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Programme for Research: EUC Report

My Lords, I start by thanking my noble friend Lord Woolmer for introducing his report and for the wide-ranging way in which he did so. I thank all noble Lords who participated in this debate and in the work of the sub-committee. The Government have given their formal written response to the recommendations and conclusions of the sub-committee. Raising Europe’s innovation and R&D performance is central to achieving the Lisbon goals and the Government support the further development of the European research area through FP7. UK organisations have traditionally done well out of the framework programme. In FP4 and FP5, UK organisations were involved in more projects than any other member state, and in financial terms secured nearly 16 per cent—more than €2 billion—of the overall funding, second only to Germany. So far in FP6, UK organisations are involved in 48 per cent of projects and have secured 14.5 per cent of funding—in the region of €1.74 billion. The performance of the UK higher education institute sector has steadily increased in recent years. In FP5, UK HEIs were responsible for 46 per cent of UK participations and almost 50 per cent of funding—€1 billion out of €2.1 billion awarded to the UK. In FP6, those figures have risen to 56 per cent of participations and 58 per cent of funding. UK business participation in FP6 hovers around 20 per cent of total UK participations. Feedback from business suggests that the main reasons for this relatively low level of participation—as referred to by several noble Lords—are increased bureaucracy and decreasing relevance in the scope and focus of the programme, which aversely impact on cost-benefit ratios. The proposals for FP7 go some way to addressing these concerns, and I will say more about that later. I note the comments of my noble friend Lord Haskel about the retail sector. This is a crucially important sector to the UK and one where traditional measures of R&D intensity may not be generally applicable. Recognising that, a number of strands of work are being taken forward in multilateral fora to consider this issue. Applications developed through research funded by the framework programme can find uses in the retail sector, as my noble friend rightly pointed out. The DTI’s R&D scoreboard shows that some large retailers, such as Tesco, have begun to disclose substantial R&D in their accounts. Technology clearly has an important part to play in the retail sector’s innovation. My noble friend Lord Giddens touched on the issue of the change in the nature of research and innovation. The committee’s report touched on concerns that some areas of business believed that there was no competitive gain from participating in EU research programmes. However, in a DTI-commissioned study of all UK participants in FP4 and FP5, the majority of responders endorsed the need for funding science and technology at the European level. The survey also showed that the framework programme produces considerable added value for the UK research and policy communities, including: addressing questions that require a critical mass and cannot be tackled at the national level; providing a mechanism to pool resources, facilities and knowledge; and tackling issues of a specific European nature. As I mentioned earlier, the Government believe that the proposed structure and implementation procedures for FP7 go some way to addressing some of the programme’s perceived weaknesses. The architecture of FP7—with four specific programmes covering ideas, people, co-operationand capacities—provides a clearer focus on the programme’s overall aims: strengthening the science and technology base, improving industrial competitiveness, and supporting EU policy development. The UK’s position paper submitted in 2004 supported the concept of establishing a European Research Council as a way of raising the quality of the best basic research. The proposal for the ERC has been hotly debated in both the European Council and the Parliament, and has found support from all parties. The result is the establishment of an ERC that is autonomous from the Commission and member states and run by scientist for scientists. Funding will be allocated through competition, based on excellence and originality as assessed by peer review. Most noble Lords who have spoken today have supported the ERC, particularly the noble Baroness, Lady Sharp. The position paper also stressed the need for FP7 to contribute to increasing Europe’s competitiveness and to leveraging increased private sector investment so that research translates into world-leading goods and services. The Government believe that the FP7 proposal reflects UK priorities and recognises the importance of industrial engagement, not least by allocating 65 per cent of the budget to the co-operation specific programme. The UK position paper was also clear that the seventh framework programme should underpin better policy-making at the level of Community by providing quality research to inform policy debates in Brussels and in other member states. The Government believe that FP7 reflects UK priorities in this respect, with clear funding streams allocated to priority areas for policy-making in the coming decade, such as healthy ageing, infectious diseases, obesity, renewable energy sources and climate change, a point raised by the noble Lord, Lord De Mauley. The Commission has been receptive to the concerns expressed by the Government and shared by industry across Europe about the need to ensure that FP7 is driven by the ultimate end-users of research in industry. It has sought to strengthen the industry input into the policy-making progress through such instruments as the European technology platforms and it is seeking to make FP7 more industry-friendly in its programmes and structures. The Government welcome this increased openness