Higher Education and Research Bill

Baroness Brown of Cambridge Excerpts

Committee: 7th sitting (Hansard - continued): House of Lords
Monday 30th January 2017 Lords Chamber

Moved by

[Baroness Brown of Cambridge]

482C: Schedule 9, page 105, line 30, at end insert—
“(d) form, participate in forming or invest in a commercial arrangement including a company, partnership or other similar form of organisation for the purposes of supporting economic growth through commercialising research or promoting university-business collaboration (up to a financial limit determined periodically by the Secretary of State).”

[Baroness Brown of Cambridge (CB)]

My Lords, in moving Amendment 482C, I wish to speak also to Amendments 490A, 495C and 495D in my name and those of my noble friends Lord Mair and Lord Broers. All these amendments relate to the issue that I and others highlighted earlier of the need to maintain and strengthen Innovate UK’s business focus within UKRI, and, in delivering its support to businesses of all sizes and stages of development, ensuring that Innovate UK is itself able to innovate in the forms of support it can deliver, so that they are appropriate to the need and scale of the business.

As we heard earlier, Schedule 9 states that UKRI is not allowed to enter into joint ventures, or form or invest in companies, partnerships or similar forms of organisations without the specific consent of the Secretary of State. These are just the kind of things that Innovate UK has done, does now, and which it is likely to want to do more of as it extends its activities in the future. The very successful catapults, for example, are companies which Innovate UK has formed, appointing their initial chairs and non-executive directors and funding them. Indeed, I understand that Innovate UK has recently appointed a chief investment officer to look at opportunities to support new technology-based companies. Schedule 9 appears to constrain this type of innovative business support rather than encourage it. The amendments would remedy this while still leaving an appropriate level of oversight and control with the Secretary of State.

Amendment 495C also supports the business focus and autonomy of Innovate UK within UKRI. It would transfer back from UKRI to the Innovate UK council, with, I hope, its independent chair, the determination of which of the UKRI functions Innovate UK should exercise to increase economic growth in the United Kingdom.

These are very important aspects of ensuring that Innovate UK can continue to provide innovative business-focused support to UK economic growth. I beg to move.

[Lord Mendelsohn (Lab)]

My Lords, I will speak to the amendments standing in my name. Briefly, the context is of course that Innovate UK is a good thing that is making real progress, and we do not want to see anything that constrains it, particularly within this legislation. However, it is worth looking at the Government’s case for its inclusion in UKRI—we will deal with some of its merits later—and what that means for its operating method and efficiency, and whether it meets the right objectives. That is also about ensuring that Innovate UK has the right basis for entering it, which is what our Amendments 482D and 495E relate to. The efficient use of the interrelation between business and research is aptly put by the question I will ask having visited Harwell, where there is a fantastic facility. Particularly with regard to space, where we have a huge emerging industry, we have invested in a chamber to be able to test products as they would wear in space. There is a five-year waiting list, even though construction has not been completed yet. Therefore, where in the research world is the case made to extend those facilities and make them more available? That is part of what we are looking at here.

Amendment 495F would require Innovate UK, when exercising the functions required,

“to maintain its focus on assisting businesses”.

As well as some people having concerns about Innovate UK affecting the way the research is seen, we want to make sure that Innovate UK is established with the right focus and that its priorities and funding will not be excessively influenced by its proximity to the research councils and Research England.

One of the other issues on which we would like clarity from the Minister is how other elements, which have a strategic focus on these issues, relate to this. One is the role for the Council for Science and Technology, which is known by the acronym CST and sometimes dubbed “Charlie Sierra Tango”. It advises the Prime Minister on science and technology policy issues, which cut across the policy issues of government departments. It is housed in BEIS, and it is the most significant location where issues of science, technology and the interface with business are addressed by government. It would be logical for it to be proactively charged with the role and responsibility to look at this issue. We will be interested to see where it fits in.

Amendment 495G is our proposal that Innovate UK’s spending is separately reported and evaluated by the NAO, just to make sure, again, that we have that counterbalance.

In the development of the relationship with business and making sure that that function works particularly well, it is narrow just to consider the role of Innovate UK, however esteemed, useful and effective it is. We should be looking at the issues surrounding spin-outs—the commercialisation of university research, and how that works. We should be looking at some of the other elements; for example, research councils supported the Rainbow Seed Fund as a seed fund generator. It is a most outstanding, although small, fund, which has done a terrific job at encouraging investment in our research base and in companies that spin out from it. It will be useful to have some idea of where some of the new institutions, such as the Industrial Strategy Challenge Fund, which has been announced, will fit in with Innovate UK and its new research framework. Similarly, how will the Small Business Research Initiative fit in?

