EU Report: Effectiveness of EU Research and Innovation Proposals

Baroness Warwick of Undercliffe Excerpts

Thursday 21st November 2013 Lords Chamber

[Baroness Warwick of Undercliffe (Lab)]

My Lords, I am grateful to the noble Lord, Lord Kakkar, for securing this timely debate and congratulate him and the EU Committee on a trenchant and thorough report. I certainly look forward to debating in this House any reports that he makes to us in his new role as an ambassador for healthcare and life sciences.

There are others to congratulate as well, notably the Minister, Universities UK and the UK Higher Education International Unit, as well as other bodies which have been involved in the long-running lobbying campaign to secure a good outcome for research, innovation and higher education in the EU budget negotiations, which were concluded on Tuesday. Although the final figure is less than the €80 billion originally proposed by the Commission, about which the EU Committee is rightly disappointed, it is none the less excellent news for the UK that the budget for research and innovation has been protected in the context of the first overall reduction in the EU budget. However, I have a caveat to that praise in relation to the arts and humanities, to which I will return, as I will be urging the Minister to take further action.

The quality, breadth and depth of research in the UK enable it to secure a disproportionately large quantity of EU research funding, as others have said. Research and innovation is one of the areas where UK interests are most closely aligned with opportunities offered by the EU. The more that the EU invests in research and innovation, the more the UK benefits from EU membership. However, the decision to protect the innovation and research budget in a climate of cuts is also excellent news for Europe. Evidence suggests that each extra 1% invested in public R&D in Europe generates an extra 0.17% in productivity growth. The European Commission has estimated that the current framework programme for research and innovation will create 900,000 additional jobs, and growth in GDP of nearly 1%—growth which equals the total expenditure of all other EU budget lines combined.

In short, the European Union has made the right choice to protect investment for growth. We in the UK will benefit enormously from that decision. So far, under FP7, the UK has received more than 15% of all funding. Only Germany has received more. We are certainly the most successful country by far in applications for European Research Council and Marie Curie research funding. I want to quote one exemplar: UCL. I declare an interest as a council member. UCL is a lead player in EU-funded research and is consistently ranked in the top four HEIs in Europe. It has more than 600 FP7 projects with a total cumulative budget in excess of €300 million. ERC research funding, arguably the most prestigious in Europe, represents half UCL’s research income, which clearly demonstrates excellence across all areas of activity. UCL is the lead HEI in Europe in health-funded research.

The report that we are debating today rightly points out the importance of prioritising excellence. There has been substantial pressure to distribute research funding on other criteria. In my view, it would have been wrong to distribute research funding merely on the basis of geographical factors. Not only would it be unfair, but it would have diluted the economic impact of this investment. The fact that the funding for excellence pillar of the Horizon 2020 budget has been increased is also good news. Further, EU-funded research and innovation enables stakeholders to engage in international collaboration on a global scale. This has positive impacts in Europe and the UK by building a critical mass of knowledge and adds significant value given the global nature of the research environment and the common global societal changes we are all facing.

I now come to my caveat: the arts and humanities. Only last week, the foreign secretary of the British Academy and the president of the All European Academies wrote to the Commissioner for Research, Innovation and Science expressing deep concern that the social sciences and humanities were being marginalised in the development of the Horizon 2020 programme. The amount proposed for SSH research provides considerably less funding than has been available under FP7. The draft work programme foresees bids of between €1.5 million and €2.5 million, which means, on average, roughly four to five successful projects per call across the entire European Union. This is nonsensical. It is bound to have an impact on those bidding, when the chances of success are so small. The presidents are concerned, as well, that there are no structures which embed interdisciplinary work, and I know that the vice-chancellor of Cambridge is raising these issues as we speak with DG Research in Brussels. Will the Minister undertake urgently to talk to the British Academy to understand its concerns so that his department can intervene with the European Commission, should it prove necessary, in order to reassure the social sciences and humanities research community that it will, indeed, be able to contribute to a successful Horizon 2020?

