Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP, at the Council for Industry and Higher Education

Speech by the Chief Secretary to the Treasury.

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

The Rt Hon Danny Alexander

Good afternoon, and thank you for inviting me to deliver the annual lecture. It’s a pleasure to speak with representatives from so many of our leading businesses and universities.

Many of you here are spearheading the university, business and Government collaborations that are driving groundbreaking research and innovation right across the UK.

And it’s something I care about deeply because I’ve seen first-hand the huge difference it has made in my own constituency in the Scottish Highlands.

Across Scotland, thousands of people have benefited from the pioneering partnerships forged by the University of the Highlands and Islands.

An initiative that brings together 13 colleges and research institutions, and an even bigger network of over 50 learning centres to provide education for over 8000 students, drive groundbreaking research, and boost growth across Scotland.

It’s the kind of innovation and collaboration we have to foster across the UK to lead our economic recovery.

Economic conditions

As you’re all aware, we face an extremely tough economic environment. The ongoing crisis in the Eurozone continues to undermine confidence in the global economy, acting as a drag on all our economies, the UK included.

After all the EU is our largest trading partner, and a resolution to the crisis would provide a huge boost to the UK economy.

But more than that, the Office for Budget responsibility concluded last week that the sharp and unexpected rise in global commodity prices in the last year had severely hampered the economy.

Furthermore they presented new evidence demonstrating that in fact the pre-crisis boom and post-crisis bust were much bigger and deeper than previously thought.

In sum it means we face a considerably greater challenge to restore growth than we previously expected.

But there is still much that we as a Government can and are doing to support a recovery.

To encourage sustainable growth through private sector investment, enterprise, and of course innovation and invention.

Innovation and growth

Both, innovation and invention have been key drivers of British economic success over several centuries.

It’s a natural human instinct to be curious…we are forever compelled to experiment and discover. Every success offers us a glimpse to better future and a world of new opportunities.

And Britain has played a critical part in that journey.

Through the Industrial Revolution with the Spinning Jenny and James Watt’s steam engine…

To the world-wide-web, the brainchild of the British scientist Sir Tim Berners Lee.

And today, we have huge research strengths which allow us to continue that journey…

4 of the top 20 universities in the world, and 32 of the top 200 are based here in the UK.

Companies like RollsRoyce and GSK continue to build on long established and highly successful with universities across the UK.

And the benefits reach right around the UK.

A cluster of research and innovation excellence around Cambridge University…

The prospect of a Maritime Centre of Excellence at the University of Southampton…

And the knowledge exchange hubs led by Dundee, Lancaster, Queen Mary and the University of the West of England partnering with the likes of Microsoft, IBM and the BBC.

Competitiveness challenge

But despite those strengths, some measures also suggest that the UK needs to do more to keep up - and overtake - the most innovative in the world.

For instance, just over 40% of UK manufacturing firms are involved in technological innovation, lower than Sweden and Finland at 50%, and Germany at over 70%.

And the barriers to research and innovation can be significant in the UK, in particular in health research.

For instance, complex regulatory arrangements are a major reason why it takes an average of 621 days from a decision to support studies to the first patient entering a trial, compared to a 30 to 60 day process in Canada.

And of course, there is always the risk that in uncertain times, businesses turn to the short term, sacrificing the long term investment and R&D critical to long term competitiveness.

The Higher Education Business and Community Interaction Survey has served to highlight those risks

It revealed that the growth in research and business interaction slowed in 2009/10, and that the income Higher Education Institutions earned from  large businesses fell.

But it’s not just research and innovation that risks falling behind.

Across the board, UK competitiveness has slipped over the last decade.

The World Bank ranks the UK 17th for ease of starting a business compared to 2nd for Australia and 9th for the US.

According to the World Economic Forum, on a composite measure of global competitiveness, the UK was ranked 4th in 1998, but 12th in 2010…

And worse than France, Germany and Spain for the quality of our infrastructure.

We are committed to restoring our competitiveness, and the decisions we have taken in the last year have already seen us rise to 10th in the 2011 competitiveness league table.

Those decisions include investing £250bn to update and renew the UK’s infrastructure over the next decade and beyond.

And as announced last week, that includes an extra £5bn of Government investment, along with up to another £20bn from UK pension funds over the next decade.

But we also want to make the UK one of the best places in Europe to start, finance and grow a business. To support the innovators and the entrepreneurs that will create new jobs across the economy.

That means… cutting unnecessary regulation through the Red Tape Challenge, and stemming the flow of new rules through the One-in-One-out system.

Fundamentally reforming our planning system to embed a presumption in favour of sustainable development.

Ensuring businesses have access to finance, including through the new credit easing schemes announced last week.

