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April 2009

Picking Winners or Responding to Demand: Supplementary Evidence for Science and Engineering at the Heart of Government Policy: a response to the UK Parliaments IUSS Committee
1 The Royal Society of Edinburgh (RSE), as Scotlands National Academy, has been heavily involved in the development of science strategy in the UK and Scotland, and therefore welcomes the supplementary call for evidence from the Innovation, Universities, Science & Skills (IUSS) Committee relating to Lord Draysons recent proposals on strategic science funding. Has the time come for the UK as part of a clear economic strategy to make choices about the balance of investment in science and innovation to favour those areas in which the UK has clear competitive advantage? was the question posed by Lord Drayson in a speech on 4th February 2009. Its thrust has subsequently been supported in speeches by the Secretaries of State for Innovation, Universities and Science and of Business Enterprise and Regulatory Reform and the Prime Minister. of humanities and social science funding to STEM research would have the desired effect. Such an approach ignores the underlying structural problem. 5 Over the last decade, the push from the science base has been greatly increased as universities and institutes have adopted a contribution to innovation as part of their mission, increasing the rate at which spin-out and start-up companies have been formed and being highly creative in forming links with business1. Important though these processes are, they are highly unlikely to contribute significantly to growth of the magnitude required unless this science base push is reciprocated by business pull. It is our view that the sub-optimal translation from the science base into utility is a deep-seated structural problem that results from a deficiency of pull from industry on the science base. It is reflected in relatively low levels of R&D investment, a problem that is magnified in Scotland, where industry is dominated by low research intensity sectors. We believe that Government has tools in its hands that could stimulate business demand pull, and that this should be the focus of Government policy rather than yet another supply-side initiative to pick winners. We go on to suggest what this stimulation should be in section B. First however, it is important to be clear about the function of that part of the science base concerned with fundamental research. One of the most important properties of the science base is to act as an insurance against an unknown future, a source of ideas of potential and of skill able to respond to unpredictable challenges and opportunities. New opportunities may be offered by the science itself, or by new market demands or opportunities. Not only should the science base be able to address current demands and opportunities, but be sufficiently diverse in areas not currently in vogue to respond to the unexpected.

A. Is such a policy desirable or necessary 3 Fundamental scientific understanding, derived from basic research has been over the last hundred years the ultimate driver of much of the dramatic, but unpredictable technological progress that has changed, and will continue to change the way we live. However, notwithstanding two decades of highly competitive processes in the UK that have fostered an ethos of competitive excellence that has made our science base the best structured, most productive and cost-effective in Europe and, globally, second only to that of the USA in its scope and impact, the dilemma remains, that the science base is less effectively exploited for social and economic benefit than we would wish. Given this dilemma, Lord Draysons question is highly appropriate, but it is vital to avoid too easy an answer that risks undermining rather than enhancing the science bases potential to deliver benefit. If the questions implication is that we should concentrate more resource in particular areas of science, we are highly sceptical that a simple shift of, say 20% of funding from earth science to life science, or mathematics to communications, or a massive part 6

1 On this note, we are very concerned that the collapse of investment finance over the last 9 months threatens the survival of the many early stage technology companies that have been created from the science base in recent years, and in which Britain has led Europe.These should in principle be the seed corn for future industrial growth.They could be destroyed within the year. Moreover, the University/VC deals designed to build on these successes have also collapsed. A source of risk capital to support these enterprises over the period of the recession is vital.The banks are not fulfilling this role. Government should.

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It is crucial therefore that the UK maintains a strong, balanced portfolio of science, especially given that new developments often emerge from interdisciplinary and multidisciplinary approaches, whilst assessments of technological potential have invariably missed the mark, with a lamentable record of anticipating future developments only a few years away2. Furthermore, picking winners also picks losers, creating weaknesses that could undermine our capacity and capability to respond to opportunity. The UK has a strong, broad research base compared to the rest of Europe, and which makes a significant contribution to the world scientific endeavour. It does not need to prioritise, unlike for example Singapore, which is so much smaller.

