Knowledge Transfer Networks
Accelerating business innovation
A Technology Strategy Board programme
Christine Salmon
Clerk of Science and Technology Committee
House of Lords
London SW1A 0PW
Wednesday, 23 September 2009
HOUSE OF LORDS SCIENCE AND TECHNOLOGY COMMITTEE
CALL FOR EVIDENCE: SETTING SCIENCE & TECHNOLOGY RESEARCH FUNDING PRIORITIES
Dear Ms Salmon,
The Resource Efficiency KTN would like to express the views of our membership on the questions
posed by the inquiry into the setting of research funding priorities within Government and other
responsible bodies for the allocation of public funds for science and technology research. The 4500+
membership of the Resource Efficiency KTN consists of a broad cross-section of industrial, academic
and public sector individuals with a common interest in the issues around a resource efficient and low
carbon economy. These topics cut across a range of science and technology areas and are heavily
involved in many of the current funding programmes in order to develop and prove the new
technologies required to enable the UK to be at the forefront of this arena.
Yours sincerely,
Arnold Black
Network Director – Resource Efficiency KTN
Knowledge Transfer Networks
Accelerating business innovation
A Technology Strategy Board programme
SUMMARY STATEMENT
Since the Industrial Revolution there has been a trend towards a broadening and extension of the
education system. In the 1960’s some people still left school at 14 with only a rudimentary education.
In Europe it is now common for young people to continue their education into their mid-20s. As
societies develop the extension of the period of the education and development of the young seems to
be part of an evolutionary process. According to UNESCO figures the number of students pursuing
tertiary education has grown from 28.6 million in 1970 to 152.5 million in 2007 (an annualised growth
rate of 4.6%) 1 .
All around the world there is competition to attract investment for the development of new science and
technologies. If the UK is to continue to participate in the fields of science and technology we must
continue to invest in the development and the harnessing of the talent of future generations. Through
the STEM programme, the Science and Innovation Investment Framework (2004 – 2014) and other
initiatives the Government has taken steps in the right direction. Investment in enhancing the
education system should continue to be made - the aim must be one of continuous improvement - if
the UK is to be in a position to be able to make a global impact on S&T research.
The UK should continue to build on the STEM programme and other innovations in educational to
provide the broad base of knowledge and skills that are required to be in a position to explore long
term ‘blue skies’ ideas and initiatives. In addition it is important that sufficient funds are provided to
build on existing areas of excellence and to ensure that they maintain the ‘critical mass’ that can make
them ‘self-sustaining’. Through engagement across the spectrum of society it is important that the
science and technology community are able to recognise important areas for research and
development that can deliver societal impact and bodies like the Technology Strategy Board and
research councils should be empowered to continue to facilitate this process. For example significant
investment should be assigned for R&D that can contribute to the development of a low carbon
economy and for the effective utilisation of resources. This would enable the UK to continue to show
leadership - not only in talking the talk but also walking the walk - in sectors that are of critical global
significance.
1
http://www.uis.unesco.org/ev.php?ID=7628_201&ID2=DO_TOPIC
Knowledge Transfer Networks
Accelerating business innovation
A Technology Strategy Board programme
What is the overall objective of publically-funded science & technology research?
The UK has a relatively high population density and a limited supply of high grade natural resources.
In the past the UK has relied on international trade for obtaining resources that are not readily
available within its borders. As global trade becomes more competitive and the demand for resources
in other parts of the world increases (E.g. China, India, etc) competition for scarce resources will
increase. It is important that publically-funded research in science and technology should keep in
touch with developments around the globe that can impact on society in the UK. Science & and
technological (S&T) developments in the UK have had global impact in the past and if the UK is to
remain competitive in the future it must continue create the conditions that will enable scientists and
technologists of the future to continue to do so.
Privately funded investment in S&T is primarily driven by commercial considerations.
Publically funded research in S&T should focus on the following: •
•
•
Fostering a high level of engagement in science, technology, engineering and mathematical
education programmes.
Ensuring that the UK continues to create and maintain centres of excellence in the teaching of
STEM subjects at the tertiary level to produce researchers that can deliver new S&T
breakthroughs.
