Public Accounts Committee

Thursday 11th June 2026

(began 9 hours, 34 minutes ago)

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10:02
None Portrait Speaker 1
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Well. To the Committee on Thursday the 11th of June 2026. The year is flying by. Department of Science and Innovation and Technology. Dcit is responsible for positioning the UK at the forefront of global scientific and technological advancements, and sponsors UK Research and Innovation, which will also use by its acronym here on Ukri. Ukri is a non-departmental public body sponsored by Dcit, and it is responsible for almost all of the UK's research infrastructure. This is the facilities, resources and services that researchers used to carry out their work in 2025.

Ukri spent 1.2 billion on building, maintaining and upgrading research infrastructure, representing 10% of the total dcit spending on research and development, which was 12.6 billion. The budget for 256 D six budget R&D budget is forecast to grow to 13.9 billion, so Ukri also established the Infrastructure Fund to five. Ukri spent 1.2 billion on building, maintaining and upgrading research infrastructure, representing 10% of the total spending on research and development, which was 12.6 billion. The budget for 256 D six budget R&D budget is forecast to grow to 13.9 billion, so Ukri also established the Infrastructure Fund to provide more structured and strategic approach for identifying, prioritising and selecting major research infrastructure projects for investment.

Ukri has approved 30 projects at an expected cost of 2.4 billion. However, last year our committee reported that there was insufficient clarity on how Ukri invests its money and we call for the establishment of clearly defined objectives from the organisation against which to judge its performance and hold it accountable. So today we will be looking to examine whether Dcit and Ukri are ensuring spending on research infrastructure is aligned with national priorities and managed appropriately. We'll also be exploring whether Dcit and Ukri have effective processes to support funding decisions, and if they could do.

More to realise the potential economic benefits of public investment in research infrastructure. So to help us today, we have a very experienced group of people. And so welcome Permanent Secretary of Dcit. Would you like to introduce yourself and say when you were appointed?
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None Portrait Speaker 2
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Okay. Um so can I give some context first?Of course. So the, the, the Stfc budget Science and Technology Facilities Council's budget for 2526, 835 million. By the end of the spending review period, it will be 842 million. That's not much of an increase, but it's essentially flat. So it's a flat a flat budget over the four year spending review period. There is a misnomer that the budget is being cut. The budget is flat.

Um the conversely, our forecasts of the costs against our existing portfolio of activities is that the costs will exceed the budget. Um, so the budget hasn't been cut, but we are having to rationalise our portfolio to make sure that our spending meets the budget, which is just a rational and reasonable management thing to have to do. We are going through a process on that. We have not yet determined exactly which parts of our portfolio may need to change. Um, we have been interacting with the community over the last six months on this.

So we identified this problem. Um, and started talking to the community in October 25th, we issued letters to all grant holders to look at different funding scenarios. Um, in January, we've just recently received all of that feedback. Now we are doing detailed impact assessments. As your correspondent rightly asks for. Um, and we are in the final throes of that. So we are, we had a council meeting last week. Um, we have further science board meetings to come and the Ukri board is meeting at the start of July to look at the different options of how to manage this, this cost pressure.

Um, after that, we will then feed up to ministers and the department before we can then communicate onwards to the community about exactly what we intend to do. But we have taken a what's this 6 to 9 months to do detailed assessment, talking to the community. We. Michelle did so many town halls and events, talking to the community and consulting about. What are their priorities and what are the most important things in our portfolio. And we have got these detailed impact assessments now underpinning this, this, this, these decisions.

So we haven't rushed into anything here. We're taking our time to make the right decisions.
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None Portrait Speaker 2
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Yes. Can I, um, start at the top level here?So, um, does it have a framework document with us where they set us objectives?Those five objectives were published last year, and I think they are pretty clear about what is wanted from the organisation that then flows down into. We will publish later this year, um a strategy for Ukri for the next five years hung around those five objectives, as you might imagine. Um, each of the high level five objectives will have a couple of key performance indicators against which we expect to be held to account over the next five years.

