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House of Lords

Friday, 3 November 2006.

The House met at eleven of the clock: the LORD SPEAKER on the Woolsack.

Prayers—Read by the Lord Bishop of Rochester.

Programme for Research: EUC Report

Lord Woolmer of Leeds rose to move, That this House takes note of the report of the European Union Committee on the Seventh Framework Programme for Research (33rd Report, HL Paper 182).

The noble Lord said: My Lords, first, I express the thanks of the sub-committee to our then Clerk, Anna Murphy, and our then committee specialist, Oriel Petry, for the excellent assistance that they both gave us in conducting the short inquiry that formed the basis of our report. I also express my warm appreciation to all the members of Sub-Committee B for their diligent work on this inquiry and in producing the report.

Our inquiry into the Seventh Framework Programme for Research was short, because of the pressure of other internal market issues before us at the time. We concentrated therefore on a small number of matters but recognise that there are many other important facets of research, development and innovation in Europe that we were unable to address. Today's debate may provide an opportunity for your Lordships to touch on some of these wider matters. I look forward in particular to the contributions of the noble Baroness, Lady Sharp of Guildford, and the noble Lord, Lord Giddens, who both bring enormous experience to debate on research issues.

Member states of the European Union agree that strengthening the research base and increasing research and development as a proportion of gross domestic product is an important part of the Lisbon agenda aimed at ensuring that Europe can take on the challenges of an increasingly competitive global economy. The European Council and Commission aspire to increasing research and development in Europe from 1.9 per cent to 3 per cent of GDP by 2010, but in oral evidence, the Minister told us that the Commission has now lowered its expectations to an increase of just 2.6 per cent. In the United Kingdom, our figure is around the European average at 1.9 per cent, and two-thirds of that is done by companies. Research in universities and our research institutes makes a further valuable contribution, supported by public funding programmes and by the private sector.

The latest research and development scoreboard published by the DTI recently analysed the top 1,250 global companies by research and development spend and the top 800 UK companies. Eighty-two per cent of global research and development is in companies based in just five countries—the USA, Japan, Germany, France and the United Kingdom—with Taiwan and South Korea growing significantly

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and China beginning to grow quickly from a very low base. Sixty-one per cent of all that global research and development is undertaken by the top 100 companies; and 70 per cent of all research and development is in just five sectors—technology hardware, pharmaceuticals, automotive, electronics and software—while aerospace and defence companies are growing research and development fastest. In this country, we are particularly strong in pharmaceuticals and aerospace with research and development in software and financial services companies growing in importance. Remarkably, of the top 800 research and development spending companies in this country, 119 are software businesses. Private sector investment is of course influenced by the general business and taxation environment—including taxation incentives—but also by the research and skills base of a country. It is important that the research skills base is maintained and grown. Our universities have an important part to play in that.

At the European level, the main programmes to support research have been what are called the framework programmes. It has been said to me already today that that is not the most meaningful phrase to use to communicate with the general population, but that is the name given to the programmes. The sixth programme, covering five years, ends on 31 December. The seventh programme, which will cover seven years, comes into full operation on 1 January next year.

The budget for the seventh programme over seven years is some €54 billion—about €7.7 billion per annum. That compares with around €5 billion a year in the sixth programme, a significant increase reflecting the importance attached to it by the Council of Ministers.

Chapter 1 of our report summarises the research and development programmes. There are four broad objectives. The first is to support co-operation between industry, universities, research centres and public bodies to gain leadership in key scientific and technological areas. This is allocated 60 to 65 per cent of the budget. The second is to promote and fund basic frontier research. This will be the responsibility of a new European Research Council, which I shall say more about later. This will take 15 to 20 per cent of the budget. The third is to train and to provide mobility and careers development for researchers through a range of schemes, known generally as the Marie Curie schemes, and will take 10 per cent of the budget. The fourth is to strengthen research and innovation capacity throughout Europe. This will take the final 10 per cent of the budget.