Support investment in then pilot and demonstration facilities that are necessary to prove the
value and viability of new technologies.
The UK research resources are clearly finite but have a high global reputation. Although it is important
that the UK continues to cover a very broad range of education in S&T it does not have the resources
to support extensive research programmes in every field. Of course it is not good for Governments to
try to pick ‘winners’ for research funding but it makes sense for some specific areas of importance to
UK society should be promoted through targeted funding. Where the UK has or can create research of
global significance it should concentrate resources to nurture centres of excellence that are
recognised globally as world class.
The EU has extensive S&T research programmes and it is vital that policy in the UK is aligned so that
we are in a position to maximise the benefits that the UK can derive from these programmes.
Are existing objectives and mechanisms for the allocation of public funds for research
appropriate? If not what changes are necessary?
One concern that researchers have is that objectives can be subject to political fashions. S&T
research programmes are by nature medium to long term programmes and to be effective they really
need to have the security of access to long term funding programmes. Many of these programmes
have the potential to deliver benefits to the economy of the UK and if they are to be effective they
should not be subject to the vagaries of political fashions.
How are science & technology research priorities co-ordinated across Government, and
between Government and the relevant funding organisations? Who is responsible for ensuring
that research gaps to meet policy are filled?
The Resource Efficiency KTN works closely with the Research Councils (particularly EPSRC), the
Technology Strategy Board and the Energy Technologies Institute. These organisations have priority
areas that have been established to be of importance to the UK economy and society. There appears
to be a good co-ordination developing between these organisations. It is important that there is good
communication between the relevant Government departments and agencies to ensure that new
technologies can be developed from the beginning to the end of the innovation supply chain (from the
initial idea to the practical application). Unless the fundamental research is supported in the early
Knowledge Transfer Networks
Accelerating business innovation
A Technology Strategy Board programme
stages of development, TRL 1 – 3 (Technology Readiness Level), the concepts will not be developed
to the pilot scale
Is the balance of Government funding for targeted versus response-mode research
appropriate? What mechanisms are required to ensure that an appropriate and flexible balance
is achieved? Should the funding of science & technology research be protected within the
Research Councils or Government departments? How will the current economic climate
change the way that funds are allocated in the future?
It is important to have a flexible balance. Perhaps a defined split between responsive and targeted
research, leaving a balancing percentage that is available for enhancing targeted programmes or
supporting potential new breakthrough technologies. This ‘strategic reserve’ could be used for large
projects that offer high potential for societal benefits (accelerate deployment of breakthrough or
enabling technologies)
The funding of S&T research should be increased rather than reduced – the UK is still lagging behind
its competitors in this field (see below). It is essential that the UK invests in the development of Low
Carbon technologies to gain a share in this growing global market.
Former Chairman of the House of Lords Science & Technology Select Committee, Lord Alec Broers
(2004 – 2007), believes that government investment in science and research would be better informed
if there was a more widespread acknowledgement that science and engineering are two sides of the
same coin.
"I would like to see Britain get back into some other big technology projects," says Broers. "There is an
opportunity for us to play a major part in fusion, there are also big opportunities in plastic electronics
and exciting energy projects such as plastic solar cells, hydrogen storage, electric cars and so forth.
"There is so much exciting science that is around all of these projects. People think that is
engineering, but engineering is science these days."
Broers calls for scientists advising government to have a better understanding of the relationship of
science and society. "In many cases in government departments, it's not necessary to have a chief
scientist, because, instead, a chief engineer should know the science, but understand better the
context of the science in relation with society – whether it is beneficial to society, or might be too
expensive or unsafe. I do not wish to question the importance of science, but we have the balance
wrong."
And he says that government needs to invest in big science projects if it is not to miss out on
significant commercial opportunities. "If we go into something like plastic electronics we're not going to
do it with just three small companies and a bit of research funding in the universities," he says.
