its integrated approach of growing fiscally while strengthening communities. The Helix is committed to creating growth for businesses and investors, but also to driving positive change through its purpose to help families in communities and cities around the world to live healthier, longer, smarter and easier lives.
Another advancement was this year’s announcement that Northumbria University would become home to the North East Space Skills and Technology Centre. Funded by investments from a US aerospace and defence firm and the UK Space Agency, the centre will transform the UK space economy through the research of world-leading space experts and by bringing together industry with academia. It is expected to create 350 jobs and to inject £260 million into the north-east’s economy, further demonstrating the growing recognition of what this region has to offer.
I welcome the emphasis that yesterday’s Budget placed on this sector through the record levels of research and development investment, as well as the greater regional powers granted through the North East Combined Authority and its mayor, which will unlock funding and powers to further the growth of science and technology in this region. I feel that we must now ensure its future success, and that the potential of this region is fully unlocked through continued recognition and investment.
Baroness Donaghy (Lab)
My Lords, I thank my noble friend Lord Stansgate for introducing this debate. He is a whirlwind of knowledge and energy, as anyone who has attended one of his STEM events in Portcullis House will know.
I was a member, and subsequently chair, of two of our former EU sub-committees, on internal markets and services. Among other activities, we visited universities and catapults, and invited representatives of the UK’s space industry, just referred to by the right reverend Prelate, to give evidence to our committee. I notice that another member of that committee, the noble Lord, Lord Rees of Ludlow, is in his place, and I look forward to hearing what he has to say. Some of the issues raised will not surprise anyone here: skills gaps, the importance of attracting and retaining talent, international interdependency, the mobility of skilled labour and the need for long-term strategy. Incidentally, talking about catapults, the House of Commons Science and Technology Committee reported that SMEs that had worked with catapults grew 50% faster than those that had not, with an average of five times return on investment.
As a former university administrator of over 30 years, it pains me to see the dire straits to which our universities have been reduced. Their significance for research and development should not be understated. As the daughter of an aero-engineer who worked for Armstrong Siddeley, which became Bristol Siddeley and then Rolls-Royce, it was the space industry which captured my imagination —perhaps it was also listening to “Journey into Space” on the radio. In pride of place on my bookshelves, which I inherited from my father, are the complete works of HG Wells—but it is not just a romantic interest.
The Minister has already answered questions this week about medical research, defence research and the importance of curiosity-based research. These are all vital, but I want to draw his attention to the importance of the UK space industry, which employs 50,000 people. According to the World Economic Forum, the global space economy will be worth $1.8 trillion by 2035, up from $630 billion in 2023—almost twice the rate of global GDP growth. It will connect people and goods and play an increasingly crucial role in mitigating world challenges, ranging from disaster warning and climate monitoring to improved humanitarian responses. This will involve agriculture, construction, insurance and climate change mitigation.
The Minister will be aware of the previous Government’s policy paper Space Industrial Plan: From Ambition to Action published in March this year. It was obviously too late in that Government’s election cycle to do much about it, but it stated:
“Global satellite services … underpin at least 18% of UK GDP (£370 billion), supporting everything from mapping to weather forecasting, to monitoring the power grid and enabling every single financial transaction”.
I ask my noble friend the Minister: do the Government recognise the potential importance to the UK economy of the space industry, and what action do they propose to take to ensure its growth and future potential?
Lord Mair (CB)
My Lords, I too am grateful to the noble Viscount, Lord Stansgate, for introducing this important debate. Science and technology could not be more vital to the economy than at the present time. As an engineer, both in practice and at Cambridge University, I welcome the Government’s very recent Green Paper. Invest 2035: The UK’s Modern Industrial Strategy identifies eight key growth-driving sectors. Three of these are advanced manufacturing, clean energy and digital technologies. Engineering is at the heart of all three, driving innovation and economic growth. It also plays a key role in many aspects of other sectors, such as defence and the life sciences. Engineering is integral to achieving outcomes from science and technology. The resulting new products, services and enterprises generate jobs, boost the economy and benefit society.
Demands on engineers are greater than ever, with the world facing challenges and opportunities that depend on substantial engineering input. Chief among these are the climate emergency and the rapid progress in artificial intelligence and related digital technologies. At the heart of the Government’s agenda is making the UK a clean energy superpower, with zero-carbon electricity by 2030. This involves major investments in wind and solar power, carbon capture and storage, hydrogen and long-term energy storage. Nuclear power will also be essential, and small modular reactors—mentioned by the noble Viscount, Lord Stansgate—have considerable promise. To be successful, all these technologies will require increasing numbers of engineers and technicians.
However, the UK faces an acute engineering skills gap. The Royal Academy of Engineering’s National Engineering Policy Centre has laid out how to bridge this gap—by reversing the shortage of STEM teachers, increasing apprenticeships and promoting engineering as an attractive career choice in the application of science. We should take a leaf out of Germany’s book: 20% of its 25 year-olds have a higher technical qualification; in the UK, the present figure is only 4%. Further education colleges and their role in science and technology have been neglected for too long, so I welcome yesterday’s Budget announcement to increase the funding of further education by £300 million. The plans to reform the apprenticeship levy are also welcome. In addition to supporting our world-class universities, an enhanced future for apprentices, including degree apprenticeships, will be especially important if this country is truly to become a technological superpower.
Our world-class, research-intensive universities are undoubtedly national assets and are highly regarded globally. As well as their key roles in education, training and curiosity-driven research, their science and engineering departments are hugely important drivers of economic growth. But many universities are now in a precarious financial state. In the upcoming spending review, their R&D needs further investment and support from the Government so that they can continue to innovate, attract foreign investment and stimulate industries. “Invest, invest, invest” was the mantra of the Chancellor in her Budget speech. Enhanced support for science, technology and engineering in our universities and for university-business collaboration could not be a more important investment. It will be crucial for the successful delivery of the industrial strategy, for growth and for the economy.
Lord Waldegrave of North Hill (Con)
My Lords, it is a great pleasure to follow one of our great civil engineers and to precede one of our distinguished science communicators, who I am sure will add greatly to the debates of this House. This is not just because he was nice about me, but surely—I address this to the Front Bench opposite—some way must be found, however we are selected for this House, for the noble Viscount, Lord Stansgate, to continue to give us his wisdom, because we need it.
Disraeli warned us against falling into anecdotage, but I will tell one story from my own time. When I left my role as Chief Secretary to the Treasury, I left a note for my successor, the much-lamented Alistair Darling, who was a great public servant and a very good Chief Secretary and Chancellor. The practice of leaving a note ended later, because somebody tried to make political capital out of it, which was silly. My note said that he had to support two things in particular that did not have votes in them: the intelligence services and science. You need them and you never know when you are going to need them—but, my goodness, when you have not got them, you know it.
It is a wonderful thing that cross-party support for science over recent years has developed as a result of some outstanding Ministers; I think of Lord Sainsbury of Turville and my noble friend Lord Willetts. The infrastructure of support in this Parliament and across the country for our scientific effort is a vital part of our science effort.
I congratulate the Minister on a very good first settlement in the Budget. Some of it is for one year, but that is better than it not being for one year. I congratulate him on getting the Horizon subscription properly funded, which is absolutely vital. But—and there is always a but—there is more for him to do, and we are lucky to have him. I genuinely think that he will be another of these Science Ministers who will be remembered.
There is, as other noble Lords have said, an emerging slow cascading crisis in our universities. The business model does not work anymore. We cannot subsidise research and lots of other things, through arguably overpriced foreign students. They may not continue to come, and they are beginning not to come. I think the Russell group estimates that there is a £5 billion funding gap in research, which is cross-subsidised at the moment and is vulnerable. This is beyond the remit of the department in which the Minister serves, but it is vital to his interests, and all our interests, that the Government turn their attention to this.
One more specific item I would like to raise is supercomputing power. The previous Government announced the project in Edinburgh. It was then stopped because it was said not to be properly funded and so on, and it is being reviewed. It is absolutely essential, particularly to the skills available in AI and others which we have in this country, that we have first grade supercomputing power available, but we do not have it. We are not in the top league.
Finally, I once went off as a junior Minister and sat at the feet of a great man at Caltech, a hero of mine, Murray Gell-Man. He said that there was too much rowing and stuff in Cambridge. There was some science, but the vital thing we had in England was long-term funding. Of course, we immediately threw that away. The Minister is doing his best, I believe, to try and bring it back with seven and 10-year rolling contracts. I give him all our support in attempting to do that.
Baroness Freeman of Steventon (CB) (Maiden Speech)
I thank the noble Viscount, Lord Stansgate, for initiating this debate and giving me an opportunity to introduce myself to your Lordships’ House. This is a very welcoming place, with its wonderful staff—especially the doorkeepers, with their encyclopaedic knowledge—and also all the noble Lords who have come to introduce themselves to me and make me feel welcome. I thank them.
I thank especially my mentor and supporter, the noble Viscount, Lord Colville of Culross. We were colleagues at BBC Science, where we were documentary-makers trying to communicate the importance of scientific ideas and make them relevant to people’s lives. Some people might say I have come a long way from my first job there, “Walking with Dinosaurs”—
Baroness Freeman of Steventon (CB)
Moving swiftly on.
