Speech by the Chancellor of the Exchequer, Rt Hon George Osborne MP, to the Royal Society

Speech by the Chancellor of the Exchequer.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The Rt Hon George Osborne

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It is a great privilege for me to address the Royal Society for the first time.

You are testament to the continuing excellence of British science.

You combine 350 years of history with support for cutting-edge research today.

The manuscript of Newton’s Principia Mathematica is in your Library and you host a seminar this month on energy transduction and genome function.

Later this month you will be hosting a celebration of the Nobel Prize just awarded to your Fellow, Professor Sir John Gurdon, the 277th in your history.

His research on cloning lies behind the development of stem-cells which is already transforming medicine.

The sheer quality and range of scientific enquiry, as vigorous today as in the days of Ernest Rutherford and Dorothy Hodgkin , is one of our nation’s greatest achievements in which we can take real pride.

I am glad to say that one of my predecessors has some small place in your Hall of Fame.

Charles Montagu, whose portrait is on display here today, was President of the Royal Society in the late 17th century, and at the same time as Chancellor of the Exchequer.

He made his mark as Chancellor, founding the Bank of England and so saving the country from bankruptcy after racking up debts after war with the French.

But I’m afraid to report he was a rather unremarkable Royal Society President.

He only got the job because his illustrious friend, Sir Issac Newton owed him a favour because he had given Newton the then rather lucrative role of Master of the Mint.

Charles Montagu did, however, get something right.

Newton was one of the greatest Masters of the Mint, rebasing the discredited mediaeval coinage with the same rigour and precision he brought to his scientific enquiry.

As Chancellor, it’s my job too to focus on the economic benefits of scientific excellence.

But I understand that scientific enquiry can’t be reduced to simple utilitarian calculation - even though improving the human condition is a pretty good justification for any human endeavour.

Intellectual inquiry is worthwhile in itself.

The flourishing of communication about science in the media is evidence that this hunger to understand the world is more intense and more widespread than ever.

You do not necessarily become a scientist to boost GDP - even though it is a very welcome consequence of much of what you do.

We must leave room for original research and abstract intellectual inquiry.

For even when it is abstract and theoretical it does not flourish in isolation.

David Hume put it very well in his great essay, Of Refinement in the Arts:

The same age which produces great philosophers and politicians, renowned generals and poets, usually abounds with skilful weavers and ship-carpenters. We cannot reasonably expect that a piece of woollen cloth will be wrought to perfection in a nation which is ignorant of astronomy.

In the long run it is technical change which determines our economic growth - we become more productive not by more back-breaking labour but by working with more knowledge in our heads and more equipment in our hands.

That knowledge and that equipment are achieved through scientific and technological advance.

A recent CBI study found that the quality of our scientific research base is one of the most significant factors encouraging international companies to bring high-value investment here.

Innovation is not a sausage machine.

You don’t get it by a plan imposed by government and you can’t measure it just by counting patents or even just spend on R&D.

It is all about creative interactions between science and business.

You get innovation when great universities, leading-edge science, world-class companies and entrepreneurial start-ups come together.

Where they cluster together you get some of the most exciting places on the planet.

That is where you find the creative ferment which drives a modern dynamic economy.

And this coalition government is backing them because that is how we in Great Britain are going to pay our way in a tough competitive world.

That is why we will continue to support science.

Indeed I am up for the challenge set by Brian Cox and others of making Britain the best place in the world to do science.

Our decisions on tax and spending show we are serious about this.

Even in these austere times, we have cut taxes for business who innovate, with greater R&D tax credits and the introduction of a corporate tax discount for patents.

And we have protected cash spending on science and research with a £4.6 billion ring-fenced budget.

For first time this ring fence covers the whole range of current research activity financed both from the Research Councils and from the Higher Education Funding Council.

We understand that cutting edge science requires cutting edge facilities and equipment.

And in successive Budgets and Autumn Statements I have given priority to additional investment in capital for science, adding £500million of extra spending.

It helps that our excellent research institutions have projects that are well-managed and ready to roll.

A new building with labs and offices at the Babraham Institute was built, fitted-out, and occupied by new spin-out companies all within twelve months of the funding being announced in the 2011 Budget.

That is the kind of flexibility we all like.

But we recognise that you can’t always be quite so nimble.

Big science projects need long lead times.

Take the Crick Institute which we are financing alongside the Wellcome Trust, Cancer Research UK, UCL, Imperial and King’s.

I congratulate Paul Nurse, your President here at Royal Society, on the vision and leadership he has brought to his projects over many years.

Giving this long cherished Institute the go ahead was one of my first acts in this office.

