EU Report: Effectiveness of EU Research and Innovation Proposals

Lord Haskel Excerpts

Thursday 21st November 2013 Lords Chamber

[Lord Haskel (Lab)]

My Lords, at the recent Lord Mayor’s banquet, the Prime Minister said that we were in a global race, and I am sure that he meant a race to the top. Most of us agree that we cannot leave our success or failure to chance or to simple market forces. We need a strategy, one to get us to the top and, of course, a central part of that strategy is research and innovation.

The European Union agrees with that and supports this work, as it has done for many years, through the framework programme currently in its seventh phase which finishes at the end of this year. From 2014 we will have Horizon 2020, which will support research and innovation. The framework has been especially important to us. As the noble Lord, Lord Kakkar, has just told us, our higher education institutions are among the top participating institutions, and this participation has provided an additional 15% on top of the UK Government’s own budget. It is growing and it compensates in cash terms for the freeze in our domestic science budget.

Unfortunately, the successful participation of our higher education institutions in the framework is not reflected in the participation of our private commercial businesses. They comprise only a quarter of the total number of UK participants, and there are very few small and medium-sized enterprises among them. So the purpose of our inquiry was to see how this could be improved: how small private businesses could achieve the same high participation rate as our higher education institutions. The inquiry is seeking to identify the right structures for us to achieve this increased participation.

Basically, what we have said in our report is that we want less complexity in the structure. We want shorter and simpler intermediation, more focus on monitoring outcomes and less on auditing expenditure, and more consultation.

Many of our recommendations are, yes, directed towards the European Commission, and I agree with the noble Lord, Lord Kakkar, that it is disappointing that we have not had a response from them in time for this debate. However, its actions, along with informal observation, seem to indicate that it agrees with our direction of travel.

The response from the Government to our report is encouraging. They agree that the participation of companies and small to medium-sized enterprises in Horizon 2020 has to be supported, facilitated and encouraged by a greater presence in Brussels for those organisations that support them and help them to participate, such as the Technology Strategy Board, the national contact points, trade organisations and chambers of commerce. Many are already represented there, which makes consultation and information transfer with the participating companies shorter, simpler and quicker.

That is especially important because many small enterprises look to this EU money to help compensate for the failures in bank lending. I agree with the Government’s observation that Horizon 2020 needs a “pro-innovation regulatory framework”—indeed, many of our recommendations are directed towards that end. However, my one request is that innovation should be regarded in the broadest possible terms: not just new products and services through science and technology but all the other aspects of innovation that are important to business and in which it invests. These include writing new software, modernising and speeding up the supply chain, design, branding, and developing new business processes and new ways of serving customers. I suggest to the Minister that perhaps one reason why private industry, particularly SMEs, participates far less than higher education institutes in the framework is that, to them, research and innovation is far wider than science and technology. If the Government want business to participate more in Horizon 2020, they must seek to broaden the interpretation of innovation. If the Minister will not take it from me, he may be persuaded by the recent McKinsey report which confirms that.

This does not, of course, detract from the importance of science—it is in addition to it. Indeed, I had the opportunity to briefly discuss our report with the noble Lord, Lord Rees. He is sorry that he is unable to speak in this debate, but he was disappointed that the European Research Council did not feature in our report. He considers that the European Research Council is probably the most cost-effective EU institution supporting research and innovation. Certainly, it mainly supports academic research in universities, but business eventually benefits from that. It has been going for six years and now has a budget of €2 billion. He wanted us to be aware of the excellence of its work and is anxious for us to benefit from it. He said it is as excellent as our own research councils.

I note in the Government’s response that they plan to create much greater awareness of Horizon 2020 through a range of events at all levels. We all say amen to that. However, if you are trying to capture the interest and attention of companies, you must include innovation in the less tangible aspects of their businesses.

I said at the start that we are in a global race and Horizon 2020 has to be part of our strategy to get to the top. That strategy must include all areas covered by the Commission. In our report, we again spoke of our concern about the quality of impact assessments. All parts of our Government and all parts of the Commission rely on these for making informed decisions. So it is essential that these impact assessments should indicate how the issue being assessed impacts on this strategy—how it contributes to our getting to the top. This must be applied consistently across all policy areas. It should also be part of the assessment of costs and benefits. I understand that the Commission is reviewing how to quantify these benefits in an impact assessment. Is there any news on this work? It is important to us. Members of the European Parliament must be taking this seriously because they have set up their own impact assessment unit. We, too, should be making use of this resource.

I have a couple of other points to make. In our paper we speak of public procurement as a means of encouraging demand-side innovation, to use the economists’ jargon. Thanks to the imaginative schemes run by the Technology Strategy Board here in Britain, we have developed a fair way of encouraging companies, large and small, to participate in this. It includes interim grants for small and medium-sized companies. Most small and medium-sized companies are aware of these schemes and many participate. The Commission has its own schemes, which are less successful and more bureaucratic. Can we not try to persuade the Commission to use our schemes, on the simple grounds that they are more effective and, combined, would be more beneficial?

Whenever research and innovation are discussed, intellectual property rights are always a concern. The problem for smaller companies is that protecting their intellectual property rights slows down outcomes: it delays the practical and actual introduction of their innovative services or products. The world of business moves very fast, as the noble Lord, Lord Kakkar, told us. In a perfect world, these companies would protect their intellectual property before it is made public. It is for this reason that our report calls for a more cautious approach to open access, which the Government reject. I hope the Minister understands that in doing so they are slowing down the rate at which innovative products and services are introduced by some firms in this country.

In closing, I thank my chairman and colleagues for their companionship in this inquiry. I give my particular thanks to our staff. I give my thanks also to all who came and gave evidence or sent in written evidence. It has been absolutely fascinating and illuminating—and, I think, worth while.