Catapults (Science and Technology Committee Report) - Motion to Take Note

– in the House of Lords at 12:04 pm on 19th May 2022.

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Lord Mair:

Moved by Lord Mair

To move that this House takes note of the Report from the Science and Technology Committee Catapults: bridging the gap between research and industry (2nd Report, Session 2019–21, HL Paper 218).

Photo of Lord Mair Lord Mair Crossbench

My Lords, it is a great privilege to open this debate on the Science and Technology Committee report Catapults: Bridging the Gap between Research and Industry. This topic could not be more important at the present time: there is an increasingly vital need to stimulate the UK’s economy by driving innovation and investment by industry from our science and technology research. I thank the Minister for making time to respond to this debate. It was a privilege to have been a member of this House’s Science and Technology Select Committee under the excellent chairmanship of the noble Lord, Lord Patel, who has asked me to open this debate. I speak on behalf of the committee in thanking him for his inspirational leadership and I am delighted that he will also be speaking in this debate.

The committee was very fortunate to have the benefit of excellent committee staff for our inquiry: our clerk, Dr Simon Cran-McGreehin; policy analyst, Dr Amy Creese; and committee operations officer, Cerise Burnett-Stuart. I thank them all for their hard work in running the committee proceedings so well and for producing the report.

The background to our inquiry was the crucial importance of the UK’s research and development in science and technology for the future economy, and the need to clarify the important role of the catapults in promoting collaboration between industry and research organisations. The Government have set a target that the UK should spend 2.4% of GDP on R&D by 2027, up from the current level of 1.7%. The current level is significantly lower than the average for EU countries and the average for OECD countries. The Government have committed to increasing public sector R&D spending to £22 billion per year—about 0.8% of GDP—by 2024-25. This is very welcome. However, achieving the overall target will require significant private sector investment, which is expected to be around twice the public sector spending. The 2.4% target therefore represents a very significant increase in private sector funding, some of which is expected to arise through the catapults’ activities. The question is how to achieve this?

In July 2020, the Government published its R&D road map, which reiterated the spending target and sought to build on the UK’s innovation infrastructure, including enhancing the catapult network. Importantly, as well as expecting the catapults to promote increased private sector funding of R&D, the Government also envisage the catapults supporting their levelling-up agenda for regional development. In November 2020, we launched our short inquiry to examine the contribution of the catapults to delivering the UK’s R&D road map, including their role in stimulating long-term private investment and supporting new innovation tie-ups. Our inquiry was not a review of the catapults themselves. We received written evidence from the catapults and we heard oral evidence from all nine catapults in December 2020 and January 2021. Our report was published in February 2021.

By way of background, the catapults were proposed in a 2010 review for the Government by Dr Hermann Hauser. In the foreword to that review, Dr Hauser wrote that the UK

“falls short on translating scientific leads into leading positions in new industries. This is in part down to a critical gap between research findings and their subsequent development into commercial propositions that can attract venture capital investment or be licensed … Other countries benefit greatly from a translational infrastructure that bridges this gap”.

Dr Hauser’s review proposed

“that the UK develops an equivalent capability … focused on sustained and substantive support for an elite group of Technology and Innovation Centres … that aim to exploit the most promising new technologies, where there is genuine UK potential to gain competitive advantage.”

In response to Dr Hauser’s recommendation, the then Government directed the Technology Strategy Board, now Innovate UK, to establish the Catapult Network.

From 2011 to 2013, during the tenure of the noble Lord, Lord Willetts, as Minister for Universities and Science, who I am very pleased is taking part in this debate, the first seven catapults were established: High Value Manufacturing; Cell and Gene Therapy; Digital; Offshore Renewable Energy; Satellite Applications; Transport Systems; and Future Cities. In 2015 and 2016, three more catapults were added: Energy Systems; Medicines Discovery; and Compound Semiconductors. In 2019, the Connected Places Catapult replaced the Transport Systems and Future Cities Catapults. The catapult network has proved to be an important national asset. A recent report by the Royal Academy of Engineering and the National Engineering Policy Centre, Late-stage R&D: Business Perspectives, highlights the role that the catapults have in supporting late-stage R&D, a vital part of the innovation process that accounts for the majority of R&D that businesses do.

Many businesses choose global locations for high-value, late-stage R&D activities, from multinationals to mobile, innovative SMEs with growth ambitions. But existing UK support for late-stage R&D is not meeting business needs and is considered poor compared to competitor countries. Catapults provide the physical and digital infrastructure needed to test, certify and develop new products, processes, services and technologies, safely and effectively. They assist late-stage R&D by allowing access to specialist equipment, knowledge and data that would otherwise be unaffordable or inaccessible to companies.

There have been various reviews of the catapults over the past five years. Shortly after our committee’s report was published, the Government published their review in April 2021, Catapult Network Review 2021: How the UK’s Catapults can Strengthen Research and Development Capacity. In the same month, the Government also published their response to our report. I will highlight a few of our key recommendations and draw attention to the Government’s responses.

The first was funding. We recommended that specific rules governing innovation funding should be reformed to allow greater flexibility for catapults and their partners. These rules currently act as barriers to collaboration between catapults and universities, and often place too much risk on industry in transformative R&D projects. The funding available for innovation in the UK does not appear to be commensurate with the Government’s ambitions as set out in the R&D road map. The 30% cap on collaborative R&D funding for public sector bodies inhibits collaboration between catapults and universities. Leveraged funding requirements can place too much risk on industry in transformative R&D projects. Also, lack of access to research council funding puts catapults at a disadvantage compared to universities. We therefore recommended that specific rules governing innovation funding in respect of catapults should be reformed. In their response, the Government recognised the current restrictions on funding for innovation and acknowledged that the 30% cap on collaborative R&D funding for public sector bodies could be reducing the ability of catapults to collaborate with universities as well as with each other. The Government’s response indicated that UKRI, and specifically Innovate UK, had been asked to review its funding rules to allow catapults greater flexibility. Could the Minister provide an update on what changes to the funding rules have been made or soon will be made? Will the catapults be allowed greater flexibility?

Our second recommendation was mobility between academia and industry. We highlighted the importance of strengthening links between academia and industry, and the role of catapults in providing a key role in facilitating this. The Dowling Review of Business-Research Collaborations, undertaken for BIS in 2015, highlighted that the

“lack of porosity between industry and academia remains a significant challenge”.

Noting that the strong links between researchers in academia and in industry are a strength of the highly successful Fraunhofer institutes in Germany, we recommended that UKRI foster closer links between industry and universities and assist researchers to work at the interface between the two, including through supporting roles for academics at the catapults. In their response, the Government undertook to work with Innovate UK, catapults and universities to actively promote new connections between catapults and universities. Could the Minister provide an update on this promotion of such connections? What new steps are being taken to facilitate mobility of researchers between universities and catapults?

Third was regional development. Our committee concluded that the Catapult Network can play an important role in the Government’s levelling-up agenda, about which we have heard a great deal. Catapults are one of several bodies that can contribute to regional development, and better co-ordination is needed at local levels. However, catapults face a barrier to involvement in UKRI’s Strength in Places Fund, a flagship part of the levelling-up agenda. In their response to the BEIS review into the catapults, the Catapult Network explained:

“As the funding is geographically ring-fenced, it prevents Catapults from investing in regions where they do not presently work”.

This has the effect of restricting the national reach of the catapults, preventing them from participating where they could potentially add value. Our committee therefore recommended that BEIS and UKRI develop a more strategic approach across policies for innovation and regional development, such as broadening access to the Strength in Places Fund. In their response, the Government acknowledged that their Places strategy is particularly relevant to how catapults can play a greater role in supporting local innovation and growth. Could the Minister provide an update on the Government’s position on a more strategic approach as to how catapults can contribute to their levelling-up agenda? How can they all be involved in the Strength in Places Fund run by UKRI without facing geographical barriers?

Finally, there is the crucial question of the future role and long-term continuity for the catapults. Our committee was unconvinced by the Government’s approach to encouraging industry investment in R&D and how national assets such as the catapults might be enhanced. We recommended that the Government make the best possible use of the Catapult Network, preferably with an uplift in public investment, promoting it as the UK’s national innovation asset, and using it as the default mechanism for exploiting promising technologies and sectors.

