LORD SAINSBURY OF TURVILLE

18 OCTOBER 2006

  Q209 Chairman: Perhaps I could welcome you once again to Science Question Time and the Science and Technology Committee, Minister, and thank you very much for giving us your time. Perhaps I could also welcome a packed gallery this morning. Perhaps you are expecting something that we are not! However, we are delighted to see you this morning. It is always an interesting session. Minister, the first report which the Committee did in terms of one of its thematic approaches to looking at the Research Councils was the issue of knowledge transfer. We are grateful to you for the Government's response, which we received last week. Could I start by asking you what discussions has the OSI had with the Research Councils about improving their performance in terms of knowledge transfer?

  Lord Sainsbury of Turville: The OSI regularly discusses with the Research Councils their performance in relation to knowledge transfer, not least through the performance management system. This includes delivery plans for each of the Research Councils in knowledge transfer, along with quarterly and annual progress reports and six-monthly bilaterals. Earlier this year, we commissioned Peter Warry to examine how Research Councils can demonstrate that they are delivering a major increase in the economic impact of their investments. This report, published in July has been helpful and well received by the Research Councils. RCUK's Knowledge Transfer and Economic Impact Group are finalising their action plan to address the recommendations raised by both the Select Committee and the Warry reports, and this work will be led by Philip Esler, the Chief Executive of the Arts and Humanities Research Council.

  Q210  Chairman: Thank you for that. Can we also thank you very much for the positive response to the report? We thought that it actually took the argument on. One of the things that concerned us somewhat during this inquiry was that the Government clearly have a plethora of different mechanisms and funding mechanisms to support and promote knowledge transfer, and some of them were more effective than others; but there seems to be a lack of co-ordination between the various groups which the Government were funding as far as knowledge transfer was concerned. I wonder what ideas you have for bringing that together as a more concerted approach to this whole issue, which is obviously crucially important to the British economy.

  Lord Sainsbury of Turville: You are right that there are a number of different mechanisms, but I think that there should be. I think that the way to deal with that is to be clear which bodies are required to do what, and then also to make certain there is a mechanism, largely through the Director General, Science and Innovation, to make certain that everyone is clear as to what their responsibilities are and that any lack of clarity of that is sorted out and dealt with.

  Q211  Chairman: If we take one area, Minister—the RDAs—we heard over and over again that there was a major disconnect between the work of the Research Councils and the RDAs and the delivery by the RDAs, if you like, of science and innovation on the ground. Is that something you are aware of? What could be done to make sure that, for instance, the RDAs have the right capacity to be able to deliver the science and innovation strategy on the ground? Because they are interfacing with the small/medium-sized companies.

  Lord Sainsbury of Turville: I think that is exactly the issue. The role of the Research Councils is one thing; the role of the RDAs is quite a different role. There are issues about the extent to which RDAs have the capacity to deliver science and innovation strategies in their region. I think the way to tackle that is with them directly, to make certain they do have the capacity to do that. Perhaps a more important interface is between the Technology Strategy Board and the Regional Development Agency. I think that is a rather more important relationship. There, I think we need to task the Technology Strategy Board with more of a leadership role, in terms of where the technology opportunities and involvements are.

  Q212  Chairman: But in terms of the capacity in the RDAs, that clearly seems to be missing in some of the RDAs. Is that your responsibility? Is that OSI's responsibility? Is it DTI's responsibility? Who actually makes sure that is done?

  Lord Sainsbury of Turville: It is a DTI responsibility in the sense that RDAs report to the DTI. I think that would be the route for having discussions with them and taking that forward. It is clearly an area that I, as Minister for Science and Innovation, am very interested in and have taken an interest in.

  Q213  Margaret Moran: As our Chairman has just said, I was very keen that we did this report because I think that there is a need for urgency in tackling some of the problems of co-ordination across the various areas which supposedly have a responsibility for knowledge transfer. Could you be specific about what advantages you see the new RCUK Knowledge Transfer and Economic Impact Group having over its predecessor? There is no point in moving things round the deck of the ship unless there are some very specific and rather rapid advantages.

  Lord Sainsbury of Turville: I actually think that the problem is to be clear about what the knowledge transfer responsibilities of the Research Councils are and to get greater clarity on that. That was what would make a difference. I think it is useful to have a co-ordinating body, but the real issue is to be clear what they are supposed to do and for us then to task them very clearly, through our management performance system, to achieve those objectives.

  Q214  Margaret Moran: As has been said, the concern is that the number of stakeholders involved in knowledge transfer, peripherally or otherwise, is huge. Some did not see their role as particularly central in knowledge transfer. How do you think we can all assure that Research Councils really engage with their stakeholders? Because that was one of the major issues that emerged from the report. We are very grateful for the positive response from the report, but I think that the evidence of that increasing engagement is still not there.