Funding is expected to support nine priority themes, which are set out in paragraph 12 on page 8 of our report. In addition, the seventh framework programme covers the Euratom research framework programme, although the committee did not consider that in its inquiry. We invited and received written evidence from the CBI and Research Councils UK and took oral evidence from the noble Lord, Lord Sainsbury, the Minister responsible for this policy area. In our discussion with the Minister, we covered

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seven issues, set out in paragraph 18 of our report. Your Lordships will be aware that we took his oral evidence in February this year. That is a long time ago now, and things will have moved on in several areas. No doubt the Minister today will bring us up to date.

On the overall budget, we sought to clarify the likely outcome of the then gap between the Commission’s initial budget proposal for some €76 billion and the likelihood that this would be reduced significantly. The final outcome, as we now know, is a budget of some €54 billion over seven years. This is still a significant increase, which we welcome. In its written evidence to us, the CBI told us that there was little evidence that the research framework programmes have given Europe a widespread economic advantage, and still less evidence of directly attributable competitive gains for UK businesses. In his oral evidence to us, the Minister took a more positive view of the impact and importance of these research programmes, but acknowledged that, although industry still participated in the European programme, he was concerned that participation by industry in the UK and across the EU had reduced in the last five-year programme. Will the Minister reassure the CBI today by giving practical examples of where past research programmes have borne practical results in innovation and products in the market place? It is always dangerous to expect results too quickly, but we are now on the seventh programme and we should be able to convince industry that this really does pay off.

The Minister agreed with the CBI that the largest part of the new programme should concentrate on research aimed at more direct applications and should be industry-driven. He told us that these objectives would be met by placing industry at the heart of European technology platforms charged with identifying large-scale industrial research and development challenges and with developing a strategy—the so-called strategic research agendas—to deal with them. Crucially, the Minister strongly supported the proposal that the most important of those strategic agendas should be taken forward by joint technology initiatives—long-term private-public partnerships. We discuss these very important matters on page 12 of our report.

The joint technology initiatives are a major change in the identification and delivery of improved research that is of more immediate value to industry. We welcome this new approach. It will be critical to improving the participation of industry in a European research agenda, and to the success or failure of the seventh framework programme, so far as industry is concerned. Difficult though it is, more effort should be made to set clearer target outcomes and timelines on investments through the joint technology initiatives. When we met the Minister, he was unsure what monitoring and reporting systems would be in place for the initiatives. Will he tell your Lordships today whether there has been any progress in this area? He also conceded that businesses believe that the framework programmes are too complex and bureaucratic and that changes must be made. The Government’s response to our report gives more

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detail on how, in their view, the Commission is seeking to tackle this problem. Is he optimistic that good words will turn into good deeds?

The second broad objective of the framework programme is to promote and fund basic frontier research. To this end, the European Research Council has been established and a scientific council appointed as an academic body to determine the council’s strategic strategy and to ensure that it operates on the basis of scientific excellence. As many of your Lordships will be aware, the scientific council will be chaired by the noble Lord, Lord Patten of Barnes, and two of the 22 members of the council—the noble Lord, Lord May of Oxford, and Professor Wendy Hall of Southampton University—are from the UK. We welcome the establishment of the European Research Council, and the strength of its scientific council is greatly encouraging. It can make a real difference to developing a coherent and productive programme of European frontier research. It is vital that its independence is strongly upheld in the years ahead, and that its decisions will always be based on excellence and merit.

My committee was less persuaded by the Commission’s proposal for the establishment of a European institute of technology. When the proposal was initially floated, it appeared to be modelled on the Massachusetts Institute of Technology. There had been considerable doubts about the idea of creating a top-down academic institution. In his oral evidence, at question 68 on page 11 of the minutes of oral evidence, the Minister told us:

“I think the idea of a European Institute of Technology is quite unhelpful, frankly. We remain very sceptical about it”.

Many commentators emphasised the need to strengthen existing universities and research institutes across Europe in order to ensure that more of them are world class and to strengthen further those that are already world class.

