Science and Innovation Strategy

Baroness Warwick of Undercliffe Excerpts

Monday 23rd October 2017 Lords Chamber

[Baroness Warwick of Undercliffe (Lab)]

My Lords, I thank the noble Lord, Lord Patel, for providing this opportunity to consider the vital importance of science and innovation to the success of the industrial strategy.

As others have highlighted, science and innovation are areas in which the UK excels internationally. With the recent publication of more science and innovation audit reports, we now have a compelling evidence base for the specific innovation and scientific strengths of local areas, covering almost all the UK. Investing in science, research and innovation, doing more to commercialise our science base to drive growth across the whole of the UK, is pillar 1 of the industrial strategy; I argue that all the other pillars rest on it. So it seems clear to me that the science and innovation audit reports will be critical to the success of the industrial strategy. I will say more about this in a moment.

I want first to make a very simple observation. The industrial strategy Green Paper mentions universities 63 times—I am grateful to the Universities UK researcher who did the counting. As UUK points out, this reflects the significant role universities play in their local areas, but it also underlines the fact that universities are a driving force for the future prosperity of the whole UK. Our universities, in all their activities, are intrinsic not only to the industrial strategy but to economic performance more generally. While rooted in their local cities and regions, universities are connected to global growth markets. They maintain thousands of industrial partnerships and they work closely with SMEs in emerging fields. The industrial strategy must make the most of these connections. The industrial strategy presents an opportunity to draw together a number of strands of support for economic growth, but this opportunity has to be grasped.

I said I would come back to the science and innovation audits, or SIAs. The House of Lords Science and Technology Select Committee called for,

“pathways of practical steps ... building on existing research excellence at every opportunity”.

I believe that the SIAs could contribute to the delivery of such a pathway. This body of knowledge about regional strengths in science, innovation and infrastructure is critical to the emphasis on place in the industrial strategy. The SIAs bring together sector and place; I suggest that, precisely because they can be specific about which localities should be at the forefront of which industries, they could be the basis of an approach to investment which combines national coverage with regional focus, through local enterprise partnerships. The industrial strategy could co-ordinate this and also shape the distribution of money spent on innovation through other government agencies, such as Research England, and DfE initiatives, such as the institutes of technology.

The industrial strategy offers an opportunity to make investment decisions that increase the overall funding available to university research and spread this investment throughout the UK. Will the Minister tell us whether the creation of UKRI will support this approach? If so, how? Will UKRI be tasked to ensure that funding reaches all parts of the country? Established industries are dominated by major companies and research-intensive universities. The industrial strategy also presents an opportunity to look beyond the established industries to emerging sectors. I declare an interest here as a member of the council of Nottingham Trent University, and I cite the university’s involvement in the fields of medical technology and advanced materials as an example of the tremendous potential flowing from its involvement in these fields. This has long been a major area of manufacturing in the east Midlands and is one of four major themes picked up in the Midlands Engine SIA.

In what I hope will be a very positive signal on collaboration for the rest of the sector, NTU is partnering with the University of Nottingham on the stimulation of business creation in life sciences through expanding the work of BioCity Group Ltd, which now has four sites across the UK. The university is ensuring a throughput of talent from undergraduate to PhD in life and health sciences, and is looking to ensure that the local institute of technology encompasses medical technology, so that there is a genuine skills escalator locally. NTU also works with medtech SMEs through its European Regional Development Fund programmes to enhance the leadership of some of the smaller local companies, including their ability to embrace innovation. In other words, the university is tying together a number of rather disparate government initiatives and funding streams. If the Government were to adopt a rigorous approach to the industrial strategy based on the audits, it would help enormously. Can the Minister assure us that such an approach will form part of the Government’s thinking?

The additional investment of £2 billion for R&D by 2020, announced in 2016 and restated in the industrial strategy, is welcome as an acknowledgement of the vital role science, research and investment play in economic growth, but it is essential that we do not fall behind. I echo other calls today for increased investment in R&D to put us in line with the OECD average: 2.5% of GDP. The SIAs are the evidence base we need for strategic decision-making on local innovation priorities. They must inform the industrial strategy’s pillar 1—the vital investment in science, research and innovation.

