Higher Education and Research Bill

Lord Mendelsohn Excerpts

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

[Baroness Brown of Cambridge (CB)]

My Lords, in moving Amendment 482C, I wish to speak also to Amendments 490A, 495C and 495D in my name and those of my noble friends Lord Mair and Lord Broers. All these amendments relate to the issue that I and others highlighted earlier of the need to maintain and strengthen Innovate UK’s business focus within UKRI, and, in delivering its support to businesses of all sizes and stages of development, ensuring that Innovate UK is itself able to innovate in the forms of support it can deliver, so that they are appropriate to the need and scale of the business.

As we heard earlier, Schedule 9 states that UKRI is not allowed to enter into joint ventures, or form or invest in companies, partnerships or similar forms of organisations without the specific consent of the Secretary of State. These are just the kind of things that Innovate UK has done, does now, and which it is likely to want to do more of as it extends its activities in the future. The very successful catapults, for example, are companies which Innovate UK has formed, appointing their initial chairs and non-executive directors and funding them. Indeed, I understand that Innovate UK has recently appointed a chief investment officer to look at opportunities to support new technology-based companies. Schedule 9 appears to constrain this type of innovative business support rather than encourage it. The amendments would remedy this while still leaving an appropriate level of oversight and control with the Secretary of State.

Amendment 495C also supports the business focus and autonomy of Innovate UK within UKRI. It would transfer back from UKRI to the Innovate UK council, with, I hope, its independent chair, the determination of which of the UKRI functions Innovate UK should exercise to increase economic growth in the United Kingdom.

These are very important aspects of ensuring that Innovate UK can continue to provide innovative business-focused support to UK economic growth. I beg to move.

[Lord Mendelsohn (Lab)]

My Lords, I will speak to the amendments standing in my name. Briefly, the context is of course that Innovate UK is a good thing that is making real progress, and we do not want to see anything that constrains it, particularly within this legislation. However, it is worth looking at the Government’s case for its inclusion in UKRI—we will deal with some of its merits later—and what that means for its operating method and efficiency, and whether it meets the right objectives. That is also about ensuring that Innovate UK has the right basis for entering it, which is what our Amendments 482D and 495E relate to. The efficient use of the interrelation between business and research is aptly put by the question I will ask having visited Harwell, where there is a fantastic facility. Particularly with regard to space, where we have a huge emerging industry, we have invested in a chamber to be able to test products as they would wear in space. There is a five-year waiting list, even though construction has not been completed yet. Therefore, where in the research world is the case made to extend those facilities and make them more available? That is part of what we are looking at here.

Amendment 495F would require Innovate UK, when exercising the functions required,

“to maintain its focus on assisting businesses”.

As well as some people having concerns about Innovate UK affecting the way the research is seen, we want to make sure that Innovate UK is established with the right focus and that its priorities and funding will not be excessively influenced by its proximity to the research councils and Research England.

One of the other issues on which we would like clarity from the Minister is how other elements, which have a strategic focus on these issues, relate to this. One is the role for the Council for Science and Technology, which is known by the acronym CST and sometimes dubbed “Charlie Sierra Tango”. It advises the Prime Minister on science and technology policy issues, which cut across the policy issues of government departments. It is housed in BEIS, and it is the most significant location where issues of science, technology and the interface with business are addressed by government. It would be logical for it to be proactively charged with the role and responsibility to look at this issue. We will be interested to see where it fits in.

Amendment 495G is our proposal that Innovate UK’s spending is separately reported and evaluated by the NAO, just to make sure, again, that we have that counterbalance.

In the development of the relationship with business and making sure that that function works particularly well, it is narrow just to consider the role of Innovate UK, however esteemed, useful and effective it is. We should be looking at the issues surrounding spin-outs—the commercialisation of university research, and how that works. We should be looking at some of the other elements; for example, research councils supported the Rainbow Seed Fund as a seed fund generator. It is a most outstanding, although small, fund, which has done a terrific job at encouraging investment in our research base and in companies that spin out from it. It will be useful to have some idea of where some of the new institutions, such as the Industrial Strategy Challenge Fund, which has been announced, will fit in with Innovate UK and its new research framework. Similarly, how will the Small Business Research Initiative fit in?