That, um, for each of those five objectives, we then have a series of much more granular detail of what we're aiming to achieve. We will publish again later this year a delivery plan for the one year, um, underpinned by another 50 metrics. So about ten that the department hold me to account. So grand high level macroscopic measures and then about 50 that I hold my team to account for. I can identify individuals to be held to account against concerning infrastructure, specifically, some of those measures are around the performance of our infrastructure portfolio.

Um, the, the performance of the infrastructure is no different, by the way, to the performance of our skills portfolio or the performance of our research portfolio or our commercialisation portfolio. All of them tie back to the mission and the purpose of the organisation, which is to advance knowledge. So how do we discover new things driven by curiosity that allows us to push the frontiers of human knowledge, to improve people's lives, to make social impact on the public who pay for us?How do we improve the public's lives and to drive growth?And that is something which I think has been less overt in UK mission in the past, but we see it as an integral leg of what we're trying to achieve.

And those three legs, I think, are all equally necessary. And you need to look for the symbiosis between them, how they are self-reinforcing. You wouldn't just do discovery research without pull through into commercial benefit. You can't try to improve people's lives without doing discovery research. You have to do all three. And to your question on the infrastructure portfolio, that is how we hold to account our investments is are they making social impact?Are they delivering commercial benefit?Are they advancing curiosity driven research, which which discovers new science?And those really are our three macroscopic level measures.

Then at a more granular level, of course, you can look at publications and you can look at. Citations. There are various metrics that you can use for scientific impact. You can you can make measurements about social impact, number of jobs, supported communities engaged with. You can make measurements about place impact. You can look at the pounds, the number of companies spun out or supported by an infrastructure, the number of people they employ. We measure all of these things.

We have a very detailed measurement and evaluation framework that I think right criticism is that whilst we do do that, we have not done that in a completely consistent way across our portfolio, and that is something that we are moving towards in the future, is a completely consistent monitoring and evaluation process.
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None Portrait Speaker 5
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No thank you. Chair, I wonder if I might just give an example. Indeed an example from this week. Um, so as part of London Tech Week, this week we published our AI hardware plan. And within that we talked about a piece of research infrastructure that we are funded to deliver in the spending review period, which is the AI research resource. So over £1 billion of investment into high performance computing. Now, I think in a previous time, we would have perhaps been relatively agnostic as to what chips go into this system, and we'd simply go to the market and buy what seemed to be the highest performing chips at the time.

And I think, as everyone knows at the current time, that would probably end up being chips from 1 or 2 American companies. But given that we have a cohort of UK companies who are developing the next generation of chips, indeed, some of them we've supported through early UK projects, some of them have been supported through Aria projects. We very explicitly said that we want the system that we buy to be a system that accommodates different kinds of chips isn't a single kind of chip, and that then creates the opportunity for us to build this system using chips, including from British companies, and that provides those British companies with the next step in their growth journey.

So they go from being small R&D operations to having their first scale customer. And then once they've demonstrated value there, we would hope they're able to scale and sell to other big customers as well. So I hope that's a helpful example of just, I think the shift that we're making that Ian was describing, where we're linking our research, spend much more explicitly to our industrial strategy.
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None Portrait Speaker 6
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Um thank you chairman. Um yes, I, I have to say I, I've sort of read this report with interest. I, I find myself being confused by all the various sort of disparate funding streams, which obviously the majority of it goes through Ukri, but there are other sort of bits and pieces and it all seems to be quite disjointed. I mean, the objective of my question here is to make sure that we understand that, you know, you're actually spending the right amount of money on infrastructure.

And to that point, the, the now in their in their intended objectives. And the session came up with this, which is Ukri does not have an overarching framework to monitoring and evaluating performance of research infrastructure. So I if. If we look at paragraph 3.6 on page 37, I did a bit of work on this because it seems to me that. You rely quite heavily on the universities for infrastructure, reading. Reading this. And I did a bit of work on the universities.

