Treasury Support for UK Science

Andrew Smith Excerpts

Wednesday 4th November 2015 Westminster Hall

[Angela Smith (Penistone and Stocksbridge) (Lab)]

I beg to move,

That this House has considered the role of the Treasury in supporting UK science.

First of all, let me say that it is a real pleasure to serve under your chairmanship, Mr McCabe.

I start my speech today with the simple assertion that science is a critical part of our everyday lives. It is important not only because it explains the world we live in—the world we see, hear and feel every day, which we all take for granted—but because it also makes the world of tomorrow. It shapes the future in a way that fascinates most people, and it does so with breathtaking speed. Who knows what will be possible in the future? Without science, our world would be a very different place and many of the things that we take for granted would not exist. We live longer, thanks to science; we live better lives, thanks to science; and we live broader and more expansive lives, thanks to science.

The UK, for its part, has always punched above its weight in science and innovation. Our laboratories, universities, research councils and innovation bodies are world-leading. To exemplify this point, I will refer to the startling statistic that although the UK’s population equates to just 0.9% of the global population, we account for 15.9% of the world’s most highly cited scientific research articles; since the start of the 20th century we have had 78 Nobel prize-winners, 12 of them since 2004.

We are first in the world for the impact of our science. We have built a strong record of converting science-driven discovery into economic gain, with the UK now ranked second in the world for innovation, and for every £1 invested in public research and development, there is a boost of between 20p and 30p per annum in perpetuity. The UK knowledge economy sustains a third of our businesses, with wage rates 40% higher than the average wage in the field. To be fair to previous Governments, investment in science and innovation has delivered impact in many of the areas identified as priorities, such as promoting innovation, growth and—very importantly—improvement in public services.

Maintaining our leading position in science is increasingly difficult, though, thanks to an increasingly competitive global marketplace. With countries such as India, China, and South Korea increasingly competing in the technology stakes, it is becoming clear that we need not only to maintain our research base, but to grow it. To do that, we need a commitment from Government to invest in science. It is time to take stock, to remind ourselves just how important science is to our economy, and to assess how seriously we may be damaged if we fail to support our scientific research base with adequate public funding. In my view, the most persuasive way of making the case for the importance of science to the economy is to seek a simple answer to a simple question—what has science ever done for us?

For a start, let us look at one of the major contributions made by my home city, Sheffield, which of course is where stainless steel was invented, just over a hundred years ago. Stainless steel is a technology that literally changed the world, to the extent that we do not even realise now how widely it is applied in the technologies that we all enjoy. Let not us forget either that Sheffield is also the home of Ronseal, which not only does what it says on the tin, but plays a leading role in developing environmentally friendly coatings for use in the home. Sheffield leads the way even now, with two fine research universities and its Advanced Manufacturing Research Centre, the original model for the country’s catapult initiatives. In joint ventures between Sheffield University and companies such as Rolls-Royce and Boeing, cutting-edge materials are being developed for the aerospace industry, such as the use of carbon fibre blades for the next generation of aerospace engines and lightweight aeroplane bodies.

In the chemicals field, the UK leads the way. Chemical and pharmaceutical products are our largest manufacturing export, with the chemicals sector alone enjoying an annual turnover of £60 billion. It sustains some half a million jobs throughout the country—well paid, for the most part—and finds solutions that make life better and more secure for all of us. Let us bear in mind that penicillin is a British discovery that has transformed medicine, saving countless lives. Today, the pharmaceutical industry employs 68,000 people in the UK, with 23,000 of them employed in highly skilled R and D roles.

The work goes on. British scientists from across the spectrum work on projects that impact on every aspect of our lives, helping us to meet the challenges of today—not just the obvious challenges, such as using agri-tech research to help to feed a growing world population or how to use modern science to develop the technologies we need if we are achieve a truly low-carbon economy, but other challenges that are none the less important. For instance, researchers at the University of Leicester have developed new technology that reveals previously undetectable fingerprints on metal objects; the method has been used in more than 100 criminal cases so far and is enabling the reopening of closed cold cases. Also, research into the structure of graphite is extending the lifetime of the UK’s nuclear reactors, resulting in an effective saving of £40 million to date and helping not only to keep the lights on but to reduce the country’s carbon footprint.

