National Endowment for Science, Technology and the Arts (Increase of Endowment) Order 2006

– in the House of Lords at 5:42 pm on 9th February 2006.

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Photo of Lord Davies of Oldham Lord Davies of Oldham Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, the endowment for NESTA—the National Endowment for Science, Technology and the Arts—is conferred by powers of the Secretary of State for Culture, Media and Sport under the National Lottery Act 1988. We propose to transfer to NESTA, over the next five years, £15 million a year from money held in the National Lottery Distribution Fund for expenditure on or connected with health, education or the environment.

The fund was set up, of course, in 1998 to support and promote UK innovation, with a remit to support and promote talent, innovation and creativity in science, technology and the arts. I emphasise that the Government regard the history of the development of NESTA as most encouraging. As ever with anything to do with the cutting edge of technology, the arts and science, there are bound to be areas where initiatives achieve less than were hoped for—and there can, of course, be initiatives which excite a degree of controversy about their objectives—but, broadly, NESTA has played a very important role. It provides early risk capital which gives support to new ideas; it supports young, creative entrepreneurs; and it develops outstanding talent—the innovators of the future.

This is a key stage in NESTA's evolution as an organisation. It has clearly made great progress since it has been established, but we believe that it will be 10 years before the real impact of NESTA's interventions will be felt. After all, these are seed-corn ideas, and seed-corn takes some time to germinate and develop.

A condition of this additional funding for NESTA is that it is to use its own enterprise and creativity to secure its future beyond 2011. The Government are committed to following through on our long-term investment framework in harnessing innovation, so we will be conducting a thorough review of the organisation, evaluating its impact against a five-year plan objective, and looking at the endowment as an investment model more generally.

We will also see what we can learn from NESTA's success and how that can inform general policy, because we believe that there are areas of conspicuous success. One aspect is the development of the advanced transport system. The British Airports Authority is making an additional £7.5 million investment to fund driverless electric pods which will connect Heathrow Airport with surrounding car parks—an exciting project. We need innovation in relation to air travel in particular. We are all too aware of the relationship between congestion on the ground and rapid movement through the skies. That is an important dimension.

There are many other illustrations of NESTA providing some interesting contributions. The main areas of its work are developing a culture of entrepreneurship; building dynamic networks that can be creative about problem-solving; risk funding—increasing the accessibility of seed-capital for the most promising new ideas and creating sustainable partnerships with the angel and venture capital community; and successful commercialisation—developing the business skills and market focus of new businesses and young management.

These are exciting projects. NESTA is one of the most exciting developments of recent years. It is not 100 per cent successful—how could it be with such a range of creative and imaginative ideas? Nevertheless, it is worthy of support for an important dimension of British life where we give necessary small amounts of support to really creative, novel ideas which can come to fruition and produce quite startling investment realisations. On that basis, I beg to move.

Moved, That the draft order laid before the House on 9 January be approved. [14th Report from the Joint Committee].—(Lord Davies of Oldham.)

Photo of Viscount Astor Viscount Astor Shadow Minister (Culture, Media and Sport), Culture, Media & Sport

My Lords, I thank the Minister for introducing the order. NESTA is a success, and one should congratulate the Government on bringing it into being. It occupies a part of the market that other funding bodies do not, particularly in giving small amounts of money to people who are involved in start-ups. As the Minister said, some of them work well and some do not—that is the nature of the game. NESTA has made more than 750 awards in its lifetime, and one can truly say that its funding is additional to government expenditure as opposed to some of the discussions and arguments we have had about other lottery fundings.

It is a success, and one must congratulate the trustees and the management. The only thing that made me nervous was the Minister saying that he would have a thorough review. All I can say is: it works—don't muck it up.

Photo of Lord O'Neill of Clackmannan Lord O'Neill of Clackmannan Labour

My Lords, I am happy to follow these two contributions. NESTA is one of the Government's unsung successes. It has been able to identify areas where no other conventional means of support for business start-up have been available. It has often been able to support activities which otherwise would have fallen between the cracks of various forms of government support. The examples given to us include the work of Dr Kevin Fong, who was doing work in anaesthetics at University College, London, where the multi-disciplinary character of the work he was engaged in did not attract funding from any of the normal research sources. Getting the support of NESTA has enabled him to continue with his research work. This is investing in what could be called exceptional UK talent.

Equally, it is fair to say that a number of the creative entrepreneurs coming out of our arts colleges and similar places would become distinguished crafts people if they were able to get the advice or the business start-up assistance to go on. Mark Bickers, a glassmaker who went on the Creative Pioneer course is now operating on a self-sustaining basis, selling to places such as Liberty.