I worked both at BBC Science and at the BBC Natural History Unit after doing a doctorate in what my father—initially, concernedly—thought was “not a proper science”. He was trained as a chemist; my sister is a mathematician; my mother is a theoretical physicist. I, of course, was a biologist—and, worse, I studied animal behaviour. But, under the firm tutelage of Professor Richard Dawkins, I learned to apply scientific ideas to any subject, and even my father finally admitted that the scientific method applies everywhere.
The other supporter I was honoured to have at my introduction to your Lordships’ House was Onora—the noble Baroness, Lady O’Neill. When I moved from the BBC to Cambridge University to study the slightly different art of evidence communication, it was her philosophy that guided our work. She says that, to be trusted, you must be trustworthy, and, to demonstrate trustworthiness, you must be open and clear about all the processes that lead you to your conclusions, so that people can follow them, understand them and assess them—wise words that I try to live by.
At the Winton Centre in Cambridge, we worked on how to communicate evidence in a trustworthy way to support decision-making. We all need evidence, whether we are patients choosing treatment options, parents choosing education or police chiefs choosing policies, and that evidence comes from the application of scientific methods. So, although science can obviously bring us great inventions with direct economic benefits, it is much broader than that.
Working at the statistics department in Cambridge helped me realise that science as a method is a way of us learning from past experiences to foresee likely futures, and even to put some kind of likelihoods on those possible futures. By applying scientific methods, we can understand and tease apart cause and effect: the link between smoking and lung cancer, or between CFCs and the ozone layer. The field you apply it in does not matter. We even do it in animal behaviour—and human behaviour.
At the Winton Centre, we worked with the UK’s wonderful What Works Network to help communicate the evidence it brings together from experiments done on all sorts of problems—education, crime prevention, tackling homelessness—to test potential policies. Science not only helps us understand causality from past experience and get glimpses, however fuzzy, of possible futures; it allows us to make decisions that are most likely to take us along the paths we want to follow. How can you calculate the value to the economy of being able to foresee the future and how you might be able to affect it?
When talking about science’s contribution to the economy, or industrial strategy, or science policy, we often talk about the great inventions, with their direct economic benefits. And we often also talk about the value of curiosity-driven research. But I want to make sure we recognise a third category in the middle: researchers seeing how something could be of direct societal or environmental benefit, with no direct economic benefit but huge economic benefits anyway—like getting people fit and active, children being better educated, reducing crime, or testing existing drugs and treatments for Covid, as in the UK’s world-leading recovery trial, which discovered that the commonly used steroid dexamethasone was very effective. This kind of science does not aim to make direct profits for anybody: it is probably invisible to the Treasury. It is bypassing the Treasury and directly benefiting society—but that saves the Treasury money.
The Minister knows this kind of research well from his previous roles, so, with this in mind, I have two asks for him. First, I know from own experience that, when you are a researcher at a university, there is all sorts of support for you to spin out enterprise into profit-making companies. But, if you are doing the kind of research that would be better served as a not for profit or a social venture, there is a lot less obvious support for you. Secondly, can the Minister help communicate that scientific methods, applied to all fields, are crucial to both society and the economy, through helping us choose and reach the futures we want?
Baroness Bennett of Manor Castle (GP)
My Lords, it is an honour and a privilege to be the first to commend the powerful and important speech of the noble Baroness, Lady Freeman of Steventon, and to welcome her to this House—I will describe her accurately, if perhaps not technically, as my noble friend. Her diligence in listening and learning as a new Member has, I am sure, been noted across this House—scientists like evidence. I have long proclaimed, to audiences up and down this land, that we need more people from a scientific background in this House, and indeed across politics. I am very glad that the noble Baroness in particular heard that message, for, with her long experience in health and environmental issues, and particularly her knowledge and skills in explaining risk, the House is truly getting a gem.
As the noble Baroness explained, she joins us from her role as the executive director of the Winton Centre for Risk and Evidence Communication, part of the Cambridge Faculty of Mathematics. If that sounds a little daunting, I should add that she also has experience in designing websites, games and social media content, so we need have no fear of incomprehension. For those in the House who, like me, are subscribers to the frequently terrifying Retraction Watch, it is worth noting that she has a long-time interest in reforming the science publishing system and led the UKRI-funded Octopus platform for primary research publication.
The noble Baroness referred to her work with the BBC. One of her other programmes was “Climate Change by Numbers”. Some of the noble Lords who took part in last week’s climate action impact debate might like to reconsider their approach for the future.
But what about dealing with politics in your Lordships’ House? Preparing for today, I went back to the noble Baroness’s Oxford PhD thesis, which in part covered the mocker swallowtail butterfly. The females are polymorphic—have many different body forms—and come in three main groups of colours. That sounds like good preparation for your Lordships’ House, at least as currently instituted.
Like everyone else, I thank the noble Viscount, Lord Stansgate, for securing this debate. My speech very much follows on from that of noble Baroness, Lady Freeman, for the economy is a complete subset of the environment: the physical, biological and social environment determines what our economy is like. This morning, I was at a round table discussing the Carnegie UK Life in the UK 2024 report, which reported “persistent inequality” and a “stagnation” in well-being. Our collective score for well-being was 61 out of 100 —in many university contexts, that would be a fail. The science is telling us about the reasons for that and we need to do much more to listen to that science, for the benefit of all of us, as well as for the economy.
I draw attention to an event this morning. Defra, operating on behalf of three government departments, has settled the legal case over the tragic death of Ella Adoo-Kissi-Debrah, who was killed by air pollution in 2013. The scientists keep telling us, again and again, at increasingly higher levels, how much damage air pollution is doing. Just this week, a report highlighted how about 4,000 premature deaths are caused by gas cooking in the UK each year—54% of UK homes use gas cookers.
As the noble Baroness, Lady Freeman, said, there is much focus on science making money, but we need a lot more focus on science that looks after our society and its well-being. With that thought, I welcome the Minister to his place and ask one question—I will understand if he needs to write to me. Agro-ecological approaches to producing healthy food are absolutely crucial to fixing our broken food system. How much of the research going into agriculture is going into agro-ecological approaches?
Lord Winston (Lab)
My Lords, in 2023, Sir Paul Nurse reported on how best we might keep Britain’s scientific research world-leading. One excellent example he chose to identify in his report was the role of the Medical Research Council’s so-called research units. Sir Paul’s report made it very clear how vital these were and how they must be supported to maintain our scientific expertise in healthcare and so on. These 20 units are scattered around the country and most are associated with universities—Oxford, Cambridge, Dundee, Glasgow, Edinburgh and certainly UCL in London. These units are truly world-class and are recognised worldwide as being absolutely outstanding but threatened. One such is the Cognition and Brain Sciences Unit at Cambridge, which I first visited about 20 years ago and was deeply impressed with what they were doing there. It has an 80-year history of cognition and brain science and its remit includes mental health; it focuses on the current global mental health problems, developmental disorders, stroke, dementia, and the nature of human consciousness.
People at the unit tell me that they do not think they can survive on the funding that is now being offered to them as the MRC has changed its funding plan, as we heard on Monday from my noble friend Lord Vallance when he answered my Question. I am sorry that I have not actually warned him of my speech in advance but, of course, I have been besieged by phone calls all day from different research units across the country that are seriously and deeply concerned about this problem. They think that they cannot survive. The Cognition and Brain Sciences Unit is one of six units in Cambridge that would have to be supported by the university if the MRC ceased the full funding that it currently has. The university has certainly not agreed to fund it—as, indeed, as far as I am aware, no university has agreed to fund any of the host units.
I will refer briefly to another unit that I think is particularly interesting: the Prion Unit in London. That one, of course, is famous for its work on mad cow disease, and how that particular dementia was a result of a protein that could affect the brain and fatally change its other proteins. At a recent meeting in China only a few weeks ago, members of the Prion Unit in London were greeted as the world leaders in this, feted all over, particularly at the main Chinese meeting, and the Chinese are now pouring millions into this research—for what reason I am not sure, but certainly these prions are going to come back. There are lots of species that look as though they could be vulnerable, and certainly the risk of mutation in animal species, perhaps in America, could really recur, and this would produce a massive disaster. The Prion Unit still has a very important role to play.
In answer to my Question on Monday, we heard from my noble friend Lord Vallance, the Minister of State, that the MRC had decided to change the funding model in such a way that the units are now expected to reapply for continued funding for a maximum of 14 years, with a review halfway through, after seven years. It is proposed that the host university funds the principal investigators up to 80% of their salary and the on-costs, and the surviving units will be limited to £3 million per annum. That is quite inadequate to maintain what they are doing: it is probably about one-quarter of what they actually need for their current expenses. Of course, many of these units are lab-based and therefore much more expensive.
I listened to my noble friend Lord Vallance very carefully on Monday when he answered my Question. I was extremely grateful for his care in taking up so much of his time to explain the current position, and also for speaking to me outside the Chamber on various occasions. Ultimately, I do not think that the format of an Oral Question could possibly give him anything like enough time or scope to address the concerns that the scientific community and the employees have about these units. They are certainly worried about their jobs: it is likely to affect up to 200 professors, perhaps, and around 2,100 scientists, which is of major concern.