As we take these decisions on science capital, we have been guided by the science community’s assessment of priorities.

In Autumn 2010 the Research Councils set out its key capital projects to which they gave highest priority.

In the following two years we have given the go-ahead to all but one of those.

After successfully delivering so much, the Research Councils have been assessing further the long-term capital we need to carry on doing world-class science and research in the UK.

They are publishing their report today.

It is an important long-term programme for investing in British science.

And it is matched by our commitment to sustained long-term support for capital investment as well as current spending on our science base.

This report today is evidence of our continuing strategy for science.

No one doubts the world-class nature of British science.

But there has long been anxiety about our ability to turn scientific research into successful commercialisation.

The idea that our science community do not bridge theory and practice, science and technology is just plain wrong.

We could not have world-class science without world-class technology creating new instruments.

The Cavendish Lab at Cambridge proudly preserves the equipment which made their early experiments possible.

They say they would not have won those Nobel Prizes nearly a century ago but for the skill of their glass-blowers who created the best cloud chambers.

The Large Hadron Collider is a miracle of modern engineering.

I have heard it said, there was a time when more welders were working there than on any other construction project in Europe.

Modern astronomy depends on extraordinarily sophisticated satellite systems.

In his excellent Reith Lectures, Martin Rees, the previous President of the Royal Society, explored the creative interaction of science and technology.

Scientific curiosity creates a need for new equipment which makes new science possible.

That creates new knowledge which in turn makes more new technology possible.

Market opportunities are opened up too.

I think of the British small business which has a developed a device for drilling into surface of Mars which responds to the density of the material it encounters.

It is now being used for improving the performance of the machines stamping out aluminium cans.

The advanced materials developed at Culham for enclosing the extremely hot plasma in nuclear fusion can also improve performance of conventional nuclear power stations.

The economic crisis has accelerated a change that was already happening in our world.

Prosperity and the power it brings are shifting to new corners of the globe, to countries like China, India and Brazil.

So as the Prime Minister has said, countries like ours are in a global race.

That we face a choice: Sink or swim, Do or decline.

The starting point is dealing with our debts and confronting problems we face.

And we are on the right track: we’ve cut the deficit by a quarter in the past two years.

But it’s also about making the structural reforms to make economy more competitive - and harnessing our scientific ingenuity and translating it into growth and jobs is core part of that.

I am clear about the role of government.

It is not government who creates the scientific innovation, or translates into growth.

But we can back those who do.

And as a government and as a scientific community we need to be willing to identify Britain’s strengths and reinforce them.

We do not claim to be able to predict them with 100% accuracy.

But we need some sort of assessment.

Today I want to begin a debate about eight future technologies where we believe we can be the best - where we already have an edge, but we could be world-leading.

The list put together by my colleague David Willetts draws on the advice of science community, the research councils and the Technology Strategy Board - and I would like Government to work with you to build a consensus that these are the right goals.

Let me take each area in turn.

First, the Big Data Revolution and energy-efficient computing.

The next generation of scientific discovery will be data-driven discovery, as previously unrecognised patterns are discovered by analysing massive data sets.

The world already creates 2.5 quintillion bytes of data - equivalent to 150,000 full iPads - every single day.

We need to make sure we capture value from this mass of data - both for economic growth and for social advances, such as better health.

This requires a transformation in data management.

The UK is well placed for the big data revolution.

We have 25 of the world’s 500 most powerful computers.

But crude computing power is not the be all and end all.

We have a comparative advantage in IT because of three distinctive strengths.

First, we are good at the algorithms needed to handle these large data sets.

The key role of British scientists in research projects which generate very large data-sets, such as the search for the Higgs boson at CERN, has led to the UK sustaining our world-leading strengths in the software development and algorithms needed to make sense of these massive data-sets.

Secondly, we have some of the world’s best and most complete data-sets in healthcare, demographics, environmental change and food.

One of the best places in the world to study medical risks from nuclear power stations is the University of Central Lancashire, which links data from Windscale / Sellafield with long-term reliable health records for the local population.

Thirdly, these strengths are complemented by our strong life sciences sector. The future is linking “dry” computer sciences and “wet” biological sciences.

The world’s key DNA sequencing technologies all come from British research labs. We can be a world leader in harnessing genetic data.

There are major commercial opportunities here.

We have a particular opportunity in energy efficient computing. IT is an increasingly heavy user of energy - the typical visit to Facebook uses as much energy as boiling a kettle. Energy-use is driven by the number of calculations, so smart algorithms which get to a result with less effort need less energy.

At the large scale, this means the UK is well placed to solve the challenges posed by clusters like the City of London which are close to reaching their energy and computing capacity.