In their response, the Government referred to their innovation strategy, which was subsequently published in July 2021. In this innovation strategy, the catapults are mentioned but it is not clear whether or how the best possible use of the Catapult Network will be made, particularly in terms of the envisaged prioritisation process based on the “seven technology families” identified in the innovation strategy, a concept inspired by the Government’s “eight great technologies” introduced in 2013. We understand that the new national Council for Science and Technology, chaired by the Prime Minister, will steer this crucial prioritisation process. Could the Minister comment on this? Will this process involve the catapults and how will the Government make the best possible use of the Catapult Network in the coming years?

In summary, it is clear that the Government rightly have strong ambitions for research and development, as set out in their R&D road map. Achieving the important 2.4% target will require substantially greater private sector investment. The key questions are: how is this to be achieved, which technology sectors will be prioritised, and what role should the catapults play, given that they are unique national assets? I look forward to hearing the contributions to today’s debate and to the Minister’s responses. I beg to move.

Photo of Lord Patel Lord Patel Crossbench 12:18 pm, 19th May 2022

My Lords, I am a minnow sandwiched between two competent and much more distinguished and knowledgeable speakers, the noble Lords, Lord Mair and Lord Willetts. Before I make my brief contribution, I thank the noble Lord, Lord Mair, for leading the debate and doing so comprehensively—in fact, so comprehensively that there is not much left to say. I will probably end up, as might happen to others too, emphasising what he has already said.

As the noble Lord was the key driver of the inquiry, it is appropriate for him to have led the debate and not me, just because I happened to be chairing the committee at the time. However, as the then chair, I thank all the committee members—many of whom are taking part today—for their contributions. As noble Lords know, much of the hard work of running the committee and producing the reports is done by the staff of the committee. I therefore join the noble Lord, Lord Mair, in thanking all our committee staff who he mentioned.

My brief comments are mostly related to chapter 4 of our report, which focused on the wider issues in relation to innovation, particularly those affecting the private sector, and the role that catapults can play in achieving the greater involvement of the private sector in the journey from research to innovation and commercialisation.

I would also like to link the evidence and references in our report to these issues to subsequent government policy in the innovation strategy, published in July 2021. The strategy, entitled UK Innovation Strategy: Leading the Future by Creating It, was the first report of its kind in 15 years, and it has high ambitions of making the UK a global hub for innovation by 2035. The report announces no new funding, but the hope is that government policies will lead to a greater involvement of businesses in investing in innovation. Certainly, the main focus of the report is on business. The report was widely welcomed even though there is more work to do, especially with regards to how the various components will be implemented. I think the report was widely accepted because the Government involved a wide range of institutions, including professional institutions, and businesses in developing it.

Our report called for developing greater involvement of business, academia and private investment in UK innovation and for simplifying the interface between UK research, innovation and business. Our report saw a major role for Innovate UK, and in particular the catapults, while the government report on innovation sees Innovate UK having greater powers and becoming the UK innovation agency—although it is not clear how—and is silent when it comes to the role of catapults, as the noble Lord, Lord Mair, briefly referred to.

Our report saw catapults as having a wider role, maybe even increasing their number in the area of government technology priorities. We saw an opportunity for the role of catapults to be expanded, perhaps even becoming the UK innovation agencies and bridging the interface between research, industry and business, rather like the Fraunhofer institutes in Germany. This is a model that would allow for academia to be part of the business community and for people in the institute and business to be part of academia, even to the point of innovation, and for agencies such as catapults to run their own research programmes in academic departments. So I ask the Minister: in the Government’s innovation strategy, what role do they see catapults having to implement the policy? With a change in their remit, catapults could also have an important role to play in the Government’s levelling-up agenda and ambitions, as the noble Lord, Lord Mair, already mentioned.

Our report emphasised the need to have a balanced view on competition as a driver of research and innovation. The representatives who gave evidence from the CBI commented that competition at all times is not a good idea for innovation. Our report asked that policies should make a co-operative model of innovation more possible. The Government’s innovation strategy gives the impression that a competition model is the one that they favour to encourage business to invest. It cannot be good, for example, for universities and catapults to compete for funds for innovation.

The inquiry’s report recommended longer-term funding for catapults and fewer reviews. The government response to both recommendations was, to put it generously, to pass the buck to UKRI and Innovate UK, and the subsequent government innovation strategy confirms that view. I am tempted to make the assumption that the Government are not clear what role catapults will have in the future, or maybe even that they see a different model to deliver their innovation strategy. I hope that the Minister will have some comments to make on that.

Finally, I make a plea. I feel that the innovation strategy is such an important part of the Government’s long-term R&D agenda and its implications for economic growth that the House should have an opportunity for a fuller debate on that strategy. I hope the Minister could be tempted to use his offices to persuade the business managers to facilitate this.

Photo of Lord Willetts Lord Willetts Conservative 12:25 pm, 19th May 2022

My Lords, I begin my intervention in this debate by declaring my interests as a member of the board of UKRI and as chair of the board of the UK Space Agency, which works closely with the Satellite Applications Catapult, but I am speaking very much in a personal capacity rather than on behalf of those bodies. I very much welcome this excellent report and congratulate the whole committee on it. It has been marvellous to hear the extremely constructive interventions from the noble Lords, Lord Mair and Lord Patel.

There have been a lot of reports about catapults. They began, of course, with that excellent report from Hermann Hauser, which was commissioned by the noble Lord, Lord Mandelson, towards the end of his time as Secretary of State. At the same time, my party, while in opposition, commissioned James Dyson to produce a report on this. It was a very happy coincidence that both Hermann Hauser and James Dyson proposed that Britain should have something modelled on the Fraunhofer institutes. As we often debate in this Chamber the frustrations and difficulties of getting cross-party consensus and long-term planning, I think the fact that this idea emerged from two parallel exercises from two different political parties has helped to make them a long-term feature of the environment. I occasionally used to tease my colleague and friend Sir Vince Cable that he represented the only party which had not advocated the creation of catapults in its manifesto.

We have had many reviews of catapults since. To be honest, I think we have had rather too many reviews, some of which have not been particularly constructive and have been a distraction. But this report—we have heard the emphasis already on the fact that it is not a review—stands out. It is well informed and crisp, and it has some practical, actionable proposals which it has put to the Government. Of course, we all look forward to the response from the Minister, but I think it is true to say that, already, in the period since the official government response to the committee’s report, there has been more activity that has led to the implementation of more of the proposals—especially because we now have the framework of the three-year comprehensive spending review and a longer-term and increasing budget for Innovate UK.

I would like to make a few quick reflections on the roles of catapults and how they can fulfil them. In many ways, they are to be seen as an intermediate body between universities and business. Of course, we all want to see universities and businesses dealing direct; that is excellent and needs to be promoted. However, at the same time, the analysis was that there are some kinds of TRLs—technology readiness levels—in the middle that are not the focus of attention for university research and are not yet suitable for full-blown commercial investment. That is where catapults have a really important role to play.

I still see them as torn between these two gravitational forces: on the one hand is the university academic agenda, and on the other are the requirements and needs of business. If I may draw on my new role as chair of the UK Space Agency, I hope they occupy a kind of Lagrangian point, happily balanced between these two different gravitational forces. If I were to hazard a guess, my assessment at the moment is that, if anything, the gravitational pull from business is proving rather stronger and the engagement from universities rather weaker. There are risks in that.

Catapults must find the best way of showing that they are delivering private spend by joining up with quite close-to-market projects that business is willing to finance and moving to that end of the technology readiness scale, while also thinking of more upstream activities and closer links to universities. I very much welcome the proposals in this report about getting catapults to work more closely with universities. They are not supposed to be simply recipients of contract funding for applied research which business wishes to see happen anyway; they are more at that midpoint, and we should always bear that in mind.

They went out of fashion for a few years—I never quite understood why—but they are certainly back and I think they are receiving strong support from the Government now, which I am sure is influenced partly by this excellent report. One thing that was striking during the period when they were out of favour was that an opportunity was missed to use catapults as a template whenever a new applied research institute was being created. One of the reasons for the catapult model was that too much time and effort was being expended on getting elaborate teams of lawyers to write tailor-made articles of association and deciding whether a new entity would be in the public or private sector and whether it would be a charitable body or a limited company with a public purpose. Instead, I saw the catapult model as an easily accessible template that made that whole process simpler. For example, I think the Faraday Institution, which is an excellent body, would have been up and running a year earlier if it had been simply a batteries catapult. I hope the Minister will agree that catapults are a useful template for getting on with something when we have clearly reached the stage where some mix of public and private funding is required to move a technology forward. It should be the standard template that is always available and used in those circumstances.