Of course, my noble friend Lord Vallance was absolutely right to express the need for response-mode funding as an alternative but, unfortunately, as Paul Nurse pointed out, these units are truly unique in so many ways and losing their research output, training and maintaining of technical expertise will be extremely serious. Does my noble friend the Minister accept that the way the research councils have been set up means that we cannot interfere with their decisions on money? But we should indeed have some consciousness about their strategy and this is certainly where politicians have a right to decide. Of course, we all hope that my noble friend the Minister might find a better solution to a crisis which is adversely affecting UK science and those who contribute most effectively towards its success and its continued financial income.
Baroness Wheeler (Lab)
My Lords, I respectfully remind noble Lords that the speaking time limit is four minutes. I urge all noble Lords to keep within that so that the debate may be concluded within the time allowed without the Minister having to cut short his response.
Lord Willetts (Con)
Quite right. My Lords, I congratulate the noble Baroness, Lady Freeman, on her excellent maiden speech; we look forward to many more of her interventions in the House. I also congratulate the noble Viscount, Lord Stansgate, for such an excellent opening to the debate, displaying his typical enthusiasm and making a subtle case for the hereditary principle.
I should declare my interests, particularly as chair of the UK Space Agency. I am also a member of this club of former Science Ministers, which has been referred to several times. It is great to see the noble Lord, Lord Drayson, in his place; we look forward to his speech. There is a very crude view of the role of the Science Minister: to extract money from the Treasury. I am sure that the noble Lord, Lord Vallance, has a much higher and more strategic view of his role than that, but he nevertheless did very well this week and I join those congratulating him on seeing off what looked like a significant threat.
I congratulate the noble Lord also on the speed with which the funding for science announced yesterday is already moving. There was an announcement of £520 million for the life sciences innovative manufacturing fund; it was up on the Government’s website by midnight, with the first round of applications for grants now open, with a deadline of 30 November. That is an excellent example of moving vigorously in an innovative environment. I hope, in that spirit, that the Minister will commit that the Government will indeed be implementing my proposals on improving the business case process so that it is similarly efficient and fast-moving, rather than cumbersome and bulky. We must not be complacent, however. There are of course challenges to face in the CSR, and we wish the Minister the best on that.
I would like very briefly to put three specific points to the Minister. First, cell and gene therapies are a great British scientific and technological success. However, they are suffering from the very uncertain VAT regime for cell and gene therapies sold to the NHS. HMRC defined these therapies as “work on goods”, apparently on the argument that the cells start from the human body and are eventually returned to the patient’s body and, in the meantime, they have just had a service, rather like a car going into a garage. In some cases, VAT is charged at 20%, which, in turn, affects the NICE calculations of the cost-benefit ratio in these treatments. Sometimes they are exempt. The best way forward would be for all these treatments to be clearly zero-rated and treated consistently.
My second point, if the Minister is able to comment, is that yesterday we also heard in the Statement from the Chancellor very good news on investment in the railway link between Oxford and Cambridge. Progress is gradually being made in the recreation of the old Varsity line, although it is a pity that there is a large housing estate somewhere between Bedford and Cambridge on the route of the original line.
Can the Minister confirm that, with this investment in transport, there will also be a recognition of the value of the Oxford-Cambridge supercluster and an attempt, alongside the claims of many other parts of the UK, to recognise and support that?
Finally, if he were here, I think the noble Lord, Lord Knight, would make an important point about investing in science teaching. The Government make a lot of the 6,500 new teachers. It is equally important and, in some ways, more cost-effective to invest in upskilling and retaining the teachers we have already have. Improving CPD for science teachers, so that they remain up to date, would be of great value.
Lord St John of Bletso (CB)
My Lords, I join in thanking the noble Viscount, Lord Stansgate, for introducing this debate in such a comprehensive and impressive fashion, and in congratulating my noble friend Lady Freeman on an outstanding maiden speech.
There is no doubt that the United Kingdom stands at a pivotal moment in its scientific and technological development. While I welcome the Chancellor’s commitment in her Budget speech to drive innovation to protect
“record funding for research and development to harness the full potential of the UK’s science base”,—[Official Report, Commons, 30/10/24; cols. 814-15.]
the reality is that the UK and Europe tech sector is massively underpowered and underfunded compared to the United States. What are the equivalents of Meta, Alphabet, Tesla, Apple and Microsoft in Europe? While we have much to be proud of in our achievements in science and technology in the UK, the reality is, sadly, that we are failing to fully commercialise our advantages in research excellence in our top global universities, as well as the growth in fintech and health tech companies.
I wish to focus my brief remarks on the life sciences sector, where the advances in technology have huge potential both to cut costs and to promote patient care, especially in imaging, diagnostics, and predictive analytics, as well as in administration. In this regard, AI and quantum computing have played, and will continue to play, a major contribution in harnessing more efficiencies and breakthroughs in new treatments and pharmaceuticals.
The United Kingdom is well recognised as a world innovation hub, but we have to retain that. To grow its true potential, we need to retain our talent pool. We have some of the highest costs of visa applications compared to other European nations, which has sadly resulted in the loss of a lot of talent. We certainly need to be a lot more proactive in promoting and retaining highly skilled talent. We have hugely successful science parks, particularly in Oxford and Cambridge, which have driven commercialisation, despite the infrastructure challenges of the lack of lab space.
Time restricts me from elaborating on the challenges of IP commercialisation. Many spin-outs have lost substantial equity to foreign interest, with UK universities retaining only 20% equity, which has led to substantial IP leakages in company commercialisation abroad. Can the Minister elaborate on the scope for setting up a cross-departmental implementation taskforce for streamlining funding mechanisms for scaling SMEs in the tech sector? We need to create specialised regulatory pathways for emerging technologies and develop incentives for preventive healthcare. A lot more could, and should, be done to fund longevity research initiatives—particularly for this House.
In conclusion, I say that there is no one lever to pull, but making the UK tech sector more attractive to global capital is key. The integration of science, technology and healthcare offers significant potential for economic returns and improved population health outcomes. Without immediate action, Britain risks falling behind in the global race for technological supremacy. The time for decisions is now.
Lord Liddle (Lab)
My Lords, I add my congratulations to the noble Baroness, Lady Freeman, on an excellent maiden speech. I have to say that I hesitated to put my name down for this debate. There are so many able people, including our wonderful introducer, the noble Viscount, Lord Stansgate. The whole debate has shown this House’s great expertise in and knowledge of science and technology issues.
I am afraid I am a classic of what used to be —I hope—wrong with the British education system. I was a humble grammar school boy who got a scholarship to Oxford, where I did two degrees—but I did not even have a science O-level. I hope that weakness has now been remedied.
Since then, I have tried to make up for it by taking a close interest in science and technology policy, as a result of a close interest in industrial policy. For seven years, I had the great privilege of chairing the council of Lancaster University, on which I was ably assisted by the noble Baroness, Lady Neville-Jones, who knew far more about the scientific issues than I did. Lancaster is an interesting institution. It was born in the “white heat” era—Harold Wilson opened it in 1965—but in the late 1990s, it decided to make a major commitment to science, building new departments in chemistry, physics and engineering, and a medical school, all opened up while Pauline—the noble Baroness—and I were on the council. This was an interesting attempt to build a strong science base outside the golden triangle. I would like to know what the Government’s attitude is to building research bases outside the golden triangle. I hasten to add that I am all in favour of the golden triangle, and I think that one should invest in places that are globally successful, but what contribution can a small but research-intensive institution like Lancaster make?
One of the things that was essential to us was Horizon. That brought us into partnerships with continental universities in areas of expertise. We also built partnerships in the UK, but I was always pushing the vice-chancellor harder on this. I thought: why do we not merge with a comparable institution where our scientific expertise would be complementary? What are we doing to help universities outside the golden triangle to build on their strengths?
What are the Government doing to make spin-offs from universities more effective and to increase them? When I worked with Peter Mandelson—the noble Lord, Lord Mandelson—when he was Industry Secretary, I chaired an advisory panel on new industry and new jobs, and came across the wonderful Hermann Hauser, of Arm. One of his ideas was the catapult initiative, which I think the noble Lord, Lord Willetts, in his time took forward. What more are we doing to incentivise the better use of scientific research in stimulating innovation and new enterprise? This is a very big unanswered question which I hope the new Government are going to take very seriously.
Lord Stevens of Birmingham (CB)
I declare my interests as the incoming chair of King’s College London and the chair of Cancer Research UK.
I start by picking up where the noble Lord, Lord Waldegrave, left off: congratulating the Government on not whacking the science budget to the tune of £1 billion with the Horizon costs in yesterday’s Budget. That is clearly a bullet dodged, but that is not the same as success assured. The question between now and the spending review, when decisions are made as to what the next decade’s worth of science funding will look like, is: are we going to get the sort of progress that we need?
I will make three brief observations, the first of which concerns, as has been touched earlier, the current state of universities as providers of the research excellence and scientific and technological progress we all want to see. Unfortunately, the reality is that, in yesterday’s Budget, universities got what we now can describe as a “POBA”: point one of bugger all. Essentially, there was no great reference to universities and no attempt—yesterday, at least—to deal with the underlying funding pressures and the opaque cross-subsidies that are just about keeping the show on the road, but which nevertheless constitute the slow and inexorable decline in the relative performance of UK science and research compared with other countries, as measured by most of the relevant league tables.