At the smaller scale, this means UK research leads the way in developing longer-life mobile communications such as mobile phones and tablet computers.

Business says we must out-compute to out-compete.

Last year, I announced an investment of well over £100 million in high performance computing. This has enhanced the UK’s national capability and attracted important global businesses into partnership with the Research Base.

We are seeing the benefits already with Intel putting five different investments into the UK this year.

We have also created the open Data Institute in the East of London in Tech City, to bring together study of all the data from our whole environment.

And as a government we are making more and more of that data available.

Business will invest more as they see us invest more in computational infrastructure to capture and analyse data flows released by the open data revolution.

The second future technology we should support is Synthetic Biology.

Synthetic biology is the design and engineering of biologically based parts, novel devices and systems and processes for new uses.

It can redesign existing naturally occurring genes and engineer new genes and hence organisms from them.

These organisms can be designed to meet a particular need: they say that synthetic biology will heal us, heat and feed us.

The value of the global synthetic biology market is predicted to grow to £11 billion by 2016.

In the longer term, synthetic biology has the potential to create new markets in response to emerging future needs.

Our comparative advantage derives from our long-established global lead in the biological sciences - from solving the structure of DNA in the 1950s to sequencing the human genome in the 1990s.

We are now one of the leaders in applying engineering techniques to genetics.

The aim is to use engineering principles to achieve reliable and reproducible biological products.

One spin-off company using techniques first developed with the support of the UK’s Biotechnology and Biological Sciences Research Council (BBSRC) and collaborating with Imperial is a good example of the potential of this technology. TMO Renewables outside Guildford has biologically engineered an organism that consumes household waste and converts it into bio-ethanol.

It has secured a contract worth up to $500 million to create up to 15 centres across the US, though it now needs development finance to scale up its successful proof of principle the technology.

The UK’s Synthetic Biology roadmap was recently published. It highlights where we need to address gaps and improve access to cutting-edge infrastructure to maximise benefit to the UK economy. Today, we endorse their work and are publishing our response

I can therefore announce that BBSRC is investing £20 million into leading universities and researchers in the UK to use synthetic biology to benefit the UK economy by addressing major global challenges, such as producing low-carbon fuel and reducing the cost of industrial raw materials.

The third technology I’d like to highlight is Regenerative Medicine.

Regenerative medicine is set to transform current clinical approaches to replacing or regenerating damaged human organs or tissue.

Drawing on research strengths in engineering, material and physical sciences as well as medicine, tissue engineering is the generation outside the body of a renewable source of transplantable tissue.

The UK retains a leading position in the science and commercial translation of regenerative medicine.

This comes from our cross-disciplinary research strengths and our well-balanced legislative and regulatory framework, which has been essential to building comparative advantage in this area, and attracting researchers from countries seen to have more restrictive regulations.

We have world-class research in centres such as Edinburgh (where Dolly the sheep was first cloned), Cambridge, Leeds, and London.

I recently opened the new £73 million Centre for Translational and Experimental Medicine on Imperial’s Hammersmith Campus.

This will house 450 scientists focusing on the translation of new discoveries into novel ways of preventing, diagnosing and treating diseases.

We can grow new tissue and then remove distinctive features that cause rejection by the host so patients avoid having to spend the rest of their life time on drugs to combat tissue rejection.

Current estimates of the global regenerative medicine industry value it at just over £500 million, with forecast generating revenues of over £5 billion by 2021.

Last December, the Prime Minister launched the Government’s life sciences strategy, a detailed plan which is designed to ensure the UK continues to attract the world’s best academics and companies in all areas of the life sciences.

The Government has committed £40 million to deliver the Strategy for UK Regenerative Medicine.

Regenerative medicine is a priority area - and we will have more to say next month.

The there is the technology of Agri-Science.

The UN forecasts that global food production will need to increase by over 40% by 2030, and 70% by 2050.

Yet water is becoming scarcer, and there is increasing competition for land, putting added pressure on production.

Our aim is sustainable intensification - raising the productivity of agriculture, protecting diversity of land-use, and avoiding high energy costs or eroding the quality of soil.

We did not just have the Industrial Revolution we had the Agricultural revolution too.

Ever since we have had a strong lead in agricultural research.

We need capital investment to exploit and maintain this capability.

Our historic collections of data and samples are a crucial research asset.

The Broadbalk Winter Wheat experiment began at Rothamsted in 1843 is the world’s longest-running agricultural experiment and still produces important results about yields of wheat grain and changes in husbandry.

It has had long-term funding from the Research Councils.