I very much welcome the stress the noble Lord, Lord Mair, placed on catapults as a kind of strategic opportunity. Again, in the past year we have seen the Government recognising them in that light. I had at the back of my mind the hope that, eventually, in a neat and tidy world—the world is not like that—all of the eight great technologies that we identified would have some kind of catapult support to help bring them forward. That applies now to the seven technology families identified in the Government’s innovation strategy. It is not a neat and tidy alignment, but it would be welcome if the Minister could say that, as the Government look to how they can implement their commitment in the strategy to those seven technology families, they will check to see whether, within each family, there are particular technologies or groups of technologies for which a catapult could really help deliver the Government’s ambitions.

Finally, I want to add an angle that I do not think has been touched on so far. As we look to how this country can deliver the ambitions for 2.4% of GDP being spent on R&D—let us hope it will go beyond that—there is one constraint which I fear will be the biggest single one, because I think there is now political will and a commitment to do it. The biggest single constraint is the skilled people needed to do it: the scientists and researchers, but also the technicians and technologists who will either ensure that kit works or, even better, help create new kit in that endless, exciting interaction between science and technology that brings both human progress and economic advance. Here, there is an opportunity for catapults to do far more than they do at the moment in technical training and to overtrain, training more people than may be needed for the specific operation of the catapult. If they are seen as a resource which can train more technicians to go out into industry or indeed other research institutes and universities, with proper expertise and vocational or university qualifications, that would be an extra useful role that is very relevant to the Government’s vocational and technical training agenda.

I very much welcome this excellent report, which provides a set of practical policy proposals that can be acted on, and I look forward to the Minister’s response.

Photo of Viscount Hanworth Viscount Hanworth Labour 12:35 pm, 19th May 2022

My Lords, the opening speaker in this debate, the noble Lord, Lord Mair, has filled the foreground with much important detail. I shall confine myself to the background.

Catapults were first established in 2011 with the purpose of fostering industrial research and development and bridging the gap between universities and industry. They were intended to address the fact that Britain had been failing to translate its scientific research into profitable industrial applications. This failure has a long history, which reaches as far back as the end of the 19th century. Then, it was becoming clearly apparent that countries on the European continent were outstripping Britain in industrial innovation. Eyes were turned to Germany in particular, which was experiencing revolutions in the chemical and electrical industries, as well as in heavy industries and steel production. There were social and cultural aspects that accompanied this progress, and it began to be asked what Britain was lacking.

Britain certainly lacked anything to compare to the Kaiser Wilhelm Society that was founded in 1911 as an umbrella organisation to support industrial research and development throughout Germany. Britain at the time was distracted by its imperial and colonial enterprise, which had a far-reaching effect on the national psyche. The esteem in which mid-Victorian engineers and scientists had been held began to be overshadowed by the status accorded to empire builders, who were soldiers, statesmen and colonial administrators. Talented individuals were diverted from trade and industry to serve the colonial enterprise. Nevertheless, there was a non-conformist ethic that sustained technological enterprise and prevailed in the industries of the Midlands and the north well into the 20th century.

The early post-war years saw a reform of the secondary education system in the UK under the Butler Education Act of 1944. The original intention had been to create a tripartite system of grammar schools, secondary technical schools and secondary modern schools. The technical schools were omitted and a gap was created in secondary education which has endured to this day.

A gap opened up in tertiary education when the colleges of advanced technology were freed from local authority control in 1962. Their role had been to pursue industrial research and development. This role went into abeyance when they became universities and began to teach degree courses in imitation of the older universities. The polytechnics and colleges of technology had been serving the interests of business and commerce by teaching commercial and industrial skills. The Further and Higher Education Act 1992 removed them from the control of local authorities and they too were allowed to bid to become universities. There has since been an implosion in the remnants of the further education sector, which has been severely starved of funds. The sector has been unable to invest in order to adapt to the changing demands of industry and the number of students who receive a technical education has fallen drastically.

In the meanwhile, the university sector has grown markedly. The cap on student numbers has been lifted and universities have been allowed to compete among themselves for students. The intellectual demands of a university degree course have been alleviated to cater to a wider ability range, and the research performance of universities shows signs of suffering. Their role in technical education has declined.

There have been increasing demands on universities to fill the gap where industrial research and development have been lacking. A further element has been added to the burden of the audits under which academics are labouring. They are required to demonstrate their research performance under the research excellence framework. Their teaching is monitored under the teaching excellence framework and the National Student Survey. Now, their performance in fostering industrial research and development is being encouraged and monitored under the knowledge exchange framework. They are being asked to fill the gap. These regimes make contradictory demands and ask too much of academics.

It was a consciousness of the gap that exists between academic research and industrial development that led to the establishment of the catapults. They are an increasing number of ad hoc organisations with designated purposes in various areas of industrial technology. The question that has to be asked is whether this is an appropriate and an effective means of satisfying the needs for industrial research and development. The answer that occurs to me is that, given the distorted nature of our educational system, and given the incoherent way in which Britain has organised its applied research, the catapults may be a regrettable necessity.

We can look at other countries to witness better systems. Comparisons, as we have heard, are often made with Germany, where applied industrial research, which is accorded a high status, takes place in the Fraunhofer institutes. These are research establishments spread throughout Germany that focus on different fields of applied science. With some 29,000 employees and with an annual research budget of €2.8 billion, they form the biggest organisation for applied research and development in Europe.

The size of this organisation is roughly equal to that of the Max Planck Society, which supports fundamental research in the natural sciences, the life sciences and social sciences. That organisation was given its present name in 1948. Previously, it had been the Kaiser Wilhelm Society. Its research is comparable to that of the UK universities. The superior research performance of British universities compared to their German counterparts may be an illusion, since the research that takes place in the Max Planck institutes and the Fraunhofer institutes is not directly attributed to specific universities. This is despite the fact that many of the researchers have been seconded from universities.

The report of the Science and Technology Committee makes a comparison between the catapults and the Fraunhofer institutes. However, the two networks differ in size by an order of magnitude. A comparison of the funding of industrial research and development in Germany and Britain is difficult to achieve, because of the dispersed and incoherent nature of the activities in Britain. But there can be little doubt that the funding by central government is much greater in Germany than in Britain.

It is only through greatly increased funding and by a fundamental reorganisation that industrial and applied research in Britain could hope to rival that of our European neighbours. I see no reason, for example, why the various public sector research establishments of Britain, which have served us well in the past, should not fall under the same umbrella as the catapults, to allow for a much greater coherence. At present, the catapults appear to be an ad hoc and a small-scale response to an enduring systemic failure in the United Kingdom.

Photo of Lord Bilimoria Lord Bilimoria Crossbench 12:43 pm, 19th May 2022

My Lords, just to refresh the history, the catapults were proposed in a 2010 review called The Current and Future Role of Technology and Innovation Centres in the UK by Dr Hermann Hauser, commissioned by the then Secretary of State for Business. I worked with Dr Hauser at the University of Cambridge, where I chaired the advisory board of its Judge Business School for five years until 2020. Hermann Hauser said that the UK

“falls short on translating scientific leads into leading positions in new industries. This is in part down to a critical gap between research findings and their subsequent development into commercial propositions that can attract venture capital investment or be licensed.”

He also said:

“Other countries benefit greatly from a translational infrastructure that bridges this gap”.

His report in 2010 proposed that the UK developed an “equivalent capability” focused on

“sustained and substantive support for an elite group of Technology and Innovation Centres”.

That is what led to what we now have as the catapults. In fact, I thank the noble Lords, Lord Mair, Lord Patel, and the Science and Technology Committee for the work they have done on this excellent report.

To summarise—I know that the noble Lord, Lord Mair, said this earlier—there were initially seven catapults and then more were added, so you had: High Value Manufacturing; Cell and Gene Therapy; Digital; Offshore Renewable Energy; Satellite Applications; Transport Systems; and Future Cities. Later on, Energy Systems, Medicines Discovery and Compound Semiconductors were added, and in 2019, the Connected Places Catapult replaced the Transport Systems and Future Cities Catapults.

The Institution of Engineering and Technology summarises that catapults

“provide a crucial role in bridging a gap between academia and industry to provide academia with an insight into future needs of the sector.”

They

“play the role of catalyst in helping innovation to drive skills and vice versa, especially when supporting higher technical skills. … A systems thinking approach is necessary when planning a strategy

The reality is that the United Kingdom spends 1.7% of GDP on R&D and innovation whereas countries such as Germany and the United States of America spend 3.1% to 3.2%. Just imagine if we spent just 1% extra a year—an extra £20 billion a year—and how much of a difference that would make in powering our productivity and our growth. Would the Minister agree with that? That is leaving aside the shortfall of all these years where we have underinvested.