There are of course other examples. Many people commented on the recent announcements that we were looking for something similar to the Defense Advanced Research Projects Agency—DARPA—in the States, which has had fantastic non-military applications, such as computer networking, graphical interfaces and other things. Will the Government also consider, in the context of what they are trying to achieve, that there is a role for institutions such as Israel’s Yozma programme, which revolutionised Israel’s venture capital industry and has totally transformed its universities and capacity to the point where Israel is investing as a proportion of GDP twice as much in private equity and venture capital as the United States? That has transformed the research capability of its institutions.

Innovate UK is therefore a good thing, it should not be restricted and it should certainly have a lot more functions. However, is that the end of the story, and are there other ways in which research elements that we have already, as well as others, will be considered by the Government?

--- Later in debate ---

[Lord Prior of Brampton]

I thank my noble friend for that.

Turning to how autonomous and free Innovate UK is, I fully agree it is important that it is able to provide a broad range of financial support, including the sorts of commercial activity listed in the amendments. I assure noble Lords that paragraph 16 of Schedule 9, which provides detail on UKRI’s supplementary powers, does permit UKRI and its councils to make such investments, but with the consent of the Secretary of State. This is not an unreasonable or overbearing condition. It is a necessary one to comply with cross-government rules set out by the Treasury in Managing Public Money. It is also not a change to current practice—such permissions are already required. For example, the noble Baroness, Lady Brown, mentioned catapults, but as things are set up, they do require consent from the Secretary of State.

It would not be responsible to cut out ministerial oversight entirely, particularly with regard to commercial activity that potentially carries a significant level of financial and/or reputational risk. Absolutely nothing in the Bill curtails the powers of Innovate UK to enter into joint ventures or investments in the way that it does at the moment. I agree fully with the comments of the noble Lord, Lord Mair, that commercialising our science, one of the 10 pillars in the industrial strategy, is critical to improving productivity in the UK more generally. The Government fully understand it is important that UKRI has flexibility in this regard. The Secretary of State will specify conditions for such activities, below which UKRI can act without referring back to its sponsor department.

I turn now to the amendments tabled by the noble Lord, Lord Mendelsohn. I cannot agree with Amendment 495E, which would risk taking the emphasis away from Innovate UK’s mission to support businesses by giving it further duties that are not reflected in its current charter. However, I find myself in complete agreement with the sentiment behind Amendment 495F. Although the Government strongly believe that the current drafting protects Innovate UK’s business-facing focus, let me assure noble Lords that we will carefully reflect on the comments made in this debate.

On Amendment 495G, as a council of UKRI, Innovate UK will continue to undertake detailed evaluation of the economic impact of its business-led innovation projects. It is right that the organisation is given a degree of flexibility to determine how it reports on its activities, rather than entrenching such detail in the Bill. Let me reassure the House that it is not the Government’s intention to place artificial and unjustified limits on what commercial activity UKRI and Innovate UK may undertake. The Government’s position is very clear that Innovate UK must retain its business-facing focus. I hope that with the assurances I have given noble Lords this evening, the noble Baroness will withdraw her amendment.

[Baroness Brown of Cambridge]

My Lords, I thank the Minister for his detailed response and other noble Lords who have contributed fully to the debate. I am pleased that the Minister agrees with the principle behind many of these amendments—I hope I have understood him correctly this time—particularly the need for autonomy for Innovate UK and for it to be able to deliver a broad and innovative range of financial support and commercial activities.

The Minister mentioned that the Secretary of State would be able to specify conditions within which UKRI can act, which is specifically indicated in one of the amendments. Perhaps he can write to us with more information about that as it may further allay some of the concerns.

The issue of the autonomy of Innovate UK, and the opportunity and need to have an enlarged brief to deliver the economic growth which we are all keen to see from our science base, are so important that we would like to hear more about the Government’s thoughts in this area. It is an issue to which we may wish to return on Report. However, in the context of the strong reassurance that we have had on this point, and that we will hear more, I am happy to withdraw the amendment.

Amendment 482C withdrawn.

--- Later in debate ---

Moved by

[Baroness Brown of Cambridge]

485A: Clause 87, page 55, line 32, at end insert—
“( ) facilitate, encourage and support the development of activities in higher education providers associated with entrepreneurship, innovation, commercialisation and support of regional economic growth.”

[Baroness Brown of Cambridge]

I shall speak to Amendments 485A, 496 and 499A in my name. I welcome the government amendments to include knowledge exchange in UKRI, but I do not feel that they go far enough. The Minister mentioned the Higher Education Innovation Fund, which is currently distributed to universities by HEFCE on the basis of encouraging interactions with industry and business, which includes knowledge transfer, collaboration support for registration of intellectual property, entrepreneurship and a range of other things.

