The Science Budget

Debate between Steve McCabe and Iain Wright

Wednesday 2nd March 2016 Commons Chamber

[Mr Iain Wright (Hartlepool) (Lab)]

It is a genuine pleasure to follow the Chair of the Science and Technology Committee. The manner in which she is steering that Committee towards practical added-value recommendations is exemplary and superb, and the manner in which she steered the House through her recommendations this afternoon was astonishingly good, too. I am in the weird position of agreeing with every word she said, so I will not take too much of the House’s time.

The hon. Lady was particularly strong, if I may say so, when she spoke about what a pivotal role science plays in future economic and productivity growth, and given my Select Committee’s priorities, I was particularly interested in her point about start-ups. It is relatively easy to start a business in this country, but scaling that up so that we have very large, innovative and successful firms employing a large number of people is a major challenge for this Parliament. I hope that our two Select Committees can work together closely to provide the join-up that is needed.

The hon. Lady mentioned that science has never been more crucial to our status as a modern economic nation. I agree. We need innovative and successful firms creating wealth and employment on the back of science and research and development. We are here now, in the 21st century, on the cusp of the fourth industrial revolution: the first, in the 18th century, used water and steam power to mechanise production; the second, in the early 20th century, used electric power to create mass production; the third, in the late 20th century, used electronics and information technology to automate production, unleash digital and revolutionise the means of communication.

This fourth industrial revolution, moving at an exponential pace, is astonishing. The technologies that this revolution is unleashing, such as the internet of things, autonomous vehicles, materials science, nanotechnology, biotechnology, energy storage, artificial intelligence and quantum computing, will disrupt almost every industry in almost every country, and will disrupt society as a whole. Science and technology are the foundations of this revolution, and the choice in the future will be stark. Countries that embrace and invest in science will be the winning nations of the future; those that do not will fall behind in economic growth and living standards.

This is why, as the hon. Lady pointed out, it is a matter of concern that we have lagged behind spend by our competitors on science and research and development for much of the past 30 years. As she said, what we do spend, we seem to spend very efficiently and effectively. We punch well above our weight, but we need to think about the volume of that value, as well as what we are doing with it. We have spent just over 2% of GDP on R and D just once in the past 30 years. That was in 1986, and we have never again reached that level. Spend has declined steadily over that period to reach a long-term average of about 1.6% or 1.7% of our GDP. We are below the EU average for R and D spend as a proportion of our economy.

The Russell Group has pointed out that in terms of the level of R and D intensity of the top 22 countries listed by the OECD, the UK has the lowest level of investment. Our investment has declined, while our competitors such as Korea, Germany, the US and even Japan have increased the share of their economy spent on research and development. As is mentioned in the hon. Lady’s report, Imperial College London has said that our investment as a proportion of GDP is about 1.72%, but China increased its share of R and D investment from 1.3% in 2005 to 1.98%; France increased its share from 2.11% in 2005 to 2.26% in 2012; and Germany increased its share from 2.51% in 2005 to 2.92% in 2012. The US also increased its investment in the same period from 2.51% of GDP to 2.79%. Imperial College, giving evidence to the hon. Lady’s Select Committee, said that the choice was stark:

“Without increased investment in R&D, therefore, the UK risks losing its position at the forefront of research globally, particularly given the rapid rate of advance in scientific research and the intense levels of international competition.”

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

Is my hon. Friend concerned that where the Government attempt to support innovation and R and D, the resources are very unevenly distributed? For example, from the Catapult programme, 9% of resources have gone to the midlands region, but 46% have gone to London and 22% to the south-east. Surely that is not the way to get the best out of the country.

[Mr Wright]

My hon. Friend makes an important point. If we are spending a pound of public money, what do we want to get out of that and where do we get most bang for our buck? If the Government are serious about rebalancing the economy and making sure that prosperity is not just in London and the south-east but spread across the country, projects such as the midlands engine and the northern powerhouse need to have that scientific base in order to boost investment, research and development, and ultimately wealth creation as well.

The Russell Group has stated:

“The UK punches above its weight when it comes to excellence in research and higher education but this situation is unsustainable in the long-run without continued investment…The UK lags behind its main competitors in its level of investment in R&D and cannot continue to sustain its position as a world-leader without sufficient support.”

The EU has stated that to maintain future competitiveness in the face of unprecedented global competition, member states should be working towards spending 3% of GDP on research and development by 2020. As the hon. Lady said, the UK is a long way from that target. Only Finland, Sweden and Denmark already exceed that 3% target, yet it is vital for future productivity gains.

The hon. Lady and her Committee thought that the science issue was so important that it should be the focus of their first inquiry. We in the Business, Innovation and Skills Committee thought that the Government’s productivity plan, published in July 2015, was so important—indeed, the productivity gap is the major economic challenge of this Parliament—that we made it the focus of our first inquiry. We looked at spending on research and development and found that publicly funded R and D creates a strong “multiplier effect” and “crowds-in” private sector, charitable and inward investment, stimulating around 30% more self-investment from industry. Throughout our inquiry we heard strong evidence about just how much the public spending on R and D can draw in that private spend, as opposed to crowding it out. That model is operated by our major competitors around the world. Our report stated:

“We fully agree with the Science and Technology Committee’s recommendations on maintaining good R&D investment in the UK and echo that, if the Government is serious about productivity and competitiveness, it needs to commit to a total level of public and private R&D investment in the United Kingdom of three per cent of Gross Domestic Product. We therefore recommend that the Government produces a ‘roadmap’ for increasing the total level of public and private R&D investment in the United Kingdom to three per cent of Gross Domestic Product.”