So if you're relying on the universities, I think potentially you've got a problem. Because when I when I looked at the universities, I find that many of them are actually now suffering very large deficits. You probably know that. So I think Cambridge 53 million, Coventry 60, Brunel 56, Essex 22. Derby 23, Cardiff 31. I'm also concerned that they seem to be spending huge, hugely increased percentages on non-research related jobs. So they've been hiring and buying people or bringing in people to do things called senior Continuous improvement managers, associated director of belonging and engagement events and Experiential learning Officer, immigration compliance associate.

And what's happened is the research element versus the administrative element has dropped. Equally, we read here that there's a 5.6 billion required to restore university owned research infrastructure to a fully operational condition. So do you actually think that you are even though I think what you're doing is slightly smacks of central planning, which I never like. Do you do you think you are actually investing your money wisely in the correct infrastructure, given that there appears to be a weak link with the universities?Are you chucking good money after bad?
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None Portrait Speaker 1
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All right. You keep.
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None Portrait Speaker 2
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Going, carry on. Completely changing our financial ledger system so that we previously had, um, a large number of relatively small schemes. We are moving that through to aligning our ledgers with our mission so that you can see the connection from strategy to spending, right?So that you can, it's really very overt. So the first bucket of money is around curiosity driven research and discovery. The second bucket of money is aligning with societal priorities and government priorities. So predominantly the industrial strategy and how we deliver against that.

Um, and the third bucket of money is helping companies to start to scale and ultimately to stay in the UK and prosper in the UK. So our schemes are going to align with those three high level missions that the organisation has been set by the government. So I hope that in future it is much clearer to see how our money aligns with those with those outcomes. So trying to drive spending to align to outcomes, which I think is the thesis of, of your question, um, concerning our exposure with our partners.

So of course Ukri, we self-perform research, we have about 6000 researchers, which is sort of the scale of the University of Oxford or the University of Cambridge. Um, and we have a large number of research infrastructures ourselves that we operate. Um, but we also put the predominant amount of our, of our funding, more than 80% goes into universities. Um, and we work in partnership with them. So I don't think it's my job and I don't think you want it to be my job to micromanage how they achieve outcomes to, to look at exactly their staffing mix and how they're setting up their employment contracts and who they're employing.

I should be holding them to account against outcomes. So I should say very clearly, this is what I want you to achieve with that investment of public money. And then I hold them to account against their outcomes. How they achieve it is actually their business, I think.
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None Portrait Speaker 5
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I wonder if I might just say a couple of broader things about university finances, and then ask Ian to say more about how you care. I, um, monitors its spend into universities. Um, I think the first thing I'd say is just on some of the universities that you listed there, their balance sheets are, are some of those universities, their balance sheets are very strong. Um, and so the deficits that they may have in any one year might be a deliberate decision because they've, they've, they're investing particularly hard in that particular year, but they're doing so on the basis of a balance sheet.

That means that that's a perfectly legitimate decision for them. You know, we shouldn't be we shouldn't be looking to control that. I think because there are independent institutions equally, though I think some of the universities you name the deficits probably are worrying, and they may not have the balance sheet position. That means they can run a deficit like that year after year. Um, and so I think the second thing I'd say is that we are looking very hard at university financing and sustainability.

Ministers made the decision as part of the spending review to protect and indeed continue to, to, to increase the proportion of research funding that goes to universities as a block grant, as it were. Um, to ensure that there's that stable footing for universities and tuition fees. Um, after a long period for domestic students, after a long period of being flat are going to increase again in line with inflation, um, I suppose. The other thing that universities would say is that that financial position is driving some different business decisions by them.

And so we're seeing some key decisions about consolidation just in the last few weeks, King's College London and Cranfield University have announced that they're going to be merging some of their operations. We've seen other instances of that. Again, I don't think it's for us as a department to adjudicate on those. They're independent institutions. It's for them to make those decisions. Um, but it feels like those decisions, especially that one, I think feels like a good way of protecting the research strengths of both of those universities.
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None Portrait Speaker 2
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Yeah, absolutely. So that the report rightly acknowledges that to maintain the existing estate, we have a deficit. What it doesn't assess is whether we want to maintain that existing estate. So that is all the infrastructure that exists at the moment. But we should be constantly making active priority decisions and saying that investment that we made 20 years ago, do we do we want to maintain that piece of infrastructure or do we want to now, um, you know, off board it and we should be constantly making those decisions.