There are of course other examples. Many people commented on the recent announcements that we were looking for something similar to the Defense Advanced Research Projects Agency—DARPA—in the States, which has had fantastic non-military applications, such as computer networking, graphical interfaces and other things. Will the Government also consider, in the context of what they are trying to achieve, that there is a role for institutions such as Israel’s Yozma programme, which revolutionised Israel’s venture capital industry and has totally transformed its universities and capacity to the point where Israel is investing as a proportion of GDP twice as much in private equity and venture capital as the United States? That has transformed the research capability of its institutions.

Innovate UK is therefore a good thing, it should not be restricted and it should certainly have a lot more functions. However, is that the end of the story, and are there other ways in which research elements that we have already, as well as others, will be considered by the Government?

--- Later in debate ---

[Lord Willetts (Con)]

My Lords, in commenting briefly on this clause I draw attention to the fact that I am currently trying to set up a venture capital fund. It does not yet exist, but it might do.

Several noble Lords have gone through the thought process to which my noble friend Lord Selborne has just referred. The decision that Innovate UK should be part of the overall UKRI, which is not clear in the original Nurse review, we now accept and recognise.

There are two points on which it would be helpful to hear more from the Minister. If this involves one of the letters for which this Committee has become famous, so be it. It would be helpful to know how many of the Secretary of State’s powers—which are, as the Minister rightly said, explicit in the Bill as part of the usual Treasury controls—will, in practice, be delegated to Innovate UK. Although it is clear that in theory there is a great deal that Innovate UK can do only with the consent of the Secretary of State, it was not my experience as a Minister that I or Sir Vince Cable were endlessly getting petitions to do specific things. Organisations operated within a range of delegated authorities so that they could get on with doing things. It would be helpful if the Minister could indicate the kind of flexibility that he envisages Innovate UK would have within the UKRI regime.

Secondly, in the Bill as currently drafted there is a hint of old-think pre-industrial strategy. I wonder what would have happened if the chronology had been the other way round and we had had last week’s excellent consultation document on industrial strategy and then the legislation. Some of these constraints are hard to reconcile with the ideas in the industrial strategy. Again, if the Minister can show how this model will enable Ministers to deliver what they are talking about in the industrial strategy, it would be very helpful.

[Lord Mendelsohn]

My Lords, I shall speak to our amendments. The noble Baroness, Lady Garden, has made a very good case. The long and the short of how we see this is that we do not think it was a very good idea in the first place and time has passed on. Many of the comments that have been made will find an echo in our thoughts.

It is worth returning to the original Nurse review. The report states:

“In relation to Innovate UK, as stated earlier, the current delivery landscape is too complex and there should be a smoother pathway to more applied research. Integrating Innovate UK into the Research UK structure alongside the Research Councils could help such issues to be addressed However, Innovate UK has a different customer base as well as differences in delivery mechanisms, which Government needs to bear in mind in considering such an approach and which this review, according to its remit, has not looked at in depth”.


The noble Baroness, Lady Garden, made exactly that point: what evaluations were made when it went in?

I would suggest that both its target audience and the mechanisms that Innovate UK uses are so dramatically different that it is unlikely to be able to perform such an effective function within the context of UKRI. I think that it would be a terrible misfortune if Innovate UK, which has proved itself over some years to be a very effective body doing great things, were to come into UKRI with its current framework. That would not just be restrictive but could possibly be quite damaging for an institution that is following a good path.

I also think that this is a policy that was designed for a pre-Brexit world. In a post-Brexit world—which we are not in at the moment—we know that we are going to have to rely on research an awful lot more, and a great deal will be required of it. I cannot imagine that in such a situation we would ever put one of our most significant levers into this sort of environment; we would leave it to work independently. With the industrial strategy having now been published, it is absolutely clear that there is a massive hole in the delivery of its research objectives that would have been filled by Innovate UK. That is a mistake that the Government would be wise to take note of.

By the way, it is important to understand that Nurse himself recommended:

“At the very least, the Chief Executives of HEFCE and Innovate UK should be represented, on the Executive Committee of Research UK”,


or UKRI. And that was probably a very measured judgment.

My final very brief point is in relation to what it is necessary to do to make the best of our university sector and to be able to commercialise at both ends of the spectrum via big company investments and tracking what research is being done as well as smaller companies emerging as the result of venture capital. An awful lot is going on in this area. Recently I spent time with some of the companies at Cambridge Enterprise Limited. Innovate UK is not the only solution that is required, and I think that it would be a colossal mistake to expect UKRI to perform that role and to forget the other things we may need to do. To restrict UKRI in that situation has the potential to do great harm to the long-term needs of our country, especially in an environment where we need an effective industrial strategy.