Historically, HEIF has been assessed as delivering a benefit to the UK of £7.30 for every £1 invested. It is mentioned in the new industrial strategy as one of the routes to address the concern that the UK is excellent in research but not innovation. Indeed, the Green Paper is looking to explore the expansion of HEIF. This news will be celebrated by UK higher education institutions of all kinds, from the highly research-intensive to the more applied and business-focused institutions.

I understand from discussions with the Minister of State and the Bill team that HEIF will continue to be delivered by Research England. This is again good news, except that in Clause 91 Research England can provide financial support only for research or facilities for the purposes of, or in connection with, research. This needs to be addressed at the Research England level in Clause 91 and for UKRI in Clause 87.

The government amendments in this group are very much appreciated as they go some way towards addressing this issue by extending the UKRI and Research England support to knowledge exchange. However, I am not quite sure what the definition of “knowledge exchange” is. I believe that HEIF as currently applied delivers benefit some way beyond what one might assume is included in “knowledge exchange”. It is used to support entrepreneurship activities among undergraduates, postgraduates, researchers and university staff. It helps to support initiatives such as “dragons’ den” competitions for start-up companies in universities. It supports working with local enterprise partnerships on business growth in the regions. I am not sure whether all of these activities can be classified as knowledge exchange, but they are all important in ensuring that our universities play a strong role in stimulating innovation, entrepreneurship and economic growth locally and nationally.

My amendments would go further than the Government’s proposals to ensure that the excellent work done under HEIF can continue—and, indeed, to allow Research England to distribute other such funds in future with equally broad scope for encouraging university-business links and entrepreneurial activities. I do not believe that these amendments have different objectives from those of the Government, but I ask the Minister to reflect on whether the wording of the government amendments could go further to ensure that they cover the quite broad scope of HEIF as it is currently very effectively used.

[Lord Prior of Brampton]

I am very grateful to the noble Baroness, Lady Brown, who described the wide range of activities undertaken by universities under the banner of knowledge exchange—and, beyond that, the contribution that they make to their local communities, to entrepreneurship and to local economic growth.

The Bill makes clear that Research England will retain HEFCE’s research and knowledge exchange functions. This will include distributing higher education innovation funding. This vital block grant for universities in England represents an important source of stability to the sector, allowing maintenance of facilities, core staff, support for postgraduate students and a degree of entrepreneurial research activity. Research England and the new Office for Students will act together to deliver HEIF—an example of the close joint working between the two bodies and their shared remit to support business-university collaboration. The Office for Students will continue to encourage student activities such as entrepreneurship training.

The Bill ensures that UKRI will be equipped to continue to support universities to continue to play a critical role in their communities, including through knowledge exchange.

[Baroness Brown of Cambridge]

I thank the Minister for his reassuring response. I am keen to know how the OfS and Research England will work together to deliver HEIF funding, because, as the Minister will know, there is a very precise formula for delivering HEIF funding relating to things such as the amount of university-business research collaboration undertaken by universities. It is important to understand how work will be done between the two organisations to continue to deliver this funding. Will the Minister include that in one of his letters? In that light, I beg leave to withdraw the amendment.

Amendment 485A withdrawn.

--- Later in debate ---

[Lord Mendelsohn]

I shall speak to a couple of amendments that are worth addressing, but I associate myself with the proposals by the noble Lord, Lord Patel, which have a great deal of merit.

In Amendments 495J and 500ZA, we believe we are dealing with a drafting error that currently makes ineligible independent research organisations for financial support as well as a higher education provider. We think that that excludes museums and is probably a drafting mistake, so we would be very grateful to get some clarification from the Minister about whether museums would be incorporated.

One of my sons is a big fan of a TV programme called “The Big Bang Theory”, which is the story of some young people in America who in the main, as is the vogue of the time, are what you would consider to be “geeks”. The episodes start with the name of a scientific principle, theory or experiment, so prior to this debate my son believed that my interest in the Haldane principle was about “The Big Bang Theory” as opposed to the autonomy of research councils.

The Haldane principle is one that everyone holds dear. There has been a great deal of debate about whether a more explicit reference to it should be in the Bill, and I think there is a broad consensus towards that view. I hope the Minister considers the two amendments on that issue. I am not particularly prissy about the drafting but I am sure everyone in the research and science community would be very interested to have it confirmed by the Minister if that were something the Government were keen to do.