"We need to build a big laboratory or institute. At the moment, we really don't have the mechanisms to
do that because nobody strategises that way. I was disappointed in some ways when Lord Drayson
came out with the £1bn early stage fund for technology start-ups. I would like to have seen that spent
on four large specialist organisations. You can count the number of decent sized companies that have
been founded in this country on one hand." 2
2
http://www.publicservice.co.uk/feature_story.asp?id=11376
Knowledge Transfer Networks
Accelerating business innovation
A Technology Strategy Board programme
A recent study has shown that a declining level of Government support will result in a comparatively
low level of R&D;
In their review of 11 broad manufacturing industry groups over the period 1993–2000, Becker
& Pain found that the main developments associated with the comparatively low level of R&D
seen during the 1990s appear to be weak output growth, the declining level of government
funding for private industry and the appreciation in the real effective exchange rate since
1996. Taken together these factors have largely outweighed the stimulus being offered by the
decline in long-term interest rates during the 1990s, the growing share of R&D expenditure
being undertaken by foreign-owned firms, the rising level of competition in product markets,
and the increase in skilled labour employed on R&D in the latter half of the decade.
The Manchester School Vol 76 No. 1 January 2008 1463–6786 66–87
In particular it is important to support interdisciplinary, cross-cutting and strategic research needs to
support the UK sustainable development strategy.
How publically-funded science & technology researched is aligned and co-ordinated with nonpublically funded research (for example, industrial and charitable research collaborations)?
How can industry be encouraged to participate in research efforts seeking to answer societal
needs?
We have to remember that many of UK’s larger businesses are now owned by organisations with
headquarters outside the UK. If we are to persuade them to investment in S&T R&D in the UK we
must demonstrate that they can get good returns from this investment. The current mania for applying
what is mistakenly referred to as Full Economic Costing (FEC) in Universities is tending to price some
of these UK institutions out of the global research market.
Government policy must be designed to give clear signals to non-governmental organisations on the
strategic directions that Government intend to follow. The taxation strategy, grants and allowances
should all be aligned to encourage R&D in areas identified as critical to the UK economy (such as low
carbon technologies and materials security).
To what extent should publically funded science & technology research be focussed on areas
of potential economic importance? How should these areas be identified?
Whilst it is correct to have a split of funding some being assigned to focussed areas it is important to
maintain a significant proportion of funding for longer term and more speculative programmes that
may not have a visible outcome but that do make a contribution to the expansion of knowledge.
Investment in the development of a world class education system for the development of scientists
and engineers must be seen as part of a critical enabling process for new discoveries in the future.
How does the UK’s science & technology research funding strategy and spend compare with
that in other countries and what lessons can be learned? In this regard, how does England
compare with devolved administrations?
Although a little dated now the DTI/HM Treasury publication on R&D Intensive Industries in the UK
(DTI Economics Papers No 11 March 2005) gives some useful background information. In particular
the graph reproduced below gives an indication of the trends in the important R&D sectors between
1980 and 2003;
Knowledge Transfer Networks
Accelerating business innovation
A Technology Strategy Board programme
This showed a general trend for increasing significance of R&D in Chemical (Pharmaceuticals) and
the Services industries. Going forward it is important that the UK should look to develop new
knowledge and many of the points raised in the policy briefing prepared by NESTA in 2007 are still
relevant today;
Science is about the creation of new knowledge, and frequently leads to insights that form the
basis of breakthrough new products and processes. Currently the UK is improving in three
important areas, but not fast enough. Expenditure on R&D lags behind international
competitors, STEM graduates are increasing but demand is likely to outstrip supply and links
between businesses and universities are still challenged by universities funding streams and
cultural differences. In a world where the UK is competing not only with the United States and
Europe but with emerging science powerhouses like China and India, science policy needs to
become more prominent, but more importantly it needs to become more sophisticated.
NESTA S&I/08/ Published June 2007
In May 2008 in their policy briefing on ‘Total Innovation’ NESTA suggested that;
Policymakers and industry should work together to develop Total Innovation Strategies for the
UK’s most important industries, informed by new measurements that capture total innovation.
Governments should ensure that people have the opportunity to develop the capabilities
needed for contemporary innovation, including interdisciplinary skills and strategic business
expertise.
NESTA, TI/24/ Published May 2008.
When he delivered the 2009 McLaren lecture at Aston University, David Smith, the CEO of Jaguar
Land Rover, pointed out that the R&D spend by single companies like Bosch were higher than the
whole of the UK motor industry.