And that is not addressed in the report. It just says to maintain the existing portfolio. So, um, the portfolio of things that we want to maintain is smaller than that number. And therefore we think is manageable within, within our settlements. Um, and then lastly, you asked about, um, China and fraud. Let me just address those two things. So when we, when we make investments into universities, we have a very clear policy on what we call trusted research and innovation, which outlines the expectations of our investment and how that is protected and how it is used, used in the in the nation's interests and the partners with whom which we can work on different subjects.

So there's a very clear policy on that upon which all of our investees universities or centres or catapults or companies all have to abide by that policy. And then lastly, on fraud. So we take this very seriously. We are spending public money and many of the endeavors and ventures that we're investing in are very early stage. And they are risky. They are risky ventures, um, for just to give you comfort. So for 24, 25 last financial year, our fraud rate was 0.01%.

So very low. Actually error was bigger than fraud. Even our error rate was 0.1%, most of which we recovered. So I think we do a very good job of managing fraud over a big portfolio.
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None Portrait Speaker 4
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So in terms of the way that Ukri assesses which universities to invest in, they look very carefully at the track records, the strength of the research. And we have funding streams like quality related research that then double down on that. So where a university is good at something, we give them more money because they win it, because they're good at it. So there's generally a track record, a reason why it will attract investment talent and a reason to go there. And then we have a way of making sure that investment is sustained and that infrastructure is sustained over time.

So Edinburgh is one of the universities we're investing in. Bristol, these are universities who have got long track records, who have got very, very strong research in particular areas where the infrastructures are being invested. And we keep an eye as deficit about the overall university portfolio and what's happening and how that works. But generally, the ones that get the infrastructure investments are already strong in those particular areas, and we've got a plan for sustaining that infrastructure over time. A combination of maintenance and then enhancing it.

So in a world in which universities are clearly exposed to a number of forces, it is very challenging for them. The ones that we are investing in are also making wider management decisions about how do they make themselves sustainable, how do they make sure that the subjects they're investing in, the infrastructure they're investing in is sustainable?So most of those will be bidding for this infrastructure on the basis that it's sustainable over the medium to long term. So they've generally got the establishment of the quality.

They've got the track record. We continue to invest in the research and the infrastructure because of that track record. And then those institutions are taking action themselves, and you can see that in the mergers as well.
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None Portrait Speaker 2
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Yes.
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None Portrait Speaker 4
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I don't think that is fair, actually. And I think it is changing over time. So I'll bring in Ian in a moment with some of the figures. But what we've seen is an investment in capability. Um across the UK over a long term through a series of programmes like Strength in Places has meant that actually through the recent research excellence framework exercise, you've seen universities across the UK outside the Golden Triangle getting more funding because the quality of their research has increased.

We've also done a lot of work on place within Ukri, so we're seeing an increase over time of investment going outside the Golden Triangle into other parts of the UK, going to excellence because there is very high quality research and innovation around the UK. And then we've also got programmes like the Local Innovation Partnership Fund, which is at the innovation side. That's 500 million. That's just one part of it. A lot of money goes to universities around the UK beyond that, but that 500 million we're working in partnership with a number of areas, including Greater Manchester and Glasgow, the West Midlands, on how do we invest in innovation ecosystem.

That means they can take advantage of the quality research, which we're investing more in, and then kind of spin it out. It is not resolved. I'm not suggesting that this is an equal distribution of funding, but we're taking very seriously. How do we change that?And one of the objectives for Ukri is about thinking about its impact on local areas as well as the national UK. I don't know if you want to say any more.
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None Portrait Speaker 2
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Yeah.
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None Portrait Speaker 4
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Yes. So it was published in May 2025, actually. And it's about, um, it's aimed at specific kinds of activity or institution. And that is done for a reason because it can be the activity is the thing that we need to fund rather than a specific institution, but it has to demonstrate benefit in supporting core national infrastructure, in retaining and attracting talent where the skills development supports growth, collaboration with other countries or areas where there's demonstrable need for partnerships with industry that can help drive economic growth.

