Catapults (Science and Technology Committee Report)

Lord Callanan Excerpts

Thursday 19th May 2022 Lords Chamber

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

My Lords, I express my gratitude to the noble Lord, Lord Mair, for so brilliantly introducing this debate, and to all the members of the Lords Science and Technology Committee for their careful consideration of this vital national asset, the Catapult Network, which led to the development of the report in question. I also thank all noble Lords for their excellent contributions, which once again demonstrated the wide range of expertise on this important subject in this House. I congratulate my noble friend Lord Willetts on his new role as chair of the UK Space Agency—an excellent appointment.

As was pointed out, the first catapult was established in 2011. If we fast forward to this year, we now have a network of nine catapults, spanning 40 centres, across all parts of the United Kingdom. Indeed, the Offshore Renewable Energy Catapult, which the noble Baroness, Lady Blake, just referred to, has a centre in Blyth, very close to my own stomping ground in Newcastle. In that time, the catapults have made their mark on the UK’s innovation landscape. They have been responsible for directing more than £2.5 billion of private and public sector investment into some very innovative industrial research, building the UK’s leading capacity in global markets. They enable organisations to access technologies, facilities, knowledge, expertise and collaboration that would otherwise be hard to reach. They have established more than 5,000 academic collaborations and 14,750 industry collaborations, and have supported more than 8,000 small and medium-sized enterprises.

Of course, as the report pointed out, there is always more that could be achieved, which is why we have welcomed the report and recognised the themes of funding our innovation ambitions, ensuring that governance and measurement drive performance, and maximising commercialisation opportunities.

We followed this report, soon after, with the Government’s own review of how the UK’s catapults can strengthen research and development capacity, published in April 2021. This set out a number of recommendations to ensure that the Catapult Network continues to deliver its vital support to UK innovation, sectors and industry and gives them space, without further reviews, to do so.

I turn to the report’s encouragement for funding to better reflect ambition and encourage industry participation in innovation. The 2021 spending review settlement announced an increase in core Innovate UK budgets to around £1 billion per annum by 2024-25, over £300 million more per annum than we spent in 2021-22. We will set out further detail on catapults funding in due course. Its R&D settlement provides a firm foundation for the Government to meet their ambition to increase public R&D spending to £22 billion by 2026-27 and drive economy-wide R&D investment up to 2.4% of GDP in 2027.

As my noble friend Lord Holmes and the noble Baroness, Lady Blake, highlighted, the catapults are integral to achieving our goal of increasing our investment in R&D to 2.4% of GDP by 2027. To meet the target, we are engaging the whole ecosystem of businesses, government, R&D-performing organisations, academia, finance providers, funders, international partners and others to come together. As has been pointed out, catapults are a key vehicle to convening industry and helping us to deliver this.

Following the publication of the R&D road map, my department has prioritised the publication of strategies on significant R&D commitments, including innovation and people and culture. Further improvements to the R&D system are also being driven by the commission of independently led reviews of bureaucracy, UK Research and Innovation, and the RDI organisational landscape.

I am pleased to say that we continue to make progress with the establishment of ARIA. My noble friend Lord Holmes and the noble Baroness, Lady Walmsley, both queried ARIA’s future leadership. I can tell them that we are in the process of recruiting the new CEO and chairman, and I will endeavour to update both Houses once those appointments have been confirmed.

In July last year, the Government set out their vision to make the UK a global hub for innovation by 2035 in the new innovation strategy, which sets out a clear plan of action for creating the right conditions for all businesses to innovate and giving them the confidence to do so. It aims to boost private sector investment across the whole UK. The noble Lord, Lord Patel, rightly noted the important role that this strategy plays in the Government’s R&D agenda.

Both the noble Lord, Lord Patel, and my noble friend Lord Willetts highlighted the report’s concern that overreviewing the catapults, and some perhaps restrictive KPIs, could hamper their potential. Over the last year, Innovate UK and BEIS have worked with catapults to agree new impact evaluation frameworks. While these retain a core set of common principles and metrics, they do not impose a one-size-fits-all approach. They allow for KPIs tailored to the unique sectors and contexts that the catapults work in. The Government are keen to see catapults demonstrating compelling value for money, with clear evidence of their impact and additionality. We are working with IUK and the catapults to ensure that they can demonstrate this clearly and efficiently.

