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There is also the new thematic field of space and security, which the noble Lord, Lord Bowness, talked about. I believe that I am right in saying that space research has now been separated from security work. My figures for the July budget show that it is now very much in line with the proposals made by the Commission in May 2006. Over the seven-year period, there is some €1.4 billion for space and slightly less than that, €1.35 billion, for security. It has been agreed that the security elements should concentrate on civil research. This has been a difficult issue for some time. In the 1980s, we got to the point where the defence sector relied more on civil technologies than on defence technologies per se. The degree to which the defence sector now uses developments made in the electronic communications area is enormous, and by the 1980s civilian research was leading the field. The same is true for space and satellite technologies, which are of immense value to the military sector. It is difficult to draw a neat line here. However, I understand what noble Lords are saying and I sympathise with it.
Totally separate from the framework programme but nevertheless being proposed at the same time is what some people call Barroso’s baby; namely, the European institute of technology. There is deep scepticism about this project. We know that it has taken 150 years to develop the Massachusetts Institute of Technology and I am afraid that I do not agree that a virtual institute is the same thing as a physical place. In a way, the whole issue about the exchange and cross-fertilisation of ideas by being able to rub shoulders with others is extremely important,
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I am sorry that the committee reported as early as May, although the report was not actually published until the end of June. I recognise that it was trying to feed into discussions being held at the time, but some interesting things such as actual decisions on budgets and carrying forward ideas about the technology platforms have been taking place since then. I have to admit that I would have liked to see a slightly more substantial report from the committee covering rather more areas and taking more evidence that it did.
The budget arrived at is very close indeed to the ideas put forward in May. In giving evidence to the committee, the noble Lord, Lord Sainsbury, was quite right to say that it would be about €50 billion. The total is €52 billion, but includes €2.7 billion for EURATOM. So, if you take EURATOM away, it is about €50 billion for the framework programme. That is €7 billion a year spread across 25, soon to be 27, countries. If we all had equal shares, it would be less than €200 million a year each. The UK research budget is now about €3.5 billion if you take together the research councils’ budget and the HEFCE research element. Very little now goes from the Government into industrial research but, if you look at what the Government are putting in here, you see that the UK has done particularly well in the various framework programmes. We took something like 16 per cent of the fifth framework programme, so we are looking at about €500 million, which, although it is not big money, is extremely useful—we certainly should not demean it. However, I question where some of that money is going. There remain questions about the joint research centres and whether we need to put as much money into them.
I return now to the question of what benefit the industrial technology platforms bring to the UK. Those platforms aim to bring together the key players—industries, small and medium-sized businesses, financial institutions, national and regional governments, the research communities, such as universities and research centres, and the NGOs. There are somewhere in the region of 10 areas where these platforms are being put forward. They fall into six different categories, including new technologies per se, which cover, for example, work on hydrogen fuel cells and nanotechnologies; the sustainability agenda, which ranges from research into photovoltaics through to water supply; the new technologies applied to public services, including, for example, a technology platform on industrial safety; keeping high technologies at the leading edge, which includes platforms on materials and space technology; and new technologies applied to old industrial fields—the steel, construction and textile industries fall into this category.
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The committee endorsed the concept of technology platforms. Paragraph 31 of its report states that it is important that FP7 succeeds in making R&D more industry driven. Paragraph 39 states:
“We welcome the proposal for European Technology Platforms ... to implement a strategic research agenda through public-private partnerships ... as this is most likely to ensure that the research projects are industry-driven”.
But, in paragraph 40, the committee also calls for more effective monitoring of the European technology platforms. I endorse that call.
The committee expressed scepticism about what we have got out of these European programmes in industrial terms. I should point out that, without the early developments in the framework programme, we would not have achieved the advances in mobile telephony and European satellite technology that we have made. There are many other achievements that we can look back on—for instance, the developments in biotechnology and the human genome project, in which our participation in the early days played a very important part. The pay-offs have been long term.
There is a great danger that the large companies will dominate some of these technology platforms. This certainly happened in the early days of the ICT programmes. Perhaps one reason why we have seen a fall-off in industrial participation is that they have been tougher on the larger companies.
But it is important to query whether industry is always right. I end by quoting from the evaluation report on these programmes that was carried out for the UK Government. It emphasises the importance of the degree to which some of these pay-offs from these programmes are long term. Paragraph 10 of the Targeted Review of Added Value Provided by International R&D Programmes states:
“The literature makes clear that the value of R&D is not confined to (eventual) commercial outputs. ‘Indirect’ payoffs such as expanding the supply of trained graduates may be as, or even more, important to business and society. Framework Programme evaluations permit us to understand the range of types of benefits, as well as participant satisfaction. However, they say nothing directly regarding the extent of the Programme’s impact on UK (or European) competitiveness. The benefits identified are essentially intermediate outputs (knowledge, skills, tools, relationships, et cetera). Of the many Framework sub-objectives, the evaluations reveal that ‘stimulation of collaboration’ is being achieved constantly”.
I come back to the point that I made at the beginning—the value of the collaborative efforts that have been achieved from these framework programmes.
