Science and Technology: Economy

Lord Vallance of Balham Excerpts

Thursday 31st October 2024 Lords Chamber

[The Minister of State, Department for Science, Innovation and Technology (Lord Vallance of Balham) (Lab)]

My Lords, I am sure noble Lords will agree that we have heard many thoughtful and insightful comments from all sides of this House. Like everyone else, I thank my noble friend Lord Stansgate for organising such an engaging and important debate this afternoon. I also thank him for introducing me to the concept of the POBA and for mentioning the Science and Innovation Network, known as SIN. It gives me an opportunity to apologise for the fact that I introduced the right reverend Prelate the Bishop of Oxford to SIN, which does not feel entirely right. I congratulate the noble Baroness, Lady Freeman, on her terrific maiden speech and thank her for the reminder of the ubiquitous value of applying the scientific method in all sorts of ways.

Science, technology and engineering are fundamental to every aspect of modern government, from healthcare and education to housing, planning, green energy and climate. Indeed, I cannot think of a single area of government policy or operations where science, technology or engineering would not make a difference, and none of the national missions are achievable without investment in innovation. Science and technology are essential for national security; they are the bedrock of our shared prosperity in an era of global instability—as the noble Baroness, Lady Neville-Jones, rightly pointed out—when relationships and partnerships will be important. I agree with my noble friend Lord Stansgate that science and technology are not just for DSIT but for all of government, and that there needs to be an all-of-government approach to this. That is why there is a Cabinet Science and Technology Committee, chaired by the Prime Minister.

Our discussion today is focused on growth. Growth is the first mission of this Government but it is also the first mission of my department, because the economic importance of science and technology is hard to overstate. In historical terms, to state the obvious, the impact of innovation is so profound that standard metrics cannot really grasp it. I do not know how you measure the effect of electricity on growth, or how you really look at the impact of the invention of engines, whether that is James Watt’s steam engine, the combustion engine or the jet engine.

Science and technology remain essential for economic growth today. Seven out of the world’s top 10 companies are science and tech companies, and, in the UK, engineering businesses such as Airbus, BAE Systems and Rolls-Royce employ tens of thousands in communities right across the country—whether they are designing the defence technologies needed to keep us safe or developing small modular reactors to drive forward clean energy. My noble friend Lord Hanworth rightly identified the importance of both SMRs and advanced modular reactors. Pharmaceutical giants such as GSK and AstraZeneca, now Britain’s most valuable company, have transformed healthcare for billions, here and around the world.

Today, a new generation of UK-founded—I emphasise that—companies are putting us at the forefront of the global race for tomorrow’s technologies. Our thriving start-up scene means that the UK receives two times more venture capital investment than anywhere else in Europe. Companies such as DeepMind and Darktrace are harnessing the power of artificial intelligence to tackle some of the toughest challenges, whether that is accelerating the discovery of life-saving drugs or protecting us against increasingly sophisticated cyberattacks.

As the noble Lord, Lord Tarassenko, pointed out, Demis Hassabis and Geoffrey Hinton this month became Britain’s latest Nobel Prize winners for their contributions to artificial intelligence. I know that noble Lords will want to join me in congratulating them on their extraordinary achievement. The noble Lord, Lord Tarassenko, rightly asked what it would take for these companies to grow to be major stable companies in the UK. That is a key question.

I hope noble Lords will join me in welcoming the soon to be Baroness Gustafsson to the Government and to this House. We will all benefit immeasurably from her experience and expertise, and I look forward to working closely with her in the Department for Business and Trade.

As several speakers touched on, investment in science and tech is about not just today’s economy but the economy for decades to come. The rather sudden success of large language models is the result of 70 and more years of research. The outcome of that research was never inevitable, and nor can we possibly predict the path that certain technological progress might take in the century ahead. The scientists and engineers who launched the initial spacecrafts could hardly have imagined the impact of GPS technologies, and the post-war pioneers of quantum theory could not have known how British businesses would one day start using quantum science to devise new scanners, transform the way we monitor climate change or, in the future, enhance rapid financial analysis.

While we cannot always know where innovation will take us, nor predict all of the challenges we will face, we can be certain that science and technology will be fundamental in overcoming them and therefore an absolutely core requirement for any modern Government. Countries that invest in science and technology for the long term will perform better than those that do not. The rapid rise of Singapore or South Korea—now two of the most innovative economies on earth—reflects sustained, strategic R&D co-operation between government, industry and academia to invest in the high-value sectors that hold the key to long-term economic growth.

In this context, I am of course pleased to note that, in the Budget, the overall public R&D spending will rise to a record level of £20.4 billion. Of course, as the noble Lord, Lord Stevens, pointed out, we have a multi-year settlement coming up in March, and it will be crucial to make sure that this future-looking approach and the points raised in this debate are taken into account as we think about what needs to happen then. The noble Lord, Lord Waldegrave, rightly pointed out that long-term funding is essential, and we have recently seen the seven-plus-seven years funding for new MRC centres, which I will come back to, and we have a plan for 10-year funding for certain types of science activity.