to the needs of industry. We also welcome the increased effort to engage industrial end-users in establishing priorities for FP7 funding in the co-operation specific programme. European technology platforms can play a key role in identifying a strategic research agenda for their industrial sector. This should also feed into the process of setting the work programmes and defining the fields in which the calls for proposals for FP7 funding will be made. The individual projects undertaken to advance SRAs will be funded through these calls using established FP funding instruments as well as other potential sources of funding. Joint technology initiatives, which involve FP funding in support of large-scale public/private partnerships, are also driven by industry but go a stage further in terms of integration and combining private sector, national and European level funding. Six possible JTIs have been identified by the Commission but it is not yet clear how many of those will ultimately be funded and on what scale. For example, it is possible that there will be a staggered start, with some JTIs being launched before others. Our expectation now is that the Commission will come forward with proposals on this subject in the first half of 2007. My noble friend Lord Woolmer and the noble Lords, Lord Dykes and Lord De Mauley, asked about the monitoring processes and about what is being done in practice. Until we see the detailed proposals in 2007, it is not possible to say precisely what the response will be, but it is an important issue with which the Government will fully engage. The Government’s preference at this stage, subject to further information about the scale, scope and structure of individual JTIs, would be for the JTIs on innovative medicines, aeronautics, and hydrogenand fuel cells to be priorities for an early launch.That preference reflects the views of business communicated to us by the concerned sectors. When considering the effectiveness of programme implementation, it should be noted that the Commission faces a major challenge in delivering the framework programme. It is a large and inherently complex transnational programme, where the desired balance between financial propriety and user-friendliness is not easily achieved. The Commission has already undertaken a programme of short-term actions to improve the delivery of FP6, and that has had a positive impact. It has also made a strong commitment to simplify matters further in FP7. The noble Lord, Lord De Mauley, asked for much more focus on the financial spend and on the monitoringof that spend. There is a need to make those programmes user-friendly and a question over the extent to which there should properly be full accountability. In its proposal for the FP7 rules of participation, which define the rights and obligations of those taking part in the programme, the Commission has sought to address the bureaucracy associated with it. The main change is an increase in reimbursement rates and the wider use of lump-sum and flat-rate financing. The 75 per cent reimbursement rate for universities is good news because it makes EU funding competitive with national funding. The Commission has also proposed a number of other measures to ease administrative burdens on participants. I shall come to those in a moment. The noble Lord, Lord Dykes, talked about funding rates. In FP6, the rate of funding for demonstration activities has been increased from 35 to 50 per cent. For research activities, it has been increased from50 to up to 75 per cent. In addition, in the ERC, projects will be funded at 100 per cent. Issues relating to the easing of administrative burdens include reducing audit and other reporting requirements, ensuring more consistent interpretation of rules, rationalising the number and size of documents, and relaxing requirements surrounding the dissemination, use of and access to the results of funded projects. Negotiations on the FP7 are drawing to an end and a final deal with the European Parliament is expected in November. A common position text on both the nuclear and non-nuclear parts was agreed at the Competitiveness Council in September. This wasa real achievement, requiring the resolution of longstanding and sensitive issues on human embryonic stem cell and nuclear research. Human embryonic stem cell research is always a sensitive and complex issue to negotiate, as the acceptability of this field of research varies according to the cultural and religious diversity of individual member states. For that reason, the UK argued strongly and successfully that HESC research should be governed by national law in accordance with the principle of subsidiarity, thus maintaining the agreement reached under FP6. This agreement is a true compromise by all member states and places no further restrictions on HESC research that can be carried out under FP7. Several noble Lords commented on the budget. The agreement for FP7 sets the budget at approximately €54 billion, equating to roughly€7.7 billion per annum. This was a difficult set of negotiations due to conflicting interests and priorities, but it had a satisfactory outcome for the UK as it sees increases in line with the UK position. Although not as great as the Commission’s original proposal, which sought to double the budget for FP7, it is still a substantial increase over the life of the programme and an increase of around 75 per cent in real termsby 2013. I should like to touch on the recent proposals to form a European institute of technology, also referred to in the committee’s report. I think it is fair to say that that proposal did not find favour among noble Lords today. The proposed EIT aims to raise the level of innovation and knowledge transfer in all member states by involving partners in the fields of education, research and business. It will seek to draw on both European and international expertise, and is part of a