  Lord Sainsbury of Turville: I think that you should be clear. One of the issues about which there is a lack of clarity is who is responsible for what. One of the fundamental ways that we have organised this, which is extremely important, is that universities—on the basis of the funding they get from Research Councils—are responsible for the knowledge transfer of that. That is a fundamental principle. It is copying what was the biggest change in American organisation of research which led, many people think, to the big change in America: which is that the knowledge transfer is the responsibility of the body which does the research, not of the funding body. That is absolutely fundamental. That is why I do not personally want the Research Councils to spend a lot of time worrying about the knowledge transfer from universities. That is the universities' responsibility. What we have seen as a result of the incentives we have given to the universities is a complete transformation of university knowledge transfer; so that, on any measure of knowledge transfer—whether it is spin-off companies, licence, patents, work for industry—there has been a dramatic change. That, frankly, should be allowed to get on and continue on that path. There is perhaps a case for them doing more, but the fact is that they have transformed their performance and it is working very well. That is why, in our answer to you, we have been very clear about what the particular tasks are that we expect Research Councils to do, and those were set out on page 14 of our response.

  Q215  Margaret Moran: Slightly off the report but, I think, very important—this is all about capturing innovation and using that innovation. Have you, or have you in collaboration with DTI, considered the US model of procurement, which requires innovation as part of that? Has there been any discussion about it? It has been very impressive, very influential, in the technology sector, has it not?

  Lord Sainsbury of Turville: As you probably know, there have been a whole series of government reports which cover this subject—in fact rather too many reports—and the issue is not the question of how you should do procurement. There are a lot of good ideas; it is well known how you use procurement to get innovation. The question is making this happen in practice. We are having discussions at the moment—in fact I am having discussions today—about how you make certain that government departments deliver on procurement and innovation. But the issue is not how to do it. We all know how to do it. You will see in the 2003 Innovation Report a long section about procurement.

  Q216  Dr Turner: The Knowledge Transfer Network is intended to raise business awareness. How is it going to do this?

  Lord Sainsbury of Turville: I am sorry—the knowledge transfer . . . ?

  Q217  Dr Turner: The Knowledge Transfer Network—to raise business awareness of what university research centres have got to offer?

  Lord Sainsbury of Turville: We have the knowledge transfer networks. We have a whole series of those which, as you know, are run through the Technology Strategy Board, which cover things like bio-processing, chemistry innovation, cyber-security, food processing. These are essentially intermediate organisations that bring industries and companies in those particular areas together with a university or group of universities. That has now been going for five or six years and is proving very successful.

  Q218  Dr Turner: We have been worried about knowledge transfer and effective innovation ever since I have been a member of this Committee, which is about 10 years. One of the biggest problems has always been the great funding gap. As I am sure you are aware, funding for start-up technology-driven SMEs is practically missing here, in terms of reasonable cost venture capital to see them through before companies reach revenue point, whereas it is totally different in the States and in Germany. One had hoped that the introduction of RDAs would have helped to plug this gap. It has not. Do you have any thoughts on how we can tackle what is really the biggest problem in innovation in Britain? We were in Australia last week and we found it was exactly the same there. That is where the real problem is. An awful lot of companies, an awful lot of technology, just do not get over the "Valley of Death".

  Lord Sainsbury of Turville: I think the answer to that is that it is very rapidly changing in this country. As you probably know, in the last two years there have been about 20 university spin-offs which have gone to market—IPOs. The value of those companies today is about £1.3 billion, which is excellent news. Of course, this fact has not escaped the attention of the venture capital industry. There are a whole series of particular venture capital companies who have in fact done deals now with universities to help fund any spin-offs they have. In fact there was a company which was called IPO, now called IPO Group, which has a whole list of universities it works with; there is a whole list of companies it has funded and is bringing to market. So I think that this situation has been transformed. It has been transformed by the success of the AIM market. That was spurred on, not totally but slightly, by government tax changes. The AIM market is doing extremely well now. If you can take a company to the AIM market within five years as a venture capitalist, that of course changes the whole arithmetic of it and makes it much more attractive. The fact that we are now getting spin-offs, exciting spin-offs, from universities is the other side of that. So the market in this case, with a little help from government, is really beginning to work. If you go round the country, you can see examples of this happening all over the place.

  Q219  Dr Turner: But there are still examples of companies having major difficulties. Sorting out the technologies is the easy bit; getting through funding to revenue is still very, very difficult.

  Lord Sainsbury of Turville: It is still very difficult, but it is always a question of what is the quality of the company. Now, increasingly, if you have good companies they can begin to get the funding.