11.46 am
Lord Giddens: My Lords, I, too, congratulate my noble friend Lord Woolmer of Leeds and his sub-committee on their report, which is very instructive. I have been in your Lordships’ House for only a relatively short period but I am very impressed by the standards set by the European committee and its sub-committees in the reports they have produced, which are always diligent and mostly always on the ball. As has been said, the Seventh Framework Programme for Research is very important to the
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The report is right to endorse most of the proposals for the seventh framework, including the idea of forming a European research council. It is also right to take a jaundiced view of Barroso’s baby, if we are to call it that. If I remember, Mr Barroso has also spoken about having several children in Europe and that he would not favour any of his children over the others. I do not know whether or not Barroso’s baby is one of those children but he seems fond of that kind of analogy.
As for myself, if there is money there, I would prefer to see it spent on something comparable to the research chairs scheme introduced under the Chretien Government in Canada, which was very successful in getting high-level academics back from the United States. There had been a bigger brain drain from Canada to the US than from Europe and this was a very successful scheme. You could have an extensive scheme of this kind in Europe on a competitive basis which would certainly play a large part in elevating the scientific and technological status of European universities and do more than the proposed institute would do.
Of course, a lot more money should be spent on the kinds of things that increase European competitiveness. I hope that the budget review in 2008 will be more than a notional exercise. The framework of spending in the European Union is, frankly, absurd, as we all secretly or otherwise know, because so much is being spent on the common agricultural programme. André Sapir made this point very strongly in the best report that anyone has written on the economic future of Europe, but it did not do him much good in the higher level European circles. Nevertheless, it was a point that should be made and needs to continue to be made.
The seventh framework is closely connected to the Lisbon agenda. I would like to offer a few more critical comments on the whole notion of the seventh framework in relation to the Lisbon agenda, because I am less convinced than other speakers about whether we have got it right. The Lisbon agenda, as everybody knows, has not—to put it this way—been completely successful. It has not given the bite to European competitiveness for which many people hoped. Its fate has been that those countries which did not need it have taken a lot of notice of it. The Scandinavian countries, for example, do not need it because they have already done most of the things in the Lisbon agenda. Those countries which most need it, such as Italy, Germany and France, have tended largely to ignore it. It is significant that the German report, Agenda 2010, which picks up quite a lot of what is in the Lisbon agenda, barely mentions it. So the Lisbon report has not been a conspicuous success. The reasons are linked to issues raised by the way in which funding is proposed in the seventh framework and more widely in Europe.
Just as the Lisbon agenda has not been too successful, as the report says, nor has the attempt to
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The relationship between research innovation and economic development is changing quite radically as the knowledge service economy matures. The model which has been used in the Lisbon agenda and in the seventh framework might be becoming less relevant than it would have been a few years ago.
In the knowledge service economy, a great deal of the leading edge of competitiveness is given not directly by technology and science but by changes in taste and people’s lifestyles—a range of diffuse factors which were not the same when we lived in a manufacturing-dominated economy. It is important to stress the significance of this, because only 30 or so years ago, nearly 40 per cent of the population of this country worked in manufacturing. Now that proportion is down to 12 per cent, and in the United States it is down to 10 per cent. Many of the leading-edge developments are much fuzzier than they used to be. For example, the entertainment industry is a massive part of the American economy. It has a connection to technology, as anyone who has seen the animated films coming out of Hollywood will know, but that connection is quite difficult to puzzle through. We should make a distinction between what I will call old-style research and development and new-style research and development.
The report does not, as far as I know, mention the Aho report, which is a significant emendation of the Lisbon agenda. It says that we must put the stress firmly on innovation rather than research and development as such, because what matters is how research and development is taken up and used in a very different marketplace than that which existed in the past.
Old-style research and development—by which I mean the type done in “silicon valley”, which is not that old—is where you get networks of connections between universities and business, where business sometimes develops in spatial conjunction with universities as it has done in the Cambridge Science Park, for example, and where there is a close connection between technological aspects of
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I would like to make three comments about this. First, one should regard all numerical targets as suspect. My noble friend Lord Woolmer said something about targets being increased, but numerical targets do not make much sense, especially when they are covering a generality of countries. It is just not feasible to suppose that different countries will have the same needs in terms of research and development, however that is defined. Moreover, it is almost certain that research and development will become increasingly internationalised. This will also affect what will happen in a particular country in terms of its utilisation. Although the 3 per cent target is a useful notional thing, I do not think it should have any hard and fast significance. It relates to one of the defects of the early version of the Lisbon agenda, which was also full of numerical targets. The Lisbon agenda has become much more effective since it has become contextualised in relation to countries. Different countries have different needs at different times and if those needs are not contextualised, they cannot really be met effectively.
Secondly, one of the major things happening in the world is that companies are developing a global division of labour. As they develop more complex organisation across the world, it seems clear that research and development will become globalised, which will take one further away from the local silicon valley-type model. The main reason for this is the invention of a global patenting regime or moving closer to the development of such a regime. Once that has firm purchase, it will not really matter where research and development breakthroughs come from. They will be able to be utilised by firms across the world; much more important will be how that research and development is utilised.