So the criteria are set out. Um, as Imran said, we have funded the Laboratory of Molecular Biology and the National Quantum Computing Centre. We've also had DBT, Department of Business and Trade funding, driving research and investment in vehicle electrification, and the Aerospace Technology Institute, and announced they've got ten year budgets. I think the other thing to say, though, is Ukri sets long term budgets more generally anyway, because none of these very few of these infrastructure are limited to the three year spending reviews that we have.

So we can combine that ten year certainty. And most of those have review points because. That's right. As Imran says, things change. So we need to kind of give them the certainty of the funding, but make sure we're clear what we want them to be delivering. But actually, there's a lot of long term funded institutions and activities and programs right across the UK programme, and we support them to do that, as does the Treasury, because it's impossible otherwise to have some of the certainty you need to continue.
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None Portrait Speaker 2
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Yes, yes.
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None Portrait Speaker 4
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Well, on working across government on R&D. Yes. So we have something called an R&D Oversight Board. It is co-chaired by me by the government Chief Scientific adviser and by the Treasury, because that's the group that we wanted to bring this together. And they bring together all of the R&D investors across government. So we can look at this as a portfolio. So over the past few years, we have built the information, um, the management information you would want to have.

Um, it could be improved further, but much more information about what are we investing in across government in terms of R&D, which are the areas, how can we complement one another?How do we make sure that if UK arise and investing in some fantastic research, we're thinking about how that supports and complements where Mod might be investing, for example, or DHS. So that meets on a regular basis. We have working groups underneath that, and they have been compiling management information just to try and help us understand how that portfolio works, how we can tension it, but also looking at the monitoring and evaluation.

What's the evidence base?Where is it having most impact?So that's on the government side of things. And there are various um individual board. Does that happen. And then Ukri has its own programme boards for example on the industrial strategy. So each industrial strategy area has a programme board on which members of the relevant government department sit, so that UK work is directly informed and I should say UK. I attend the R&D Oversight board.

Ian comes on to every meeting um on that on the private sector. Um a lot of the work with the private sector, we kind of look at that overall portfolio and think about where the opportunities are. We have an overall target of 3 to 1, which we look across. And some of that work will not attract private investment and nor should it, because it's where government is de-risking something and investing where only government will. And some of it is absolutely about trying to secure that investment and thinking about how we do that, where that has worked best, um, is generally at a sector level.

So working with particular sectors to understand what they're looking for, what their needs are. Um, and we have a range of ways to do that with advisory groups. We've also got some funds that we have. So we have the sovereign AI fund. Um, now we have the fund, which is all about investing in kind of secure areas of R&D. So we have ways to work with the businesses where we actually invest in them with a kind of a contract or a grant, but they particularly value, as Imran was saying earlier, contracts of some kind.

So we can work with them on a sector basis through those funds, which are slightly more general. Um, and then through some of the infrastructure that we have infrastructure that we have. So the National Quantum Computing Centre is a great example of where industry has asked as we move towards commercialising that sector, please, can we have some of the infrastructure that only the public sector can invest in that will help them grow and scale?And that's a good example of both responding to some of their demands and then working with them to make sure it's used by both researchers and industry.

I don't know if you'd want to add anything.
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None Portrait Speaker 1
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Megaflops.
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None Portrait Speaker 5
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On discovery research. And for UK startups to use that supercomputing capacity as well. So we're seeing that happen a lot. For example, at the supercomputer that Ukri funded in Bristol, the Isambard system. Um, we focused really hard on getting start ups, access to that system. Indeed, one of the things that we offer through the sovereign AI fund that Alex mentioned is access to this onboard computer, because often for start ups in the AI space, compute costs are by far the largest cost.