raft of ongoing measures to boost competitiveness as part of the Lisbon Agenda. The proposed EIT will support a series of autonomous partnerships—knowledge and innovation communities—tasked with carrying out interdisciplinary research and knowledge transfer in fields of key economic and societal interest. Communities will be made up of partners from both the public and private sectors, such as teams from universities, businesses and research organisations. They will be supported by a light-touch, independent governing board, which will define the global strategic goals of the EIT. The Government have been closely involved in discussions and are pleased that the Commission has taken a number of our concerns on board. We are keen to ensure that this proposal adds real value in terms of innovation and knowledge transfer, that it has a clear focus and that it does not overlap unhelpfully with existing instruments. A number of questions remain on which the Government will be seeking further clarification during the next phase of negotiation. The most pressing concern relates to funding. The Commission has proposed a budget for 2007-13 of approximately €2.4 billion, but it is still not clear where the funding will come from, how market funding will be attracted or how this will impact on other budgetary priorities. This remains a concern for the UK, and we cannot support a proposal with such financial implications without greater clarity, especially where this could prejudge the outcome of a fundamental review of the EU budget. It is important that funds to implement this are found within existing EU resources and are not taken from other existing programmes, suchas FP7. I was asked a number of specific questions. My noble friend Lord Woolmer touched on the issue of the awarding of degrees. The proposals that have come forward do not include plans for the EIT to award degrees and diplomas without member state recognition. The noble Lords, Lord Bowness, Lord Dykes and Lord De Mauley, asked about the security research budget and raised a number of issues on that. Security research within FP7 can only be civil research. The UK has been successful in explicitly referencing in all layers of the legal text that civil research is the only research that can be covered within FP7. The UK proposal to separate space and security into two thematic priorities and to reduce the budget in both areas has been reflected in the final decision. However, I can confirm that the budget for security research has been reduced It is now approximately 2 per cent of the total budget for the Co-operation Chapter. The issue of dual use was raised, particularly by the noble Lord, Lord Bowness, and that has certainly featured much in the negotiations for FP7. For that reason, member states and the European Parliament have successfully argued that a regulatory committee should manage the work programme for this area, thus building confidence that mechanisms are in place closely to monitor the type of research and potential applications of research in this area. In response to the involvement of COREPER in the process, we do not foresee a role for it unless the regulatory committee refers issues to the council. Several noble Lords spoke about mobility schemes. The noble Baroness Lady Sharp, talked about the importance of ensuring that Europe creates an environment which promotes the careers of individual researchers to allow them to be mobile throughout Europe and to be wherever the best research is being carried out. On the topping up of national programmes, the main focus remains on the Marie Curie fellowships. The topping up of national programmes, as I understand it, will not take place in the first year, allowing time for further consideration. The Marie Curie budget is recognised as having been successful. On that basis the budget for the Marie Curie fellowships has increased significantly from FP6to FP7. My noble friend Lord Woolmer asked what we have to show for 25 years of these arrangements and what the FP has ever done for us. That was answered in part by the noble Baroness, Lady Sharp, and by my noble friend Lord Haskel who gave some specific examples. An FP5 project involving 13 partners from six different countries created the world's largest collection of muscular dystrophy specialists to develop new diagnostics and treatments. There are others that can be set out. In all of this we have to bear in mind that, despite successive increases in the EU's R&D budget, the European funding represents only around 5.3 per cent, 3.6 per cent of total public funding for research in Europe; in other words, about 94 per cent of public funds for research are invested at national level. Given that comparatively small budget, I suggest that the Union’s R&D policy has been remarkably successful in the past 20 years. It is estimated that on average one euro of FP funding leads to a long-term increase in industry value-added of between seven and 14 euros. The noble Lord, Lord De Mauley, asked about the importance of productivity. Of course, I agree. The data since 1997 show that the UK has made significant strides in closing the gap with, or overtaking, some of our competitors. As he stressed, it is also very important that the CIP programme is integrated with other parts of the budget to ensure that it is a comprehensive and integrated process. I shall study the record and, if I find that I have failed to answer other questions, I shall write to noble Lords as appropriate. Today, technology and scientific understanding are changing our world faster than ever before and developments in information and communications technology, new materials, biotechnology, new fuels and nanotechnology are unleashing new waves of innovation and creating many opportunities for entrepreneurial business to gain competitive advantage. FP7 has the capacity to make an important contribution to that endeavour.