Higher Education and Research Bill

Lord Mair Excerpts

2nd reading (Hansard): House of Lords
Tuesday 6th December 2016 Lords Chamber

[Lord Mair (CB)]

My Lords, in the limited time available, I will confine my remarks to Part 3 of the Bill concerning innovation, and I will address the role of Innovate UK under the proposed new structure. I speak from my experience as a practising engineer in industry for almost 30 years, and subsequently as professor of civil engineering at Cambridge University. I declare an interest as a Cambridge professor currently leading a large research group receiving substantial funding from government, as well as industry.

One issue on which there has been considerable debate is whether or not Innovate UK should be part of UKRI, along with its eight other constituents: the seven research councils and Research England. It is essential that in creating UKRI, Innovate UK’s unique business-facing focus and links to its customer base are not put at risk.

We all know that science, engineering and technology underpin our whole economy, and that they are underpinned by innovation—that crucial process by which new ideas generate economic value in the form of new and improved products and services. But innovation is an inherently risky process with an uncertain outcome. The “I” of UKRI is all-important. UKRI will have to be explicitly comfortable with risk if it is to support Innovate UK in promoting high-risk and disruptive innovation. Will this be the case? This House’s Science and Technology Select Committee, of which I am a member, heard in evidence that many businesses have concerns about the status of Innovate UK in the proposed UKRI, especially in relation to risk and new finance products.

As a minimum, the Government must ensure that three key features of Innovate UK are protected: its autonomy, its funding and its business-facing focus. It is clear that the Government recognise these as important features of Innovate UK and have sought to protect them in the Bill. But the question remains as to whether these provisions are enough to protect Innovate UK as it is integrated into UKRI alongside the seven research councils, with their very different functions and ways of operating.

On the positive side, the creation of UKRI could result in an outward-looking combined body, enabling the whole to deliver more than the sum of its parts, with Innovate UK having even greater influence and impact than at present. But there needs to be adequate funding to achieve this. There has been concern that the current resourcing level of Innovate UK is a constraint, especially following its flat cash settlement in the 2015 spending review and the requirement to deliver new financial products.

However, we now have the Government’s welcome announcement in the Autumn Statement of an additional £4.7 billion for research and development from 2017 to 2021. This means an extra £2 billion per year for R&D by 2020. This is a substantial increase—around 20%—in total government R&D spending, after several years of flat science budgets. Two broad funding streams were outlined in the Autumn Statement. The first is a new industrial strategy challenge fund to back priority technologies. This is described as,

“a new cross-disciplinary fund to support collaborations between business and the UK’s science base”.

The second new funding stream is described as,

“funding … to increase research capacity and business innovation, to further support the UK’s world-leading research base and to unlock its full potential”.

Of course, this additional R&D funding is very welcome. But it points all the more to the importance of ensuring that Innovate UK, in its new role within UKRI, can effectively deliver what is needed. The proposed new programme of investment clearly focuses on the crucial role of collaboration between business—especially SMEs—and the UK’s world-leading research base. No commitment has yet been given by the Government on the distribution of this additional R&D funding. Can the Minister give an assurance that a substantial part will be assigned to Innovate UK?

With its strong business-facing focus Innovate UK, along with the engineering community, must be allowed to continue to play a key role in promoting research and innovation. It should also seek to maximise the benefits of the Government’s important and welcome new initiative of additional R&D funding. The structure and governance of UKRI must enable Innovate UK to achieve both these goals freely, successfully and with full autonomy, otherwise there is a danger that it will not be as effective as it should be.

Higher Education and Research Bill

Lord Mair Excerpts

Committee: 7th sitting (Hansard): House of Lords
Monday 30th January 2017 Lords Chamber

[Lord Willis of Knaresborough]

My Lords, I wish to speak to Amendments 480 and 481, which stand in my name and that of my noble friend Lord Sharkey. Before doing so, I offer support to the noble Baroness, Lady Brown of Cambridge, particularly for proposed new paragraph (a) in Amendment 479A, which would insert a requirement for a non-executive chair for each of the new research councils. I totally agree with the point she made. Having worked under two non-executive chairs at NERC, I know that the advantage they bring to the challenge facing the chief executive and to leading the board in terms of that challenge is of fundamental importance, and doing so would be difficult without it. I await the Minister’s response on why the Government have chosen the route of an executive rather than a non-executive chair. That is a huge departure from the way in which we have approached the research councils in the past.

I confess that I tabled Amendments 480 and 481 to try to tease out from the Minister why the councils should consist of between five and nine members rather than between nine and 13, eight and 14 or some other number. There does not seem to be a clear explanation as to why those numbers have been chosen. I admit that I generally prefer to have small boards—of one person, if possible—because they are likely to be far more effective, efficient and dynamic, but there is clearly an optimum size depending on the nature, the mission, the budget, the governance and the expectation of the organisation.

