Economy: Growth

Baroness Warwick of Undercliffe Excerpts

Thursday 31st March 2011 Lords Chamber

[Baroness Warwick of Undercliffe]

My Lords, I am delighted to be able to contribute to this debate, in which we have enjoyed some marvellous maiden speeches. I congratulate my noble friend Lord Hollick on securing this opportunity to follow up last week's wide-ranging and illuminating debate on rebalancing the economy.

I strongly believe that a strategy for economic recovery must prioritise our strengths in innovation and high-level skills. High-level skills are the currency of today's knowledge economy, and I want to concentrate my remarks on the critical role played by the UK's higher education sector in providing and developing those skills. This is a subject on which I have spoken previously in this House and elsewhere, and which I explored on many occasions during my time as chief executive of Universities UK.

Higher education has been called a global powerhouse for knowledge economies. That is certainly the case in the UK. Our universities and higher education colleges have an unparalleled record in fostering innovation, enterprise and skills and in helping to create wealth and job opportunities. I know our Government understand this. Indeed, the coalition Government acknowledge that universities are essential for building a strong and innovative economy. This reflects a widespread political recognition of the importance of higher education to the UK achieved over the past decade and the unprecedented political and financial commitment given to this highly successful sector by the previous Government. This was achieved in part because the universities themselves were able to produce the evidence to convince government that higher education was a worthwhile investment, not a cost.

As we consider a growth strategy and await the higher education White Paper, I urge the Government not to lose sight of this essential point: if we are not to fall behind competitor nations, many of which are investing heavily in universities, we cannot afford to row back on our investment in knowledge and knowledge transfer. Despite the years of additional investment, we still spend less on higher education than the OECD average. Meanwhile China and India are already turning out more engineers and more university graduates than the whole of Europe and American combined. Of course the public funding climate has changed. Universities understand that they have to shoulder their share of the cuts, so last week’s Budget’s encouragement to our research base in the form of changes to R&D tax credits and an additional £100 million in capital expenditure for science was very welcome. The spending review also gave some protection to the science budget in cash terms. However, these chinks of light should not blind us to the scale of the cuts being applied to higher education. Universities are by their very nature long-term organisations. World-class research, the creation of new ideas, products and industries and the development of a highly skilled workforce are all long-term benefits. Like other noble Lords, I refer to the OECD 2010 innovation report which concluded that Governments must continue to invest in future sources of growth, such as education, infrastructure and research. Cutting back public investment in support of innovation may provide short-term fiscal relief but will damage the foundations of long-term growth.

I wish to make two further short points about how we can best nurture our high-level skills. We must continue to support ways of transforming research into innovation, build stronger links between the UK’s science and research base and industry, create more spin-out companies and attract overseas investment to the UK. We must provide an environment in which international collaboration can flourish. That means a student visa system that is understood to be welcoming to international scholars. Of course abuse must be tackled, but the Government must also ensure that our ability to attract the best students is not harmed as a consequence. As Vince Cable has acknowledged in another place, we cannot measure where our investment should be in monetary terms alone. If we are to be players in the global knowledge economy, we cannot afford to lose momentum in our investment in higher education. To stand still in this regard is to fall behind.