The Government say they have a strong ambition for R&D as set out in the R&D road map, saying that we should spend 2.4% of GDP on R&D by 2027, but I believe they are not being ambitious enough. They are committed to £22 billion by 2024-25 but I think the Government should target the German and American levels of 3.1% or 3.2% overall. Would the Government agree?

The catapult network is a key part of this. They are key in attracting increased private sector R&D investment and are also linked to the levelling-up agenda. On Innovate UK, the Government play a major role in this as well, and then there are the links with industry. One of my priorities as president of the CBI has been to promote industries and universities and government working more closely together, therefore catapults are music to my ears.

One of the report’s big recommendations is that funding needs to be reformed for catapults—I will come to that in more detail—and the Government need to develop

“a detailed strategic plan for delivering its R&D ambitions”.

The report, Catapults: Bridging the Gap Between Research and Industry, was produced in 2020, a year and a half ago, and it considered the role that technology and innovation catapults have played in encouraging investment and collaborations in UK innovation. It speaks about the funding of the nine catapults, which is an important point. One-third comes from a government grant via Innovate UK, one-third from industry partners, and one-third from collaborative funding—the CRD funding. This is where the report says there needs to be much more flexibility in the funding. Would the Government agreed that that should be introduced to improve the catapults?

To summarise the excellent recommendations of this report, the Government, UKRI and Innovate UK should create a clear plan for how public sector resources and private investment could match the road map ambition. The Government should scale up the catapult network. Do the Government agree with this? Without that, there will not be sufficient private sector investment. UKRI should help catapults and universities work together more easily and UKRI should allow catapults to bid for research council funding where there are clear advantages for R&D and innovation, and Innovate UK should offer greater flexibility in allowing public sector bodies to have a larger share of the CRD funding, particularly where more than one such organisation is involved. Would the Government agree with that last point in particular?

Professor Juergen Maier, who used to be on my president’s committee at the CBI and who is a former CEO of Siemens UK and chairman of the Digital Catapult, told the committee that the UK does not currently have the scale that large multinational companies need for conducting innovation projects, whereas some other countries have more capacity to support innovation.

On international factors, Felicity Burch told the committee that 48% of the R&D performed by businesses in the UK was by non-UK owned businesses. Professor Maier explained that multinational companies look for two things in a country when investing in R&D: quality and scale. He said that on quality the UK does very well but on scale we do “pretty badly”.

Other speakers have referred to Germany’s Fraunhofer Society. In terms of scope, scale and depth of links between academia and industry, Matthew Durdy said that the Catapult Network

“is probably less than a third of the scale of the Fraunhofer [Institutes].”

The Government are doing good things. I am a member of the Chancellor’s advisory board on the Help to Grow management programme, which has 30,000 mini-MBAs for SMEs. It is a fantastic programme, just the sort of thing we need to improve skills and encourage growth. Yesterday, I was privileged to chair the first CBI annual dinner for three years, with almost 600 people present. Our chief guest was the Chancellor of the Exchequer, Rishi Sunak. I shall quote from his speech, which was very relevant to our debate. He said:

“Over the long term, higher productivity is the only way to raise living standards … Our incredible universities produce the third highest number of publications worldwide and we have the second most Nobel Laureates of any nation.”

Cambridge University has the highest number of Nobel laureates of any university in the world.

The Chancellor went on to say:

“Our economy has decarbonised quicker than anyone else over the last twenty years ... We also need to overcome our longstanding weaknesses in investment, skills, and innovation. Even in the decade before the global financial crisis, capital investment had weakened. Research from the Resolution Foundation and the LSE shows that lower capital per hour worked explains around half our productivity gap with France and Germany … since the financial crisis, the rate of increase in innovation has slowed considerably. A weakness that explains almost our entire productivity gap with the United States.”

Then he said this:

“The problem I don’t believe is any longer the government. Public sector net investment is reaching its highest sustained level since the 1970s. Yet capital investment by UK businesses, as a % of GDP, is a lot lower than the OECD average … UK employers spend just half the European average training their employees.”

At the CBI, we estimate that over the next decade, businesses will have to spend £130 billion investing in training and nine out of 10 people today will have to retrain in one way or another in the next 10 years.

The Chancellor went on to say that

“over this Parliament, we in government are delivering our pledge to increase public investment in research and development by 50% to £22 billion. But businesses’ investment in R&D, as a % of GDP, is less than half the OECD average. In other words, further government action can only take us so far. We need you. The wealth creators. The entrepreneurs. The leaders. We need you to invest more, train more, and innovate more … our firm plan is to

It is government’s role to create the environment for business to flourish and to invest in R&D and innovation. The Government did a fantastic thing in introducing the 130% superdeduction to encourage investment, but it is being taken away from us in April next year. We are saying that the Government should have a permanent, 100% reduction on taxes for investing by businesses. Do the Government agree that we should have something to replace the superdeduction: a 100% deduction to incentivise investment? That is what will create the growth that will create the employment that will pay the taxes that will pay down our debt.

The Government do not create the right environment for investing in R&D and innovation by having the highest tax burden in 70 years. We have already had a fragile recovery from the pandemic, exacerbated by the sad war in the Ukraine, and high taxes stifle growth and the recovery. I was on the universities and business task force that reported in 2020. One revelation that came out from that was that a huge proportion of the private sector investment that this report and the Chancellor are talking about comes from abroad. We need to continue to be a magnet for inward investment, but how can we be if we have the highest rate of taxes in 70 years? Historically, we have been the second or third largest recipient of inward investment in the world.

As chancellor of the University of Birmingham, I am so proud of one example of what the report talks about and the catapults are trying to achieve. In 2012, a PhD research project into producing a hydrogen-powered train led to a model hydrogen-powered train in the engineering department of our world-leading railway institute, headed by Professor Clive Roberts. That led to COP 26 in November last year, when we had the world’s first retrofitted hydrogen-powered train up and running. The Prime Minister and Prince Charles were on the train; I chaired a meeting of university leaders on the train. That happened only because of research by a world-leading university, working in collaboration with Porterbrook, the rolling stock company, companies such as Siemens and the Government with Innovate UK. That is what led to that world-leading innovation. That is the potential of catapults.

To conclude, catapults have a crucial role in eabling this country’s phenomenal ability to be creative and innovative in a world-beating manner: to get universities, government and business working together to create best-of-the-best, world-leading innovation.

Photo of Lord Kakkar Lord Kakkar Crossbench 12:55 pm, 19th May 2022

My Lords, I join noble Lords in thanking my noble friend Lord Mair for the very thoughtful way in which he introduced this debate on the excellent report of your Lordships’ Science and Technology Committee on catapults and their contribution to the innovation landscape, so remarkably well chaired by my noble friend Lord Patel. In so doing, I declare my interests as chairman of the Office for Strategic Coordination of Health Research, chairman of King’s Health Partners and chairman of UK Biobank.

As we have heard, there is no doubt that catapults have established themselves as playing a fundamental role in the UK innovation landscape. One of the most important areas of the economy with regard to innovation and economic development is, of course, the life sciences. The life sciences sector provides some 250,000 skilled and highly skilled jobs in the UK economy, and in 2019 contributed £80 billion to it. But the footprint for life sciences in the United Kingdom is truly global: 25 of the world’s leading biopharmaceutical companies and 30 of the world’s leading medical technology companies are responsible for 24% of the employment in UK life sciences and 37% of the turnover attributed to life sciences in our country. It is therefore critical that the environment that Her Majesty’s Government are able to facilitate and foster for innovation and economic development as a result is attractive not only domestically but to global participants, who may wish to invest in and continue to sustain UK life sciences.

We have heard in this debate about Her Majesty’s Government’s commitment to increasing R&D expenditure, and that is of course broadly welcome. In 2020, public contribution to R&D expenditure in our country reached £15.3 billion, an increase of £1.7 billion on the previous year, fulfilling the Government’s commitment, but when one looks at that public contribution to R&D funding, £6.1 billion came from UKRI—40%, the largest single public contribution to R&D expenditure. Therefore, it is vital that the funding formulae and rules that attend UKRI are conducive to supporting the broadest possible base for R&D activity in our country.

We have heard that a number of catapults were first established in 2010-11 and thereafter in 2015, and two are relevant specifically to UK life sciences: the Cell and Gene Therapy Catapult and the Medicines Discovery Catapult. The Cell and Gene Therapy Catapult, as an example of the success of catapults, is quite striking. It was established with great foresight and imagination at a time where there was recognition of an emerging technology—cell and gene therapies—to be applied not only to treat but potentially to cure diseases. We have seen a rapid advance in the technological base for cell and gene therapies, contributing at pace and increasing scale to the management of many diseases.