We want strength to the elbow of the Science department, but that cannot be seen in isolation from what is happening at the Department for Education. As other noble Lords have said, there is a funding gap between the cost of research undertaken and the resourcing to deliver it—only £0.69 in the pound is being funded across the sector in the full economic cost of research, and £0.74 in the pound for the most research-intensive universities—a huge wedge that is being cross-subsidised through international students and other mechanisms. That cannot continue over the next decade if we are going to see the kind of progress we want.
Secondly, we need to connect the debate we have just had with the debate we are having. Charities’ support for medical and life sciences research, in particular, plays an enormous role in the overall ecosystem: north of £1.7 billion in research funding; and in the case of Cancer Research UK, which I chair, over £4 billion in the last decade for cancer science, providing three in four NHS patients being treated for cancer with some of the drugs they receive. That is half the cancer drugs on the WHO’s top 100 list. Yet the ratio of the cost of science being funded through charities is even lower than that from the research councils: some £0.58 in the pound through that route. One of the great things that the last Labour Government did was to introduce the Charity Research Support Fund, which has somewhat atrophied in the intervening years. That would need to double, roughly, to get the charity funding contribution back to the £0.80 in the pound that is necessary to sustain the excellence we see in university research.
Finally, to pick up on the excellent maiden speech of the noble Baroness, Lady Freeman, I almost want to argue with the exam question that the noble Viscount, Lord Stansgate, has set us. It is quite easy in these debates to become relatively reductionist about the role of translational science at the technology-commercial interface and the economic benefits that has, whereas we need to remember that basic science— discovery science—in all sorts of serendipitous ways is the secret to our success as well.
Baroness Neville-Jones (Con)
My Lords, I am lucky enough to be one of the Members of this House who is on the Science and Technology Committee. I very much welcome this debate and the excellent introduction that the noble Viscount, Lord Stansgate, gave it.
The excellent briefing that we received, among many others, from the Library, for which I thank it, rightly says that it is hard to measure the value of the contribution made by science and technology to the UK economy because of its all-pervasive nature and the fact that it is growing all the time. I also want to emphasise the general scene and the many problems we face, but one thing that is reassuring is the recognition across the Benches of this House, and indeed in Parliament generally, of the fundamental importance and quality of the scientific work and technological development that takes place in this country, and the opportunity we now have to make good on it to further benefit our own society and, more broadly, the population of the world.
I will make one point about something rather concerning that is connected to that. Science and technology, as a topic, is beginning to become a source of hostility and tension in international relations. One only has to think of the way in which the Chinese are exploiting it. Far from being a binder among nations, it can very easily become a source of real competition, hostility and seriously malign action. We should bear in mind that the liberal democracies do not have an agreed strategy on how to deal with this, but we need to develop one. We should not go on refraining from tackling the issue because it is difficult, even though that is the case. If we do not tackle it, we will find in due course that the extent to which science and technology can benefit society is greatly reduced by the potential problem of conflict.
Returning to the UK, something puzzling about our situation is that we are a society with a reputation for science and innovation, but we seem to lag behind in what we ought to be good at, which is greater productivity. How come we have this contradiction? Our universities are the bedrock of our capability; their graduates feed our independent laboratories and learned societies, and their geographical spread helps to keep our educational disparities under control. However, as has been rightly said, they are not going to survive the financial situation in which they now find themselves. I am very concerned that we are about to witness a drama if that situation is not gripped.
The public sector needs to intervene, but I do not believe that it can deal with the whole thing. What is notable is that private sector companies, which used to be great sources of R&D themselves, no longer—with some notable exceptions—play that role. It is very important that they begin to move closer to universities, so that they themselves become sources of innovation. Whacking up the tax on them does not help with the notion that they will engage in greater investment. The Chancellor said yesterday that the public spending outlined will crowd in private investment, but I worry that it might crowd it out.
The low skills base is another problem we need to tackle. As the noble Lord, Lord Mair, rightly said, it is a soluble problem, and other people have models that we ought to draw on. We are making heavy weather of that, and we ought to do better.
I will make just one last point. The difficulties British start-ups face when they want to scale up are well known. Our relatively small economy, openness and English language make us an attractive research destination, but they also make us vulnerable to poaching. We have to inculcate the habit of investing in our intellectual property and rewarding higher-risk, higher-reward propositions. If we do that, we will go a long way towards dealing with the issue of our lag in productivity.
Lord Leong (Lab)
My Lords, the advisory speaking time for this debate is four minutes. I gently urge all noble Lords to keep within this time limit so that the debate can finish at a reasonable time.
Lord Taylor of Warwick (Non-Afl)
My Lords, I too thank the noble Viscount, Lord Stansgate, for introducing this important debate today, and congratulate the noble Baroness, Lady Freeman of Steventon, on an excellent maiden speech. This is a wide-ranging topic, but since I am delighted to be an officer of the All-Party Group on Artificial Intelligence, most of my comments will be in the context of AI.
The Stone Age did not end because we ran out of stones. It is simply a fact that mankind has always found a new and improved way of doing things. The catalyst for this change is science and technology. Although this debate relates science and technology mainly to the economy, we must not forget the effect that it has on peoples’ personal lives. My mother was a fit and healthy 79 year-old, even swimming most days. Suddenly, a major heart attack reduced her to paralysis. She was unable to speak. Within a year, she was back at the same hospital, this time as a volunteer counsellor to some of the stroke patients. It was explained to me by the consultant leading her care that their pioneering heart valve AI technology had saved her life—which would probably have been lost had the attack happened just a few years earlier. Science and technology is about people as well as the pound.
However, every industrial revolution has been met with some who resist change. In relation to AI, some say that this is a new error, not a new era. One of the lessons of history is that we do not learn lessons from history. During my time as chancellor of Bournemouth University, I emphasised to the students that this AI revolution requires new skills. Yes, some jobs will be lost, but even more jobs will be created. Increasingly, it will be skills that pay the bills. Yet a number of commentators including, in June 2024, the Council on Geostrategy, highlighted that Britain’s current visa system is one of the barriers to attracting top international talent and risks making the country a less competitive environment. How do the Government intend to address the skills gap in science and technology?
There is also the issue of regulation. I was a barrister and judge for some years and am aware of the need for some regulatory framework for AI. A few years ago, I had the privilege of meeting Sir Tim Berners-Lee, the creator of the world wide web. It was just me and Sir Tim in the room—and 200 other people—but I had a tremendous conversation with him. He told me that he has been warning for years about too much power being accumulated by just a few giant social media platforms. I understand that too much regulation could stifle innovation, but what plans do the Government have concerning future regulation?
Science and technology, including AI, are driven by data. Data is an increasingly powerful source of information. In fact, data is so important that instead of a baby’s first word being “Dada”, one day it might be “data”. The need to protect personal data, especially that of children, the elderly and other vulnerable groups, is paramount. For 10 years, I was vice-president of the British Board of Film Classification. Our main remit was to protect vulnerable groups. What extra safeguards will there be to ensure the protection of, for example, patients’ records in the NHS?
I see science and technology as providing solutions to people’s everyday lives. It should be reducing the gap between the have-nots and the have-yachts, so let us embrace this industrial revolution with faith, not fear.
Lord Lucas (Con)
My Lords, I am very grateful to the noble Viscount, Lord Stansgate, for giving the chance of this debate, and I really enjoyed the maiden speech of the noble Baroness, Lady Freeman. I totally agree with her on the need for trustworthiness and openness. I very much hope that the Government will give her the job of writing the story of the road to net zero, which is currently not displaying those characteristics.
There are three things that I want to urge on the Government. The first is that they really put money and effort into the international standards and regulations by sending really good people to the conferences which set the standards. By doing regulation really well in this country, we make this a really good place to do business. Look at the opposite; look at what happened to telecoms. When I was young, we were top of the tree and now we are nowhere. We started sending rubbish people to the standards conferences and we just became irrelevant.
The second point I wanted to make to the noble Lord is that science must challenge. We spend billions on string theory and dark matter: lots of scientists cuddled up in the comfort of an unfalsifiable consensus. It may be that this is right, and that the universe is as cold and uninteresting as those theories offer, but there are alternatives. Faced by consensus, our bias ought to be to challenge. We ought to be looking at things like quantised inertia, because of its explanatory power and the hope it offers for things such as motion and power. We ought not to be leaving that on the sideline, as we are doing now with its tiny bit of funding. This applies to lots of other interesting alternatives to the consensus and to many other bits of consensus which have established themselves around science.
We must be better at supporting challenge. We must help the Civil Service to be better at dealing with failure. We ought to reward good failure and to encourage the Civil Service to go for the kill factor. Do first what is really difficult and dangerous, and leave the easy things. If you fail early doing something difficult and dangerous, you learn from it and you do not spend a lot of money doing things that will only fail later, because you did not tackle the main subject.
To pick up on something that I think my noble friend Lord Markham was aiming towards, let us have more pull mechanisms—prizes for success and advance market commitments. Give Innovate UK a clear mandate to do those things, because that way will really crowd in private sector interest and investment and end up rewarding success, leaving the cost of failures to the private sector.