Meanwhile, a new element of the research budget will be targeted at widening participation in research programmes and spreading excellence. It will receive about 1% of funding from the Horizon 2020 budget and will encourage partnerships between strong research institutions and those in new member states through new twinning and teaming initiatives. This will be complemented by much larger structural funds, the receipt of which is now linked to a national innovation strategy being in place.

Although the outcome of the budget negotiations in general is, in my view, good news for the UK and Europe, we cannot afford to be complacent. As the EU Committee points out, if we are to compete with emerging economies, we will have to spend a still higher proportion of GDP on research and innovation. Europe has failed to make significant progress towards meeting the Lisbon goal of investing 3% of GDP in research and development. The EU average is just 2%, while the OECD average is higher at about 2.6%. The UK lags behind, spending less than 1.8% of GDP on R&D. The previous Government had a target to increase this to 2%, but we have made frustratingly slow progress towards that figure.

Meanwhile, as other noble Lords have emphasised, emerging economies such as China and South Korea are increasing investment rapidly and seeing results in improving performance in patent and citation indices. What has happened to that target? What plans do the Government have to raise our game? Does the Minister accept that it would be dangerously complacent for us to assume that we can continue to outperform faster-developing economies when we have much lower levels of investment? As the noble Lord, Lord Hannay, has pointed out elsewhere, the UK has a fantastically efficient research system, more so than the US, as measured by the number of citations for each unit spent. However, it is not at all clear that we can continue to maintain that advantage in the long term.

Finally, the committee is right to identify private sector involvement in R&D as a priority. The UK has an inglorious history of decline on this score. Universities do much to stimulate investment through partnerships with industry, but if we are to maintain our position as a leading economy we need a long-term strategy to address this issue, including by encouraging private firms to participate in European funding projects.

I conclude by asking the Minister to tell the House what plans the Government have to support business, particularly SMEs, to help them take advantage of the opportunities that Europe so clearly presents.

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[Lord Ahmad of Wimbledon (Con)]

My Lords, it has been a stimulating debate. We have travelled far and wide—to Kuala Lumpur, Singapore and China—and I will cover most if not all of the questions in my response. Before I go further, it would be remiss of me if I did not pay tribute to the excellent introduction to this debate provided by the noble Lord, Lord Kakkar, and congratulate him on his recent appointment as UK business ambassador for health and life sciences—which, again, underlines and illustrates what we hope is the continuing promotion of British and European interests abroad. It is also appropriate for me to pay tribute to the chairmanship of my noble friend Lady O’Cathain. What I am sure would have been her forthright and robust contributions to today’s debate have been missed. I am also always mindful of the fact that while our debates on Europe may take place under various watchful eyes, they are under the watchful eye, too, of the chairman of the EU Committee, the noble Lord, Lord Boswell, who remains my noble friend. I join other noble Lords in thanking the members of the committee for their excellent report and the comprehensive way in which they have dealt with a variety of issues which I shall seek to address.

The report examined in great detail the issues surrounding the EU’s major funding programmes for research, development and innovation and made a number of important recommendations. As several noble Lords have pointed out, the Government have responded and we have had various exchanges in this regard.

The report is aimed at ensuring that these programmes, which will be responsible for spending some €70 billion over the next seven years, from 2014 to 2020, are as effective as they can be. Many of the recommendations were addressed to the European Commission and, like all noble Lords who have spoken today, the Government look forward to seeing its response in the near future.

On the UK’s track record of participation in EU research programmes, one point which emerged clearly from the report was the major opportunity that the EU’s existing and future funding programmes have offered, and will continue to offer, to UK researchers and research institutions. The UK is already a very strong player in the EU’s current framework programme, FP7. It receives, as several noble Lords, including the noble Lord, Lord Haskel, pointed out, 15.4% of the total funding available, which puts us second only to Germany among our European partners. The UK also participates in more successful projects than any other country: 41.2 % of all grant agreements in FP7 to date include at least one UK partner. Research-intensive UK universities have been particularly successful in this regard and are actively engaged in Europe. Several universities—Birmingham, for instance—have Brussels offices and now derive a substantial proportion of their external research income from EU sources. The value of presence on the ground was a point made by several noble Lords and our universities are certainly taking this forward.

