United Kingdom: Productivity

Lord Rees of Ludlow Excerpts

Tuesday 8th September 2015 Lords Chamber

[Lord Rees of Ludlow (CB)]

My Lords, the maxim “if we don’t get smarter, we’ll get poorer” becomes increasingly germane to the UK as our economy and public services become more dependent on the high-tech sector and high-skill individuals. There are three interlinked prerequisites for higher productivity: better education and training at all levels, from school to PhD; excellent R&D, exploited here; and success in attracting and retaining mobile talent.

As regards the first of these, there is real concern. The UK is a laggard in educational attainment levels at the secondary school stage. This aggravates the life-chances for the cohorts whose job prospects are already blighted by current austerity. That is why we should welcome greater emphasis on apprenticeships and on a more appropriate curriculum for the 50% of 16 to 18 year-olds who are not aiming for higher education.

There are currently too few schoolteachers with specialist subject knowledge. More than 20% of mathematics and chemistry teachers, a third of physics teachers and more than half of computing teachers in state-funded schools in England have no relevant post-A-level qualifications in the subject that they teach, and language teaching is equally dire. There have been many initiatives here. The best hope lies in expanding the number of well-qualified people who transfer into teaching mid-career.

My own experience is of university teaching and research, so I will now focus on this and declare an interest as a member of Cambridge University. We are mindful of the need to transition academic expertise into the wider economy. I think our Cambridge network exemplifies how this can happen if the environment and sociology are right.

The country’s R&D effort depends on both public and private investment. An impressive recent study by Jonathan Haskel and colleagues at Imperial College revealed that there were symbiotic links between public and private investment. There is a “crowding in” effect whereby publicly funded R&D enhances the amount that is privately funded and incentivises the attractiveness of this country to foreign companies and investment. But, as we all know, both private and public levels of investment are low by international standards, and industrial research is concentrated in rather few sectors. According to 2012 data, the percentages of GDP spent on private and public R&D were 3.32% and 1.04% respectively in South Korea, which is top of the league, and 1.23% and 0.5% respectively here. And we are far below the US and Germany.

Just today, there is a letter in the FT from senior figures in the pharmaceutical industry urging the need for enhanced public R&D if we are to sustain competitiveness. Of course, we are lucky that medical charities donate £1.3 billion annually—one-third of all publicly funded medical research.

Incidentally, R&D levels within all government departments have undergone sustained long-term decline. They are down by a factor of more than three since 1980 and by a factor of more than two since 1994. This signals a worrying loss of expertise in parts of Whitehall where policy and procurement choices should be based on high-quality strategic advice. We need to adopt the right priorities in infrastructure and energy decisions. Let us learn from the dismal tragedy of nuclear R&D. Our national labs were once world leaders. Now, if we have any nuclear power, it will be state-owned—but by the French or Chinese state.

I will focus now on university research. Recent steps towards restoring pre-austerity levels of capital investment are welcome. But the flat cash settlement over the past five years means that the cumulative erosion of the ring-fenced science budget since the 2010 spending review amounts to more than £1.1 billion. The research community has made large savings through equipment sharing and multi-institutional alliances, but this cannot continue indefinitely. That is why the new spending review is crucial for science and why we need to close the gap between us and other major countries to which the noble Lord, Lord Bilimoria, referred.

Cuts to research and innovation in the 1980s drove many leading UK scientists to the USA. Today, generous investment in research by Governments across the world, coupled with austerity at home, risk creating a similar exodus. Perception is important, too. If we are perceived to be on a steeper upward gradient than other nations, we will get more than our share of the best talent. Our cost-effectiveness will rise. Conversely, if perceptions are pessimistic, as I fear they are, we will not merely end up with less research effort, but what we are left with will be less cost-effective. We should welcome brain circulation but not a brain drain.

A recent RAND Europe study of the worldwide correlation between research funding and output revealed, importantly, that it takes at least three years for a decline in real-terms funding to manifest itself in publications and other indicators. This is ominous because it means that we may not have seen the full downside of recent stringency, and it makes it even more urgent that we reverse the trend.

Current visa restrictions and Home Office rhetoric are real own goals. I will cite my own experience. I am based in a small Cambridge department that is world-class academically. Our last five faculty vacancies were filled by outstanding foreigners, three from outside the EU. Just last week, one of them told me that he thought it would be harder to attract people such as him now than it was when he joined us because of these perceptions.

Along with their status as research powerhouses, the most important output of universities is their graduates—both undergraduates and postgraduates—who will follow careers in all walks of life. If universities cannot attract or keep the best faculty, it will impact negatively on the quality of output of the students. Here, the UK has an opportunity to enhance teaching through the world-leading Open University and its FutureLearn platform. Online courses may have been overhyped in the US, but they have a genuine edge, especially at the level of taught master’s degrees, where they enable mature and motivated part-time learners to acquire specialist qualifications. Surely other universities should help by augmenting the OU’s content so that it can expand and enhance the range of such courses, which will have great value not only in the UK but worldwide.

Finally, we should surely all hope that the UK will achieve its proclaimed aim of being the best place to do science and ensure that it thereby helps to enhance national wealth. We need to incentivise international companies to establish research bases in the UK and to encourage enterprise and start-ups. That will require changes to visa rules and public investment in the next five years that narrows the gap with other nations.