The Bill—wrongly, I think—assumes that each of the new research councils will be exactly the same, but they will not; they will have very different aspirations, albeit a general one in terms of promoting research. The current research councils have memberships ranging from 10 on the ESRC to 17 on the EPSRC, and that is entirely possible because the Science and Technology Act 1965 did not say anything about numbers. I suggest to the Minister that, rather than adopt an amendment of this sort, it may be better to remove this requirement altogether and to allow the newly formed research councils, with guidance from the Secretary of State—we are very keen on that—to decide what number of members would work well for each one.

Amendment 481, the second amendment in my name in this group, is perhaps more significant. The one thing I have learned while I have been on a council—sorry, I have learned a lot of things; that sounded awful. But one of the most important things I have learned is the value of the lay members who come along to challenge the executive, and indeed the council, in ways that I did not think were possible. That has been particularly important as our research council has tried to remove our research institutes into different governance arrangements. It has been hugely important to have people who actually understand the machinations of changing governance and financial structures and who are able to look at complex organisations working with each other. Therefore, Amendment 481 says that on every research council there should be a minimum number of lay members to allow that challenge. If you had a board of five, it would be very difficult to say what the minimum number should be. I accept that four is a purely arbitrary number, and I look forward to the Minister’s response.

[Lord Mair (CB)]

My Lords, I support Amendments 479A and 481A, to which I have added my name. I declare my interests in higher education and research as a professor of engineering at Cambridge University and as indicated in the register. I speak from my experience both as an active leader of university research, collaborating very closely with industry, and as a practising engineer in industry for almost 30 years before becoming an academic.

As has been said by my noble friend Lady Brown of Cambridge, and reinforced by the noble Lord, Lord Willis, the aim of these amendments is to maximise the effectiveness of the councils, including Innovate UK, under the proposed new UKRI structure. They should each retain independent non-executive chairs, as well as having a chief executive. This generally works very well for the research councils and Innovate UK as they currently operate—each has a chief executive and a non-executive chair, the latter usually from a business background. This is surely good governance, facilitating the successful operation of each council, as well as ensuring that the council can provide effective challenge to its chief executive. The non-executive chair can also play a key role as an independent senior voice for each council. The Bill proposes to remove the non-executive chair, which many of us believe would reduce the effectiveness of each council. The aim of these amendments is to restore that important role.

In the case of Innovate UK, it is especially important that the non-executive chair that we are proposing should be from a science-related business background. Industry will want to see this. Close engagement with industry is vital for Innovate UK’s effectiveness. Innovate UK will be able to operate most effectively with its unique business-facing focus if the majority of the ordinary council members are from a science or engineering-related business background. There is a real danger that industry will perceive the UKRI structure currently proposed in the Bill as a downgrading of Innovate UK in terms of industry engagement. Amendments 479A and 481A seek to avoid this.

[The Earl of Selborne]

My Lords, I will also speak to Amendments 479A and 481A. Perhaps I should declare a historical interest in Amendment 479A, because way back in the 1980s when there were six research councils, two of them had a non-executive chairman—the Medical Research Council, chaired by Lord Jellicoe, and what was then the Agricultural and Food Research Council, which I chaired and which has now been subsumed into the Biotechnology and Biological Sciences Research Council. I think that both Lord Jellicoe and I were rather flattered when, as a result of the review of the research council model, it was decided that the other four should no longer be headed by what was called a HORC—a head of research council—but a non-executive chairman, whose job was to do what happens in good governance in any other organisation, where the chairman holds the chief executive to account and the two have very separate roles. That model has been well adopted by the research councils. I was on the Science and Technology Committee of this House at the time, when some of my colleagues looked with some suspicion at this proposal, but now it is clearly viewed with universal favour.

On Amendment 481A, it is inconceivable that Innovate UK should not continue to have a non-executive chairman, as it does at the moment. Innovate UK has got to be business related and facing business. Business needs to continue to have confidence that it is there to represent its interests and that it has not been taken over by academia and other interests. That will be a battle. As I said on an earlier amendment, the cultures will be very different. These two amendments precisely deal with this issue and like the noble Lord, Lord Mair, I support them both heartily.

Higher Education and Research Bill

Lord Mair Excerpts

Committee: 7th sitting (Hansard - continued): House of Lords
Monday 30th January 2017 Lords Chamber

[Lord Broers (CB)]

My Lords, I support this case as well. Innovate UK has been very successful and should not be constrained in any way. It may be useful to talk about three examples of where institutions, excellent in the purest of research and in applied research, do similar things. I will start with Cambridge. I declare my interest again as a past vice-chancellor and head of the Department of Engineering, and I remain chair of the International Visiting Committee for the department—a point about internationality came up recently.