However, it is interesting that the area around Stevenage, the home of the Cell and Gene Therapy Catapult, is also the world’s third largest cluster of cell and gene therapy companies. In establishing the catapult, the innovation landscape has not only established the opportunity to house essential technology and equipment but provided the opportunity for nascent and established businesses to test their innovation, establish their credentials and ensure their broader application generally in healthcare. It has also encouraged the development of many novel businesses in the location and their taking advantage of those opportunities to ensure the development of jobs and economic activity.

Your Lordships’ Science and Technology Committee report identified a critical anxiety regarding funding rules attending the opportunity for catapults to avail themselves of Research Council funding and to be in a secure position to take full advantage of public funding made available by Innovate UK. These are two critical issues that my noble friend Lord Mair touched on in his presentation of the Committee’s report. I should declare that I was a member of your Lordships’ Science and Technology Committee. In making recommendations 3 and 4, we highlighted the repeated concern and the chilling effect of a restriction regarding access to Research Council funding, and that the 30% cap on Innovate UK funding to public sector organisations, which could include the two catapults or universities working together, was a substantial disadvantage. Her Majesty’s Government recognised and accepted the recommendation.

In November 2021, Innovate UK published its plan of action moving forward, recognising the success of catapults but, as far as I can ascertain, failing to address the question of restrictions to Research Council funding and the quantum of Innovate UK funding for public sector organisations. Are Her Majesty’s Government content that this issue has been addressed and if not, how do they propose to address this pivotal recommendation in the Science and Technology Committee’s report?

It is clear that public sector investment in research and development is frequently attended by a tremendous upside in terms of private sector contribution. We see this in the analysis of the biomedical catalyst fund: some £250 million of funding resulted in £1.3 billion of private sector contribution to research funding, acquisitions and other elements of commercial activity.

If the true opportunity to leverage public sector R&D in the life sciences sector is to be achieved, providing that funding consistently through mechanisms such as the catapults is of tremendous importance and significance, as is Her Majesty’s Government’s commitment to ensuring that if our country is unable to participate in Horizon 2020 funding as an associate member, that funding deficit will be matched. Can the Minister update us on the Government’s position regarding Horizon 2020 funding or its future matching, as that too plays a vital role in the UK innovation landscape?

Photo of Lord Holmes of Richmond Lord Holmes of Richmond Conservative 1:04 pm, 19th May 2022

My Lords, it is a pleasure to take part in this debate. I congratulate the noble Lord, Lord Mair, on the eloquent way in which he introduced and took us through the Committee’s report. I am privileged to serve on your Lordships’ Science and Technology Committee. Unfortunately, I did not become a member of it until after this report was put together, but I echo all the comments that noble Lords have made regarding the staff, clerk and support for the Committee. It is always a tremendous team effort, with everybody playing their part—not least one of our former chairmen, the noble Lord, Lord Patel, who provided inspirational and supportive leadership during the first couple of reports I was involved in.

If we are to recover from Covid, build back better—or whatever phrase we choose—and come through this horrific situation in Ukraine, it will come down to the interplay of inclusion, innovation, talent and technology, and optimising all therein. My noble friend Lord Willetts was quite correct that talent and skills are a key part of the issue right now. Credit must be given to my noble friend Lord Baker for the work he has done with university technical colleges and the powerful role they play, not just in producing people to fill these roles but in enabling technical education to have the status it should, rather than being seen as somehow secondary. As the noble Viscount, Lord Hanworth, said, that was potentially the view going right back to the Butler Education Act 1944.

However, we have many reasons to be cheerful in this country, and the catapults are a key part of that. We are not short on world-beating universities, and we are not short on brains—my noble friend Lord Willetts, famously, has two. We are good at the ideas but when it comes to spinning out and, crucially, scaling up at pace, there is such a long way to go, not just in the reasoning for the establishment of catapults but in the key role for them to play in that space. We need more scaling of catapults to enable scaling of the UK economy and all those brilliant ideas to come to fruition.

The Digital Catapult has taken public funding and applied a significant multiplier to it to make a difference right across the country—over 400 businesses each year since its establishment. On levelling up, look at the work in Northern Ireland that the Digital Catapult is doing with nano manufacturing businesses: a clear example of how the catapult can play a critical role in that part of the ecosystem, add pace at that stage and be a key part of the Belfast innovation district. Again, that shows that this is not just about individual entities, individual parts of the state trying to operate as verticals or in isolation. It has to be an ecosystem, a district, a cluster and a collaboration between all those elements, right across the United Kingdom.

We have the opportunity. Crucially, it comes down to enabling that talent and technology to come together—that inclusion and innovation. To answer the question that still exists in this area, as much as in so many areas of our lives, the talent is everywhere. The ideas are everywhere. Crucially, the opportunity still is not. Catapults have a crucial role to play and we should all continue to be supportive of their work.

Finally, I ask the Minister for his view on what more we need to do to ensure that we get to the 2.4% and beyond. As I have the microphone, I hope I will be indulged in asking him where the Government are on the leadership of ARIA and how he sees the role it can play in the overall innovation space. It will be the so-called new technologies that build economic growth and, through that, the social, psychological, community, city and national growth that we need to move forward for the benefit of us all.

Photo of Baroness Walmsley Baroness Walmsley Co-Deputy Leader of the Liberal Democrat Peers 1:10 pm, 19th May 2022

My Lords, it was a privilege to be a member of the Science and Technology Select Committee, under the able leadership of the noble Lord, Lord Patel, when we produced the report on catapults. I congratulate the noble Lord, Lord Mair, on his excellent introductory speech. He emphasised the need to increase the scale of funding for the catapults, commensurate with the Government’s great ambitions.

I knew little about catapults before I heard the evidence to the committee, bar the fact that they hurt when somebody fired one at you in the playground. That is a serious point, because catapults often hide their light under a bushel, despite their important role to assist the transfer of research into industry, jobs and profitability. The noble Lord, Lord Willetts, mentioned that they were not on the Liberal Democrat manifesto in 2010, but I am pleased that they were finally introduced under Vince Cable, a Liberal Democrat Secretary of State for Business. He supported them very enthusiastically.

Even the DCMS does not seem to know much about them. That department recently published a report about translating artificial intelligence R&D into commercialisation. There was no mention of the commercialisation and translational role that catapults could play, even for the most successful ones, such as the Digital Catapult, which is the one most relevant to artificial intelligence.

As I see it, there were four themes to our recommendations. The first was the role of catapults in delivering the Government’s objective to spend 2.4% of GDP on R&D by 2027. The second was the need for strategic decisions from Government on matters affecting private investment decisions to assist the catapults in their role to deliver more of that; and the noble Lord, Lord Patel, focused on this. The third was what can be done to correct the imbalance between collaboration and competition to enable universities and industry to work better. The noble Lords, Lord Patel and Lord Willetts, both spoke about that. The fourth was an enhanced role for the catapults in delivering the Government’s levelling-up agenda.

As you might imagine, our witnesses from the catapults suggested ways in which they could get their hands on more cash to fund their projects. The noble Lord, Lord Bilimoria, asked for more flexibility about funding. Some of our recommendations agreed that this could be done in a number of ways. We asked UKRI to allow catapults to bid for research council funding, where there are clear advantages for research and innovation. I am pleased that the Government’s subsequent review of the catapults agreed this should be done. We also asked that Innovate UK should raise the cap on the share of collaborative research funding for which catapults can bid, particularly where more than one such organisation is involved. I echo the request for that from the noble Lord, Lord Mair, and the noble Lord, Lord Kakkar, said that failure to do so has had a chilling effect.

Again, the Government agreed to ask UKRI and Innovate UK to make these changes, so I ask the Minister whether there are any figures on how much additional funding has become available to the catapults since that change was agreed in the Government’s review. This would be money well spent. Catapults can deliver enormous leverage for the funding they receive, though some are better at it than others. For example, the Digital Catapult core grant is £12 million. It calculates the yield as £436 million over four years, from the funds raised by the businesses it supports. The noble Lord, Lord Holmes, also mentioned this and the noble Lord, Lord Kakkar, mentioned the great success of the Cell and Gene Therapy Catapult.

There is of course some variation in the success enjoyed by the catapults. Some are better at working with universities than others, and we recommended that more could be done, perhaps through adjusting the universities’ KPIs, to encourage them to collaborate with catapults to increase translational work. Some are better than others at helping small businesses grow, and I would like to see more opportunities for the less successful ones to learn from the leaders in the catapult field.