The noble Lords, Lord Mair and Lord Kakkar, and the noble Baronesses, Lady Walmsley and Lady Blake, all asked for an update on allowing more flexibility in the funding rules for catapults. I am pleased to inform noble Lords that UK Research and Innovation has reviewed its eligibility rules for research council funding and, from 1 June 2022, catapults will be eligible to apply for opportunities on the same basis as independent research organisations and public sector research establishments.

IUK CR&D funding is oversubscribed, of course, and it is a highly competitive process, but it is important that funding allocation and distribution decisions do not crowd out other types of project and reduce overall investment in R&D. There has always been scope for individual competitions to make a case for up to 50% where there is evidence that more significant research organisation participation is necessary to deliver the best outcomes with that funding.

BEIS has already set out how its £39.8 billion R&D budget will be allocated between partner organisations over the next three years. As I said, further detail, including funding for catapults, will be set out in due course.

In his excellent introductory speech, the noble Lord, Lord Mair, asked how our approach to catapults can contribute to the levelling-up agenda, without undermining their innovation objectives, and be involved in the Strength in Places Fund. As confirmed by the noble Baroness, Lady Blake, the levelling-up White Paper sets out our commitment that domestic public investment in R&D outside the greater south-east will increase by at least 40% by 2030. This additional government funding will seek to leverage at least twice as much private sector investment over the longer term to stimulate innovation and productivity growth. In support of this mission, I am pleased to confirm that my department is aiming for the regions outside the greater south-east to receive at least 55% of its R&D budget by 2024-25. We are giving UKRI a new organisational objective to support levelling up and increase consideration of local growth criteria and impact in the funding of R&D.

The report rightly highlighted the important contributions that catapults could make to the levelling-up agenda, as the noble Lord, Lord Patel, and the noble Baroness, Lady Walmsley, recognised. At their heart, catapults are UK innovation assets created to support specific sectors or technologies and businesses throughout the UK—this remains their primary purpose. Of course, catapults have always worked across the UK, with their 40 sites now spanning all UK nations and regions. The centres have a track record of accelerating growth in clusters of innovative business, facilitating connections to local research bases and driving skills development in their local economies. For this reason, the new catapults funding agreement for 2023 to 2028 will include a focus on local economic impact alongside their primary objective of national economic impact.

As the noble Baroness, Lady Walmsley, noted, catapults have been at the centre of several of the successful UKRI Strength in Places proposals, including the £43 million investment in the compound semiconductor catapult and the £64 million Smart Nano-Manufacturing Corridor in Northern Ireland. Some £200 million will be invested in 12 projects across the UK over the next three years, through the ongoing Strength in Places Fund programme. Innovate UK is working with local partners to deliver the three innovation accelerators announced in the levelling-up White Paper, in Glasgow, Greater Manchester and the West Midlands. It is considering opportunities for catapults to be involved.

The noble Lord, Lord Kakkar, recognised that catapults are instrumental in growing businesses and clusters in the UK. He quoted the example of the Cell and Gene Therapy Catapult, which has supported the creation of the second largest cell and gene therapy cluster in the world, a development that we should all be very proud of. Through the seven technology family priorities, the Government give clear signals to industry about the opportunity to co-invest in the strength of UK tech. This is supported by the recent confirmation of a record R&D funding settlement and the prominence of the seven technology families in UKRI’s 2022 to 2027 strategy, published in March this year.

My noble friend Lord Willetts asked how catapults could play a role in developing and implementing the technology families. The Catapult Network is well positioned to play a role in delivering these, both in specific technologies—through the High Value Manufacturing Catapult’s expertise in advanced materials and manufacturing, for example—and in cross-technology, multidisciplinary approaches that realise their strengths across the network. Supporting this, catapults will continue to nurture strong collaborations with the research community, industry, government and early-stage, high-growth innovator companies.