Since we reported, the European Council invited the Commission to bring forward a formal proposal, which was published on 18 October. It aims to have a European institute of technology in place by 2009. In October, the president of the vice-chancellor’s organisation of Universities UK commented that although the proposal is now better defined, they still have some serious reservations. First, will funding of the European institute of technology impact on the European Research Council’s budget and its priorities? Secondly, what problems will there be if the institute of technology seeks to award its own degrees? Thirdly, will it really add value or will it threaten some of the many collaborations which already exist between universities and industry? What is the present view of the Government on the proposal and what answers would the Minister give Universities UK on its continuing concerns?

The third objective of the framework is to strengthen training, mobility and careers development for researchers within the context of promoting excellence in European research. This will continue to be delivered through Marie Curie schemes in order to develop research skills and training capacity, which we warmly welcome. The UK

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research councils told us that these programmes have been strongly beneficial to the United Kingdom and have added value at the European level. They had some concerns about the topping up of national programmes and how that is affected by the European scheme. What progress has been made in meeting the concerns of the UK research councils?

The final area of interest to our committee was the relationship between the EU competitiveness and innovation programme, EU industrial policies, structural funds and these research programmes. Each of these is of great importance, but they offer the potential for overlap, confusion, and complexity. The Minister told us that the Government shared our concern. In September, the Commission published a European Union innovation strategy—Putting knowledge into practice: A broad-based innovation strategy for the EU. My committee awaits legislative proposals in this area and will look carefully at these matters as well as at the positive benefits that a vigorous and well constructed innovation strategy can bring.

Research and development lie at the heart of competitiveness, improving standards of living and the quality of lives. The framework programmes are just part of responding to the challenges and just part of the solution, but they are an important initiative at the European level and demonstrate the value of strengthening our diverse but large internal market in ideas and research communities. I look forward enormously to the debate. I beg to move.

Moved, That this House takes note of the report of the European Union Committee on the Seventh Framework Programme for Research (33rd Report, HL Paper 182).—(Lord Woolmer of Leeds.)

11.23 am

Lord Bowness: My Lords, I thank the noble Lord, Lord Woolmer, for introducing this report and for the bulk of the report before your Lordships today. It fell to the Foreign Affairs, Defence and Development Policy Sub-Committee to consider the space and security programme included in the Seventh Framework Programme for Research. Therefore, that sub-committee of the European Union Committee contributed to and has the responsibility for Chapter 3. I am grateful to members of the sub-committee and our clerk, Emily Baldock, for their work in preparing this chapter.

I do not wish to take a great deal of your Lordships’ time, but I have a number of specific questions relating to Chapter 3 that arise from the Government’s response, to which I hope that the Minister may be able to give some answers today. When the original proposals were published, the Government expressed serious reservations on security research. The Home Office published a long paper in consultation with the Ministry of Defence, which stated that it was essential to ensure that the European security research programme did not harm the security interests of member states or cut across either national defence research or European co-operation on defence research, and that there would need to be effective safeguards. The sub-committee agreed with that view.

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On the narrow point of the budget, to which the noble Lord, Lord Woolmer, has already referred, I would ask the Minister to clarify the position. In the Government’s response, they note that the political agreement was the same as in the Commission’s revised proposals. But the Government have also stated that they would like to see the budget line for space and security reduced. It is unclear from this response whether there has been any reduction in the budget line for space and security and whether this still reflects the United Kingdom’s priorities on the proposed budget. Clarification would be much appreciated.

As regards security research, the sub-committee acknowledges and welcomes the undertaking given by Commissioner Verheugen in correspondence that the focus should be on civil research. The Government have noted that under the framework programme these moneys cannot be used to fund defence research. However, this does not cover the potential problems of dual-use research, to which the sub-committee’s recommendations mainly referred. We recommended a number of means of monitoring such research proposals, but the Government’s response makes no specific comments on that. I should be grateful if the Minister could state specifically whether they have pressed for the involvement of COREPER and the General Affairs and External Relations Council in accordance with the recommendation made in this report, and for co-operation between the Commission member states and the European Defence Agency.

The Government’s response also refers to the role of the programme committee in which they are to participate. It states that the committee will be able to carry out the function foreseen by our committee. However, there is no indication that the programme committee should consult with, for example, the European Defence Agency. We were seized of the considerable sensitivities that may arise at the prospect of the Commission having any involvement in defence matters, even if that were legally possible.