When we wrote the report, we believed that there needed to be more clarity in the Government’s plan for their innovation ambitions, a matter we are pursuing further in our current report on the R&D landscape. In their response, the Government restated their confidence that their target of reaching a spend of 2.4% of GDP on R&D would be achieved by 2027, though unfortunately, as mentioned by the noble Lord, Lord Mair, the latest data available says we have reached only 1.7% to date.

The Government have accepted that more private funding is essential to their ambition, but we recently heard from a senior industry witness that they are not engaging with industry sufficiently well to achieve that. There is a lack of confidence in the clarity and consistency of the Government’s science strategy to encourage such investment. I realise the response was published a year ago—we have been waiting that long for a debate on this—but I wonder whether, in his reply, the Minister will tell us whether that situation is improving and through what actions.

I heard that the Government’s innovation strategy, published several months after our report, contained a mention of the role of catapults, so I had a look at the “implementation” section. I found multiple strategies, missions, forums, reviews, assessments, headline pledges and even a new organisation—ARIA, the Advanced Research and Innovation Agency, which, as the noble Lord, Lord Holmes, pointed out, cannot seem to find a chief executive.

Eventually, I found a mention of catapults on page 110. First, I found the review of catapults, which, as I have mentioned, was carried out last April just after our report. I found an acknowledgement of the role of catapults in the levelling-up headline ambition, as they are in 40 different locations across the country and are charged with creating jobs and improving skills by helping industries to grow. I found that the review published last April recommended:

“Innovate UK will ensure that Catapults deliver on their full potential for business. This will include growing their capabilities to support skills development in the sectors they support, contributing to levelling up, driving research commercialisation, and enabling global innovation collaborations.”

Our committee also had a recommendation about this. The catapults work in the regions, but the strength in places funding stream from UKRI is tightly ring-fenced. This means that they sometimes cannot work in places where they might have added value. We asked the Government to look at this and I hope the Minister will tell us that they have. I therefore wonder whether that recommendation and various others about scaling up funding are being carried out, and I look forward to what the Minister has to say about that.

I have one or two more points. The noble Lord, Lord Mair, asked about our suggestion that UKRI should support researchers to work at the interface between universities and industry, in the exact place where the catapults work. Support for such professionals would allow them to make a valuable contribution to any catapult. Has there been any progress on this idea?

The noble Lords, Lord Willetts and Lord Holmes, mentioned skills, and they might like to know that our next report will be on what can be done to increase the science and skills people pipeline. I look forward to further debates on that when it comes out but, for now, I look forward to the Minister’s response.

Photo of Baroness Blake of Leeds Baroness Blake of Leeds Opposition Whip (Lords), Shadow Spokesperson (Business, Energy and Industrial Strategy and International Trade) 1:20 pm, 19th May 2022

My Lords, I thank the Science and Technology Committee for its thorough investigation and the report we have before us. In particular, I thank the noble Lords, Lord Mair, Lord Patel and Lord Kakkar, and the noble Baroness, Lady Walmsley, for their considered contributions today. I am sure the Minister agrees that the scale of the issues raised today warrants a further debate and an in-depth look at the issues raised. As we have heard, the 2010 Hauser report, commissioned by Gordon Brown’s Government all those years ago, recommended the establishment and funding of a network of technology and innovation centres in areas where the UK has the potential to gain substantial economic benefit, and that became the Catapult Network. We need to focus on that regional element.

These Benches take science seriously and fully support the Catapult Network’s role in driving innovation. I am afraid I believe this is contrary to a Government who have had five Science Ministers in less than three years and have offered a multitude of strategies, road maps, plans, reviews—as we have heard—and various broken promises, but who are short on purpose, power, resources and, indeed, leadership. Those things are needed to drive a high-skills, high-wage, high-productivity economy benefiting the whole country, not just talk and hesitation. This is evident in the findings of the Science and Technology Committee, which examined the contribution of catapults to the R&D framework, particularly their role in stimulating long-term investment from the private sector and the support they offer to new innovation collaborations between organisations rather than the centres themselves. It was, of course, welcome that the report found that the innovation system had all the components to be successful, but that is about where the good news ends. I shall address some of the barriers preventing the Catapult Network delivering the economic benefits it promised, and the recommendations in the report that would be particularly beneficial in realising this.

The only place to start is funding. We have heard something about this today. At the highest level, the Government have already stated that the 2.4% of GDP target found in the 2017 industrial strategy and the R&D road map could be achieved by 2027 or earlier if enough private investment could be leveraged. I have no doubt that this is something the Minister will already be doing, but can he update us on progress towards it and on what steps are being taken to ensure that sufficient investment can be leveraged? Having examined the technology and innovation centre networks operating in the UK’s international competitor countries, Dr Hauser’s 2010 report clearly set out the importance of a strategic, predictable and sustained approach to public funding that can be complemented with programme and contract funding from the public and private sectors. This approach allows the networks to capitalise on local and national strengths, helps integrate the network into the wider innovation system and technology-focused activity across government and enables long-term planning to maximise their contribution.

A third model was adopted in accordance with best international practice, and Dr Hauser’s 2014 review supported its continuation, with one-third of funding coming from a core grant from the Government via Innovate UK, one-third from industry partners and one-third from collaborative R&D funds bid for by consortia involving catapults. However, the report in front of us found that, while this is an appropriate intention in theory, in 2019-20 total funding from core grants was 90% higher than funding received from collaborative R&D funds. In Germany, by contrast—where, by the way, total funding is more than three times higher—the split was close to exact. Younger projects in particular struggle to meet the funding split and subsequently rely more heavily on their core grant. Perhaps the Minister can look into this and see whether more flexibility with the model may be beneficial for helping new innovative projects get off the ground.

The report also found that Innovate UK’s cap on the amount of CRD funding that can be allocated to public sector partners in a consortium, which is currently set at 30%, can limit the extent to which catapults are able to engage with these organisations. They are also found to be at a disadvantage to universities by not being able to apply for UK Research and Innovation research council funding. I am pleased to understand that the Government are in agreement on these two issues and have asked UKRI and Innovate UK to review them. Can the Minister update us here?

While I briefly welcome the Government’s actions, I shall take a moment to reassert that one positive aspect of the levelling-up White Paper was the Government’s commitment to invest at least 55% of R&D funding outside the greater south-east by 2024-25. More R&D spend across the country is of course to be welcomed, but what are the Government doing to ensure that much of it does not just end up in the regional hubs of companies based in London and the greater south-east that end up reaping the rewards of investment elsewhere? Let us be clear: the greater south-east dominates research and development funding. The east of England receives £1,106 per head, nearly twice as much as the UK average and four times as much as Wales.

As well as public sector funding, the committee found that private investment and the involvement of academia could be better harnessed by more strategic decisions being made to

“optimise the performance of the organisations and maximise innovation and commercialisation.”

Will the Minister update us on what steps are being taken in this space?

I will finish on a few broader points. It is very disappointing that the Government have rolled back on their promise to double science spend as part of reaching their 2.4% GDP target and seem to have abandoned their manifesto commitment to finding a cure for dementia through this means. Do noble Lords remember the dementia moonshot? Will the Government reconsider delivering on this promise?

Lastly, many excellent UK science start-ups are being bought up or are moving abroad because of a lack of UK investment options, with private sector funding for research and development lagging behind comparable countries. This is particularly disappointing with regard to the impact it has on levelling up, as science investment remains so heavily focused on the golden triangle. For example, I have been speaking to colleagues in offshore renewable energy off the north coast, and this sector highlights the issues perfectly. Brilliant research means that they are ready to upscale capabilities immediately. The huge risk with delay is loss of competitive advantage with markets overseas, especially, as we have heard, in Europe, where companies are ready to proceed. This has to be one of the main focuses of our considerations today.

I heard the Chancellor’s comments, as read out to us today, at the CBI dinner last night. In the media coverage today I recognise some of the despair that greeted them from so many. I emphasise that the essential ingredient for success in business is ebbing away, and that is confidence. We need a clear, long-term funding plan for science and innovation, and we need it now. Government action in response to the report before us is urgent and overdue. The UK deserves and needs so much better.

Photo of Lord Callanan Lord Callanan Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy) 1:30 pm, 19th May 2022

My Lords, I express my gratitude to the noble Lord, Lord Mair, for so brilliantly introducing this debate, and to all the members of the Lords Science and Technology Committee for their careful consideration of this vital national asset, the Catapult Network, which led to the development of the report in question. I also thank all noble Lords for their excellent contributions, which once again demonstrated the wide range of expertise on this important subject in this House. I congratulate my noble friend Lord Willetts on his new role as chair of the UK Space Agency—an excellent appointment.