[Lord Prior of Brampton]

My Lords, we could debate this issue for two or three hours, but we must restrain ourselves. I turn first to the two points raised by my noble friend Lord Willetts. I will indeed have to write to him about the powers the Secretary of State will be planning to delegate to Innovate UK. In a way that also answers his second question because he referred to “old think”, and indeed some of that could be construed in this Bill when comparing it with the requirements of the industrial strategy. But if the delegation to UKRI and Innovate UK from the Secretary of State is right, I think it will be perfectly possible to reconcile that with the industrial strategy.

I would actually take issue with the noble Lord, Lord Mendelsohn, because I think that Brexit has made the coming together of Innovate UK with the research councils within UKRI even more necessary, but I agree that Innovate UK is only a part of the answer. We have to have a competitive fiscal regime, long-term risk capital and a well-trained technical workforce among many other things. Innovate UK on its own is not going to shift the productivity dial for the country, although we believe that it has an important part to play.

The noble Baroness, Lady Garden, asked about an assessment of Innovate UK. A detailed business plan was made, although I am afraid that I cannot remember when it was published. I shall certainly endeavour to send her a copy of that report. The fact is that this is more of a judgment than something which can be proved with spreadsheets and the like. I think that the right judgment is to bring innovation together with research; that is the right thing to do because the reality is that one of our weaknesses, as other noble Lords have mentioned, is that we have a fantastic research base but have not been able to take maximum commercial advantage of it. That is a space which Innovate UK has filled and will continue to do so.

The extra investment being made by the Government in UKRI is a clear vote of confidence, and our support for the central role of Innovate UK in delivering our future knowledge economy will include a substantial increase in grant funding. The Bill seeks to name Innovate UK in legislation for the first time. It will retain its own individual funding stream and grow its support for business-led technology and innovation as a key part of the industrial strategy. I think it is worth quoting Ruth McKernan, the chief executive of Innovate UK:

“The establishment of UK Research and Innovation, including the research councils and Innovate UK, recognises the vital role innovation plays and further strengthens the UK’s ability to turn scientific excellence into economic impact”.


That is one of the 10 pillars of the industrial strategy referred to earlier by the noble Lord, Lord Mair. It is absolutely fundamental to our future and bringing these organisations together is critically important. Only by bringing Innovate UK into UKRI will we remove the remaining barriers to greater joint working between research and business at all levels. Businesses will be able to identify more readily possible research partners and will benefit from the better alignment of the outputs of research with business needs in, for example, technology and data skills. Researchers will benefit from greater exposure to business and commercialisation expertise so that they can achieve maximum impact. It will be simpler to find and form partnerships and there will be easier movement between academia and business. The UK will benefit from a more strategic, agile and impactful approach across UKRI’s portfolio which can respond to real-world challenges and opportunities.

The critical achievement is reaching the right balance between freedom and autonomy for Innovate UK while recognising at the same time that, ultimately, the Secretary of State has to be held financially accountable in Parliament for the money that is spent. With that, I hope that the noble Baroness will feel able to withdraw her amendment.

--- Later in debate ---

Moved by

[Lord Mendelsohn]

485E: Clause 87, page 55, line 32, at end insert—
“( ) facilitate, encourage and support UK research’s participation in EU programmes and initiatives and be responsible for ensuring the UK’s position on international research projects.”

[Lord Mendelsohn]

My Lords, this group of amendments relates to UK research and the impact of leaving the European Union and probes the Government’s intentions about how we should approach this. Of course, as has been said, the Bill was written in a pre-Brexit environment and there is not inherently a good post-Brexit situation. A great many concerns have been expressed over the issues of funding and staff—researchers and others—and students being able to gain access to it, and also about our leadership in the European and international research community being diminished as a result. Indeed, on other amendments we have already debated some of those issues.

I have a genuine personal concern about this. I have been involved in two businesses now that are both within the context of our science and research base. The fundraising of one, which I was looking to participate in, has been pulled because the CIO, the CTO and two engineers and designers—who are European—now plan to return to their countries. The company has a considerable problem in being able to deliver its plans. The other company is in a similar position. Not all is doom and gloom; I am invested in another company which does not have too many EU nationals involved.

I have spent rather too long with doctors in recent times but one of the medical research teams told me that his team was informed not only that it would not be welcome as part of the European bid that it had been involved in for some time, but also that it was felt that the UK being involved would mark it down. As a result, a whole group of researchers is giving notice and planning to leave, and is currently planning arrangements for their children.