The hon. Lady also mentioned the move from grants to loans. I worry about that, because it is a major concern. Decisions on capital investment are global, often decided by people around boardroom tables that are not in the UK, and it can be transferred anywhere. Those multinational corporations will be looking at a different dashboard of metrics when deciding where to put their latest investment. They will be looking at the flexibility of the labour market, tax rates and the ease of doing business. They will also be looking at the collaboration and partnerships between public and private, particularly in terms of R and D.

Other countries provide help and support to land that investment, and for the past 15 years we have had a major strength in that. The level of foreign direct investment into the United Kingdom has been excellent, but I think that we will put that at risk by moving from grants to loans. For example, why would Rolls-Royce invest in a factory here when Singapore, where the company already has a presence, could be offering a whole lot more? It is a case of making sure that we do not compromise our true strengths when it comes to grants and loans. Therefore, echoing what the hon. Lady said, what is the rationale for that? Is the Minister not aware that there is a huge risk in moving from grants to loans? What metrics will he use to advance this? Can we pilot it before it is rolled out across the economy?

The second risk that I would like to talk about is the proposal to merge Innovate UK and Research UK. The Catapult centres are working well, but they are relatively new organisations and they need a period of stability and certainty to become embedded in the ecosystem of science research and innovation. The merger will cause disruption and uncertainty and it will affect our science base. Will the Minister therefore outline for the House what the roadmap is to ensure that Innovate UK and Research UK can come together in a safe way?

The Business, Innovation and Skills Committee fully agrees with the Government on the need to improve productivity; we want to focus on that throughout our inquiries in this Parliament. Part of that is being able to spend for the long term and prioritising capital spend. Under the coalition Government, BIS’s capital departmental expenditure limits rose by about 84%, but under the spending review announced by the Chancellor two or three months ago it will fall by about 60%. The spending review stated quite explicitly:

“The government has chosen to prioritise its day to day spending on national security and key public services while investing more for the long term in capital infrastructure.”

The Government’s capital investment over the lifetime of this Parliament actually increases by about £12 billion, but BIS’s capital spend is being cut by 60%. The Ministry of Defence’s capital spend will increase, as will the capital spend of the Department for Communities and Local Government—a comparably sized Department—because of housing. The Department for Transport’s capital spend will double to £12 billion.

In contrast, the science budget will bob around throughout this Parliament at about £1.1 billion a year. I do not see that as a huge success. Actually, I see it as a failure in negotiations by BIS during the spending review, especially given that, as the Chancellor has said, science is a major priority for this Government. Since 2010 we have lost around £330 million in capital spend on science. It will take an awful lot of investment and prioritising to catch up, given that our competitors are moving ever further away. Therefore, does the Minister think that that was a disappointing negotiation? Given the priority and the pivotal role that science plays, does he think that we should be spending more on science in order to boost that long-term value for the economy?

Given the central importance of science as perhaps the principal driver of future economic growth, increased competitiveness and improved living standards, the relative decline in our science spend, regardless of whether we spend it wisely, should be a cause of enormous concern, and there should be a determination at a national level to reverse it. That is why I am really pleased that the hon. Lady has brought forward this debate. I hope that the Minister will respond positively to ensure that science is at the heart of our economic revival, now and in the future.

Youth Unemployment

Debate between Steve McCabe and Iain Wright

Wednesday 22nd June 2011 Westminster Hall

[Steve McCabe]

Yes. I welcome any initiative that is designed to help people to be better prepared for work and to help young people to get that first foot on the work ladder. I absolutely agree with the hon. Gentleman on that point.

[Mr Iain Wright (Hartlepool) (Lab)]

I congratulate my hon. Friend on securing this debate, which is very important. His experience in Wolverhampton in the 1980s is very similar to my experience in Hartlepool in the 1980s. Following the two previous interventions, does he agree that the cancellation of the education maintenance allowance is a detrimental step in helping people to stay on in education? In addition, the abolition of the future jobs fund, which helped scores of people in my constituency and elsewhere, will also stop interventions that help young people gain work experience, which is so vital for their future careers.

[Steve McCabe]

I feel quite strongly that, so far, what we have seen from the Government is the cancellation of initiatives. I hope that during this debate we might hear something about a fresh initiative. However, I personally think that the wrong time to withdraw support is when we are in the depths of a recession and youth unemployment is rising. That is patently wrong.

I am not alone in expressing my concern about youth unemployment. The CBI has recently voiced its concerns about the rising trend of youth unemployment, a trend that it fears. There are about 31,000 more young people chasing work now than there were last summer. Youth unemployment is hovering around the 1 million mark. That means that one in five of our young people are without work, which is an awful lot of talent and potential for any country to write off.