I know that the noble Lord is keen on resilience and fire drills. I hope that we have a serious fire drill in the course of this Government. To engage the country in understanding the vulnerabilities of, say, the electricity supply system will really help us to understand the need to have and benefit from having manufacturing in this country in a serious way, so that we can recover from a setback. To have a fire drill will give the public confidence that we will react well when something happens. Suppose we were to have a Carrington Event—a huge solar storm knocking out the transformers in the electricity network. There would be no power for a year or two, because we do not have the capacity to rebuild the transformers. Having a fire drill means that we do not make that mistake, because we will have the courage to turn off the transformers in time and the public will know that we will do it and do it well.
Lord Tarassenko (CB)
My Lords, I declare an interest as a director of Oxford University Innovation. I thank the noble Viscount, Lord Stansgate, for securing this debate and for his thorough review of UK science and technology.
I was surprised, however, that there was no mention of the 2024 Nobel Prizes for Chemistry and Physics. Earlier this month, we celebrated the award of the Nobel Prize for Physics to Professor Geoff Hinton. The next day, we celebrated the award of the Nobel Prize for Chemistry to Sir Demis Hassabis. Both are home PhD students from British universities— Edinburgh and UCL. Both ended up working for the same US big-tech company, a company currently valued at $2 trillion.
What would it take for a deep-tech company to emerge from one of our research-intensive universities and become the UK’s first $1 trillion company? First, it would need a good supply of home PhD students. Unfortunately, there is mounting evidence that an unintended consequence of the rise in the undergraduate tuition fee to £9,000 is a loss of home PhD students in STEM subjects.
For example, from 2019 to 2022, there has been a decrease of 39% in the number of UK-domiciled computer science graduates in doctoral study 15 months after graduation. We know that the least well-off students graduate with the most debt; now it looks as though many students from disadvantaged backgrounds will no longer consider PhD study as a financially viable option. This trend must be reversed.
Secondly, the spinout ecosystem that exists around our research-intensive universities must be nurtured further, not only with human capital but with finance to start new companies, scale them and grow them. The £40 million over five years of proof-of-concept funding to seed new spinouts announced in yesterday’s Budget is welcome, but it should be targeted where it is needed—outside the golden triangle.
Thirdly, a coherent industrial strategy makes it more likely that the UK’s first trillion-dollar company will emerge by 2035. The UK on its own is not able to invest in all possible areas of science and technology. Even in my area, described as “digital and technologies” in the industrial strategy Green Paper, further choices will have to be made.
The House of Lords Select Committee report on large language models called for a “sovereign LLM capability”, but it would be pointless, because of the prohibitive costs, to compete with US big tech companies in training hyperscale LLMs such as GPT-4 or Gemini—other LLMs are also available. Instead, and this chimes in with the excellent maiden speech of the noble Baroness, Lady Freeman, we should be backing UK companies developing trustworthy AI using medium-scale LLMs and proprietary datasets, giving them privileged access to our sovereign data assets.
The final piece of the jigsaw is the scale-up funding available to British tech firms, which is still mostly missing. The target set by the Mansion House compact to have 10 of the UK’s largest pension funds invest 5% of their assets in private ventures needs to be met by 2030. If progress is also made on sorting out the issues highlighted in the Harrington report on foreign direct investment into the UK, there is a fighting chance that a British tech company, with its roots in one of our universities, will reach a trillion-dollar valuation within the next decade.
Lord Drayson (Lab)
My Lords, I join noble Lords in thanking my noble friend Lord Stansgate for opening this debate in such style. I take this opportunity to pay tribute to the long-standing commitment and passion he has shown to science and the scientific community. It is a particular pleasure to follow a former colleague, the noble Lord, Lord Tarassenko, given his deep expertise in engineering and innovation and his skill as an academic entrepreneur, and to build on the argument that he made.
I will focus my contribution in this debate on artificial intelligence, given the accelerating impact that this technology is having on our society and economy. In doing so I draw the House’s attention to my registered interests, particularly regarding Appella and Arcturis—two companies engaged in the development and application of AI.
Over the past 38 years as a science entrepreneur, I have experienced first hand the challenges of creating wealth from UK science and technology. However, never have I witnessed the pace of change and the breadth of impact that I see now, as virtually every company, CEO and entrepreneur tries to understand and adopt AI technology, whatever sector they are in.
Unusually for a new technology, AI plays to the strengths of the large incumbent tech businesses and disadvantages the start-ups aiming to disrupt them. The key elements needed to develop and apply AI, such as access to large sets of training data and huge computing power, require massive capital investment. This puts the big US tech companies at a considerable advantage. Together with their ability to leverage their established customer bases to deploy AI via their existing product platforms, it presents a formidable barrier to competition. This has serious implications for the UK and for government policy.
How can we ensure that the value generated by the adoption of this transformative new technology, often based upon research undertaken here, fuels the UK economy? The answer is for the UK to adopt a proactive partnership strategy in AI with the United States and its leading technology companies. We know that many UK businesses are enticed to the US by access to its substantial market and large pool of capital. To ensure that AI businesses stay and grow here, we need to create joint UK-US initiatives that leverage our complementary strengths and enable those businesses to become transatlantic—for example, by establishing joint R&D grants; building on existing programmes to encourage US/UK talent exchange in AI; facilitating transatlantic university partnerships with common IP and data-sharing agreements; and building bilateral AI labs where we can work together to develop and scale the application of AI in health, defence and finance, sectors where the UK and the US have common interests and where the UK has deep expertise and competitive advantage.
As we look to regulate AI, let us align our policies with the US and attract American capital to fuel UK-based businesses and infrastructure by creating a common listing framework for the London Stock Exchange that is aligned with NASDAQ, rather than trying to sustain our own failing AIM. In summary, let us leverage our special relationship with America to ensure that British science remains at the forefront of AI research and is a major driver of a prosperous UK economy.
Lord Rees of Ludlow (CB)
My Lords, I add my thanks to the noble Viscount, Lord Stansgate, for his fine introduction to this debate and add a welcome to our very well qualified new Minister who will reply to the debate. I am sure he would agree that the prospect of a scientific career should remain attractive to enough of our young talent and that our research institutions should remain attractive to foreign talent. I shall comment briefly on these issues, especially in a global context.
Some people will become academics, come what may —the nerdish element, of which I am one—but UK science cannot survive just on them. It must attract a share of young people who are savvy about their options and ambitious to achieve something distinctive by their 30s. They increasingly associate academia with years of precarity and financial sacrifices, which is not what they want.
A further off-putting trend is the deployment of ever more detailed performance indicators to quantify outputs and the labour involved in preparing grant applications with diminishing chances of being funded. The so-called REF is very damaging in discouraging high-risk and long-term projects. Confidence and high morale drive creativity, innovation and risk-taking, whether in science or entrepreneurial activity. We need to support excellence. The difference in pay off between the very best research and the merely good is by any measure hundreds of per cent, so what is most crucial in giving taxpayers enhanced value for money is not the few per cent of savings that might be made by improving efficiency in the office management sense; it is maximising the chance of the big breakthroughs by attracting top talent, backing the judgment of those with the best credentials and supporting them appropriately.
We cannot confidently predict how, when or whether a specific research project will pay off intellectually, still less whether its applications will offer social or economic benefits. To ensure that we effectively exploit new discoveries, research institutions must be complemented by organisations in the public or private sector that can offer adequate development and manufacturing capability when it is needed. This fortunate concatenation certainly proved its worth in the recent pandemic. It is imperative, likewise, that nations should foster expertise in agriculture, energy, climate and the cybersphere.
We should also welcome the growing mobility among scientifically advanced countries in North America, Europe and Asia. One exemplification of this is that three of the greatest US-based companies—Microsoft, Google/Alphabet and IBM—now have Indian chief executives. But this mobility offers little consolation to the least developed countries. They face daunting challenges in retaining their all too few highly trained people and even more in attracting them back. We in the developed world should surely be uneasy and feel an obligation to redress this loss. Of course, Africa’s predicament is worse. About half its health workers want to leave and their departure can be ill afforded. It is doubly tragic if, after moving to a developed country, doctors find that they are not accredited and become cab drivers. It is just as bad in all the other specialities that African nations require if they are to develop their potential. The poorest nations need to engage their diaspora communities, encouraging those with expertise to at least make regular visits back home.
Wealthier nations should take some responsibility too. A cost-effective form of aid would be to establish in Africa and elsewhere centres of excellence, with strong international links, where ambitious scientists could work in less dispiriting conditions, perhaps via linkages with foreign experts. They could then fulfil their potential without emigrating and strengthen tertiary education in their home country as well as working with other countries on the challenges of health, clean energy, and intensive agriculture on which their future depends. Let us hope that as a way of providing aid in a cost-effective and distinctive way, the Foreign Office and the department can collaborate on this goal.
Viscount Hanworth (Lab)
My Lords, I concur in the praise that has been accorded to the proposer of this debate and to the maiden speech. I wish to discuss the failures of Britain to profit from its own technological innovations, which has been an enduring pathology.
Long ago, the Civil Service developed a methodology of cancellation aimed at projects for which it could not envisage immediate and secure returns. To understand the development of that mindset, we may cast our minds back to the early post-war years, when Britain was at the forefront of a wide range of scientific and technological innovations. Britain was endowed with a large and vibrant aircraft industry, which had been sustained by the demands of the war. Under the aegis of the Ministry of Supply, it had been devoted to the mass production of a limited range of military aircraft. After the war, the constituent firms acquired their independence. Many of them had active design offices and there was a proliferation of military prototypes that sought and received government support.