The UK’s historical success in science and technology is testament to the strength of our research base, with four of the top 10 universities in the world. This simple point was not just noted by academics but raised repeatedly by investors at the recent investment summit. ARIA is a new part of our important funding landscape, adding different ways of thinking and contributing to this vibrant system. The right reverend Prelate the Bishop of Newcastle is absolutely correct to point out that this is right around the UK—the strength of the north-east and the Helix project she referred to is an important part of this.

In the years ahead, researchers and businesses will, of course, continue to push the limits of the possible. Their innovations will provide security, opportunity and prosperity for future generations: better jobs, better public services and longer, happier and healthier lives. However, they will only do so if we protect basic, curiosity-driven research—as several speakers have said—and if we invest in the skills and the infrastructure that research and development need. That includes the development that is not always about economic growth, but has other purposes, as has been pointed out by the noble Baroness, Lady Freeman.

Moreover, as many people have mentioned, including my noble friend Lord Hanworth and the noble Lord, Lord Mair, we must support the formation and growth of companies through strong partnership with the private sector. This is why the industrial strategy will have R&D running through its core. I will say a little more about that in a minute. If we wish to lay the foundations for long-term growth, we must support the businesses that are taking ideas out of the lab and into lives. We know that £1 of every Innovate UK grant creates £3 of benefits for businesses, and we know that businesses that have Innovate UK funding do better than those that do not.

My noble friend Lord Liddle asked about spin-outs. In yesterday’s Budget, the Chancellor announced £40 million to support researchers spinning out from UK cutting-edge research into the firms of the future, right the way across the UK. That money will go to the sorts of things that take place before the private sector is prepared to come in but will catalyse private sector investment. As the Science & Technology Framework makes clear, however, this has to be about more than just public sector research funding and start-ups. The noble Lord, Lord Tarassenko, listed several of the things that need to be done if we are to be successful at growing companies. We need to unlock private sector capital for scaling; we need to have a supportive regulatory environment; and—a point made very eloquently by the noble Baroness, Lady Bowles—we need clear procurement signals and processes.

The recently announced regulatory innovation office will streamline the regulatory journey for high-tech firms to ensure that the process is easier and simpler and that people and public services can benefit from early access to transformative technologies, whether that is AI for healthcare, pest-resistant crops or cultivated meat that could provide food security—all these are in scope. The noble Lord, Lord Taylor, asked about AI in healthcare, and it is one of the topics that will be covered by the regulatory innovation office.

The noble Lord, Lord Lucas, spoke quite rightly about standards and their importance. This will be looked at as part of what the regulatory innovation office does. He also made a point about the poor quality of people sent to standards meetings—I went to two of those in Edinburgh two weeks ago, so I apologise if that was not satisfactory.

The Government will seek to use procurement to be an early customer of high-tech businesses, learning from models such as the National Security Strategic Investment Fund. This will not only help grow our domestic companies but enhance public service delivery. The missions of course provide a very clear opportunity to link procurement through to R&D. The industrial strategy will have R&D running through every sector. It identifies “life sciences” and “digital and technologies” as two of the key growth-driving industries in the decade to come. In yesterday’s Budget, the Chancellor announced the first £70 million—as has been pointed out—for the new Life Sciences Innovative Manufacturing Fund, which is up to £520 million.

The noble Baroness, Lady Greenfield, rightly pointed out—this point was also raised by the noble Lord, Lord St John—that there is something about join-up that becomes very important here. It is about not looking at each of these things individually, but having a package that can work. That package includes everything, including of course the tax environment, which is important for those companies.

My noble friend Lady Donaghy and the right reverend Prelate the Bishop of Newcastle both raised the importance of the space sector. It is an increasingly significant commercial sector for the UK that now employs over 50,000 people. It is one of four areas in the initial wave of work for the regulatory innovation office and, over the current spending period, UKSA will have spent something like £1.9 billion. We will continue to look at ways to support and grow this sector, including through the catapult network and through some of the sectors identified in the industrial strategy, including advanced manufacturing and defence.

We must harness science and technology for public good and for public services. To achieve sustainable, equitable economic growth, it will be necessary to champion the adoption and diffusion of technologies to ensure that everyone can access the benefits that they bring. Today, the UK’s AI sector is the third-largest in the world. At the international investment summit a fortnight ago, over £24 billion in inward investment was directed specifically to AI. However, without the right infrastructure and the right skills, too few British people stand to benefit from the enormous opportunities.