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[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Prior of Brampton) (Con)]

My Lords, I find myself in the slightly odd situation of being able to agree 110% with what the noble Lord, Lord Mendelsohn, has just said; I do not think there is anything between us at all. I thank the noble Lord, Lord Patel, for tabling the debate today. It has been interesting, insightful and opportune, given that the White Paper is coming out in November.

I am afraid I shall disappoint the noble Baroness, Lady Morgan, and the noble Lord, Lord Fox: I am not going to address skills today. Clearly they are utterly critical, and the cultural divide that we have had between academic and technical education has been a disaster for this country since 1944 and probably earlier—I think we are all in agreement on that—but I shall talk more about science and innovation today, if I may.

When the Green Paper on the industrial strategy was launched earlier this year, the noble Lord, Lord Hennessy, asked with a customary rhetorical flourish, “Where is the magic?”. I think he had read eight previous versions of the industrial strategy and, quite rightly, was saying, “What is different about this one?”. I have thought about that a lot. It may lie in our culture, in our great institutions, in our legal system or in our national character. It may lie in the welcome that we have always given to people from different countries. It may lie in that very difficult and shifting balance between social justice and entrepreneurship. It may lie in all those things, but if I had to choose one—if I had to say where the magic was today—I would say our great universities and research institutes.

The story may be apocryphal—if it is, no doubt the noble Lords, Lord Bhattacharyya and Lord Patel, will tell me afterwards—but soon after India became independent in 1947, Nehru asked John Kenneth Galbraith, the great American economist, for advice on how to modernise the Indian economy. The great man is supposed to have replied, “Establish an independent flourishing university sector and wait for 800 years”. Of course you do not have to wait that long, and Warwick and Bath are two universities that are testament to that, but it is perhaps no coincidence that our two oldest universities, Oxford and Cambridge, are ranked first and second in the world. It has been said that in the Dark Ages the monastery kept alive learning, progress and civilisation; in the Middle Ages the centre of gravity moved to the castle; and in the industrial age the factory became the epicentre of economic growth and power. In today’s age, the age of information and knowledge, it is the university that stands centre stage—not some gleaming academic ivory tower but a seat of learning, driving ideas, innovation and science into a connected ecosystem. This is the magic that has created the world’s most powerful economic ecosystem in Silicon Valley, an alchemy that brought together great universities such as Stanford and Berkeley with great entrepreneurs, with enlightened government support—we have already talked about DARPA today—and with intelligent, long-term, patient capital, as my noble friend Lord Freeman stressed in his speech. As the noble Lord, Lord Willis, said, it is bringing together, fusing science and entrepreneurship, that makes Silicon Valley, Boston and those other great ecosystems around the world so successful.

In the UK, the first industrial revolution was ours. The second, the factory age, was ultimately won jointly by Germany, Japan and the US. The third industrial revolution was unquestionably won by the USA. The fourth industrial revolution, which is now upon us, based on AI, robotics, quantum computing and the like, is what we are now playing for. Clearly, the US and China will be at the table, but we must make sure that we are there, too.

Where are we? We have four universities that nearly always figure in the top 10: UCL, Imperial, Oxford and Cambridge. We have 31 in the top 200. The Elsevier report published last month shows that we account for 9.9% of downloaded academic articles, 10.7% of citations and 15.2% of the world’s most highly cited articles. The UK continues to rank number one by field-weighted citation impact.

If we look around the country, we can start with the Crick and the Turing Institutes at King’s Cross, move to Norwich, where I come from, where there are the John Innes and the Tyndall centres, and move up to York, with its extraordinary work on optics and digital infrastructure. Further north, there is Dundee, where the noble Lord, Lord Patel, was such a distinguished academic clinician. Look at its extraordinary record of drug discovery. We can come past Huddersfield, not a place associated with a great university, but it has an extraordinary hidden gem there in rail technology, and down to Warwick.

The noble Lord, Lord, Lord Bhattacharyya, mentioned the National Automotive Innovation Centre, a joint venture between Tata, JLR and the Warwick Manufacturing Group. It is an extraordinary success how Warwick, quite a young university, has developed that extraordinary technology. JLR invests £3 billion a year in research. That is one company with revenues of £25 billion or so. It is an extraordinary commitment to research, and we are very lucky that it does that.