However, the expense was exorbitant and in 1957 the Minister of Aviation, Duncan Sandys, called a halt to military aviation. It was decreed that henceforth military aircraft should be replaced by guided rocketry. Surface-to-air missiles were to replace interceptor aircraft and ballistic missiles were to replace bombers. The project was successful in staunching the expenditure and in curtailing the aircraft industry. Some projects for manned military aircraft did survive, only to face later cancellation, and we aimed to purchase American aircraft instead.
The Civil Service also turned its attention to other expensive technological endeavours, of which those of the nuclear industry were the most prominent. Britain had been a leader in civil nuclear development, beginning with the Magnox reactor, which was succeeded by the advanced gas-cooled reactor—AGR. The development of the AGR was protracted and problematic but eventually the design was perfected and such reactors remain in operation today, albeit they are approaching the end of their life. However, such a prejudice against the AGR had been derived during the process of its development that it was abandoned at precisely the time that it had reached perfection. The next reactor to be commissioned in the UK, of course, was the American pressurised water reactor, such as at Sizewell B.
Our nuclear industry is currently subject to a weak attempt at its revival, but this is also subject to the familiar pathology. We are seeking to restore our electricity generating capacity by harnessing wind and solar power and by using nuclear reactors to provide a baseload of generating capacity. This is to be provided mainly by small modular reactors. There are four contenders for the favoured design: three from American companies and one from a British company. The American contenders benefit from substantial subventions from the American Government and our Treasury is glad to have been relieved of the costs of developing these reactors.
All of the SMR reactors embody a tried and tested pressurised water technology that is fit to be replaced by the superior technologies of fast closed-cycle reactors, molten salt reactors and advanced high-temperature gas-cooled reactors. There have been projects within the UK aimed at developing these technologies, which threaten to go into abeyance or to be withdrawn to other countries through lack of government support. It is likely that Britain, which pioneered these technologies, will be depending on foreign suppliers for its future technology.
I would like to instance many other cases where we have failed to exploit British technological developments, but there is insufficient time to do so, as I have been strongly reminded. However, as a footnote, I will mention that I recently travelled on an Italian Pendolino tilting train on the west coast main line. This is a straightforward derivative of a cancelled APT—our advanced passenger train.
Baroness Bowles of Berkhamsted (LD)
My Lords, it gives me pleasure to commence the winding-up speeches on this debate. I congratulate the noble Viscount, Lord Stansgate, on bringing it to us and the noble Baroness, Lady Freeman, on an excellent maiden speech.
We have had a great debate, showing how important science and technology are today and the far greater economic contribution they could make, as the noble Lord, Lord St John of Bletso, said. My noble friend Lady Northover pointed out that it is all about interconnections. I was expecting to congratulate the noble Viscount, Lord Hanworth, on reminding us of the importance of mathematics in all these scientific projects and so forth, which I do agree with. I am sure that the Minister will not be surprised that I look forward to the Procurement Act and that it will be one of the topics I will speak about. If there is not a supportive environment for the procurement of new innovation for small enterprises, we will lose out, in AI and elsewhere, just as we did to the US super-corporations on internet technology when once we were ahead.
For 30 years, my career was in scientific research on semiconductors and then as a patent attorney. I was working with companies that were highly successful and some which struggled to make a breakthrough, despite great innovations. It is that which drove me into politics, where I have now spent 18 years looking at finance and the economy, including in industry. I come back to the same point: lack of procurement is preventing scale-up and better commercialisation of our technical innovation. It prevents a greater contribution to the economy, in particular for exports, and it prevents us closing the productivity gap.
I will focus on three linked things that are blocking innovative companies and scale-up: the treatment of start-up and growth companies, under which competitive tendering for round after round of piecemeal grants and loans sets them up for failure; the closed shop of government procurement, tied up with frameworks that ask discriminatory questions and favour incumbents; and the fact that the Government have become a systematic expropriator of early-stage intellectual property, killing instead of growing innovative companies.
Why is it that we have a trail of breadcrumb grants via our innovation agencies—including catapults, Innovate UK and small business research initiatives—with each grant expensively competed for at every stage in time consumption, but never leading to public procurement? In many instances where a lot of public money is spent on procurement, this is closing the door on making that expenditure bring multiple returns.
As various think tanks have highlighted, first public procurement is the ticket that enables growth companies to create exports—far better for our economy than those businesses relocating to the US or selling out equity in their innovation to other countries. That pattern has even hit Rolls-Royce and its small modular reactors, losing 20% equity to other countries.
In the US, they use a programme, From Innovation to Procurement. More entrants start than finish, but there is procurement at the end, which launches commercialisation. It is still competitive to enter, but the succeeding companies can progressively get on with the real job, instead of spending half their time applying for the next grant.
In our system, there is no promise of procurement: indeed, little chance, because of the procurement frameworks and the incumbency factor. An innovative growth company cannot positively answer the questions about previous alpha and beta delivery in the way incumbents can, so it falls at the first hurdle. How are innovators and emerging technology companies expected to grow to export level with that approach? Additionally, the incumbents essentially have a procurement fast track and get asked to support innovation programmes, which then allows them to learn from and ultimately undermine new market entrants.
Returning to the grant process, if you look at the contract clauses for the breadcrumb grants, for just a £50,000 early-stage development or proof of concept, there are clauses requiring the recipient of the grant to give to the relevant government body and its partners free, perpetual, irrevocable and royalty-free licences, together with the right for the Government to grant sublicences to anyone to use all the information, data, results and conclusions arising from the project. In other words, all the IP generated is as good as lost to competitors.
I know some people think those clauses just mean reading and benefiting from the reports, but it is far more. It is licensing use and licensing performing the invention. It is undermining patents and IP and allowing the Government to license competitors at the procurement stage. I have shared the clauses with the Chartered Institute of Patent Attorneys and it concludes the same as me.
It is so unfair, on many levels. The breadcrumb grant has never been a commercial rate for the work performed and, due to the UK’s own, rather short-sighted, Subsidy Control Act, never covers the full cost. Why should a measly £50k that forces high-tech entrepreneurs to work for free or below minimum wage rates—I can provide figures that prove that—entitle use and sublicensing rights of IP that could be worth £1 million or more were they not undermined by such a clause and that may have been the bedrock of success for the innovative company had it not been expropriated to competitors.
Yes, real innovation can happen in a matter of months. But, like a jeux sans frontières competition, innovative companies face repeated grant application hurdles. In a game of chance, does your presentation fit a set of part-time assessors’ preferences, complete with marking down smaller businesses for factors such as not having the top and most costly accounting or risk-tracking software? I have seen it all.
Solving this is not rocket science. First, use a staged programme system, with end-stage procurement like in the US. Secondly, stop poaching early-stage IP to put in the hands of competitors and incumbents. There are fair licensing provisions that can cover large bills and contracts and prevent vendor lock-in. Thirdly, maybe look at treating innovative company IP and intangible assets as collateral for loans alongside grants. Fourthly, give those IP assets an export market opportunity weighting in assessments, instead of eliminating applicants out of fear of lock-in. Fifthly, recognise that value for money assessment must incorporate risk for growth, and that sometimes ends in failure.
Every project cannot be run like this, but even a relatively few smaller ones would make a big difference. If we do not make public procurement truly open to growth companies, great economic opportunities for getting more bang for your procurement buck are being missed. While I celebrate with other noble Lords the strength of science and technology in the country, I hope that the Minister can find ways that penetrate into procurement in the big spending departments to bring about the economic transformation that is there for the taking to bring money back to the Treasury.
Viscount Camrose (Con)
My Lords, it has been an absolutely brilliant debate, and I join others in thanking the noble Viscount, Lord Stansgate, for bringing it forward. I also join others in congratulating the noble Baroness, Lady Freeman. Many years from now, eventually “Walking with Dinosaurs” will be a fantastic title for her memoir, but we are not there yet. I have been asked to slightly curtail my remarks and I am very happy to do that. I hope noble Lords will forgive me if I do not reflect on everything that has been said in the debate, but rather offer, just to begin with, some of my personal highlights from what I heard.
As a theme, it is clear that we are as one in deeply recognising and valuing the contribution that science and technology can and will make to our economy. Sadly, and frustratingly, many different approaches have been advanced as to how we can best finance that. I hope that we can be on the path of constant improvement to get more investment into this crucial space. I noted a sense of ruefulness from my noble friend Lord Willetts as he said that the role of the Science Minister was to extract money from the Treasury; I am pleased to say that we have somewhat moved on from this position.
I was very struck by the noble Baroness, Lady Neville-Jones, reminding us of the growing importance of international rivalry in this space. I think that is going to play an increasing part in our deliberations here.
The noble Lords, Lord St John of Bletso, Lord Tarassenko and Lord Drayson, asked, one way or another: where are our Metas or Alphabets? It is a question that certainly bugs me. Let us hope that, between us, we can move towards more of an answer. The noble Baroness, Lady Bowles, spoke powerfully about the issue of IP retention in universities, and that is clearly something we need to continue to look at.
The noble Lord, Lord Lucas, raised the issue of standards and regulations. There are not many silver bullets in technology regulation, but standards will be one of them. International global standards, particularly for instance with the copyright issue in AI, are going to be a big part of that solution.