And so if we can provide them with access to publicly funded compute, we're sorting that problem for start ups. And it really accelerates their journey. And then, as Ian says on the broader picture of the availability of high performance computing in the UK, I think Ian is absolutely right. The vast majority of it will be private sector funded for private sector clients. Um, I think the challenge there is building it at the right scale. Um, we have lots of data centre capacity in the UK, but often it is that small scale.

It's smaller facilities and the facilities that we're seeing in the US or in the Middle East. And there are real advantages to those large facilities for large private sector clients, such as the AI firms themselves. We don't currently have those large care infrastructure assets in the UK. They will be private sector funded. They won't be public sector funded. Um, but we felt we needed to do more to facilitate the building of those assets. And that's what led to the creation of the AI growth Zones programme.
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None Portrait Speaker 2
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Correct.
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None Portrait Speaker 7
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Thank you.
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None Portrait Speaker 1
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I agree.
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None Portrait Speaker 2
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Why don't I bring it back to the, to the infrastructure fund and the latest wave of infrastructure projects that we've just invested in. So, um, we had very disparate projects proposed to that. And, and the things that we've announced that we've invested in are, um. The national cryogenics facility, which is supporting development of, um, next generation quantum technology and superconductors, which have applications in energy transmission and, and energy projects in general. Um, a platform facility which is doing imaging across scales, which can be applied in many different sectors.

So predominantly focused on, on medical techniques and biological techniques. Um, and then two projects which are looking at clean energy. So one in the Orkney Islands looking at um tidal energy and renewable energy, and then one looking at offshore wind platforms. Now we made those investments and that's a, that's a range of investments in different places. So from Scotland down to the south west actually. So, so we look at the place lens, we look at the social impact lens.

Um, we look at the, the industrial sector lens and which sectors does the UK really have a right to, to dominate and to have a significant market share in. And we also look at things which provide platforms. So the imaging across scales is a platform facility which can be used for many different disciplines ranging from heritage science, right, right through to medical science. Um, and so because we have that portfolio approach, we can, we can tension them. But there were other projects that, that we could not invest in.

So, um, we had a project around a centre for, for mass spectroscopy, which we did not pursue. And to Rupert's earlier question, we had given some seed funding to that to explore in detail, and we couldn't pursue it. We had a project in particle physics looking at a next stage detector at CERN. Again, we'd done some seed money to evaluate that. We couldn't pursue it in this round. So we always have an oversubscription and we're trying to balance those many different competing.

Is that a useful example for you?
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None Portrait Speaker 3
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Sorry.
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None Portrait Speaker 2
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To.
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None Portrait Speaker 9
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If I may, to, to give some examples of that. So we, um, now ask for a 12 page business case because actually we were often having 400 page business cases, but they weren't necessarily getting to the assurance that you need about is this value for money for the taxpayer?Is it going to deliver the outcomes we want?We have changed the delegation level for Ukri. So it's 100 million. Now, what that means is UK doesn't need to come to us to agree.

Some of those smaller business, still big but slightly smaller business cases. So you're not going through double processes because where business cases do not work as well. And David Willetts was very clear on this is when we take too long to decide on fast moving science and technology. And when we don't ask the right questions about what do we know and what don't we know?So we've done those two things already. We're also doing a review of the end process within Dcit.

We're working closely with Ukri on that. About how do you think about from the very early stages, all the way through to monitoring and evaluation?Did it work?Was that a good use of funding, and what did we learn from it for the future?So we're doing that and we're working with Ukri on the different roles and responsibilities that we have, because DC, of course, sets the overall framework and the priorities UK, our advisers on the projects and has the expertise and delivers them working out through the business case process.

So we both get the assurance that we need that money is being spent well and delivers the outcomes, but we don't duplicate and we don't make it too slow. That's exactly, I think, what we're working on. So made some progress more to do, but we're actively working on.
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None Portrait Speaker 6
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Please me again, I'm afraid. Um, yeah. So, uh, intellectually as I. Said, I don't like this centrally planned approach, but let's assume, as you say, Sir Ian, you've now whipped it into shape and you've, you feel you've got you've got on top of it. Michelle says you're doing it very well. So we're encouraged to hear that. But I think I think for me, what's interesting and the question I have is if you are going to have this approach to using taxpayers money to take risk, uh, and develop new businesses in the cutting edge sort of sphere of where we're going.