If we come down from Warwick, we find what is possibly the most extraordinary research institute in the world: the Laboratory of Molecular Biology at Cambridge, the birthplace of modern molecular biology, with 11 Nobel prizes to its name. It is led, of course, by a Nobel prize winner, Venki Ramakrishnan, and, of course, we should pay tribute today to Richard Henderson for his Nobel prize this year for his work on electron cryo-microscopy. I note in passing that Richard Henderson shared his Nobel prize with a US and a Swiss researcher, and that Venki Ramakrishnan was born in Tamil Nadu in India and shared his Nobel prize with two scientists from the US and Israel. Science is international, and respects no boundaries. If we in our country do not accept that and welcome people from abroad, we are cutting off our nose to spite our face.

I turn now to the ecosystem, if you like—the innovation side of the equation. You can look at this through the lens of intellectual property, of royalties, of spinouts, of unicorns, or however you want to measure it. We all know what we mean. The question is: are we capturing for the UK the downstream value added of science, or are our universities instead still to some extent basking in the glory of academic excellence? This is not for one minute to downgrade the value of basic, fundamental blue-sky research, just to raise the question: are we making the most of it? As the noble Lord, Lord Patel asked: are we turning ideas into money?

Historically, the answer has to be a pretty emphatic no. I suppose the most egregious example that I have come across is that of monoclonal antibodies, discovered by two researchers at LMB and humanised by Greg Winter, who is today the Master of Trinity College. Monoclonal antibodies today comprise six out of the 10 best-selling drugs in the world. We hardly make a biologic in this country. Why could we not have just one Genentech in the UK? We have none. As the noble Lord, Lord Mendelsohn, mentioned, graphene was discovered at Manchester University in 2004, yet today we hold just 21 graphene patents out of a total of 2,224. It is now an area dominated by the US, China, South Korea and Japan. I could go on. The British consulate in Silicon Valley says that it fields inquiries from more than 300 companies a year looking to make the move to California. Illumina is based there, with a market cap of $30 billion, based on gene sequencing technology again developed at the LMB.

But that is looking backwards. We are getting much better. UK universities’ knowledge exchange income has increased by 27% between 2010 and 2016, to £4.2 billion. Universities are increasing engagement with businesses, with income from businesses increasing by 6% from 2014-15 to 2015-16, and with 71% of this coming from collaborative research, contract research and consultancy, but that is still nothing like enough.

The knowledge exchange framework announced by my honourable friend Jo Johnson two weeks ago is a start to try to address that issue. We are going to measure universities not just by teaching and research excellence but by how much added value they put into the community. In the US, the Bayh-Dole Act, which came in in the 1980s, fundamentally changed how universities in the United States commercialised their research. Economists say that it was probably the most significant Act passed in the US in the past 40 years. I hope that the knowledge exchange framework will do the same in the UK.

I was very struck by the comments of the noble Baroness, Lady Greenfield, about taking research out of universities. How right she is. Carnegie Mellon University, MIT in Boston or Stanford have a “5% and go in peace” policy. They encourage their scientists to set up spin-outs; if you are not doing that, you are not proper scientists in those places. They take 5% of the equity and go in peace; they do not hang on to all the intellectual property or royalties. A lot of British universities still keep between 40% and 60% of the equity, and they wonder why entrepreneurs find it hard to raise money in capital markets.

I have a much longer speech than I have time to give this evening. We are doing work with higher education innovation funding, the connecting capability fund and, of course, the industrial strategy challenge fund. So the Government are fully apprised of this; nothing has been said in this debate that the Government are not wholly in agreement with.

When it comes to the scale of investment, noble Lords are absolutely right in saying that we are way off the pace. We spend 1.7% of GDP on research and development. The average in the OECD is 2.4%, but Germany spends 3% and wants to spend 3.5%. Our aspiration is to get to the average of the OECD, of 2.4%. We must keep making the argument that returns on investment in this area are as good as you can find anywhere.

I have only one minute left, so I shall end with a point on long-term patient capital. We are making some progress: Neil Woodford has the Patient Capital Trust established in Oxford, but clearly this is an area—particularly in bioscience, where it takes 20 years to bring a new drug to the market—where there is an absence of intelligent long-term capital. I hope again that the industrial strategy will produce that in November and have something to say about that issue.

I thank the noble Lord, Lord Patel, for introducing a fascinating and useful debate, which will certainly help our thinking as we move to the White Paper in November.

[Baroness Warwick of Undercliffe]

Could the Minister comment briefly on the role of UKRI in ensuring that investment and funding is spread right around the country?