I absolutely share the wish of the right reverend Prelate the Bishop of Newcastle to foster a faster-growing tech community in the north-east of England. If I may, I commend to her the work of the brilliant organisation CyberNorth; she may know it already.
Innovation is not merely an advantage; it is the foundation of economic growth and global competitiveness. Science and tech are no longer confined to laboratories or research institutions; they are part of the fabric of almost all the work we are doing of any kind across this country.
As of last year, we are one of three countries in the world with a trillion-dollar tech sector. Today, that sector contributes £150 billion annually to the UK economy, a figure that reflects not only the sector’s rapid growth to this point but its remarkable potential for expansion. With emerging fields that have been mentioned many times—quantum AI, engineering biology, and so on—we have the opportunity to cement the UK’s status as a global leader in scientific and technological innovation.
Of course, the contributions of science and tech, as I enjoyed hearing from the noble Baroness, Lady Bennett of Manor Castle, are not limited to economic growth. They enhance our resilience in the face of global challenges. I frequently argue that for all the amazing scientific advances we have seen over recent years, perhaps the most impactful was the development of the Covid vaccine, which I think we can all agree underscored, among other things, the power of UK-led scientific innovation, saving lives and demonstrating the critical impact of robust scientific infrastructure.
Investment in science and technology is also an investment in the workforce of tomorrow. The noble Lord, Lord Mair, and others raised this point very powerfully, as did my noble friend Lord Willetts and the noble Lord, Lord Taylor of Warwick. By prioritising education in STEM fields and by fostering partnerships between industry and academia, we are equipping future generations with the skills and knowledge required to thrive in a rapidly evolving landscape. It is not only essential for individual opportunity but vital to our ongoing economic competitiveness.
I want to address some pressing concerns raised by yesterday’s Budget. The Chancellor announced a significant allocation of £20.4 billion for research and development, including £6.1 billion aimed specifically at protecting core research funding. There is no doubt that this funding is crucial for advancing the core of our scientific curriculum. However, the research community has expressed some apprehensions regarding the implications of this. The Budget allocates an increased £2.7 billion for association with EU research programmes and covers the cost of the old Horizon Europe guarantee scheme. This means we are committing with this money not only to new funding but to managing the cost of past obligations. I would welcome some clarity from the Minister on how this is going to break down.
Further, as raised by my noble friend Lord Waldegrave, the abruptness of the decision over the summer to cancel the exascale computing investment—which was, by the way, fully funded through DSIT’s budget, contrary, I am afraid, to statements from the Government that I have heard from time to time—must stand as a significant red flag to AI investors, if only for its unexpectedness and suddenness. When we take this together with the additional costs and risks of hiring staff, the reduction of incentives to invest in technology and the—in my view, rather aggressive—treatment of non-domiciled investors, I think we have grounds for concern. I wonder whether, when the Minister rises, he could tell us to what he attributes our leadership today in science and tech. Is he concerned that these decisions may diminish that leadership and, if so, what do the Government propose to do about it?
That said, I am keen to close on a note of excitement and positivity. Ray Kurzweil, of “singularity” fame, argues that the time between major advances in science and technology diminishes exponentially. If he is right, the technologies available to us at the end of this Parliament will be truly staggering. So let us all be working together to make sure that as many of those breakthroughs as possible are delivered and safely exploited in this science and tech superpower, the United Kingdom.
The Minister of State, Department for Science, Innovation and Technology (Lord Vallance of Balham) (Lab)
My Lords, I am sure noble Lords will agree that we have heard many thoughtful and insightful comments from all sides of this House. Like everyone else, I thank my noble friend Lord Stansgate for organising such an engaging and important debate this afternoon. I also thank him for introducing me to the concept of the POBA and for mentioning the Science and Innovation Network, known as SIN. It gives me an opportunity to apologise for the fact that I introduced the right reverend Prelate the Bishop of Oxford to SIN, which does not feel entirely right. I congratulate the noble Baroness, Lady Freeman, on her terrific maiden speech and thank her for the reminder of the ubiquitous value of applying the scientific method in all sorts of ways.
Science, technology and engineering are fundamental to every aspect of modern government, from healthcare and education to housing, planning, green energy and climate. Indeed, I cannot think of a single area of government policy or operations where science, technology or engineering would not make a difference, and none of the national missions are achievable without investment in innovation. Science and technology are essential for national security; they are the bedrock of our shared prosperity in an era of global instability—as the noble Baroness, Lady Neville-Jones, rightly pointed out—when relationships and partnerships will be important. I agree with my noble friend Lord Stansgate that science and technology are not just for DSIT but for all of government, and that there needs to be an all-of-government approach to this. That is why there is a Cabinet Science and Technology Committee, chaired by the Prime Minister.
Our discussion today is focused on growth. Growth is the first mission of this Government but it is also the first mission of my department, because the economic importance of science and technology is hard to overstate. In historical terms, to state the obvious, the impact of innovation is so profound that standard metrics cannot really grasp it. I do not know how you measure the effect of electricity on growth, or how you really look at the impact of the invention of engines, whether that is James Watt’s steam engine, the combustion engine or the jet engine.
Science and technology remain essential for economic growth today. Seven out of the world’s top 10 companies are science and tech companies, and, in the UK, engineering businesses such as Airbus, BAE Systems and Rolls-Royce employ tens of thousands in communities right across the country—whether they are designing the defence technologies needed to keep us safe or developing small modular reactors to drive forward clean energy. My noble friend Lord Hanworth rightly identified the importance of both SMRs and advanced modular reactors. Pharmaceutical giants such as GSK and AstraZeneca, now Britain’s most valuable company, have transformed healthcare for billions, here and around the world.
Today, a new generation of UK-founded—I emphasise that—companies are putting us at the forefront of the global race for tomorrow’s technologies. Our thriving start-up scene means that the UK receives two times more venture capital investment than anywhere else in Europe. Companies such as DeepMind and Darktrace are harnessing the power of artificial intelligence to tackle some of the toughest challenges, whether that is accelerating the discovery of life-saving drugs or protecting us against increasingly sophisticated cyberattacks.
As the noble Lord, Lord Tarassenko, pointed out, Demis Hassabis and Geoffrey Hinton this month became Britain’s latest Nobel Prize winners for their contributions to artificial intelligence. I know that noble Lords will want to join me in congratulating them on their extraordinary achievement. The noble Lord, Lord Tarassenko, rightly asked what it would take for these companies to grow to be major stable companies in the UK. That is a key question.
I hope noble Lords will join me in welcoming the soon to be Baroness Gustafsson to the Government and to this House. We will all benefit immeasurably from her experience and expertise, and I look forward to working closely with her in the Department for Business and Trade.
As several speakers touched on, investment in science and tech is about not just today’s economy but the economy for decades to come. The rather sudden success of large language models is the result of 70 and more years of research. The outcome of that research was never inevitable, and nor can we possibly predict the path that certain technological progress might take in the century ahead. The scientists and engineers who launched the initial spacecrafts could hardly have imagined the impact of GPS technologies, and the post-war pioneers of quantum theory could not have known how British businesses would one day start using quantum science to devise new scanners, transform the way we monitor climate change or, in the future, enhance rapid financial analysis.
While we cannot always know where innovation will take us, nor predict all of the challenges we will face, we can be certain that science and technology will be fundamental in overcoming them and therefore an absolutely core requirement for any modern Government. Countries that invest in science and technology for the long term will perform better than those that do not. The rapid rise of Singapore or South Korea—now two of the most innovative economies on earth—reflects sustained, strategic R&D co-operation between government, industry and academia to invest in the high-value sectors that hold the key to long-term economic growth.
In this context, I am of course pleased to note that, in the Budget, the overall public R&D spending will rise to a record level of £20.4 billion. Of course, as the noble Lord, Lord Stevens, pointed out, we have a multi-year settlement coming up in March, and it will be crucial to make sure that this future-looking approach and the points raised in this debate are taken into account as we think about what needs to happen then. The noble Lord, Lord Waldegrave, rightly pointed out that long-term funding is essential, and we have recently seen the seven-plus-seven years funding for new MRC centres, which I will come back to, and we have a plan for 10-year funding for certain types of science activity.
The UK’s historical success in science and technology is testament to the strength of our research base, with four of the top 10 universities in the world. This simple point was not just noted by academics but raised repeatedly by investors at the recent investment summit. ARIA is a new part of our important funding landscape, adding different ways of thinking and contributing to this vibrant system. The right reverend Prelate the Bishop of Newcastle is absolutely correct to point out that this is right around the UK—the strength of the north-east and the Helix project she referred to is an important part of this.
In the years ahead, researchers and businesses will, of course, continue to push the limits of the possible. Their innovations will provide security, opportunity and prosperity for future generations: better jobs, better public services and longer, happier and healthier lives. However, they will only do so if we protect basic, curiosity-driven research—as several speakers have said—and if we invest in the skills and the infrastructure that research and development need. That includes the development that is not always about economic growth, but has other purposes, as has been pointed out by the noble Baroness, Lady Freeman.