As we can see, science is all around us. It gives us hope for the future, for our health, for our security, for our living standards and for the sustainability of our living standards. We are good at science here in the UK—after all, we are the country where Newton discovered gravity and Faraday made early advances in harnessing the power of electricity, fundamental advances that revolutionised our understanding of the world.

Science has done a great deal for humanity and it is precisely because it fulfils such an important role in changing lives that it is also vital to our economy, particularly if we are to maintain and grow our economy and our knowledge base. A modern knowledge economy has to be underpinned by science. For example, my constituency is home to Tata’s Speciality Steels, which works at the top end of high-value steelmaking. Tata knows that it has to stay ahead of the game with its research if it is to survive the challenges presented by developing economies such as China. It almost goes without saying that if steel is one of our foundation industries—I think it is commonly accepted that it is—science is one of the vital foundations of steelmaking itself.

Our position on science has been strong. The UK has enjoyed a powerful public research base, creative innovation mechanisms and a supply of highly skilled workers, who help to drive up our productivity and further develop our knowledge economy. Our position on science has encouraged inward investment. The UK is the largest recipient in Europe of such funding, despite the squeeze on public investment and the long-term neglect of our science capability. However, this rather unbalanced approach to investment cannot continue without damaging both the UK’s reputation and our economy. Government investment in R and D acts as a powerful magnet for industry investment, both domestic and foreign, and the announcement in the comprehensive spending review of any more cuts would risk damaging our overall funding profile even more.

[Mr Andrew Smith (Oxford East) (Lab)]

I am sorry that I missed the very beginning of my hon. Friend’s excellent speech. On her last point, does she agree with me that it would be a great mistake if the tax credit grant element of research help to industry was converted into loans, which has been mooted in some quarters and which businesses that carry out a lot of R and D are very worried about?

[Angela Smith]

I agree entirely with my right hon. Friend that any fiscal levers designed to improve the research profile of UK science should be maintained.

It is worth mentioning that according to a study by the Department for Business, Innovation and Skills, every £1 of public investment secures an increase of between £1.13 and £1.60 in private funding. The importance of public funding for science is underlined by comparisons with our international competitors. The comparisons are not flattering—indeed, since the mid-1980s, our investment in science and innovation has fallen behind, leaving us sixth in the G7 for overall spending and last overall for public investment alone. South Korea enjoys public and private investment in science equivalent to 3.6% of GDP—no wonder it looks likely that South Korea, rather than Forgemasters in Sheffield, will be making the pressure vessels for our nuclear power stations—and in Germany and the USA, the figure is 2.8%. Here in the UK, the figure stands at just 1.7%.

We have punched above our weight, but it is clear that that cannot continue. Comparatively low levels of investment in research and development risk losing any competitive advantage we have over other innovation leaders who are investing more. As we all know, our economic productivity has already fallen by at least 15% from a pre-financial crisis position of steady growth. International studies demonstrate impressive and positive impacts on productivity from increased scientific research and development profiles, and it is clear that our 1.7% GDP investment rate is causing problems.

I acknowledge, of course, that the Government ring-fenced funding during the last Parliament and that that decision helped to keep safe £1.2 billion of private sector investment, but it is also true that the cash limit on research and development represented a real-terms cut of around £l billion. Although that decrease has been weathered in the short-term, if extended, it risks serious damage not just to our science base, but to the economy itself. If this Government and this Chancellor are serious about rebalancing the economy and closing the productivity gap—as a northern MP, I include the northern powerhouse in that—we need to see robust and secure funding plans for science put in place. How can we hope to become, as the Chancellor wants, the highly skilled, highly advanced economy with a healthy export profile and a healthy balance of payments if we allow our science base to slide further down the international league tables?

As we come to the all-important comprehensive spending review, we need to see the Chancellor’s warm words matched with a commitment in the review to tackling the underfunding of science in our economy.

--- Later in debate ---

[Daniel Zeichner (Cambridge) (Lab)]

I congratulate my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) on securing this important debate and on her excellent speech.

