Queen’s Speech

Baroness Sharp of Guildford Excerpts

Tuesday 10th June 2014 Lords Chamber

[Baroness Sharp of Guildford (LD)]

My Lords, I start with the sentence in the gracious Speech that,

“Legislation will be introduced to help make the United Kingdom the most attractive place to start, finance and grow a business”.

The legislation that will follow is the small business, enterprise and employment Bill.

For a long time, I have had a considerable interest in science-based small firms. As the noble Baroness, Lady Warwick, mentioned, the UK has a very strong science base. We also have a surprisingly strong record in the development of spinout companies from our universities. Our problem has been that, long term, we failed to grow these small spinout companies into the Microsofts and Googles of this world. A particular problem arises in the bridging of the gap between pilot projects and getting a business up and running. I do not very much like the phrase, “bridging the valley of death”. In the days very long ago when I worked at the National Economic Development Office—NEDO—we called it the pre-production development gap and we had a pre-production development scheme to bridge it. It is the same problem. It has been with us for a very long time.

When I was at the University of Sussex, I belonged to a group that called itself the triple helix group. It maintained that successful innovation required three players all interacting with each other: universities linking up with the private sector, but the Government also had an important role. They all played a part in the process. I was therefore very interested in the complementarity between these three players being emphasised again in a recent report issued by the Campaign for Science and Engineering, The Economic Significance of the UK Science Base. That was written by three economists, including the son of the noble Lord, Lord Haskel—who will follow me in this debate. The report shows very clearly that investing in public sector research helps to stimulate private sector expenditures and that the two are very complementary. As Professor Alan Hughes—another of the three authors —puts it, the two,

“should not be seen as substitutes in the drive to enhance the productivity performance of the UK”.

The report suggests that there is a virtuous circle in which an increase in public sector investment in research leads to an increase in private sector research which in turn increases the capacity of the private sector to benefit from and use public sector research, thus amplifying the overall economic benefit to society as a whole.

I have also been quite interested to see that over time the coalition has come to adopt a somewhat similar philosophy towards innovation. There was a time when my friend in the other place, Vince Cable, who led a working party on industrial policy for the Liberal Democrats, advocated the total abolition of what was then the DTI and is now BIS—his own department. Above all, that working party wanted to see the abolition of all policies of industrial support. Yet, over the past four years he and David Willetts, the Minister for Universities and Science, put together what might be described as a new industrial policy built around the exploitation of the science base and the development of new industries associated with new technologies. That followed very much this triple helix model where the Government play an important intermediary role in helping bridge the gap between early and late-stage development. Measures announced in the Queen’s Speech seem to take this one stage further. The Government set up, through the Technology Strategy Board, Catalyst and Catapult centres, influenced by the German and US models. Opening up access to public procurement for small and medium-sized businesses is something the Americans have done for a long time and which the Science and Technology Committee of this House has long urged upon the Government. That is a new, important and very welcome step.

However, I also urge the Government to think further about the implications of the triple helix model of complementarity between Government, universities and the private sector in promoting innovation. In our report last year on regenerative medicine, the Science and Technology Committee examined the role of the cell therapy Catapult centre set up in May 2012 as one of the then seven TSB technology and innovation centres that aim to help businesses adopt, develop and exploit innovative products and technologies. It was described as,

“a new approach to bridging the investment ‘valley of death’”.

The Technology Strategy Board put £200 million into the seven Catapult centres—approximately £30 million into each centre. This contrasted with the $3 billion put into the California Institute for Regenerative Medicine. It is not surprising that one of the report’s main conclusions was that the Technology Strategy Board funding was insufficient and that the Government could not rely upon the private sector and venture capital to fill the gap.

In both Germany and the US, the state or regional level of government plays a substantive role in helping fund applied research, often putting together a package of private and public funding and mobilising local financial intermediaries. This level of funding is largely absent in the UK but the committee suggested that the Technology Strategy Board and the Economic and Social Research Council get together and fund an evaluation of innovative funding models in this and other countries to see if more effective methods could be found. This suggestion was welcomed by both the research council and TSB, and by the Government. That was last autumn. Is it proceeding? I realise that the Minister will not have the information to hand but could he write to me with the answer on what is happening with that suggestion?

I finish by endorsing the remarks of the noble Lord, Lord Aberdare, about the new apprenticeship proposals coming forward from the Government. Like him, I find myself very worried about the sheer complexity of the payment mechanisms, the five different levels of apprenticeship that will be created and the sheer impossibility of small and medium-sized companies handling these new apprenticeship positions. I have just been reading and enjoying the book by Professor Anthony King and Ivor Crewe, The Blunders of Our Governments. It seems that we may be replaying two of those blunders: the individual learning accounts and the tax credit accounts. I recognise that there are currently pilots and trailblazing. I hope very much that we will learn the lessons that can be learnt from them.