The noble Lord, Lord Kakkar, in his excellent contribution, stressed the importance of the assessment of programmes and their delivery. In this regard, I want to highlight to your Lordships’ House several notable success stories. For example, the Nobel prize-winning work undertaken at Manchester on graphene, an ultra-thin, ultra-light and superconductive material with potential uses ranging from energy storage and high-speed computing to improved tennis racquets, was partly EU-funded. Jaguar and Rolls-Royce are collaborating with Queen Mary College and innovative UK SMEs in a project aimed at turning waste heat from engine exhaust gases into electricity, meaning reduced carbon dioxide emissions and better fuel consumption. ARM Ltd has successfully participated in a series of EU research projects which have helped underpin its global leadership in providing microchip designs for a broad range of digital technologies. I say to my noble friend Lord Maclennan that the Jaguar and Rolls-Royce example underlines issues and challenges that we are looking at in terms of environment.

On the quality of the UK research base, the UK does well because of the excellence of the research conducted here. An indicator of this strength is provided by the distribution of grants by the European Research Council, which funds groundbreaking research on the basis of Europe-wide peer review. Among all the ERC grant-holders, the UK ranks well ahead of both Germany and France. This quality provides a firm basis on which to build even stronger engagement in the future. I agree wholeheartedly with the praise of the noble Lord, Lord Haskel, for the European Research Council, which plays an important role in all these EU research programmes, and from which, as I have already illustrated, the UK has done well.

The noble Lord, Lord Kakkar, and others referred to Horizon 2020. The process of negotiating the new seven-year Horizon 2020 programme has been long and complex but the political agreement that was reached between the Council and the European Parliament represents, in the Government’s view, a good deal for Britain. It retains the primacy of excellence as the factor for deciding who receives funding. I know that we have discussed this issue but I assure my noble friend Lord Jenkin that excellence is the key determining factor in this regard. The programme is structured round a limited number of key societal challenges such as health, climate change and energy security. It also provides a range of support right along the innovation chain, from blue sky research through to large-scale demonstrators of new technologies. It seeks to embed and mainstream the insights from research in the social sciences and the arts and humanities—I know that was a concern of the noble Baroness, Lady Warwick—another area of UK strength across the programme, as she rightly pointed out. It will allocate increased levels of dedicated funding to innovative small and medium-sized enterprises. I agree with the important point that the noble Lord, Lord Haskel, raised about applying a much broader interpretation of research and innovation. Horizon 2020 will make provision for other areas of support and for new business models.

The noble Lord, Lord Kakkar, and others referred to red tape. One of the key challenges and issues for the implementation of the programme remains that of reducing red tape and administrative overheads. We should not look at this just in a European context. As someone who spent many years in the private sector before joining your Lordships’ House—indeed, during my time on the Conservative Back Benches I continued in business—I know that red tape is not just an issue that government must tackle but one with which many businesses across the board have to grapple. The rules that set the conditions for participation in the Horizon 2020 programme contain welcome simplifications, which is something for which we have pushed. The Government will monitor in particular the European Commission’s performance in delivering on its commitment to reduce the time taken over funding decisions by 100 days. My noble friend Lord Liverpool pointed out that it is all very well securing the funding but asked what is the point of bidding for it if, by the time it arrives, the business has closed. That is a very important point on which to reflect.

As regards Horizon 2020 funding, within a smaller overall multiannual financial framework for 2014-20, spending on research and innovation is one of the few areas to increase. This is in recognition of the potential for spending in this area to contribute to sustainable growth and jobs and add real value to the investments made at national level: a point underlined at the European Council meeting last month.

I turn to business participation. As several noble Lords have pointed out, in looking at UK participation in EU funding programmes, I have thus far focused on the performance of our UK universities. I am aware that UK business participation in the framework programme has not always been as strong as we would have liked. There are several reasons for this. I have already referred to the levels of bureaucracy and red tape associated with EU funding. I assure all noble Lords that we shall work with the Commission to address this in Horizon 2020. Indeed, the committee’s report specifically highlighted this as a major concern.