And as Jeffrey says, I'm, I do quite a lot of Ise investment myself. So I do understand that. But I also understand that what often happens with early stage companies, you invest quite a lot of money on several rounds to get takes a lot longer than you think to get somewhere and then it explodes. And what I think, well, what tends to happen, and we saw it with SoftBank buying arm, there's actually countless examples of US companies and other companies, us particularly who are more on the ball than us, who basically wait for this long gestation period.

They spot the growth and then they buy the business at a crucial time. After a lot of the risk has been taken by our taxpayers. So I think the question the committee would like to know is, is given that you you're doing it the way you're doing it and given you feel you're doing it well and you're on top of it, if you do come up with a company which is going to change things, and we know Britain is very good at innovating, a lot of the best inventions come from Britain.

A lot of the best sports come from Britain. Virtually everything good comes from Britain. Originally, but often we then let ourselves down by not capitalising on the actual, uh, brilliance. Of the idea. So how how are you?How can you reassure us that you are going to protect the interests of the taxpayer and actually let them enjoy the benefits of the risk they've taken and not give that to somebody else, which I suspect has been happening in the past?
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None Portrait Speaker 5
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Yeah. Perhaps if I come in on the government aspects of this and then ask Ian to follow on, um, I think the first thing I'd say is, you know, we do look very closely at the comparison to the US. Um, and I think in some respects now the UK is in a much stronger position than we used to be vis a vis the US. When you look at venture capital as a proportion of GDP in the UK, we're now almost at US levels. Um and that was certainly not the case ten years ago.

So that gap has closed massively. The other thing I think that sometimes we don't notice about the US system is the US system also spends a lot on public R&D. So even a massive company such as SpaceX. Much of their early technology and some of their earliest contracts were government contracts and government funding. Um, but then I think the key question is exactly as you say, how do we support those companies to go from early stage to scale properly?And for the benefits of that to be in the UK?Um, and that is where we certainly have a challenge.

And I think the challenge is there on both respects that you mentioned, it's there in terms of the availability of capital, we have much less growth capital available in the UK than other countries do. Um, we're in a stronger position than most of Europe, but not as strong as the US. That's why the government's been so focused on bringing more pension capital into that growth stage. And the British Business Bank helping to cornerstone some of that private capital. But I think the move there has probably been slower than we would have liked to see.

I think we're starting to see some pension funds move now. We'd love to see more of that happen. They certainly have enough capital to deploy. And if that growth capital could come more, if it could come from pension funds.
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None Portrait Speaker 6
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Thank you. That's.
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None Portrait Speaker 2
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Yeah, I can I can talk about IP. So, um, look. The the thesis of your argument actually is why I joined you. Kerry. Um, in that we have this amazing remit that goes from discovery science through to starting and scaling companies. There's very few organizations in the whole of the world that have that remit. Um, and I do think there is an incumbent upon us to get better at identifying within our portfolio of investments, that whole portfolio, as I described earlier on, almost all disciplines.

Um, so we're not overexposed on anything across that whole portfolio. Being able to say, these are the parts of our research base which are genuinely internationally differentiated. This is the part that's world class. This is our crown jewels. And of that, this is the part that is also high growth potential. That is such an investable proposition to, to Rupert's question, how do you secure private co-investment?You show them that portfolio, you show them this is the bit of our of our portfolio of investments.

And remember, we make, roughly speaking, half of the R&D budget flows through Ukri. So we see all of this. We have almost unique oversight of this whole portfolio. And we can identify the really high growth potential, really high value parts of it. And then in concert with that, we have to have the right protections and the right commercial behaviours. And I, I think it is worth us looking again at the IP terms and conditions that we have. We have a framework and a policy around which any investment that we make, the owner of the IP, which is typically not us, it's the university or the, the centre or the institute into which we've invested.