Thirdly, the knowledge in the knowledge economy is only partially scientific and technological, for the reasons I mentioned earlier. One of the most important emphases in the Aho report is the significance of creativity and of opening up new markets following changes in consumer tastes. Technology is rarely the dominant driving force in those areas. The iPod, for example, which has been a massive success, is based on a technological breakthrough, but the reason it has been successful is to do with lifestyle and taste. It found a niche in the style market for younger people, not only in our society but across the world. If you do not find that niche in a society based on lifestyle—that is what a service-based economy is—you will not be able to get competitiveness out of direct research and development. There is a good cluster of reasons to be a bit more sophisticated about the relationship between research and development and competitiveness. That is important for Europe as a whole to take on board, as well as this country.
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Let us take the example of Starbucks. Who knew that the British were somehow, deep in their soul, desperate for really good coffee? Who knew, indeed, that the Americans were? I used to live in America; you could get coffee all over the country and they always refilled your beaker, but it was always terrible. Who knew that the Americans had this latent taste? Spotting those sorts of things will in the new economy give companies a competitive edge. I do not dispute that those things will often be scientific and technological. It is very important for every country to keep a lead in science and technology, but there is far more to it than science and technology alone.
I leave your Lordships with a brief story. It is said that the Americans spent $10 million in the space race trying to invent a ballpoint pen which would write upside down in space. In the mean time, the Russians used a pencil.
Noon
Lord Haskel: My Lords, what a pleasure it is to work on Sub-Committee B. Our Clerk, chairman, advisers and my colleagues are all committed and I thank them for their diligence and companionship. Like my noble friend Lord Giddens, I rather like the seventh framework programme proposal. What I like about it is that it does not treat research and development as something that just happens on its own in isolation—something that takes place in a laboratory somewhere. Of course, the research is essential, but it is not enough for innovation, which comes from a combination of things.
The noble Baroness, Lady Sharp, spoke of collaboration; she is right. We list some of the collaborations in our report, including co-operation between universities, business and industry, research centres, public authorities and consumers. That co-operation is central to innovation—it is “knowledge transfer”, to use the jargon. In addition, there have to be business models which can accommodate the new technology, and there have to be people trained in science. Indeed, the Prime Minister is speaking today about this. What excellent timing by my noble friend Lord Woolmer!
As the noble Baroness, Lady Sharp, said, all this has to work across frontiers. I think the seventh framework proposal largely tries to take all this into account. This is why I think that our committee was right, and the Government were right to welcome it and to welcome the increased funding, which should enable innovation and more productivity in member states.
What did cause me concern was the memorandum from the CBI to the committee which seemed to disagree with this. The CBI somehow wanted proof of this—but it seems to me that the proof is all around us. As my noble friend Lord Woolmer reminded us, more proof appeared on Monday, when the DTI published its R&D international scoreboard. Yet again, this demonstrated the link between R&D spending and growth. The CBI in its evidence is right that participation by industry fell away in the sixth framework, but this has happened everywhere—and, yes, the leeway has been taken up by the universities.
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The CBI has concerns about bureaucracy but, as the noble Lord, Lord Sainsbury, pointed out in his evidence, the Commission has published an annexe with proposals which set out what it is going to do about simplification. These proposals seemed sensible to him; they also seem sensible to me. They should make the funding schemes simpler and more flexible. However, there are two areas where one might criticise this proposal. The first is “why bother”, because everything is going to be made in India and China anyway. Secondly, and perhaps more seriously, the seventh framework does very little for the services sector, which is now the major part of our economy.
The view that nothing will be made here anymore is not only cynical but manifestly untrue. Lots of things are made here, but far more of them are made elsewhere—often as a result of our researching them, designing them, developing them, improving them and working on them here. This is a very important part of our industrial base. My noble friend Lord Woolmer asked the Minister for an example, and the noble Baroness, Lady Sharp, mentioned telephony. In this country we developed virtually every aspect of the modern mobile phone and its network—the liquid crystal display, the detector technology, the nipple antenna and the embedded software were all developed here. The phones themselves are made and used elsewhere, but what is of crucial importance to our economy is the trade, not only in the innovative products, but in the services relating to the installation, development and improvements to these innovations. In mobile phones, this has been enormous in our economy.
This part of our manufacturing economy is largely ignored, often misunderstood and probably misrepresented in statistics. It has been and will be important in many other industrial sectors, in molecular biology and genetics and in the creative industries of the 21st century, as my noble friend Lord Giddens said. With our open approach to trade, collaboration and science, this is how the seventh framework programme will be of great benefit to us. It will also make us an attractive place for overseas companies to design, develop and research their new products.
I have raised research and development in the service sector with Ministers before, and I make no apology for raising it again. My noble friend Lord Giddens touched on the matter with his reference to new-style R&D. In his evidence, the Minister spoke of the low requirement for research in the service sector. Retailing is one of our major services, which has been revolutionised by R&D. When I started work in the textile industry, 40 years ago, clothing shops had two ranges—summer and winter. Today, thanks to computer-aided design, tight integration of the supply chain by using modern communication technology, modern transport and distribution technologies, by using embedded information and
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