Knowledge Transfer Networks
Accelerating business innovation
A Technology Strategy Board programme
A study by the Anglo German for the Study of Industrial Society compared the levels of industrial R&D
in the UK and Germany and delivered the following in the executive summary;
•
Investment in R&D has long been recognised as being among the main determinants of
economic growth and prosperity. Analysing the factors that affect R&D is, therefore, a
crucial issue for the economic understanding of what affects growth and competitiveness,
and for the provision of public incentives that could help to increase the stock of
knowledge of the society.
•
Research and development intensity has risen significantly and consistently in Germany in
recent years, while declining in the UK. The aim of this project is to contribute to the
understanding of the reasons behind the R&D intensity gap between the two countries
and to suggest possible policies that may be employed in order to increase the amount of
investment in R&D undertaken by business enterprises.
•
Our analysis shows that output is an important determinant of R&D expenditure. An
increase in industry output leads to an increase in R&D both in the short run and the long
run. However, output movements are significant only in the high-tech industries and their
impact is much stronger in the UK than in Germany, particularly in the long run.
•
The larger output effect in the UK could be the outcome of different institutional settings in
the two countries – i.e. more flexibility in the UK compared to Germany and, hence,
greater ability to adapt R&D investments to final demand.
•
Another, and perhaps more plausible, explanation for this result could be the different
R&D strategies in the two countries. In Germany, there is more emphasis on generating
new technologies and this objective is less likely to be determined by output movements.
In the UK, the focus is on imitation and technology transfers, which are probably more
responsive to changes in demand.
•
Among the main factors behind the decrease in R&D expenditure in UK manufacturing is
the concentration of R&D in a few key sectors, the decrease in military R&D after the
Peace Dividend, the insufficient supply of skills and the slowdown in government R&D
subsidies to business enterprises. The R&D carried out by foreign affiliates positively
affects total R&D in the UK, compensating for the decline in other sources of R&D
expenditure in the business sector.
•
Additional measures are needed in order to improve the innovative capacity of the UK.
Policies should aim at increasing the supply of skills, particularly at the intermediate skill
level, and promoting direct government funding of high-tech/ high-risk projects. Benefits
could also be attained by more widespread investment in R&D across all manufacturing
sectors.
For example, one conclusion was that the German government devotes a large amount of resources
to basic research. Furthermore, we find a positive impact of government-financed R&D in the hightech industries for Germany. It is in fact a practice of the German government to directly finance
specific high-tech projects, which are likely to be more risky but also characterised by higher returns.
Knowledge Transfer Networks
Accelerating business innovation
A Technology Strategy Board programme
The following table gives the latest OECD figures (2006) for R&D spend as a percentage of GDP.
From ‘Putting Science and Engineering at the Heart of Government Policy’, House of Commons IUSS Committee,
Eighth Report of session 2008/9.
Knowledge Transfer Networks
Accelerating business innovation
A Technology Strategy Board programme
Looking at the % of GDP classified as R&D is one way of comparing the relative priorities that different
nations put on R&D. However it is also important to consider the absolute levels of expenditure. For
example in 2006 the totals spent on R& D were;
R&D as %GDP
Australia
Finland
France
Germany
Italy
Japan
Korea
UK
USA
1.8
3.5
2.1
2.5
1.1
3.4
3.2
1.8
2.6
R&D in M$*
11,510
5,516
33,737
56,595
17,076
120,156
33,773
32,018
404,662
*GDP taken from OECD figures, US$, constant prices, constant PPPs, OECD Base Year
3
For example;
UNESCO has published data that considers global R&D expenditure patterns, their summary table for
the source of R&D funds n Europe is copied below 4 , this shows that a higher proportion of R&D
funding comes from business enterprises in Germany, Sweden, Belgium, France, etc
3
4
http://stats.oecd.org/Index.aspx?DatasetCode=SNA_TABLE1
http://www.uis.unesco.org/ev.php?ID=7055_201&ID2=DO_TOPIC
Knowledge Transfer Networks
Accelerating business innovation
A Technology Strategy Board programme
In his seminal paper published in 2004 Sir David King studied the scientific impact of nations He
concluded that;
A strong science base need not lead directly to wealth generation. For instance, although the
strength of the UK science base has long been acknowledged, it has only recently begun to
translate this into the development of high-tech clusters accompanying knowledge transfer
between higher education and industry. However, strength in science has additional benefits
for individual nations, and for the world as a whole. From global terrorism and the spread of
disease to the dangers of global warming, we are increasingly facing the sorts of threats for
which governments everywhere will need to turn to their scientists.
