Science and Innovation Strategy

Lord Bhattacharyya Excerpts

Monday 23rd October 2017 Lords Chamber

[Lord Bhattacharyya (Lab)]

My Lords, I congratulate the noble Lord, Lord Patel, on securing this vital debate and applaud the Science and Technology Committee for producing an excellent submission to Ministers on innovation’s place in the industrial strategy. I declare my interest as chairman of WMG at the University of Warwick. WMG has a strong record of industry innovation partnerships going back many years. It was set up by the then Prime Minister, Mrs Thatcher. We will be the home of the National Automotive Innovation Centre, which will, in the end, have a funding of just over £1 billion, entirely from the private sector, at a British university. We are delighted to be part of the recently announced Faraday Institution. Getting that sort of funding comes only with delivering impact.

It is very welcome that, for the first time in several decades, “industrial strategy” is no longer an anathema. I remember speaking in the debates here that created the Technology Strategy Board, now Innovate UK. It was a hard slog. The current welcome shift in attitude to industry was spurred on by the Prime Minister’s first speech outside Downing Street. The Business Secretary, Greg Clark, has done an excellent job of focusing the industrial strategy on the pillars of future growth. On top of that, the Engineering and Physical Sciences Research Council’s focus on impact, the Nurse review and the inclusion of Innovate UK within UK Research and Innovation have helped move the agenda forward. I fought very hard to get UKRI and Innovate UK together because I thought that was the best way for us to have technology transfer.

However, as the committee’s letter says, we have had many short-term announcements. We have lacked an integrated, long-term implementation. Creating impact is about using assets well, especially to strengthen partnerships, then monitoring results, tracking outcomes and backing success. For innovation, our most important asset is our science and technology base, as everybody says. As has been said, whether judged on Nobel prizes, citations or any other measures, British science is world-leading. For the past two weeks, I have been in China; everybody there praises British science. For the money we spend, the result we get is world-leading.

The Government cannot be criticised for withdrawing funds. Britain’s science spending has been protected. However, we lack business incentives. As the OECD shows, we are at the lower end of research and development tax incentives. Despite that, as Phil Nelson of the EPSRC has said, at least for patents and licences, our current spending is productive. The big problem is that our scientific excellence has not led to industrial success, whether in products, exports, or employment. Impact has to mean growth and making ourselves technical leaders in the global market. We will not get either without more industrial contribution to innovation. We have one of the lowest rates of business R&D, in both firms and collaborative research. The latest data shows further decline in that investment.

Worryingly, our spending is also limited to very few sectors. Pharmaceuticals, automotive, IT and aerospace do over half of Britain’s business R&D. We need to use our strength in science and technology to encourage business R&D in our strong sectors and expand into new fields. Therefore, the strategy needs to address directly the long-term challenges of real businesses. We have done that in the automotive sector: on connected vehicles, road infrastructure and battery technology, there are innovation partnerships between industry and academia, attracting private investment. As far as the Midlands is concerned, we have the Midlands mayor, who is charged with delivering the impact on funding and who will make sure that happens. Whether it is the Faraday Institution centres for research into batteries, looking at industrial impact—not only now but in the future—everything is being linked for the first time.

One of the keys to that approach is seeking real business investment, in cash, not in kind. The majority of the industrial investments in Britain that are talked about are always in kind. Why do businesses such as Jaguar Land Rover support us in this way? First, they know that their industry is in a state of real flux. They spend more than £3 billion on R&D. Firms are aware they must adjust to new regulatory, legal and consumer demands. That acts as a trigger to invest. Next, they know that there is a long-term commitment and investment from academic researchers to work with them to find solutions that will work in a global marketplace.

We cannot go it alone here, because technology is moving so fast and Britain is a small country. We need to collaborate with innovators all around the world or be left behind. So the final element of a successful strategy must be monitoring economic impact over the long term. We need to measure real job creation, increased productivity and economic growth. We need a focused definition of impact. Otherwise, we will end up with research institutes that do not make a practical difference. I strongly support the committee’s proposal of a body to monitor the industrial strategy. We need a real debate about exactly what should be measured and how we know whether impact has been achieved. If we do not do this, there will be a short-term squabble about where the money should go. Within five years, we will not know which investments have made a real difference.

For British industry to compete, we need businesses to commit to innovation. That is their responsibility. Firms have to choose to invest, but we can, and should, do more to make investing in innovation an attractive proposition.