Cambridge University established Cambridge Enterprise about 10 years ago to aid the transfer of knowledge from the university through commercialisation. Its mission is to achieve this through intellectual property management and licensing, investment in university spin-outs, and consultancy management and advice. It has been a big success. Similarly, the Royal Society—I declare my interest as a fellow—launched the Royal Society Enterprise Fund in 2008, with the objective for it to become a financially successful contributor to early-stage company support and a role model for the translation of excellent science for commercial and social benefit. Again, the Royal Academy of Engineering—I declare my interest as a member and past president—recently established its Enterprise Hub, through which it offers a number of grants aimed at identifying and supporting the next generation of high- potential entrepreneurs and prizes celebrating success in innovation and entrepreneurship. Innovate UK should also, as the amendment says,

“participate in forming or invest in a commercial arrangement including a company”.

One of the reasons that some of us are worried about bringing Innovate UK under UKRI is that it is so different from the research councils, and we do not want to harm the research councils or Innovate UK. This is therefore a plea to give Innovate UK its true freedom, which it enjoys at the moment.

[Lord Mair (CB)]

My Lords, I support Amendments 482C, 490A, 495C and 495D, to which I have added my name, and support what has been said by my noble friends Lady Brown of Cambridge and Lord Broers.

The noble Lord, Lord Liddle, referred earlier to the industrial strategy. This is highly relevant to the Bill and to Innovate UK. The industrial strategy has 10 pillars. The first is:

“Investing in science, research and innovation”.


The Green Paper clearly acknowledges the serious problem we have in the UK with commercialising our outstanding science. It states that,

“historically, we have not been as successful at commercialisation and development as we have been at basic research … We have already taken action to address the UK’s … relative weakness in commercialisation, through the establishment of new, more industrially focused institutions such as Innovate UK”.

This group of amendments addresses the freedom of Innovate UK within UKRI to operate successfully and with full autonomy—otherwise there is a danger that it will not be as effective as it should be. I fully support the point made by my noble friend Lady Brown of Cambridge. Paragraph 16(1) of Schedule 9 states:

“UKRI may do anything which appears to it to be necessary or expedient for the purpose of, or in connection with, the exercise of its functions”.


However, paragraph 16(3) states that UKRI may not,

“form, participate in forming or invest in a company, partnership or other similar form of organisation”,

except,

“with the consent of the Secretary of State”.

That seems unnecessarily restrictive on Innovate UK. It should not have to obtain the consent of the Secretary of State whenever it wishes to make an investment in a company, partnership or similar organisation. A very similar point was made earlier by my noble friend Lord Oxburgh in relation to forming joint ventures. Innovate UK should have the freedom and flexibility to invest as necessary to promote research and innovation to the greatest economic benefit of the UK—although, clearly, financial limits should be set periodically by the Secretary of State. That is the purpose of our Amendment 482C.

The world is changing very rapidly and it is therefore vital for the economy to have a high level of UK R&D investment in science and engineering. The UK must continue to be world leading in innovation. We cannot afford to slip behind, and UKRI must be made to work really effectively. Innovate UK, with its strong business-facing focus, along with the science and engineering community, must therefore be allowed to continue to play a key role in promoting research and innovation. Innovation is an inherently risky process with an uncertain outcome. To be really effective, Innovate UK must be allowed to promote high-risk and disruptive innovation.

This House’s Committee on Science and Technology, chaired by the noble Earl, Lord Selborne, and of which I am a member, heard in evidence that many businesses have concerns about the status of Innovate UK in the proposed UKRI, especially in relation to risk and the backing of new companies. Innovate UK must be allowed to invest in commercial arrangements, including companies or partnerships, if it is to be fully effective in promoting innovation and commercialising research—and this should be in the Bill.

Innovate UK operates in a quite different way from a research council, so I urge the Minister to reflect on and give careful consideration to this matter, and to ensure that the proposed structure of UKRI is not unnecessarily restrictive on the crucial activities of Innovate UK.

[Lord Mackay of Clashfern (Con)]

My Lords, it is perhaps important to point out that Innovate UK is to be henceforth merely a committee of UKRI. The scope of its work is set out in Clause 90(1), which states:

“UKRI must arrange for Innovate UK to exercise such functions of UKRI as UKRI may determine for the purpose of increasing economic growth in the United Kingdom”.


So I do not think that there is any sense in which UKRI is autonomous. Innovate UK will have no employees of its own—they will all be employees of UKRI—and it certainly will not be autonomous in any sense that I can understand. The question may be whether the result that these amendments are aiming at can be attained only by taking Innovate UK out of UKRI and giving it a separate status. There may be disadvantages in that as well, but, as presently set out in the Bill, Innovate UK is a mere committee of UKRI—and that is not a particularly elevated status. In many aspects—not all, because I have just referred to a special aspect in the clause that I mentioned—it is being treated pretty much as a part of UKRI.