As was pointed out, the first catapult was established in 2011. If we fast forward to this year, we now have a network of nine catapults, spanning 40 centres, across all parts of the United Kingdom. Indeed, the Offshore Renewable Energy Catapult, which the noble Baroness, Lady Blake, just referred to, has a centre in Blyth, very close to my own stomping ground in Newcastle. In that time, the catapults have made their mark on the UK’s innovation landscape. They have been responsible for directing more than £2.5 billion of private and public sector investment into some very innovative industrial research, building the UK’s leading capacity in global markets. They enable organisations to access technologies, facilities, knowledge, expertise and collaboration that would otherwise be hard to reach. They have established more than 5,000 academic collaborations and 14,750 industry collaborations, and have supported more than 8,000 small and medium-sized enterprises.

Of course, as the report pointed out, there is always more that could be achieved, which is why we have welcomed the report and recognised the themes of funding our innovation ambitions, ensuring that governance and measurement drive performance, and maximising commercialisation opportunities.

We followed this report, soon after, with the Government’s own review of how the UK’s catapults can strengthen research and development capacity, published in April 2021. This set out a number of recommendations to ensure that the Catapult Network continues to deliver its vital support to UK innovation, sectors and industry and gives them space, without further reviews, to do so.

I turn to the report’s encouragement for funding to better reflect ambition and encourage industry participation in innovation. The 2021 spending review settlement announced an increase in core Innovate UK budgets to around £1 billion per annum by 2024-25, over £300 million more per annum than we spent in 2021-22. We will set out further detail on catapults funding in due course. Its R&D settlement provides a firm foundation for the Government to meet their ambition to increase public R&D spending to £22 billion by 2026-27 and drive economy-wide R&D investment up to 2.4% of GDP in 2027.

As my noble friend Lord Holmes and the noble Baroness, Lady Blake, highlighted, the catapults are integral to achieving our goal of increasing our investment in R&D to 2.4% of GDP by 2027. To meet the target, we are engaging the whole ecosystem of businesses, government, R&D-performing organisations, academia, finance providers, funders, international partners and others to come together. As has been pointed out, catapults are a key vehicle to convening industry and helping us to deliver this.

Following the publication of the R&D road map, my department has prioritised the publication of strategies on significant R&D commitments, including innovation and people and culture. Further improvements to the R&D system are also being driven by the commission of independently led reviews of bureaucracy, UK Research and Innovation, and the RDI organisational landscape.

I am pleased to say that we continue to make progress with the establishment of ARIA. My noble friend Lord Holmes and the noble Baroness, Lady Walmsley, both queried ARIA’s future leadership. I can tell them that we are in the process of recruiting the new CEO and chairman, and I will endeavour to update both Houses once those appointments have been confirmed.

In July last year, the Government set out their vision to make the UK a global hub for innovation by 2035 in the new innovation strategy, which sets out a clear plan of action for creating the right conditions for all businesses to innovate and giving them the confidence to do so. It aims to boost private sector investment across the whole UK. The noble Lord, Lord Patel, rightly noted the important role that this strategy plays in the Government’s R&D agenda.

Both the noble Lord, Lord Patel, and my noble friend Lord Willetts highlighted the report’s concern that overreviewing the catapults, and some perhaps restrictive KPIs, could hamper their potential. Over the last year, Innovate UK and BEIS have worked with catapults to agree new impact evaluation frameworks. While these retain a core set of common principles and metrics, they do not impose a one-size-fits-all approach. They allow for KPIs tailored to the unique sectors and contexts that the catapults work in. The Government are keen to see catapults demonstrating compelling value for money, with clear evidence of their impact and additionality. We are working with IUK and the catapults to ensure that they can demonstrate this clearly and efficiently.

The noble Lords, Lord Mair and Lord Kakkar, and the noble Baronesses, Lady Walmsley and Lady Blake, all asked for an update on allowing more flexibility in the funding rules for catapults. I am pleased to inform noble Lords that UK Research and Innovation has reviewed its eligibility rules for research council funding and, from 1 June 2022, catapults will be eligible to apply for opportunities on the same basis as independent research organisations and public sector research establishments.

IUK CR&D funding is oversubscribed, of course, and it is a highly competitive process, but it is important that funding allocation and distribution decisions do not crowd out other types of project and reduce overall investment in R&D. There has always been scope for individual competitions to make a case for up to 50% where there is evidence that more significant research organisation participation is necessary to deliver the best outcomes with that funding.

BEIS has already set out how its £39.8 billion R&D budget will be allocated between partner organisations over the next three years. As I said, further detail, including funding for catapults, will be set out in due course.

In his excellent introductory speech, the noble Lord, Lord Mair, asked how our approach to catapults can contribute to the levelling-up agenda, without undermining their innovation objectives, and be involved in the Strength in Places Fund. As confirmed by the noble Baroness, Lady Blake, the levelling-up White Paper sets out our commitment that domestic public investment in R&D outside the greater south-east will increase by at least 40% by 2030. This additional government funding will seek to leverage at least twice as much private sector investment over the longer term to stimulate innovation and productivity growth. In support of this mission, I am pleased to confirm that my department is aiming for the regions outside the greater south-east to receive at least 55% of its R&D budget by 2024-25. We are giving UKRI a new organisational objective to support levelling up and increase consideration of local growth criteria and impact in the funding of R&D.

The report rightly highlighted the important contributions that catapults could make to the levelling-up agenda, as the noble Lord, Lord Patel, and the noble Baroness, Lady Walmsley, recognised. At their heart, catapults are UK innovation assets created to support specific sectors or technologies and businesses throughout the UK—this remains their primary purpose. Of course, catapults have always worked across the UK, with their 40 sites now spanning all UK nations and regions. The centres have a track record of accelerating growth in clusters of innovative business, facilitating connections to local research bases and driving skills development in their local economies. For this reason, the new catapults funding agreement for 2023 to 2028 will include a focus on local economic impact alongside their primary objective of national economic impact.

As the noble Baroness, Lady Walmsley, noted, catapults have been at the centre of several of the successful UKRI Strength in Places proposals, including the £43 million investment in the compound semiconductor catapult and the £64 million Smart Nano-Manufacturing Corridor in Northern Ireland. Some £200 million will be invested in 12 projects across the UK over the next three years, through the ongoing Strength in Places Fund programme. Innovate UK is working with local partners to deliver the three innovation accelerators announced in the levelling-up White Paper, in Glasgow, Greater Manchester and the West Midlands. It is considering opportunities for catapults to be involved.

The noble Lord, Lord Kakkar, recognised that catapults are instrumental in growing businesses and clusters in the UK. He quoted the example of the Cell and Gene Therapy Catapult, which has supported the creation of the second largest cell and gene therapy cluster in the world, a development that we should all be very proud of. Through the seven technology family priorities, the Government give clear signals to industry about the opportunity to co-invest in the strength of UK tech. This is supported by the recent confirmation of a record R&D funding settlement and the prominence of the seven technology families in UKRI’s 2022 to 2027 strategy, published in March this year.

My noble friend Lord Willetts asked how catapults could play a role in developing and implementing the technology families. The Catapult Network is well positioned to play a role in delivering these, both in specific technologies—through the High Value Manufacturing Catapult’s expertise in advanced materials and manufacturing, for example—and in cross-technology, multidisciplinary approaches that realise their strengths across the network. Supporting this, catapults will continue to nurture strong collaborations with the research community, industry, government and early-stage, high-growth innovator companies.

The noble Lord, Lord Mair, questioned the steps being taken to facilitate the mobility of researchers between universities and catapults. My noble friend Lord Willetts noted the importance of collaborations with academia. I am proud to say that there is a strong track record of catapults working closely with universities. Innovate UK is providing additional targeted funding to enable catapults to directly engage with institutes, research and technology organisations and public sector research establishments. UKRI awarded £4.8 million of funding to a consortium led by the University of Sheffield that will form a network to encourage engagement between academics and the catapult centres and administer 59 researcher-in-residence awards of between £50,000 and £100,000 each year over its four-year lifetime to enable individual academics to conduct secondments, working in catapult centres, generally over a period of one to three years. Innovate UK is also increasing investment in knowledge transfer partnerships, which are collaborative, three-way partnerships that bring university expertise together with innovating businesses, creating positive impact and driving innovation.

