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Programme for Research: EUC Report

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 future of Europe and is directly connected to the Lisbon agenda, to which I shall refer in what I haveto say. 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 increase research and development spending in Europe. It was supposed to reach a 3 per cent target by 2010, and it is generally accepted that it will not reach that target. The Minister said that in his responses to the interrogation to which he was subjected. Business research and development is supposed to rise to two-thirds of this total investment, which is the case in the US. I do not see it as very likely in Europe, and it is not happening here. The reason is that the business segment that is supposed to elevate the proportion spent on research and development is not really likely to think in these terms. Why should business firms have an interest in increasing expenditure on research and development for its own sake? They would not unless there was market capability, which comes with it. If firms can, they will cut back on research and development if they can still sustain innovation and the marketplace. Because research and development is, for them, an economic cost, even the big companies are likely to outsource it more and more in the future. 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 knowledge creation and the utilisation of that in the marketplace. I suggest, and the Aho report implies, that we are moving towards a situation in which new-style research and development will be more significant in relation to the changes that are happening with the development of the knowledge-based, service-based economy. 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 toget 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. 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.