The Government also need to enhance their support to potential participants. The Department for Business, Innovation and Skills and the Technology Strategy Board have therefore been working on the implementation of new national support services for Horizon 2020. A new TSB-hosted website and helpline service will be ready in time for the launch of the first competitions for grants in December. I turn to some specific questions in this regard. The noble Lord, Lord Kakkar, referred to the key role of SMEs. The Technology Strategy Board has a key role to play through the national contact points system in prompting opportunities for SMEs. It is welcome that funding will be allocated on the basis of excellence, as I have already mentioned. For the first time, individual SMEs will be able to receive funding, so they will no longer be required to find out about partner organisations. This, we feel, should help participation and make it easier for SMEs to participate themselves.

The noble Lord, Lord Young, also raised the issue of the national contact points. Full-time employees of the Technology Strategy Board will be better integrated with the technology innovation structures, the knowledge transfer network and the Enterprise Europe Network to provide a better co-ordinated service. He also raised the important point about the role of local enterprise partnerships. The TSB is in the process of developing relationships with the LEPs, including a focus on their innovation agenda. This includes drawing attention to the opportunities available for EU funding, notably via the structural funds.

The TSB’s recruitment of the new Horizon 2020 national contact points is under way. The TSB is also actively looking to establish a presence in Brussels early in 2014 that will further help to improve the support it provides in increasing business access to Horizon 2020 programmes. Furthermore, we are working to strengthen communications strategies to ensure that information about Horizon 2020 and the opportunities which it offers is available to all those who might have an interest in participating. I fully take on board the important point made by several noble Lords about having presence on the ground. Again, I underline the Government’s commitment to encouraging that. When I was discussing this debate with officials, I raised the obvious point that while it is all very well having the funding, if you do not know about it then it is a difficult chore. Therefore, the communication strategy that the Government are seeking to put behind this will, we hope, also encourage wider and greater participation, especially at the SME level.

Several noble Lords also mentioned the barriers to innovation. It is essential that European funding programmes for research and innovation foster the emergence of new industry sectors and jobs. The committee’s excellent report rightly drew attention to issues that affect the exploitation of the outputs and outcomes of the projects funded. One such was the EU regulatory environment. For instance, there is little point in working on disruptive technologies if the regulatory framework or regime favours existing technologies. More generally, there are concerns about EU regulations or differences of approach between EU countries which make it excessively difficult, at times, for business to bring innovative products to the market. The noble Lord, Lord Haskel, spoke about the importance of the demand side in innovation, particularly in public procurement. I am glad to report that Horizon 2020 will in fact introduce a new SME instrument aimed at pulling innovations through into the market place.

I turn to promoting innovation-friendly regulation. My right honourable friend the Minister for Universities and Science has been actively promoting a more innovation-friendly regulatory environment in Europe, working with key partner countries. We are now seeking to build on this momentum and to provide and promote a greater role and higher profile for scientific advice in policy and decision-making, drawing on the expertise of the chief scientific adviser to the EU and the Commission’s in-house joint research centre.

We have heard a lot about what some noble Lords suggested was the diminishing influence of Britain in Europe. I do not agree with that point. As the noble Lord, Lord Hunt, pointed out, it is notable that the Commission’s chief scientific adviser, Professor Anne Glover, is indeed British. I use that word deliberately. She may be Scottish but she is British as well, and long may that be the case.

The noble Lords, Lord Brooke and Lord Hunt, raised the issue of representation on the ground in the EU. I must point out that in this policy area, notwithstanding how many British representatives we have at the moment, one of the important things to realise about Europe is that while officials there are of course promoting national interests, there are also the wider interests of Europe. We certainly take the view that we must establish good working relationships with all Commission officials. The only thing I would point out in support of this point, which was also well made by my noble friend Lord Maclennan, is that the success of our relationship is perhaps underlined by the fact that Her Majesty’s Government have secured many of our key negotiating objectives within Horizon 2020.

I shall deal with a small point as an aside. The noble Lord, Lord Brooke, and my noble friend Lord Liverpool raised the issue of the actual funding amount. Because this was preset, the actual funding remains and is then adjusted, so the figure of €79 billion that we are hearing being quoted has been adjusted for inflation. It is important to point out that distinction.