In addition the John Innes Centre in Norfolk, the Institute for Animal Health  in Surrey and the Roslin Institute  in Edinburgh are global leaders in agri science.

We can design better seeds and more productive farm animals.

Wheat provides a fifth of all human calorie consumption but improvements in wheat yields have been slowing down and fertiliser intensity is growing.

Heat stress is a growing problem threatening yields.

It is a research priority to harness our world lead in wheat research to improve wheat yields.

This raises UK wheat production, generates exports as new wheat strains are exported, and contributes to international development as for example we create new strains of drought-resistant wheat.

We now get on average about 9 tonnes of wheat per hectare from a British farm (about 1 tonne this wet summer from organic farms that do not use fungicide).

Rothamsted’s 20:20 wheat programme aims to deliver wheat yields of 20 tonnes in 20 years.

Such a doubling of wheat yield in the UK would generate £1.5 billion at the farm gate.

It has strong industry representation to increase business investment and we have recently issued a public call for evidence to ensure our priorities are those of the sector.

And the Government is spending around £400 million a year on investing in the UK agri-food sector.

A fifth technology is Energy Storage for the Nation: Stockpiling Electricity.

We need better ways to store electricity.

This is true at three levels.

First there are the batteries in all our personal electronic devices.

These use lithium ion batteries working on a chemical reaction developed at Oxford in the early 1980s.

Thirty years on that basic technology is still central.

Second there is the development of battery-powered vehicles.

One reason Nissan decided to produce their new all electric LEAF car here in the UK in Sunderland was the continuing support for research on innovative batteries for cars.

Third there is the challenge of storing more electricity for the Grid.

Electricity demand peaks at around 60 Giga Watts, whilst we have a grid capacity of around 80 Giga Watts - but storage capacity of around just 3 Giga Watts.

Greater capability to store electricity is crucial for these power sources to be viable.

It promises savings on UK energy spend of up to £10 billion a year by 2050 as extra capacity for peak load is less necessary.

The Research Councils’ energy programme is investing over £500 million over this Spending Review period in energy research, including energy storage.

However, urgent action is needed to accelerate translation of research into new technologies and products so that global market opportunities are realised by UK companies - and ensure the UK is established as an international focus for energy storage research and innovation.

Research projects are delivering but the UK currently lacks the test-bed demonstrator capacity and dedicated R&D facilities to take the next step in developing and testing new grid-scale energy storage technologies.

We need to create them.

We are funding the Energy Technologies Institute jointly with industry partners - including BP, Caterpillar, EDF Energy, E.ON, Rolls Royce and Shell - to accelerate new technologies for producing clean, reliable and affordable energy.

And we are now investing £800 million with industry to maximise the funding of low carbon energy technology innovation.

A sixth technology is centred on Advanced Materials and Nano-technology.

The UK has a long-established reputation for excellent materials science, as well as industrial strengths in advanced materials. Wedgwood and Pilkington are two of the many companies to gain competitive advantage from the application of materials research.

One example of advanced materials, meta-materials, are materials which are built from the atom up and designed to have characteristics not found in nature.

Materials innovation is crucial for sectors such as aerospace and the automotive sector. Formula One racing teams in the UK, especially McLaren which is one of our most research intensive companies, push rapid innovation in advanced materials.

The future of construction is to incorporate more functions into structural materials rather than adding them as extras.

Scientists at Imperial have created a cement which absorbs CO2 as it sets.

It brings us closer to the carbon neutral building.

The new Baglan Bay Innovation and Knowledge Centre, which was opened by Vince Cable last month, will develop and prototype novel technologies and functional coatings for energy storage and release. In the future, this could turn buildings into small power stations and potentially revolutionise the construction sector.

And clothing is increasingly likely to incorporate advanced materials with smart functions such as health monitoring.

They have already developed in Spain a sports vest for footballers which enables the coach to monitor every player’s heart beat during a match.

We need that development in the UK.

And new advanced materials are needed for next generation nuclear fission and for nuclear fusion as well.

These are being developed at Culham in Oxfordshire to enable ultra-hot plasma to be held in stable conditions.

After the Fukushima disaster, part of the market is looking for a nuclear fuel rod that does not heat so much: we may be able to develop this, using high performance computing to model the new materials we need.

We are determined to act fast to seize the moment.

Take the new material graphene for example.

International competition was intense after the award of the Nobel Prize to the inventors of Graphene, Andre Geim and Konstantin Novoselov of Manchester University and so we moved without delay to invest in major new research capabilities there and in other universities - £50 million in all committed to ensure an invention made in Britain was developed in Britain.