[Baroness Brown of Cambridge]

My Lords, I support Amendment 489 from the noble Lord, Lord Patel, and shall speak to Amendments 503A and 505A in my name and that of my noble friend Lord Krebs. Amendment 503A follows on from the comments of the noble Lord, Lord Mendelsohn, about the Haldane principle. At Second Reading many noble Lords, including the noble Baroness, Lady Kennedy, and the noble and learned Lords, Lord Kakkar, Lord Winston and Lord Krebs, urged the Minister of State to be bold and take this opportunity to, as the noble Lord, Lord Mandelson, put it,

“hardwire the arm’s-length, Haldane principle into the Bill”,

or, rather more to my taste, as Lord Waldegrave said more simply,

“let us at least try to put the Haldane principle on the face of the Bill”.—[Official Report, 6/12/16; cols. 624-27.]

In the words of the noble Lord, Lord Willetts, when he was Minister for Universities and Science:

“The Haldane principle means that decisions on individual research proposals are best taken by researchers themselves through peer review … Prioritisation of an individual research council’s spending within its allocation is not a decision for Ministers”.


He said the principle was,

“vital for the protection of academic independence and excellence”.—[Official Report, Commons, 20/12/10; col. 138WS.]

Its presence in the Bill would remove many of the other concerns about the autonomy and operation of the research councils in the new UKRI organisation. Amendment 503A would put a specific reference to the Haldane principle in the Bill in relation to the Secretary of State’s direction to UKRI.

Amendment 505A picks up the important issue of ensuring the continuation of the dual funding model for research. It seeks to assure that the streams of funding for research grants, distributed by the research councils, and for QR, distributed on the basis of the results of the research excellence framework by Research England, could not be redistributed or used for cross-subsidy. It is important that the two funding streams remain distinct and complementary. In addition to the eloquent support from the noble Lords, Lord Kakkar and Lord Kerslake, for the dual funding systems in their Second Reading speeches, Sir Paul Nurse commented in the Nurse review, on which much of this part of the Bill is based, that having QR in addition to research grants was:

“one of the reasons behind the UK’s success in research and these separate funding streams should be preserved”.

These two streams should be evaluated and distributed in separate and complementary ways, as should other funding streams such as HEIF, as we heard earlier.

--- Later in debate ---

Moved by

[Baroness Brown of Cambridge]

490B: Clause 88, page 56, line 18, at end insert—
“( ) In exercising the power under section 87, UKRI and the Research Councils must operate fair, open and transparent competitions for funding.”

[Baroness Brown of Cambridge]

My Lords, Amendment 490B stands in my name and that of my noble friend Lord Krebs.

Both Amendment 490B and the other amendment in the group, Amendment 505D, in the name of the noble Lord, Lord Mendelsohn, seek to ensure that UKRI and the research councils operate “fair, open and transparent” funding and assessment processes. Such processes would ensure that the principle of supporting excellence wherever it is found is maintained, allowing for change and supporting strong competition and new entrants in areas of research—the very focus of much of the Bill. It aligns with the following description by the noble Lord, Lord Willetts, of the Haldane principle:

“Ministers should not decide which individual projects should be funded nor which researchers should receive the money. This has been crucial to the … success of British science ... Overall, excellence is and must remain the driver of funding decisions, and it is only by funding excellent research that the maximum benefits will be secured for the nation”.—[Official Report, Commons, 20/12/10; cols. 138-39WS.]


This amendment is about ensuring that we fund excellence in our university research system wherever it is found. I beg to move.

[Lord Prior of Brampton]

I thank the noble Baroness, Lady Brown, for raising this issue. I also thank the noble Lord, Lord Krebs.

The vast majority of research council grants are allocated through open and rigorous competition between all eligible institutions, which ensures that the principles of fairness and good use of public money are upheld. While I agree with noble Lords about the importance of open competition, the precise mechanism of how this is put into operation is a matter for the current and future independent funding bodies. This is consistent with the important principles of subsidiarity of decision-making and Haldane, which we have committed to defend through this Bill.

Further to this, these amendments would place an undue restriction on UKRI and the research councils by requiring that all their financial support must be allocated through open competition. This is not always suitable. For example, research councils also have an important role in providing core funding to support unique underpinning infrastructure, such as institutes and facilities. While I agree that the majority of council funding should be allocated through open competition, I feel that such a strict requirement is not consistent with the important principles of subsidiarity of decision-making and would hamper other important areas of council activity. I therefore ask the noble Baroness to withdraw the amendment.

--- Later in debate ---

[Baroness Brown of Cambridge]

I thank the Minister for his response and for his commitment to the principle behind the amendment. I also thank him for his earlier strong support for the Haldane principle and for perhaps setting a challenge to the team of determining whether it is possible to encapsulate this in law. In the light of these reassurances and the very strong commitment we have heard today to Haldane, I am happy to beg leave to withdraw the amendment.

Amendment 490B withdrawn.