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Science, Technology and Engineering

My Lords, it is a real pleasure to follow the noble Lord, Lord Haskel. I congratulate him not only on selecting this topic for debate but on his excellent and wide-ranging speech. I do not always agree with what he argues in your Lordships’ Chamber but on this occasion I agree 100 per cent with what he said. I declare some interests in the subject. I am the honorary chairman of Cambridge University’s technology transfer office, Cambridge Enterprise Ltd, and I have a financial interest in about a dozen high-technology companies either as a director or an investor. I should therefore like to concentrate on one specific aspect of the challenge facing the United Kingdom in developing and encouraging science, technology and engineering activity, at the start-up end. It involves pre-revenue high-technology companies which rely largely on seed funding not only from the Government but from universities. This is the seed corn for the future in terms of developing the quality of science, technology and engineering in this country. I agree with the noble Lord, Lord Haskel, that the great resources in this country, for which we are world famous, will solve our practical problems. The previous debate might lift the spirit but this debate deals with the urgent practical problems and challenges facing this country. It is a pleasure to see the Minister, the noble Lord, Lord Drayson, in his place. He was a great loss to the Ministry of Defence but I am delighted that he is back in government as Minister for Science and Innovation. This debate and his concluding remarks will be followed with great interest by the royal academies and by many universities interested in this subject. The United Kingdom, if not pre-eminent, leads the world in innovation in this field. Perhaps I may compare our great universities with those in the United States. We develop and register more innovations but perhaps exploit fewer of them commercially and financially. However, we have a proud record to defend and nurture. The problem which I am identifying occurs at a very early stage in the development of technology: financing the development and proving of the technology before it is exploited commercially. Many initiatives and programmes are available in this country. Perhaps I may single out, within the public sector, Partnerships UK. I pay tribute to what it has done, but it is very small in comparison with the resources needed; its total capitalisation, I think, is of the order of £45 million. There are also great foundations—in part led largely by the noble Lord, Lord Sainsbury, and a very generous benefaction to many universities in the development of science and technology—individual business angels; some venture capital companies; Capital for Enterprise, sponsored by the Department for Business, Enterprise and Regulatory Reform; and corporate venture capital funds. The great problem is that this traditional source of financing is beginning to dry up, presenting a real crisis in the development of technology in this country. Once the tap has been turned off, we will pay, five or 10 years down the road, in the lack of innovation that has been commercially exploited. Before I follow the noble Lord, Lord Haskel, in turning to the Government’s latest proposals I ought to acknowledge some present sources of alleviation. So far as the European Union is concerned, the Commission has just announced a doubling of the funding for future and emerging technologies, from about £88 million this year to double that by 2015. That is warmly welcomed, although sometimes bidding for these funds presents a serious challenge in terms of both energy and the detail required. However, it is certainly welcome. The public procurement pull-through, which the noble Lord, Lord Drayson, has talked about in the past—in other words, the public sector providing financial resources in order to pull technologies through before they are either developed further in the public sector or commercialised in the private sector—has an important role to play. Again, I pay tribute to the All-Party Parliamentary Small Business Group, which is specifically focusing on how to improve public sector procurement at the moment. One must also congratulate the British Library’s Business and IP Centre; it is spending a relatively small sum but it is an excellent resource for young technologists and small business men seeking information about patents, intellectual property and comparable technologies around the world. I congratulate the British Library on what it has already achieved. The Department for Business, Enterprise and Regulatory Reform has shown focus in producing an excellent pamphlet called Solutions for Business. It is the first occasion when all the various sources of financial advice have been drawn together. In terms of what is currently available, I single out Scottish Enterprise as quite a sensible model for the regional development agencies or whatever succeeds them. Scottish Enterprise takes the lead in providing matching funds for small high-technology start-ups, particularly those being spun out of the Scottish universities. It has been bold and brave in backing a number of companies, and it has already had its successes. I turn to the kernel of my argument: all this activity, expenditure and support is not enough. In the Budget, the Chancellor talked about a £750 million strategic investment fund to take over from and provide much the same services as the old Industrial and Commercial Finance Corporation and 3i, until 3i decided to pull out of its traditional role of nurturing new technology. Then, on 20 April, the Prime Minister made a promise at Loughborough University; the idea was to set up a state-backed bank to address the funding gap for start-up ventures, so this was a specific proposal derived from the bigger innovation, the strategic investment fund. Now we read today in the newspapers of the appointment of Mr Christopher Rowlands, formerly of 3i, who is going to lead an official review of how a state-backed bank should be set up, reporting to the noble Lord, Lord Mandelson. It would be helpful if the Minister could confirm that that is indeed the case, along with the terms of reference and a timescale for the review. We should be grateful to the National Endowment for Science, Technology and the Arts—NESTA—and the British Venture Capital Association for supporting the idea of a state-provided but privately run or privately managed fund for high-tech start-up businesses. Richard Lambert, the director-general of the CBI, deserves specific credit for helping to derive that suggestion. In conclusion, the three principles that should govern this new initiative on spending public money to support high-technology, early start-up enterprises are, first, that we need an allocation of funds, and the £250 million that has been talked about by the Government in your Lordships’ House is of the right order of magnitude; secondly, we must embrace the private sector to help to manage and exploit the assets available, because I do not think it should be run entirely by the public sector; and, lastly, that we ought to be picking winners, backing technology that has already had proof of concept in our universities or research institutes and technology that is either proven or capable of being proven. We do not want to spread the available money too thinly across many projects all over the country. The time to act is now, and the Minister’s support is vital to the success of the project.