The Engineering and Physical Sciences Research Council will be announcing £22m worth of funding to leading research groups across the UK in graphene engineering later this month, focusing particularly on manufacturing processes and technologies linked to graphene.

Graphene is just one of the many new exciting advanced materials we should exploit.

And we should work on Robotics and Autonomous Systems - a seventh critical technology.

Robots acting independently of human control - which can learn, adapt and take decisions - will revolutionise our economy and society over the next 20 years.

Our wider manufacturing industry has so far been a slow adopter of industrial robotics - the UK has 25 robots per 10,000 employees in non-automotive sectors; whilst Japan leads the world with 235 robots per 10,000 employees.

Our researchers have some distinctive leads which we can exploit.

NASA’s Mars Rover vehicle is largely controlled from Earth with a 7 minute delay as instructions travel to Mars. The European Mars Rover vehicle, due to land in 2018, is more autonomous and is mainly British technology.

In the Bristol Robotics Laboratory they are developing self-powering robots which collect dead flies and other detritus and place it in a back pack container of bacteria which converts this into electric power.

The UK can lead in developing these technologies for sectors as diverse as defence, healthcare, manufacturing, transport, entertainment and education.

Here are some examples. One of the world’s first fully autonomous cars has been developed at Oxford with close involvement of the car industry.

At the University of Hertfordshire they are making breakthroughs in helping profoundly autistic children who find it easier to interact with a humanoid robot than a human.

The market for medical robotics is growing around 50% annually worldwide. The UK has a strong track record in pioneering medical and surgical robotics.

They can enable operations to be done remotely.

They can replace hands and arms. Exo-skeletons give movement for severely disabled people with controls linked directly to the brain.

The Engineering and Physical Sciences Research Council funds some of this research.

It is also a key strand of the Technology Strategy Board’s support for advanced manufacturing.

There is a small budget to encourage SMEs to shift to robotic manufacturing techniques but they need to be able to try out these techniques at demonstration facilities.

David Willetts has convened a series of meetings so academia and industry and government can develop a strategy for future investment decisions.

Finally there are the opportunities to be a world leader in satellites and commercial applications of Space.

The UK space sector, including such companies as Astrium, Inmarsat and Avanti, already generates £9 billion a year for the economy, and has grown at over 8per cent per year through the recent difficult economic times.

Our ambition is to have a £30 billion industry by 2030.

We are now at a watershed where space is transitioning from a celebration of science endeavour into a capability that impacts on our everyday lives.

Live transmissions of news and sports are driven by satellite telecommunications, and satellites are bringing broadband to rural communities across the UK, while providing enormous export opportunities.

The new generation European navigation programme brings very precise location capabilities opening up new markets.

Because space involves substantial investment, much of it is better done through international collaboration.

In particular, the UK gains great scientific and industrial benefits through being a strong but selective partner in the European Space Agency.

We engage particular strongly in a number of areas of high added value including telecoms, earth observation and meteorological satellites.

The European Space Agency is holding its four-yearly Ministerial meeting later this month, where commitments for the period to 2017/18 will be made.

I can now announce that, subject to negotiation with our European partners, the UK is willing to commit an average of £240 million per year over the next five years through ESA to high value scientific and industrial programmes which will benefit the UK.

Subject to satisfactory negotiations, substantial benefits to the UK will flow from this investment, and the private sector itself has already identified projects to the value of £1 billion that will flow from this investment.

I am delighted also to announce that ESA has agreed, to site its telecoms satellite headquarters in Harwell, Oxfordshire.

This will crystallise a major space hub at Harwell and create 100 new high-tech jobs there.

So there are eight technologies I challenge the scientific community of Britain to lead the world in, with our support;

  • the Big Data Revolution and energy efficient computing
  • Synthetic Biology
  • Regenerative Medicine
  • Agri-Science
  • Energy Storage
  • Advanced Materials
  • Robotics and Autonomous Systems
  • Satellites and commercial applications of Space.

The Royal Society is testament to our proud past and a symbol of our future scientific potential.

It is right that, even at times of fiscal restraint, we find the resources to enable new scientific breakthroughs, to bridge the gap between discovery and commercialisation and to spread the economic and social benefits of scientific research.

The prize is not just our future wealth but our health and quality of life, and our commitment to intellectual enquiry.

No one can know what the future holds.

But we can discern those areas where we have particular strengths and which scientists themselves believe have the most potential.

Let us identify what Britain is best at - and back it.

Today, I have also published the Research Councils’ new roadmap, announced the next stage in the development of our strategy for synthetic biology and explained how we will put the UK at the heart of the Euopean space programme.

We have great science in Britain.

We are backing it.

And we will do more.

Published 9 November 2012