They own the IP, but we have a framework against which they must abide. And, and clearly we indicate to them that we expect you to exploit the IP and not just hold it and not use it. And we expect you to have the right conditions for the growth of the company and not overstep the cap table and things like this. Right. But but we could, I think, um, look again at the terms and conditions that we use. UK arise terms and conditions are more liberal than other public investors say area or nature, other parts of the public sector.

And when they make investments into into research institutes and organizations, they will have more stringent controls over IP. Um, and that in itself is perhaps a bit anomalous that different parts of the public sector have different terms. So we are looking at that. We are in process at looking about the right terms and conditions. We certainly don't want to be so stringent that we denude growth and that we we actually inhibit company growth. But at the same time, we don't want to be too liberal.

So there's a balance there to strike. It's a thing that we're reviewing, um, with the, with the department to, to look at what are the right, what's the right balance there?
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None Portrait Speaker 2
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There is more.
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None Portrait Speaker 9
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To be done.
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None Portrait Speaker 1
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And no, sorry.
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None Portrait Speaker 9
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Sorry if I may. So, um, I mean, because of course UK terms and conditions will be really important for that. But in the current situation where it goes to the, uh, often the universities who get the grants, we are doing okay. In fact, UK universities generate more spinouts and patents per unit of research resource than their US counterparts. So not as many, but comparatively not bad. And UK IP income is growing faster than the US over the past decade.

So there's some good things happening. However, the way that universities make the most of that IP is absolutely patchy. Um, we have seen some real challenges where they've either kept too much or they haven't sought to, to spin that out. There's a number of programs that UK run that are about trying to encourage more entrepreneurship, more use of the research. And we know from the research we've done, and there was a big review of this, um, Irene Tracey and Andrew Williamson did this looking at spinouts commercialization.

We know it's not just about the IP though that matters. It is about, as you were saying, the desire to spin out the thinking about how do you get the support to do that, understanding what the market is. So you actually have a market for a product rather than simply interesting idea. So there's a set of things. We had 11 recommendations from that review. We are working with Ukri implementing all of those. And we're seeing some good results.

We've definitely got more to do. But there are things where tech transfer offices from the US and the UK are working together to agree different ways of doing tech transfer that absolutely. Look at that balance between taking enough IP but not too much IP. So you don't put off the investors, but you're getting enough of the benefit from it and seeing that kind of come through, that guidance has gone to all the universities. More of them are using it. And we're learning from Stanford and MIT as part of that.

So definitely more to do. But I think there's a wider framework in which Ian's work sits, where we are taking very seriously. How do you do this, and how do you take it from a great idea to a product for a market with some of the government contracts, with some of the support from other bodies like the British Business Bank and other funds. So you can actually scale a company all the way through.
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None Portrait Speaker 9
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So shall I start on that and Ian. So I think um, that's exactly as we think about improving the way we scale up in the UK, we're absolutely thinking about that. And you can see with the British Business Bank, that's exactly the approach we're looking to take as a government. Um, and I think that we're also looking to improve the way that UK. Ryan innovate and some of the amazing companies IT funds do pull through. So actually when they do need greater capital than innovate can or should provide, they are going through to the British Business Bank and the National Wealth fund.

So there is a way of kind of pulling that through. We are thinking about equity stakes. It is that balance, as you say, between taking so much that you put off the investors. And we know from the feedback we've had, it can do, particularly if there are particular sectors where it's more off putting. So I think life sciences is one of the kind of major challenges. For example. Um, so how do we make sure we're benefiting from it, but not taking so much of a stake that we don't achieve the outcome, which is that we want it to scale.

So we've got a number of institutions trying to do more on equity. We're trying to take a more strategic approach as a government on it. We have more to do, and we're trying to make sure you care as a part of the pipeline that thinks about it. So that balance, though, I think, is one that we we are continuing to look to tread carefully on so we don't inhibit growth, we actually benefit from it.
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None Portrait Speaker 4
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Thank you. Chair.
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