We sometimes think that business support is for very large operations or ones which of themselves will create a great number of jobs. But one of the great and telling lessons of the past couple of decades has been the significance of small business and the way in which small businesses take on two or maybe three employees and account for a sizeable amount of the increase in our employment rates.

However, it is also fair to say that, where the money has gone in, in a number of instances it has been able to attract support from angels and venture capitalists on a ratio of £1 which would attract £5 from anywhere else. I imagine that the success of that is one of the driving forces behind the Government's review because it was set up with money from the Lottery—a source not available for any other purpose in this way—and it could be reaching the point of self-sustaining growth as an endowment. It is to that that we should look to the future. It is exciting that we have made this fairly modest contribution—because in terms of industrial support, £15 million per annum is not a massive sum. But Jonathan Kestenbaum, Chris Powell, the chair and their colleagues will be able to look forward to five years of sustained activity in which they will be able to establish the endowment as a means of giving young people—particularly young people involved in the creative areas, the grey areas of industrial and business activity—assistance and support. Just affording them the mentoring and network facilities that the endowment gives will help people who are on their own. They are often bewildered by the range of business opportunities that are supposed to be there and they never quite know how to take advantage of them, but they will be able to do so because of this endowment. It is a credit to the ingenuity of the first Labour government and it will be a credit to successive Labour governments because the success of our economy will come in large measure through the kind of work that the beneficiaries of the endowment have been able to take forward. A dynamic economy requires creative industry and creative industry hitherto has not been able to attract the kind of support that it is now getting, not only through the endowment but through the credibility which the endowment provides. It enables these individuals to go elsewhere and get the additional support that they need to make their businesses grow. I welcome the Government's courage in providing £75 million over the next five years and I welcome this order tonight.

Photo of Baroness Sharp of Guildford Baroness Sharp of Guildford Spokesperson in the Lords, Education & Skills

My Lords, we too have no problem with this order. NESTA has been a great success. The Minister talked about it being an exciting development. It is not only exciting; it is very creative. He also said that not everything had been a success, but in the world of venture capital, you are lucky if one in 20 projects is a success. NESTA has hit rather more than one in 20, so it has a very good record. As the noble Lord, Lord O'Neill, mentioned, for every £1 that has been invested in NESTA, a further £5 has been leveraged for further financing.

One of the current enterprises in which NESTA is involved is what they call their future lab, which is developing new learning software. The DfES has put in £3 million, and Microsoft and Disney are also putting in similar sums of money. A spin-out company is emerging from NESTA this April. All the creativity, dynamism and innovation are to be welcomed.

Photo of Lord Davies of Oldham Lord Davies of Oldham Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, I am grateful for that whole-hearted support—more than I had dared anticipate—particularly from the noble Viscount, Lord Astor, who rightly upbraided me by asking why we need a review when he is documenting success. He has made me think twice about that concept, too. We are looking upon NESTA moving to a more substantial and mature role in terms of its finances. I think the noble Viscount will recognise that the first few years had their difficulties with investment and support, and we are now seeing NESTA grow into a more substantial role. That is the necessity for the review. I give the noble Viscount the assurance that it is not broke, and we are not going to go about fixing it in crucial areas. I was grateful for his support.

I was grateful to my noble friend Lord O'Neill. It is almost a NESTA-type innovation to have a Back-Bencher contribute to our orders, such is the restricted dialogue that goes on between the Front Benches, with limited Back-Bench contribution. I was grateful to him for contributing, particularly for his illustration of exceptional UK talent being nurtured by NESTA, and for emphasising the fact that there is some good value in the investment returns from the work which NESTA has done.

I was also grateful to the noble Baroness, Lady Sharp, who expressed her enthusiasm for the work of the organisation. It is the single largest provider of early seed-funding in this country, willing to invest at a stage where it is notoriously difficult to get others to do so. It fills a crucial gap, and also explores what can happen when you merge the boundaries between science, technology and the arts. Having an endowment as a model of investment is essential to achieving its aims. My real answer to the noble Viscount is that we move from that degree of necessary support from the lottery into a situation where we hope the endowment will flourish sufficiently to guarantee the necessary resources. NESTA's influence is important in these terms.

I am aware of a number of other criticisms which noble Lords were too kind to voice this evening. One is entirely valid, and I would have accepted it from any source. NESTA is not too good at blowing its own trumpet. It could do better with its own publicity, and that is something which we hope to impress upon it for the future. Success breeds success, but only if people are aware of that fact.

On Question, Motion agreed to.