Treasury Support for UK Science

Seema Malhotra Excerpts

Wednesday 4th November 2015 Westminster Hall

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

It is a pleasure to speak in this debate and to serve under your chairmanship, Mr McCabe. I congratulate my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) on securing this important debate.

I am grateful for the contributions of hon. Members from all parts of the UK, including the hon. Member for Bolton West (Chris Green), my hon. Friend the Member for Cambridge (Daniel Zeichner), the hon. Members for East Antrim (Sammy Wilson), for Bury St Edmunds (Jo Churchill), for Kirkcaldy and Cowdenbeath (Roger Mullin) and for Strangford (Jim Shannon), and others. They raised a range of issues, including the need for a long-term strategy, which is vital for innovation; the need to focus resources where they work; the importance of research through the universities; the need to build connections to ensure we get the most out of contributions and the progress that comes from that; and the need for strong and committed Government action. Notwithstanding the contribution that the Minister will make, it is disappointing that there is no Treasury Minister here today, because this is essentially a Treasury debate.

My hon. Friend the Member for Penistone and Stocksbridge said that the UK has always punched above its weight in science and innovation. We should be proud of our record, and as politicians we should recognise our role in ensuring that success for the future. I thank all the organisations that have contributed in so many ways to the debate, including the Royal Society of Chemistry, the Royal Society of Biology, the National Centre for Universities and Business, the Campaign for Science and Engineering and many others.

Science matters, and Treasury support for UK science is absolutely critical, not least because of the pivotal role of scientific research in driving innovation and productivity and its importance in building the high-tech, high-skilled economy that we need. This issue is at the very heart of the choices and questions facing our country. We need strategic and sustained investment to secure our future prosperity.

Independent analysis suggests that every pound spent by the UK Government on research and development raises private sector research and development output by 20p a year in perpetuity. Even that is an underestimate of the full multiplier effect of public investment in science and research, because Government investment stimulates additional private sector investment. The scale of public sector investment is greater than what the private sector can do on its own, as the lead that other countries have over us shows. Government investment also has a wider role in developing the wider capabilities that we need.

The Chancellor likes to talk about his support for science, but, as in so many areas, there is a gap between what the Government say and what they do. Their record of investment in our country’s future is not as good as we want it to be. They like to boast about the success of catapult centres, which we support—indeed, they were an initiative of the previous Labour Government —but the support that those centres receive under this Government falls short of the amount provided to comparable schemes in other countries such as Germany and France, which benefit from more than 10 times as much public support. We under-invest in the science-industry linkage. Similarly, Finland spends about 10 times as much per capita on innovation funding as our Government do.

The protection that the Government say they are providing to the science budget is only in cash terms, which means that inflation has eaten up about £1 billion of its value over the past five years. The Government’s commitment to science needs to be subjected to critical scrutiny. This is no time for complacency. There are disturbing signs that we are falling further and further behind key competitors when it comes to investment in innovation and technology, which is critical for future business growth and our competitiveness in the global economy.

The previous Labour Government established a target to increase UK R and D, both public and private, to 2.5% of GDP by 2014. The latest official figures from the Office for National Statistics show that R and D expenditure was at 1.67% of GDP in 2013. We are behind many countries and behind the EU average. OECD figures for 2012 show that the US spent 2.8% of GDP on R and D and that new global players, such as China and South Korea, were forging ahead of us. Furthermore, the UK continues to have a lower level of business R and D spending than the OECD average. That has been exacerbated in recent years by short-termism in corporate planning.

A recent report from PwC is clear that the UK lacks the skilled workforce and the necessary skills to complement and drive R and D at scale. As a result, we continue to fall behind our competitors. Recent labour market trends have confirmed the importance of technology-related investment in creating new jobs. As Sherry Coutu’s report for the previous Government shows, we face a worrying scale-up gap, with too many small businesses struggling to access the skills and support they need to grow into global players. Just two of the world’s top 20 companies for R and D spend are located in the UK. One of them, GlaxoSmithKline, is based in Hounslow, which is my borough, and both of them are pharmaceutical companies. We continue to need long-term leadership from Government to ensure that businesses get the support they need to be able to scale up.

All the trends demonstrate that, contrary to the current Government’s outdated laissez-faire attitudes, we cannot rely solely on private sector investment to secure our place in tomorrow’s high-tech global economy, nor can we leave the private sector to fend for itself without the support of an active and strategic state. Although standard figures show that the majority of aggregate R and D investment is undertaken by the private sector, that risks obscuring the fact that the public sector delivers most of the research, so that the private sector can concentrate more on development. Moreover, the public sector has a key role to play in ensuring a smooth division of labour between the two, building the relationships and institutions that can foster horizontal linkages between basic and applied research, or science and industry, to maximise the positive feedback effects between the two.

To get Britain to be competitive, it is therefore essential that both public and private R and D not only rise but work more closely together. We need not only increased investment but greater strategic focus. That is why we have asked Professor Mariana Mazzucato, a leading authority on the role of the state in creating innovation ecosystems in which knowledge-led enterprises can thrive, to join Labour’s council of economic advisors and to contribute to the development of our plans to ensure that the UK can seize the economic opportunities available to us.

I am glad to be able to add the voice of Labour’s shadow Treasury team to the call for support for science and innovation in this month’s spending review. I can reassure my hon. Friend the Member for Penistone and Stocksbridge, all the Members who have spoken today, and all those who care about the future of our science base and our economy that if the Government do not listen, the Labour party will.