I turn to the launch of Horizon 2020. The package is now largely agreed and waiting for formal adoption at the end of this year. Officials are working closely on this point. Indeed, in a “hot off the press” moment, I was informed as I was coming in to the debate that only this morning the European Parliament agreed in its plenary session in favour of the Horizon 2020 package. This will now pass to the Council of Ministers and we are currently awaiting the date of that meeting. We will continue to work with all UK stakeholders and our partner countries in preparing the ground for the formal launch of the programme, drawing up work programmes, for instance, and engaging with potential participants to ensure that they are fully aware of the opportunities on offer. A series of promotional events is planned, with BIS holding a formal high-level launch event for Horizon 2020 on 31 January next year. I am of course happy to share the details of the programme as it is agreed.

I shall touch on a few other questions that were raised. The issue of impact assessments was mentioned. As I said, excellence will remain a key part of this. My noble friend Lord Liverpool raised a concern over duplication of the European Parliament’s role as well as the role of the European Commission. That is something that we have taken up and we are assured that, rather than duplicate this, the role will be perceived as being complementary in nature.

I have great respect for my noble friend Lord Jenkin and 99% of the time I find myself agreeing with him on the matters that he raises. He referred to the political criteria currently being used and asked why certain issues have to be raised again. One of the things that I grew up with in personal, business and indeed political life was that if you believe in a particular point, if you believe in something such as the importance of excellence and the importance of reiterating a point, and you wish to provide some constructive input to your friends, you keep reminding them of it. However, for many years applications have been assessed on the basis of an independent peer review. The principle is now fully accepted and written into the Horizon 2020 legislation. As I have already said, the principle of excellence is manifest in the European Research Council, which is widely acknowledged and which supports world-class research.

My noble friend Lord Maclennan raised an important point about the EU research and innovation programme and the importance of participating and perhaps broadening it more internationally—I agree with him on this point—where there is mutual benefit to be had. Again, this will be an important feature of Horizon 2020. My noble friend also asked various questions about the committee’s reply to my right honourable friend David Willetts’s letter of 19 July. The TSB is actively looking to establish a Brussels presence, as I have already said. The issue of British nationals in the DG was raised. Up to 59 currently work in the research directorate-general. The noble Baroness, Lady Warwick, raised concerns about humanities, which I hope I have addressed and reassured her about. There were a couple of other small questions which, if I may in the interests of time, I shall write to noble Lords about.

[Baroness Warwick of Undercliffe]

Before the noble Lord reaches his peroration, I wonder whether he could address a specific point. Because of the urgency of the position with regard to the arts and humanities, will he undertake to talk to the British Academy about its concerns?

[Lord Ahmad of Wimbledon]

I assure the noble Baroness that that is already happening: officials are talking on the exact point that she has raised. I do not think that it is happening in real time but I assure her that an ongoing conversation is taking place.

The noble Lord, Lord Hunt, raised various issues concerning China and the representations made there. My right honourable friend the Prime Minister is visiting China. Through UKTI, we have an established presence in China—in both Beijing and Shanghai—and we continue to promote not only UK interests but European interests as well.

The noble Lord, Lord Hunt, also suggested that I could perhaps use my influences in relation to the Prime Minister’s travel plans. I can only share my experience as someone whose in-laws are in Australia. When I go there, I try to book the A380 simply because it is an easier way to travel, and I shall certainly seek to share my experiences on that front.

Both the noble Lords, Lord Brooke and Lord Hunt, asked whether the Government are committed to research and innovation and whether we believe in it. I can do no better than pay tribute to my right honourable friend David Willetts, the Minister for Universities and Science. The noble Lord, Lord Hunt, said that he has not been mentioning the EU much, but perhaps I may give a direct quotation. He said:

“Driving research and innovation in the EU is central to putting our economies back on the road to a sustainable and competitive future … This is one of the areas where we can benefit the most from constructive engagement with our European counterparts. Some of the most exciting and innovative research projects have been the fruits of greater cross-boundary cooperation and mobility”.