(Nature, Volume 130, 15 July 2004).
The UK has traditionally had strength in medical and pharmaceutical research. In a review of the
future of research universities, Paul Horn, Senior Vice President and former Director of Research,
IBM, Armonk, NY, USA, stated that;
Developed countries around the world are facing the challenge of remaining competitive in an
environment in which economies are becoming more knowledge-based. In such an
environment you simply must be more educated to be competitive. This alone is a motivation
for governments to fund universities. The best place for society to invest its money is in
educating the next generation; that’s how you secure your future.
European Molecular Biology Organization EMBO Reports, Vol 8, No 9, 2007, p805-810
With regard to the devolved authorities it would make sense for them to focus on areas where they
have some potential in terms of developing new technologies and businesses. In Scotland there has
been a clear focus o utilising their assets for renewable energy systems. However it is important that
these efforts are co-ordinated across the UK so that we do not produce too many versions of the
wheel! The successful funding of one marine energy system in Scotland has recently been
announced;
The company behind the Oyster wave-powered generator has raised £10m in its first round of
fund raising. One of Aquamarine Power's devices was recently installed at the European
Marine Energy Centre in Orkney. It will be connected to the national grid as part of sea trials,
with the first commercial wave-power station, scheduled to be ready in 2014. A further £40m
will be required to develop Oyster before it becomes commercially viable.
http://news.bbc.co.uk/1/hi/scotland/8267492.stm
The development of prototypes and demonstrators in this area is expensive and it is important that
where these have global potential the UK is able to identify opportunities and promote deployment –
the UK missed the opportunity for ‘first mover’ opportunity in the wind turbine business. Effective coordination across the Innovation Supply Chain’ (EPSRC, TSB and ETI with major energy producers,
users and policy makers) will ensure that the UK can reap some rewards from the global markets for
low carbon technologies. The company that developed the Oyster technology, Aquamarine Power has
received significant funding and support from Scottish Enterprise, Highlands and Islands Enterprise,
the Technology Strategy Board, the Royal Academy of Engineering, the Engineering and Physical
Sciences Research Council (EPSRC) and the Scottish Government. The Scottish Government is
showing leadership and strategy through their support in the development of Marine Energy (see their
5
Marine Energy Roadmap, published in August 2009)
5
http://www.scotland.gov.uk/Publications/2009/08/14094700/12
Knowledge Transfer Networks
Accelerating business innovation
A Technology Strategy Board programme
In Wales the Technium centres were founded in 2001. Technium is an environment where science
and technology businesses can flourish – and turn their potential for high-growth into reality. They aim
to help new and early-stage science and technology businesses overcome obstacles to success and
provide an environment where they can prosper. They also act as a base for international companies
looking for a foothold in the UK market. 6
Over the years Wales has been successful in attracting inward investment and a Japanese company,
Sharp Manufacturing established a PV manufacturing facility in North Wales in 2004 and the OpTic
Technium at St Atalphs is supporting R&D in the development of PV systems. 7
The Welsh Assembly Government has also published a renewable energy strategy 8 and Wales is
backing up policy through the planning system having approved the development of the 750MW
Gwynt y Mowr off-shore wind farm. 9
This is supporting ambitious plans for renewable energy in Wales. The aim is to generate to generate
more renewable energy than the energy demand for the whole of Wales by 2020. They have also set
a target for all new buildings to be zero carbon by 2011. 10
6
http://www.optictechnium.com/
7
www.matuk.co.uk/docs/PV%20solar%20energy%20SJCI.pdf
8
http://wales.gov.uk/about/cabinet/cabinetstatements/2008/routemap/?lang=en
9 http://www.guardian.co.uk/environment/2008/dec/04/wind-farm-wales
10
http://www.ibwales.com/business-sectors/sustainable-technologies/renewable-energy/