The noble Lord, Lord Mair, questioned the steps being taken to facilitate the mobility of researchers between universities and catapults. My noble friend Lord Willetts noted the importance of collaborations with academia. I am proud to say that there is a strong track record of catapults working closely with universities. Innovate UK is providing additional targeted funding to enable catapults to directly engage with institutes, research and technology organisations and public sector research establishments. UKRI awarded £4.8 million of funding to a consortium led by the University of Sheffield that will form a network to encourage engagement between academics and the catapult centres and administer 59 researcher-in-residence awards of between £50,000 and £100,000 each year over its four-year lifetime to enable individual academics to conduct secondments, working in catapult centres, generally over a period of one to three years. Innovate UK is also increasing investment in knowledge transfer partnerships, which are collaborative, three-way partnerships that bring university expertise together with innovating businesses, creating positive impact and driving innovation.

During his speech, the noble Lord, Lord Kakkar, asked about the future of Horizon Europe, a subject we have debated many times in this House. As the noble Lord will no doubt be aware, we are funding full association with Euratom and Horizon Europe. In the event that the EU does not proceed with allowing the UK to associate with Horizon Europe, as I remind the House it committed to do, the UK will of course fund all these programmes ourselves. All the researchers who are funded are guaranteed their funding, including those supporting new international partnerships.

Given the regrettable delays to our association that come from the EU side, we are working at pace to develop a coherent, compelling and high-quality alternative programme to Horizon Europe that will provide the fellowships, collaborations and industry engagement that is so valued in Horizon. We have always been clear that our priority is to support the UK’s research and development sector, and we will continue to do this in all future scenarios.

My noble friends Lord Willetts and Lord Holmes asked how catapults can contribute to skills and developing the workforce. I am pleased to tell both my noble friends that the BEIS Catapult Network Review recommended that all catapults should take a more active role in recognising and responding to the skills needed in their sectors. Those catapults are working with the Gatsby Foundation and others to develop their capability and respond to this important challenge. Catapults have already had a significant impact in this, through their own apprenticeship centres and schemes, by working with providers to shape programmes that work for learners and industry and by collaborating with schools to inspire the workforce of the future.

I was of course pleased to learn of the enthusiasm of the noble Lord, Lord Bilimoria, for the Help to Grow management programme. I hope he will spread his enthusiasm to the Help to Grow digital programme, which is one of my ministerial responsibilities. I would be delighted to work with him and his organisation on both these fantastic schemes. On his questions on funding, the network received £1.2 billion of direct public funding for the current five-year funding period, which runs to 1 March 2023. Core funding for the network in 2020-21 was £239 million, and it generated £155 million from commercial income and £119 million from collaborative research and development. While the Government increase public investment in R&D to £22 billion a year, we are reforming R&D tax relief to support greater private sector investment in R&D as well.

The noble Lords, Lord Mair and Lord Patel, and the noble Baroness, Lady Walmsley, all asked how we will make the best possible use of the Catapult Network in the coming years and what role we see catapults playing in implementing policy for the innovation strategy. I have already set out several excellent initiatives where catapults will make a positive impact in driving our innovation strategy objectives, clearly demonstrating how the Government see catapults playing a key role in its delivery. But, as my noble friend Lord Holmes and the noble Baroness, Lady Walmsley, pointed out, the ambition remains to expand the network when it is appropriate to do so and, of course, when funding is available.

We see the catapults playing a pivotal role in delivering on our ambitions in innovation. That is why my colleague, Minister Freeman—the Minister responsible—and Indro Mukerjee, the CEO of Innovation UK, agreed a new deal with the catapults in March this year. This sets out a clear plan to maximise the impact, activity, promotion and private sector investment delivered through the Catapult Network. Innovate UK will continue to work with the catapults to identify and proactively facilitate opportunities for greater cross-catapult and cross-ecosystem collaboration. It has also committed to remove arbitrary eligibility constraints so that catapults can participate in collaborative programmes throughout the spectrum of research and innovation.

It is clear from today’s robust discussion that the Catapult Network has made a huge impact across the R&D ecosystem and that the catapults’ value is quite rightly recognised across the House and the parties. The Government will continue to work with them and with IUK to build on their successes and facilitate even greater potential. As we look to the future, R&D will be critical to economic recovery, and catapults are and will remain a valuable part of the UK’s innovation ecosystem, as we seek to build back better. I once again thank the Lords committee for this excellent report. The Government look forward to working with it as we take this programme forward.