My noble friend Lord Stansgate and the noble Lords, Lord Mair, Lord Rees and Lord Willetts, all raised questions about skills and education. We remain strongly committed to the idea of supporting teachers in their ability to teach these subjects through the subject knowledge enhancement training programme. I also draw to noble Lords’ attention the £300 million for FE. I would like to reassure the noble Baroness, Lady Bowles, and my noble friend Lord Hanworth that, in terms of mathematics, I have recently met both the Royal Society and the Academy for the Mathematical Sciences—which has just got started—on the topic of maths teaching and education. The noble Baroness, Lady Greenfield, rightly raised the question of diversity. I can assure her that we will be very focused on that question of diversity, both in grants and in terms of training. It is crucial if we are to be successful.

We will shortly publish the AI opportunities plan—work done by Matt Clifford—to set out how we will drive up the research, development and adoption of AI across our economy and how we will ensure that the public sector is well positioned to harness its power to improve the quality and efficiency of the services it provides.

We will also, as part of that, look at the question of compute power, which was raised by noble Lord, Lord Waldegrave, and the noble Viscount, Lord Camrose. It is an important area for the UK where we need significant compute infrastructure. The Exascale project in Edinburgh—I visited Edinburgh very recently—was not funded at the time we took over. It is important that we get the AI and the Exascale process sorted out, so that we have proper compute infrastructure right the way across the UK academic and business communities.

I am very pleased to say that the Government Chief Scientific Adviser and the National Technology Adviser will undertake a review to advise on how to promote adoption of technologies more broadly, which is very important. In answer to the specific question asked by the noble Lord, Lord Markham, about the med tech pathway, I can tell him that the innovative devices access pathway has been launched, eight technologies are under review and, in addition, the NICE process has undertaken a review to see what could be done to improve uptake and adoption. I can certainly provide more detail if the noble Lord would like.

Finally, I would like to say something about the national data library, to unlock the full value of public data assets. This is going to be important and will address the questions that were quite rightly raised by the noble Lord, Lord Markham, about the real value and opportunity in life sciences data. We have huge resources, including UK Biobank. Bringing these together and getting them properly interoperable and accessible will be important.

I turn now to some specific points that have been raised by individual noble Lords. The noble Lord, Lord Willetts, rightly identified cell and gene therapy as a crucial and transformative industry, and he raised important points about the complexity of VAT being applied to something that is both a service and a product. I will certainly raise these issues with both the Department of Health and the Treasury, and I will also point out that the Dutch system has found an answer to this, so there may be a model to look at.

Coming back to the question of procurement, I agree with the noble Baroness, Lady Bowles. It is crucial; we have to get this right. It is a big part of what will drive innovation. In terms of the points on IP, I will not go into details, but the IP requirements for Innovate UK are not for any IP. There is a specific requirement in one part of the process, called “Contracts for Innovation”, which concerns departments looking for grant-giving for companies. Because of the Subsidy Control Act, there is a nuance which means that it is quite difficult for them not to have some IP taken—but I want to look at that and see if we can get to an answer.

International work was raised, and it is so important that we are back in Horizon and that we have an uptake both from academia and industry, which should be everywhere across the country. The noble Lord, Lord Drayson, asked about the links to the US. I point him to the interest that has come up as a result of the AI Safety Institute, where there is now a very strong link with the US and, indeed, with US companies. His point about where we align regulation is a critical one.

Europe also came up in relation to FB10. I have commented on this previously; we are keen to be part of future European programmes, provided they are based on excellence and create value, and we have already issued a statement on FB10 in a paper.

The noble Lords, Lord St John and Lord Taylor, talked about skills, visas and talent, and it is important that we get that right. We know that the ability to retain skills in this country will be crucially important, and we know that we have always relied on significant overseas skills to be at the forefront of what we do in science and technology. I completely agree with the noble Lords, Lord Mair, Lord Waldegrave and Lord Stevens, that universities are key and I am working very closely with the Department for Education to make sure that we get the right support for them.

In reply to the noble Baroness, Lady Bennett, I am afraid I do not have the answer on agro-ecological approaches and the per cent spend, but I will find the answer and get it to her. I will also come back to the noble Lord, Lord Winston, on the MRC centres, which are important—I gave quite an extensive answer on that earlier this week, but I will come back to the noble Lord with more details.

Finally, I will pick up on the point about failure and the acceptance of it, raised by several noble Lords, including the noble Lord, Lord Lucas. It is crucial that we have a system that allows failure to occur; you cannot innovate without failure. I have talked to the National Audit Office about this and, as we look at UKRI and Innovate UK, it will be part of trying to get this into a much better position.

In the Budget yesterday, the Chancellor set out an ambitious plan to fix the foundations of our economy and to rebuild Britain by mending public services and delivering sustained economic growth. None of that is possible without science and technology. Without science, technology and innovation, we will not be able to transform the quality and efficiency of our hospitals and schools. Without championing science and technology in start-ups and scale-ups, we will not create the good jobs that are needed. It is a crucial part of what we need to do for today and tomorrow, it will reap benefits for years to come, and it is important for national resilience. I end by saying that I completely agree with the fire drill point.