During his speech, the noble Lord, Lord Kakkar, asked about the future of Horizon Europe, a subject we have debated many times in this House. As the noble Lord will no doubt be aware, we are funding full association with Euratom and Horizon Europe. In the event that the EU does not proceed with allowing the UK to associate with Horizon Europe, as I remind the House it committed to do, the UK will of course fund all these programmes ourselves. All the researchers who are funded are guaranteed their funding, including those supporting new international partnerships.

Given the regrettable delays to our association that come from the EU side, we are working at pace to develop a coherent, compelling and high-quality alternative programme to Horizon Europe that will provide the fellowships, collaborations and industry engagement that is so valued in Horizon. We have always been clear that our priority is to support the UK’s research and development sector, and we will continue to do this in all future scenarios.

My noble friends Lord Willetts and Lord Holmes asked how catapults can contribute to skills and developing the workforce. I am pleased to tell both my noble friends that the BEIS Catapult Network Review recommended that all catapults should take a more active role in recognising and responding to the skills needed in their sectors. Those catapults are working with the Gatsby Foundation and others to develop their capability and respond to this important challenge. Catapults have already had a significant impact in this, through their own apprenticeship centres and schemes, by working with providers to shape programmes that work for learners and industry and by collaborating with schools to inspire the workforce of the future.

I was of course pleased to learn of the enthusiasm of the noble Lord, Lord Bilimoria, for the Help to Grow management programme. I hope he will spread his enthusiasm to the Help to Grow digital programme, which is one of my ministerial responsibilities. I would be delighted to work with him and his organisation on both these fantastic schemes. On his questions on funding, the network received £1.2 billion of direct public funding for the current five-year funding period, which runs to 1 March 2023. Core funding for the network in 2020-21 was £239 million, and it generated £155 million from commercial income and £119 million from collaborative research and development. While the Government increase public investment in R&D to £22 billion a year, we are reforming R&D tax relief to support greater private sector investment in R&D as well.

The noble Lords, Lord Mair and Lord Patel, and the noble Baroness, Lady Walmsley, all asked how we will make the best possible use of the Catapult Network in the coming years and what role we see catapults playing in implementing policy for the innovation strategy. I have already set out several excellent initiatives where catapults will make a positive impact in driving our innovation strategy objectives, clearly demonstrating how the Government see catapults playing a key role in its delivery. But, as my noble friend Lord Holmes and the noble Baroness, Lady Walmsley, pointed out, the ambition remains to expand the network when it is appropriate to do so and, of course, when funding is available.

We see the catapults playing a pivotal role in delivering on our ambitions in innovation. That is why my colleague, Minister Freeman—the Minister responsible—and Indro Mukerjee, the CEO of Innovation UK, agreed a new deal with the catapults in March this year. This sets out a clear plan to maximise the impact, activity, promotion and private sector investment delivered through the Catapult Network. Innovate UK will continue to work with the catapults to identify and proactively facilitate opportunities for greater cross-catapult and cross-ecosystem collaboration. It has also committed to remove arbitrary eligibility constraints so that catapults can participate in collaborative programmes throughout the spectrum of research and innovation.

It is clear from today’s robust discussion that the Catapult Network has made a huge impact across the R&D ecosystem and that the catapults’ value is quite rightly recognised across the House and the parties. The Government will continue to work with them and with IUK to build on their successes and facilitate even greater potential. As we look to the future, R&D will be critical to economic recovery, and catapults are and will remain a valuable part of the UK’s innovation ecosystem, as we seek to build back better. I once again thank the Lords committee for this excellent report. The Government look forward to working with it as we take this programme forward.

Photo of Lord Mair Lord Mair Crossbench 1:49 pm, 19th May 2022

My Lords, I thank the Minister for his responses to many of the questions raised by noble Lords, and of course I thank noble Lords for all their contributions. In particular, I think the Minister confirmed the Government’s confidence in the Catapult Network and their support for its important role in driving the innovation agenda. I will make just a few comments on some of the excellent speeches made by noble Lords in this debate.

The noble Lord, Lord Patel, rightly referred to the innovation strategy having very high ambitions. We have all noted that catapults are mentioned quite frequently in the innovation strategy, but there is no specific role for the catapults described in it. However, from the Minister’s replies to some of the questions, we now understand a bit more about the Government’s role for the catapults.

The noble Lord, Lord Willetts, referred to a lot of reports having been written about catapults. That is absolutely right; there have been a lot of reports and reviews, and it was a great pleasure to hear him say that our report was well informed and crisp. We are grateful to him for that. He emphasised that he would like to see more connection between catapults and universities, and that has been a theme throughout this debate. He also made the important point about how the catapults could well be used by government as an easily accessible template for future initiatives. He rightly referred to the formation of the Faraday Institution and how that might well have become a battery catapult in a much more streamlined process.

The noble Viscount, Lord Hanworth, drew attention to the very important role of technical education and technicians, and of further education—I think it is recognised that that sector has been starved of funds. We all recognise that, in this great drive to improve the relationship between research, technology and investment in new ventures, we need to make much more of our technicians.

The noble Lord, Lord Bilimoria, referred very eloquently to the important need to get to the targets that we see in the USA and Germany: 3.1% or 3.2% on R&D. The very ambitious target of 2.4% is to be welcomed, but the noble Lord is absolutely right: it is not, in fact, big enough and we should aim for higher figures. Having heard the Chancellor speaking recently at a dinner that he hosted, the noble Lord emphasised that the Government may well be able to play a major part in changing the tax regimes to encourage and promote private sector investment, particularly in the context of R&D. He very much supports the crucial role of catapults in promoting all of that.

The noble Lord, Lord Kakkar, rightly drew attention to the life sciences and the enormous contribution that they have made in many ways. He talked about the Cell and Gene Therapy Catapult and how it led, in the region of Stevenage, to a series of clusters. That absolutely illustrates how powerful a catapult can be.

The noble Lord, Lord Holmes of Richmond, also emphasised the crucial role of technical education, echoing the noble Viscount, Lord Hanworth. He also very much wanted to emphasise examples of catapults at their best and illustrated some very important applications by the Digital Catapult in many areas throughout the country. He also rightly asked a question about ARIA.

The noble Baroness, Lady Walmsley, also emphasised some of the contributions from the Digital Catapult. She raised an interesting and important question: should there be more opportunities for less successful catapults? In our report, we noted that some catapults are far more successful than others. There is a role for government in addressing that and enabling more opportunities for the less successful catapults.

The noble Baroness, Lady Blake of Leeds, rightly drew attention to the multitude of road maps, reports and plans. The same point was made earlier by the noble Lord, Lord Willetts. We have seen a lot of words and there is an awful lot to actually do in terms of action now. She also talked about levelling up and a regional role for catapults, citing as a good example the excellent work that the Offshore Renewable Energy Catapult is doing. That was something the Minister referred to in his summing-up; the catapult is very close to home for him in Blyth, and it is a very successful one, too.

The Minister gave a lot of good responses to our questions. It is excellent to hear that there will be increased funding for the catapults and that the Government will in due course set out that funding. It is welcome to hear that catapults will be able to apply for research council funding—I think the Minister said that would be from 1 June, which is very welcome. We were also pleased to hear about a large percentage of R&D funding being devoted to the levelling-up agenda.

In the seven technology families that we referred to, the catapults have a clear role—but that role is not yet very specific. It is still rather in generalities. The seven families cover a very wide area and we would like to hear more about what is specifically envisaged for catapults. The organisations Innovate UK and UKRI are promoting further interactions between academics at universities and catapults. That is extremely welcome and we are pleased to hear it. I think the Minister’s last point was that there is a clear plan for catapults. We may not yet know the full details of that plan and would obviously be keen to hear the details from the Government as soon as possible.

So, again, I thank all noble Lords who participated in today’s debate. Many excellent points were made and I hope they will be taken on board by the Government. As has been said, there have been many position papers and reviews published about catapults and the comprehensive UK Innovation Strategy has been published. Even more reviews are under way; one is being undertaken by Sir Paul Nurse. Of course, we look forward to the outcome of these, but, although it is a huge challenge, it is really time now for decisive action—not necessarily more words and plans.

There are potential dangers in a proliferation of committees and reviews, but I hope that our committee’s report and the speeches today have emphasised that the Government should make the best possible use of the Catapult Network. Catapults need to be promoted actively by the Government as a UK national innovation asset. They have a crucial role in developing technologies in which the UK excels, promoting private sector investment and supporting sectors that will bring substantial benefits to our economy.

Motion agreed.