Queen’s Speech

Baroness Warwick of Undercliffe Excerpts

Tuesday 10th June 2014 Lords Chamber

[Baroness Warwick of Undercliffe (Lab)]

My Lords, it is one of the essential roles of any Government to ensure that the conditions are right not just for economic growth but for economic growth that is sustainable, long-term and provides high-quality jobs for as many as possible. This requires the Government to invest in infrastructure, whether concrete or intangible, because much of that infrastructure would simply not be built if it were not for government investment. Other agents lack either the financial clout or the incentives to ensure that this infrastructure is in place.

The Infrastructure Bill announced by Her Majesty deals in part with one such major project, the second phase of high-speed rail, but as the UK increasingly becomes a knowledge economy, the infrastructure we need is not just rail, bricks and mortar but world-leading research facilities to conduct basic research and conditions to support the conversion of that research into innovative projects and businesses.

I want to talk about the research base but first, in declaring an interest as a non-executive director of the Pension Protection Fund, I want to make a brief comment about pensions and about stable long-term funding. Pension funds and other long-term institutional investors represent a potentially major source of long-term funding for illiquid assets such as infrastructure. Indeed, the Government have supported initiatives such as the Pensions Infrastructure Platform. However, recent OECD survey results show that there is still a low level of investment in infrastructure, which can only mean that there are considerable barriers and disincentives that limit such investments. There is an opportunity with the Infrastructure Bill to remove some of those challenges and I hope that the Government will do so to make Britain a world leader in this area.

The strength of our science and research base has been responsible for so much of our economic success as a country. In a globalised labour market, a research sector that maintains that strength is surely an essential element of an economy that grows sustainably and provides high-quality jobs. It is essential that the Government bolster that research strength, particularly to provide the infrastructure on which it relies: laboratories and other research facilities, which only government funding can support. They must also ensure that the conditions are right for businesses and universities to collaborate effectively so that the research can benefit the economy as a whole.

We start from a position of strength. The UK is one of the world’s top research nations, second only to the USA on most measures. But although we are rated second in terms of output, when ranked on level of investment we fall to 21st in the world. I hope that the Minister took note of the comments of the noble Lord, Lord Bamford, about Germany’s greater investment in R&D, and I congratulate the noble Lord on an inspiring and wonderfully robust maiden speech.

The Government have made a welcome commitment to an increase in capital spending of just over £1 billion per year for each of the next five years. If well directed, it will make an important contribution towards ensuring that we have the research infrastructure necessary for the decades ahead.

The critical matter now is to ensure that it is well directed. On this point, I suggest that the Haldane principle is still a good one: in other words, that the academic community is best placed to make decisions about research priorities and funding. That means that the Government and Ministers should resist the temptation to fund eye-catching announcements of large-scale trophy projects at the expense of ensuring the quality of our broader research infrastructure.

Indeed, investment in large-scale projects should be modelled on the Crick Institute: targeted, strategic initiatives that add value to the research base but do not divert resources away from wider investment. It is essential that government funds are used to ensure that our wider research infrastructure is up to scratch, because although universities have become increasingly adept at working with charities and businesses to fund research, that is often not an option for capital spending. Quite reasonably, most charities or businesses want to ensure that they get as much for their money as possible. They want to be sure that it is not being spent on merely maintaining the research infrastructure but is directly contributing to research that otherwise would not occur.

The higher education innovation fund, or HEIF, supports universities in working with businesses—in particular, SMEs. That funding leverages additional resources. The Government have recognised that for every pound spent via HEIF, about £6.30 is generated in total. Just as importantly, businesses benefit from their knowledge exchange activities with universities as a result of that funding. That facilitates the development of exactly the kind of innovative products and businesses that will help the UK to compete in future.

The Minister kindly wrote to me when I last talked about HEIF in this House, but only to communicate the decision that HEIF funding would not be increased—despite recommendations in Andrew Witty’s report that the Government should do exactly that. That is short-sighted, and I hope that it will be reconsidered. Whether that happens or not, there is an urgent need for a commitment to the long-term security of the hypothecated HEIF funding stream for, say, at least three to four years, so that universities do not now need to dismantle the infrastructure that they have built, which has delivered substantial economic benefit. I urge the Government to give that commitment today.

Universities are a major UK industry in their own right, directly and indirectly providing employment for more than 600,000 people. Much of that employment relies on the fact that international students can study at our universities. With the public concerned about the level of immigration and its effects on the country, fuelled by UKIP’s rhetoric, it is understandable that the Government are looking at ways of addressing it.

However, let us remember that the largest group of those entering the UK—and also the largest group leaving again—are the students who have come to study at our universities and colleges and, in doing so, support a world-leading export industry. Not only are international students a particularly attractive category of migrant in economic, social and cultural terms, they are also a category of migrant that the public is not generally concerned or alarmed about.

The Prime Minister has a particular responsibility to speak up much more forcefully and show that the UK welcomes well qualified students. The continued ability of our universities to recruit international students, with all the benefits that they bring, must not be sacrificed in an attempt to satisfy a public concern that, in the case of student migrants, does not exist. I therefore hope that the Government will relent, after all the arguments in your Lordships’ House, and at least remove students from the net migration target.

Finally, on the new pensions proposals, I echo the words of so many other commentators and Members of this House: without access to good advice, there can be a real risk of mis-selling or some of the other mistakes of the past being repeated. I welcome innovation to improve pensions outcomes. I am aware that the Minister has been looking at models in the Netherlands and Denmark. Scheme members will need a clear insight into what they are signing up to and, specifically, what guarantees and protections they can expect at the end of their working life. When considering what kind of protection regime is suitable for this new structure, I urge the Government to discuss it not only with the industry but with all those concerned, including the PPF and the Pensions Regulator.