exchange and translation possibilities into mission related applications. 12 Such initiatives send strong signals to relevant industry that encourages long term and external investment. Business R&D in such areas also stimulates a response from the science and technology base, and from Research Councils and others who support research. Moreover, the history of science is full of examples of fundamental research being driven by the need to explain phenomena that emerged in applications. We believe that such an approach is a natural, more powerful means of exploiting the strength of the science base rather than top-down prior selection of research areas in the hope that the choice will prove to be correct. For such an approach it is important to maintain the diversity of the science base, as the demands of market driven technological development on the science base may prove to be more diverse and unexpected than could be predicted by early choice of research winners. In this scenario, the diversity of the science base is a strength and not a weakness. 13 Whilst the Haldane Principle, that the science community, rather than government or administrators should decide on prioritisation of research directions, has created one of the worlds most efficient and powerful science bases, another aspect of Haldanes recommendations has been neglected, that of the importance of mission-driven research.We strongly advocate such a dual approach. It is the solution that emerged post-war in the United States and that has been so successful. It has created a diverse and adaptable basic research enterprise, coupled with sustained, long term investment in platform technologies that ultimately provide perennial spin-off that can be exploited by companies that pull strongly on the research base for technological solutions, and has been further stimulated in recent decades by the power of public procurement through the SBIR scheme. For example, a mission-driven component of national strategy might have been more effective, ten years ago, in ensuring that the UK exploited its early lead in stem-cell technologies in the period when stem-cell research in the USA was restricted.We need to see initiatives actively designed to create new global winners in the UK economy. This should involve initiatives from the NHS, MOD, Local and National Government, HMRC etc. It should also involve bodies from the wider public sector such as Ofcom.All public agencies should expect congratulation if they help one or more British companies to build commercial success.

B.What the potential implications of such a policy are for UK science and engineering, higher education, industry and the economy as a whole. 10 Notwithstanding these provisos, understanding how best to ensure translation of fundamental research into utility is a crucial challenge.We believe that the question of adjusting the balance of investment in science and innovation to favour areas in which the UK has clear competitive advantage should be answered in a different way to that implied by Lord Draysons question, and which addresses the structural deficit described above. 11 Examples from elsewhere (e.g. the USA,Taiwan) suggest that sustained commitment to technology areas where there are large actual or emerging markets creates a more effective mechanism for making choices. Such commitment should not have the short term horizons of many initiatives that hope for quick wins, but should have a timeframe of decades at least. The Council for Science and Technology recently suggested3 a process through which such technology areas should be identified.They should be areas where the UK has world-leading capacity; which have large actual or potential growing global markets (in excess of 100 billion); where UK has the businesses, structures and people able to take developments to market; where there are strong, positive societal benefits; where technology risks are low and where Government is able to intervene, not merely or necessarily through funding, but also through regulation. For example, the Governments recent proposals in favour of low carbon vehicles could, if developed through regulation and the provision of infrastructure, promote major growth in this sector. Mission-driven research which focuses on particular areas leads to a derived demand for certain kinds of fundamental research linked through knowledge

2 For example, US President Roosevelt, in 1937, set up a Commission to advise on the most likely innovations of the succeeding 30 years.They not only identified many unrealised technologies, but missed nuclear energy, lasers, computers, xerox, jet engines, radar, sonar, antibiotics, pharmaceuticals, the genetic code and many more. 3 Strategic decision making for technology policy. Council for Science and Technology, November 2007.

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14 Although there have been attempts to use public procurement in the UK as a stimulus for R&D based innovation, it has not as yet developed into a powerful mechanism.We strongly advocate a more decisive and coherent effort from government in this domain. The unique form of our National Health Service, for example, could be a powerful driver of technological and business development, and should be promoted as such with greater urgency. 15 The development of such a twin-track approach will require appropriate institutional responsibilities. The Cabinet Sub-Committee on Science and Innovation should play a key role in developing a national strategy, providing leadership in terms of objectives, processes and bodies, that is agreed and supported at Cabinet level, and should ensure cross-government implementation and integration of relevant activity. The Technology Strategy Board should have the role of identifying key long-term opportunities and stimulating the intermediary bodies (such as the Research Councils, University Funding Councils and Regional Development Agencies) with the aim of commercialising valuable technology-based intellectual assets. C.Were such a policy pursued, which research sectors are most likely to benefit and which are most likely to lose? 16 We have argued above that prior shifting of the balance of research funding by picking winners is not a wise strategy.We should rather develop a mission-driven approach with sustained Government support, resulting in selection in response to demand. It avoids serious errors from mistaken choices. D.What form a debate or consultation about the question should take and who should lead it? 17 It is important that any consultation on such a major strategic change in research and innovation policy is well conceived through prior consultation and meeting with those with deep understanding of the research base and of innovation processes. A meeting with representatives of the academies (Royal Society, Royal Society of Edinburgh, Royal Academy of Engineering,Academy of Medical Sciences) with the Technology Strategy Board and Director General of Research Councils, could be a means of creating a well-developed concept before consulting the wider community.

Further enquiries should be addressed to the RSEs Consultations Officer, MrWilliam Hardie (Email: evidenceadvice@royalsoced.org.uk). Responses are published on the RSE website (www.royalsoced.org.uk)

The Royal Society of Edinburgh (RSE) is Scotlands National Academy. It is an independent body with a multidisciplinary fellowship of men and women of international standing which makes it uniquely placed to offer informed, independent comment on matters of national interest. The Royal Society of Edinburgh, Scotland's National Academy, is Scottish Charity No. SC000470