As a result, we have a pressing need to address some of these issues quickly. While there are other amendments on this—I note the presence of the noble Lord, Lord Hannay, who proposed some very good ones—we tabled Amendment 507ZA to establish a UKRI visa department which may well have a useful function in a post-Brexit scenario but certainly, in our view, in a pre-Brexit scenario has symbolic value and is an important aspect of what we need to do to reassure people that this is a primary concern, something the Government will address and that they will almost move mountains to deal with.

The other amendments look at ensuring that UKRI spends a lot of time—I think it will need additional resourcing for this—to make sure that the UK continues to have a very strong participation in EU programmes and initiatives. There is much to be done in intergovernmental negotiations, which this is not part of. The Government need to work harder at those sorts of things. Of course, as in Amendment 485F, we are concerned about other aspects of research support from the EU. The Government committed to supporting the European funds that are lost—that is to be welcomed—but it is important that we quantify that loss on an ongoing basis.

We must also consider that we will have lost some important research opportunities. For example, there is a belief among many in the sector that our inability to access the European Research Council creates a real gap as it, in particular, complements other funding activities in Europe and has an investigator-driven or bottom-up approach. It allows researchers to identify new opportunities and directions in any field of research rather than other sorts of priorities being established in other ways. Those sorts of gaps are important for us to identify.

Given the firm consensus that exists to ensure that the UK base remains as strong, world-leading and important as it should be in future, the purpose of this group is to track what we do, do more to hold our position and show symbolically that we will welcome and look after people who come here. If we do not do that, we will lose our global position as a world-leading base. I beg to move.

--- Later in debate ---

[Lord Prior of Brampton]

The noble Lord stopped me in full flow. I was just getting to a point raised by the noble Baroness, Lady Brown, regarding visa applications. As the research councils do now, we expect UKRI, as an employer, to have a role in sponsoring visa applications for international staff on its own payroll and, in some circumstances, for particular individuals with agreed posts in universities. However, it would not be practical to make UKRI responsible for visa sponsorship for the whole sector. I think we will probably have to come back later to discuss that issue in more detail. The Government do not agree—this, I am afraid, goes to the point made by the noble Lord, Lord Hannay—that the Bill should be amended as suggested, as UKRI will be an outward-looking organisation and will build on our current excellence. I therefore ask the noble Lord to withdraw the amendment.

[Lord Mendelsohn]

I thank the Minister for his reply. I shall not echo the sentiment of the noble Lord, Lord Hannay. I think more needs to be done, and I shall just make two points. We have to face up to a certain reality. While it is no doubt true that some people in the United States of America are considering their position, there it is a somewhat temporary measure. There it may be four years or eight years, but our exit from Europe will have much longer term implications. That is the issue we have to address.

While it is certainly true that things are coming to us—although some of the stuff that has been announced was being discussed well before Brexit, and people have taken a different view on risks—there is a human dimension here: making sure we are attracting talent. I have a corporate finance business. International companies that used to send people to the UK will now look elsewhere when trying to attract eastern European talent. London is not the only location they will now look at as the right sort of place to locate families.

It is important that we get this talent issue under control, and find a way to make sure that we fully express our ambitions and put the right sort of measures in the Bill. However, given the Minister’s comments—hopefully there will be some form of reflection—I beg leave to withdraw the amendment.

Amendment 485E withdrawn.

--- Later in debate ---

[Lord Patel (CB)]

My Lords, the aim of Amendment 489 is to investigate and ask what autonomy the research councils will have when UKRI is the single voice for research. Although I accept that UKRI has a very important purpose in being that voice, it must allow the individual research councils to flourish in order to identify the most promising science and, through their institutes, deliver ground-breaking insight and understanding. My amendment seeks to ensure that UKRI can co-ordinate but does not in any way crush the expertise, independence and autonomy that created organisations such as the Laboratory of Molecular Biology in Cambridge, an institute of the MRC often referred to as the UK’s Nobel prize factory—I think at the last count for 15 scientists.

The executive chairs and management of the councils should be allowed to decide on scientific priorities and have the authority to run their organisations in an effective way, working within the strategic framework set by UKRI, but without having to defer to the UKRI board for operational or scientific issues. Research councils need a distinct identity, and the independence and agility that goes with it, to enable them to undertake procurement and form partnerships, joint ventures and collaborations without continuous recourse to the UKRI supervisory board. In mentioning the example of the Medical Research Council, I should have declared an interest in that I have been associated with the council for a long time and until recently was a council member.