Supporting UK science should absolutely be a priority in this Parliament and beyond, and I hope the Chancellor will take heed of the points made here today. As Members will appreciate—they have probably heard me say this before—Cambridge is a leader for science in the UK.

[Mr Andrew Smith]

Along with Oxford.

[Daniel Zeichner]

Along with Oxford, of course.

Cambridge is a buzzing hub of research labs, biotech companies and innovation centres, and science is fundamental to both our economy and our collective identity. Nearly 60,000 people are employed in the Cambridge cluster alone. It is thought by some that Cambridge and its leading scientific reputation are untouchable. That is not the case. We must not take our assets for granted. Only with careful future planning and sustained, stable economic investment can Cambridge continue to function as a centre for scientific excellence, attracting investment and expertise from around the globe.

I want to see Cambridge’s scientific stature secured, but I also want to see the knowledge economy increasing across the entire country, ensuring that the UK remains a leader for science on the world stage. This is not a zero-sum game. Cambridge doing well will help other parts of the country. Cambridge going backwards causes the whole country damage. A genuine long-term strategy for science is vital if we want to promote innovation and increase productivity in our country. The Chancellor says that that is what he wants, but the wrong decisions over the next few weeks risk sending us in the wrong direction.

The Government and their cheerleaders helpfully remind us about the long-term economic plan—I see that some Government Members recognise that phrase—but we need that to be a reality rather than a soundbite. The truth is that in the previous Parliament we actually saw a substantial real-terms cut in science funding. The Campaign for Science and Engineering has shown that the resource budget accumulated a real-terms shortfall of £1 billion during the previous Parliament. Data from the OECD suggest that our country’s investment in research and development has been on a downward trajectory for the past few years and is well below the EU average of 0.64%. As Universities UK tells us, the UK comes 27th in the EU27 and eighth in the G8 in total science and research investment as a proportion of GDP.

The argument is familiar. The Minister has told us before that we still do well and that we punch above our weight, but as the hon. Member for Oxford West and Abingdon (Nicola Blackwood), the Chair of the Select Committee on Science and Technology, has pointed out on more than one occasion, it may be that we do well because of funding from the past. We cannot assume that with lower levels of public support we can continue to be competitive when other countries are upping their game.

Let me raise one specific worry. Many are talking about it, but I was struck by a representation from a biotech company in my constituency, Discuva. It develops new antibiotics to combat antimicrobial resistance and recently won an innovation award from Innovate UK. Indeed, I believe the award was presented here by the Minister. Discuva received a biomedical catalyst grant in 2012, which helped grow its business enormously, giving it the necessary risk capital to take chances and ultimately sign the world’s largest preclinical antibiotic drug discovery deal with a major pharmaceutical company. Its products will feed into the UK healthcare system, saving lives, reducing the healthcare burden and consequently increasing GDP.

I am sure we will all champion such businesses, but Discuva is just one of many that have expressed alarm over the suggestion that the Treasury is considering swapping research grants for loans. It tells me that this would be disastrous for companies in its sector. It argues that a significant loan on the books of many small to medium-sized high-tech companies would make them technically insolvent and affect relationships with potential investors, presenting a major business obstacle. I hope the Minister can assure us today that those suggestions are just speculative rumour in the wider rumour mill, and that those important grants will not be converted into loans.

I conclude by reminding Members that the Treasury has repeatedly said that it will prioritise spending in areas that drive productivity and growth. Well, 51% of UK productivity growth between 2000 and 2008 was due to innovation, with 32% being attributable to changes in technology resulting from science and innovation. That tells us that we need to see greater investment in mechanisms that support innovation—more, not less.

I have a suspicion that the Minister is largely persuaded by the strengths of the argument, but for reasons we all understand he will possibly have to be circumspect in his reply today. Those of us battling for science and innovation wish him well in his battles over the next few weeks. Funding for a secure, long-term, successful science and innovation sector is vital for the future prosperity of our whole country, and it must not be sacrificed for a short-term political fix. It is important that the Minister is successful and that the dead hand of the Treasury does not win out yet again.