Moreover, as many people have mentioned, including my noble friend Lord Hanworth and the noble Lord, Lord Mair, we must support the formation and growth of companies through strong partnership with the private sector. This is why the industrial strategy will have R&D running through its core. I will say a little more about that in a minute. If we wish to lay the foundations for long-term growth, we must support the businesses that are taking ideas out of the lab and into lives. We know that £1 of every Innovate UK grant creates £3 of benefits for businesses, and we know that businesses that have Innovate UK funding do better than those that do not.
My noble friend Lord Liddle asked about spin-outs. In yesterday’s Budget, the Chancellor announced £40 million to support researchers spinning out from UK cutting-edge research into the firms of the future, right the way across the UK. That money will go to the sorts of things that take place before the private sector is prepared to come in but will catalyse private sector investment. As the Science & Technology Framework makes clear, however, this has to be about more than just public sector research funding and start-ups. The noble Lord, Lord Tarassenko, listed several of the things that need to be done if we are to be successful at growing companies. We need to unlock private sector capital for scaling; we need to have a supportive regulatory environment; and—a point made very eloquently by the noble Baroness, Lady Bowles—we need clear procurement signals and processes.
The recently announced regulatory innovation office will streamline the regulatory journey for high-tech firms to ensure that the process is easier and simpler and that people and public services can benefit from early access to transformative technologies, whether that is AI for healthcare, pest-resistant crops or cultivated meat that could provide food security—all these are in scope. The noble Lord, Lord Taylor, asked about AI in healthcare, and it is one of the topics that will be covered by the regulatory innovation office.
The noble Lord, Lord Lucas, spoke quite rightly about standards and their importance. This will be looked at as part of what the regulatory innovation office does. He also made a point about the poor quality of people sent to standards meetings—I went to two of those in Edinburgh two weeks ago, so I apologise if that was not satisfactory.
The Government will seek to use procurement to be an early customer of high-tech businesses, learning from models such as the National Security Strategic Investment Fund. This will not only help grow our domestic companies but enhance public service delivery. The missions of course provide a very clear opportunity to link procurement through to R&D. The industrial strategy will have R&D running through every sector. It identifies “life sciences” and “digital and technologies” as two of the key growth-driving industries in the decade to come. In yesterday’s Budget, the Chancellor announced the first £70 million—as has been pointed out—for the new Life Sciences Innovative Manufacturing Fund, which is up to £520 million.
The noble Baroness, Lady Greenfield, rightly pointed out—this point was also raised by the noble Lord, Lord St John—that there is something about join-up that becomes very important here. It is about not looking at each of these things individually, but having a package that can work. That package includes everything, including of course the tax environment, which is important for those companies.
My noble friend Lady Donaghy and the right reverend Prelate the Bishop of Newcastle both raised the importance of the space sector. It is an increasingly significant commercial sector for the UK that now employs over 50,000 people. It is one of four areas in the initial wave of work for the regulatory innovation office and, over the current spending period, UKSA will have spent something like £1.9 billion. We will continue to look at ways to support and grow this sector, including through the catapult network and through some of the sectors identified in the industrial strategy, including advanced manufacturing and defence.
We must harness science and technology for public good and for public services. To achieve sustainable, equitable economic growth, it will be necessary to champion the adoption and diffusion of technologies to ensure that everyone can access the benefits that they bring. Today, the UK’s AI sector is the third-largest in the world. At the international investment summit a fortnight ago, over £24 billion in inward investment was directed specifically to AI. However, without the right infrastructure and the right skills, too few British people stand to benefit from the enormous opportunities.
My noble friend Lord Stansgate and the noble Lords, Lord Mair, Lord Rees and Lord Willetts, all raised questions about skills and education. We remain strongly committed to the idea of supporting teachers in their ability to teach these subjects through the subject knowledge enhancement training programme. I also draw to noble Lords’ attention the £300 million for FE. I would like to reassure the noble Baroness, Lady Bowles, and my noble friend Lord Hanworth that, in terms of mathematics, I have recently met both the Royal Society and the Academy for the Mathematical Sciences—which has just got started—on the topic of maths teaching and education. The noble Baroness, Lady Greenfield, rightly raised the question of diversity. I can assure her that we will be very focused on that question of diversity, both in grants and in terms of training. It is crucial if we are to be successful.
We will shortly publish the AI opportunities plan—work done by Matt Clifford—to set out how we will drive up the research, development and adoption of AI across our economy and how we will ensure that the public sector is well positioned to harness its power to improve the quality and efficiency of the services it provides.
We will also, as part of that, look at the question of compute power, which was raised by noble Lord, Lord Waldegrave, and the noble Viscount, Lord Camrose. It is an important area for the UK where we need significant compute infrastructure. The Exascale project in Edinburgh—I visited Edinburgh very recently—was not funded at the time we took over. It is important that we get the AI and the Exascale process sorted out, so that we have proper compute infrastructure right the way across the UK academic and business communities.
I am very pleased to say that the Government Chief Scientific Adviser and the National Technology Adviser will undertake a review to advise on how to promote adoption of technologies more broadly, which is very important. In answer to the specific question asked by the noble Lord, Lord Markham, about the med tech pathway, I can tell him that the innovative devices access pathway has been launched, eight technologies are under review and, in addition, the NICE process has undertaken a review to see what could be done to improve uptake and adoption. I can certainly provide more detail if the noble Lord would like.
Finally, I would like to say something about the national data library, to unlock the full value of public data assets. This is going to be important and will address the questions that were quite rightly raised by the noble Lord, Lord Markham, about the real value and opportunity in life sciences data. We have huge resources, including UK Biobank. Bringing these together and getting them properly interoperable and accessible will be important.
I turn now to some specific points that have been raised by individual noble Lords. The noble Lord, Lord Willetts, rightly identified cell and gene therapy as a crucial and transformative industry, and he raised important points about the complexity of VAT being applied to something that is both a service and a product. I will certainly raise these issues with both the Department of Health and the Treasury, and I will also point out that the Dutch system has found an answer to this, so there may be a model to look at.
Coming back to the question of procurement, I agree with the noble Baroness, Lady Bowles. It is crucial; we have to get this right. It is a big part of what will drive innovation. In terms of the points on IP, I will not go into details, but the IP requirements for Innovate UK are not for any IP. There is a specific requirement in one part of the process, called “Contracts for Innovation”, which concerns departments looking for grant-giving for companies. Because of the Subsidy Control Act, there is a nuance which means that it is quite difficult for them not to have some IP taken—but I want to look at that and see if we can get to an answer.
International work was raised, and it is so important that we are back in Horizon and that we have an uptake both from academia and industry, which should be everywhere across the country. The noble Lord, Lord Drayson, asked about the links to the US. I point him to the interest that has come up as a result of the AI Safety Institute, where there is now a very strong link with the US and, indeed, with US companies. His point about where we align regulation is a critical one.
Europe also came up in relation to FB10. I have commented on this previously; we are keen to be part of future European programmes, provided they are based on excellence and create value, and we have already issued a statement on FB10 in a paper.
The noble Lords, Lord St John and Lord Taylor, talked about skills, visas and talent, and it is important that we get that right. We know that the ability to retain skills in this country will be crucially important, and we know that we have always relied on significant overseas skills to be at the forefront of what we do in science and technology. I completely agree with the noble Lords, Lord Mair, Lord Waldegrave and Lord Stevens, that universities are key and I am working very closely with the Department for Education to make sure that we get the right support for them.
In reply to the noble Baroness, Lady Bennett, I am afraid I do not have the answer on agro-ecological approaches and the per cent spend, but I will find the answer and get it to her. I will also come back to the noble Lord, Lord Winston, on the MRC centres, which are important—I gave quite an extensive answer on that earlier this week, but I will come back to the noble Lord with more details.
Finally, I will pick up on the point about failure and the acceptance of it, raised by several noble Lords, including the noble Lord, Lord Lucas. It is crucial that we have a system that allows failure to occur; you cannot innovate without failure. I have talked to the National Audit Office about this and, as we look at UKRI and Innovate UK, it will be part of trying to get this into a much better position.
In the Budget yesterday, the Chancellor set out an ambitious plan to fix the foundations of our economy and to rebuild Britain by mending public services and delivering sustained economic growth. None of that is possible without science and technology. Without science, technology and innovation, we will not be able to transform the quality and efficiency of our hospitals and schools. Without championing science and technology in start-ups and scale-ups, we will not create the good jobs that are needed. It is a crucial part of what we need to do for today and tomorrow, it will reap benefits for years to come, and it is important for national resilience. I end by saying that I completely agree with the fire drill point.
Viscount Stansgate (Lab)
My Lords, in making a few closing comments, I wish it was rather like those old red phone boxes, where you could press button B and speak for as long as you like. Sadly, I have only 60 seconds in which to thank everyone for taking part. The wealth of expertise in this House is amazing, and today’s debate is an example of the House at its best. There has been a good bipartisan spirit; there may have been a few comments about the Budget but, as somebody once said, recollections may vary. On the whole, the debate has been conducted in a good spirit.
I particularly thank my noble friend Lady Freeman, if I may call her that, for her excellent maiden speech—look at the impact it has had on all of us here today. I was rather pleased to convene a sub-committee of the “former Science Ministers’ club” as part of today’s debate. I very much hope that the Minister will feel that he has the support of the House as he undertakes his role. I, for one, am going to send a copy of today’s Hansard to members of the Cabinet committee, as it is worth them reading the debate and having this on their agenda.