The Medical Research Council has collaborated with AstraZeneca on drug development and Marks & Spencer on food security, as well as collaborating internationally in several cases. Research councils should have the right to retain returns from the exploitation of publicly generated IPR. Such IPR will continue to be both an important source of revenue and a valuable incentive to translate scientific developments into new products and devices. Individual research councils could be encouraged to develop IPR and be able to share in the economic benefits of exploiting them, recycling them back into science and research for the good of the nation.

Furthermore, internationally renowned brand identities, such as that of the MRC, should be retained. There is clear evidence that brand identities such as the Medical Research Council’s attract some of the very best scientists to the UK. Its reputation for rigour and excellence also leverages co-funding from other research funders, often in a ratio of 10:1 or more.

The current wording in the Bill that UKRI will arrange for councils to,

“exercise such functions … as UKRI may determine”,

does not seem to sit easily with the principles of subsidiarity, autonomy and independence of research council disciplines. There is a need for greater clarity as to how the autonomy of the research councils will be maintained. I beg to move.

[Lord Mendelsohn]

I shall speak to a couple of amendments that are worth addressing, but I associate myself with the proposals by the noble Lord, Lord Patel, which have a great deal of merit.

In Amendments 495J and 500ZA, we believe we are dealing with a drafting error that currently makes ineligible independent research organisations for financial support as well as a higher education provider. We think that that excludes museums and is probably a drafting mistake, so we would be very grateful to get some clarification from the Minister about whether museums would be incorporated.

One of my sons is a big fan of a TV programme called “The Big Bang Theory”, which is the story of some young people in America who in the main, as is the vogue of the time, are what you would consider to be “geeks”. The episodes start with the name of a scientific principle, theory or experiment, so prior to this debate my son believed that my interest in the Haldane principle was about “The Big Bang Theory” as opposed to the autonomy of research councils.

The Haldane principle is one that everyone holds dear. There has been a great deal of debate about whether a more explicit reference to it should be in the Bill, and I think there is a broad consensus towards that view. I hope the Minister considers the two amendments on that issue. I am not particularly prissy about the drafting but I am sure everyone in the research and science community would be very interested to have it confirmed by the Minister if that were something the Government were keen to do.

[Baroness Brown of Cambridge]

My Lords, I support Amendment 489 from the noble Lord, Lord Patel, and shall speak to Amendments 503A and 505A in my name and that of my noble friend Lord Krebs. Amendment 503A follows on from the comments of the noble Lord, Lord Mendelsohn, about the Haldane principle. At Second Reading many noble Lords, including the noble Baroness, Lady Kennedy, and the noble and learned Lords, Lord Kakkar, Lord Winston and Lord Krebs, urged the Minister of State to be bold and take this opportunity to, as the noble Lord, Lord Mandelson, put it,

“hardwire the arm’s-length, Haldane principle into the Bill”,

or, rather more to my taste, as Lord Waldegrave said more simply,

“let us at least try to put the Haldane principle on the face of the Bill”.—[Official Report, 6/12/16; cols. 624-27.]

In the words of the noble Lord, Lord Willetts, when he was Minister for Universities and Science:

“The Haldane principle means that decisions on individual research proposals are best taken by researchers themselves through peer review … Prioritisation of an individual research council’s spending within its allocation is not a decision for Ministers”.


He said the principle was,

“vital for the protection of academic independence and excellence”.—[Official Report, Commons, 20/12/10; col. 138WS.]

Its presence in the Bill would remove many of the other concerns about the autonomy and operation of the research councils in the new UKRI organisation. Amendment 503A would put a specific reference to the Haldane principle in the Bill in relation to the Secretary of State’s direction to UKRI.

Amendment 505A picks up the important issue of ensuring the continuation of the dual funding model for research. It seeks to assure that the streams of funding for research grants, distributed by the research councils, and for QR, distributed on the basis of the results of the research excellence framework by Research England, could not be redistributed or used for cross-subsidy. It is important that the two funding streams remain distinct and complementary. In addition to the eloquent support from the noble Lords, Lord Kakkar and Lord Kerslake, for the dual funding systems in their Second Reading speeches, Sir Paul Nurse commented in the Nurse review, on which much of this part of the Bill is based, that having QR in addition to research grants was:

“one of the reasons behind the UK’s success in research and these separate funding streams should be preserved”.

These two streams should be evaluated and distributed in separate and complementary ways, as should other funding streams such as HEIF, as we heard earlier.