Having conducted a previous inquiry into the European Defence Agency, however, we are optimistic about its prospects. During that inquiry it was clear that research in some instances may have a dual use. Communications is a prime example, but it would be unfortunate if, by maintaining a too purist view, we encouraged or permitted duplication of effort and cost, or did not use the resources available. The European Defence Agency appears to be a vehicle by which this can be avoided. I would be grateful if the Minister could assure the House that the technologies with a dual use—civil and military—will be identified, and if he could advise us of the current state of co-operation between the Commission and the European Defence Agency on these issues.

11.30 am

Baroness Sharp of Guildford: My Lords, I pay tribute to the noble Lord, Lord Woolmer, for bringing to the House this extremely timely report. The

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seventh framework programme reaches its crucial decision point with the European Parliament at the end of the month, so the House now has an opportunity to debate the programme and what we are likely to gain from it. I have to confess that I asked to speak in the debate because before I came into the House—I celebrated my eighth birthday as a Member last week—I was the author of a book on the framework programmes with Professor John Peterson from Edinburgh University. It took us up to the end of the fourth framework programme and was to an extent a definitive text on framework programme workings. Given that my responsibilities on these Benches have been concentrated largely on education, I am afraid that I have not kept completely up to date, so I am enjoying the opportunity to be able to dig back into this area, although, thanks to the Education and Inspections Bill being considered both in this House and the other place this week, I have not been able to give it as much time as I would have wished.

It is interesting to be able to look back and make comparisons between what is now being proposed under the seventh framework programme and what was set out in the earlier ones. In many ways, the shape and processes of the programmes have not changed much. There is still a large element of co-operative, collaborative research where research institutions and companies are asked to get together to form networks across Europe to progress research projects within identified areas of priority. The co-operation element of the budget is still in place, as is the mobility element, which has been an extraordinarily important part of it. That is because moving young researchers to different research institutes across Europe has been of enormous value to all the European institutions. At a meeting of the Foundation for Science and Technology, the noble Lord, Lord Rees, said that when he was a young postdoctoral student the natural thing was for him to go to America, where he met up with other European researchers. He said that, thanks largely to the framework programmes, as frequently as not young researchers now spend time meeting their European counterparts in European centres—indeed, as much as they do at American centres. That is of enormous value to Europe as a whole and particularly to the United Kingdom.

Money is also available for infrastructure and building up capacities under the cohesion element of the programmes, which should not be underestimated. It is important that countries more backward in research should be encouraged to move forward. I believe that when I was writing in the 1990s I had more sympathy with this point than most. A substantial amount of the budget is still devoted to the joint research centres and to the nuclear aspects of EURATOM. There are some questions to be asked about that.

What is new? I am delighted to see on the agenda the European Research Council, which is going to fund basic research. I always thought it anomalous that we were funding applied research at the federal,

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Commission level in Europe. It has limited immediate knock-on effects and is called “pre-competitive” research. In the United States, basic research is funded at the federal level because its effects are long term and diffuse; they cannot easily be measured. It makes more sense and is more natural to fund such research at the higher levels of government. In the US, individual states, which are the equivalent of the European member states, provide funding for applied research. We argued back in the 1990s in my book that it would make sense for the Community to put more money into basic research, and I am delighted that this idea has got off the ground with the European Research Council and even more delighted that the noble Lord, Lord Patten, is its chairman. We have two excellent representatives on the council board and I look forward to seeing what comes from it. I think that they are going to put particular emphasis on enabling two sets of researchers to carry forward their work. One set comprises young researchers without a track record but who need a leg up and the other is a set of more experienced researchers who want to pursue what are known as blue-skies projects.

Also new are the joint technology platforms and the joint technology initiatives, which pull together industrial capabilities. These put industry in the lead in applied research—or pre-competitive research, which the CBI has said is never competitive research. I shall come back to this in a moment, because I have a few reservations about what is happening and I should like to explore those further with noble Lords.

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