And of course, protecting spending on science and research programmes as the foundation of an innovative and knowledge based economy.

Government investment in R&D

Despite the pressure on public spending, our Spending Review last year protected resource funding for Science and Research programmes in cash terms at £4.6bn per annum over four years.

An explicit recognition that the UK research base is a vital national asset, and critical to long term growth.

And despite even greater pressure on capital spending, we were able to find the funding for key research infrastructure projects…

£220m for the Francis Crick Medical Research Institute

And £69m for the Diamond Synchrotron facility in Oxfordshire.

But we have gone even further in the last year.

At Budget in March this year we provided an additional £100m to support projects across the country including at Daresbury, Norwich, and the International Space Innovation Centre.

In October we announced £50m of investment in the development of a Graphene Global Research and Technology Hub to build on the UK’s research lead in the area following its ground breaking discovery at Manchester University.

And in the same month we also announced £145m of investment in High Performance Computing to provide scientists and businesses access to the most sophisticated supercomputers to keep them at the cutting edge of research and development.

Autumn Statement and further announcements

Only last week, in our Autumn Statement we announced a further £200m of investment in science and innovation infrastructure.

We are also provided funding to support the UK’s life sciences strategy as announced by the Prime Minister on Monday.

A £180m catalyst fund targeted at new British ideas in life sciences and support a sector that accounts for 165,000 jobs, turns over £50bn every year, and makes a difference to all our lives.

We’re already seeing how the sector is making a huge difference to millions of lives. Through our approach to tele-health we are getting technologies into patients’ homes so they can be monitored remotely.
The trial has been a huge success and we’re rolling it out nationwide to provide dignity, convenience and independence for millions of people.

And tomorrow Vince Cable and David Willets will be launching the Government’s Innovation and Research Strategy for Growth setting out details of new investment from the Autumn Statement that will provide additional support for SMEs.

A strategy that will include announcements on R&D programmes for SMEs, the Small Business Research Initiative to open Government procurement to innovative technology based SMEs, and additional support for emerging and growing clusters such as Tech City in the East End of London.

Higher Education Innovation Funding

Because, it is those organic clusters and networks that provide the vital springboard for innovation and enterprise

We are working hard to foster greater cooperation and interaction between universities and research centres… but also working hard to ensure that our universities and researchers have the opportunity and capacity to work with business… to help take their discoveries and innovations to market here in the UK.

That’s why we decided to maintain the Higher Education Innovation Funding at £150m a year.

A fund to strengthen the connections between universities and businesses to help the commercialisation of knowledge, research and technology.

Technology Strategy Board

And it’s why we have also provided £1.3bn to support the work of the Technology Strategy Board, to help accelerate economic growth by stimulating and supporting business led innovation.

And the TSB has done a huge amount of work to help develop the new Technology and Innovation Centres across the UK.

The £200m programme will help create a critical mass for business and research innovation, driving commercial innovation in specific technologies where there is potential for UK global leadership.

The first TIC in Advanced Manufacturing went live in October, and we are working hard to launch the cell therapy and offshore renewable TICs next year.

Of course, the TSB not only bridges the gap between universities and businesses, but brings businesses together themselves.

In fact I spoke at a TSB event in October, hosted by Inmarsat, and saw first hand just how useful those occasions are for creating new networks and collaborations.

The TSB has already worked with over 4,000 companies in the UK, helping to network over 35,000 business men and women to facilitate knowledge transfer and create new collaborative R&D projects.

The Gross Value Added generated by these collaborative R&D projects is estimated to be almost £7 per £1 of Government funding.

A huge return to investment, and I hope many of you use today to build those networks and spark new ideas.

But it’s not only the growth potential that is so exciting about R&D investment, it’s also the potential to fundamentally transform public sector ways of working.

The Small Business Research Initiative in particular plays a vital role in providing business opportunities for innovative companies through public procurement. And we’re already seeing the results…

Cutting edge 3D medical imaging devices

Technology to cut ventilation associated infections in hospitals…saving lives and millions of pounds.

And intelligent algorithmic systems proven to deliver real time and life saving predictive assessments of patients’ health.

Skills and research investment
Of course, our ability to realise these benefits depends on our ability to stay at the very forefront of world leading research.

The Higher Education Funding Council for England has a vital role in that task, investing over £1.7bn per year in research in English Higher Education Institutions.

And the devolved Higher Education funding bodies are providing a further £370m for research in institutions across the rest of the UK.

In addition, the UK Research Councils invest around £3bn per year in world leading research through universities, independent research organisations and through their own research institutes.

In fact, UK Research Councils currently fund around 25 per cent of all PhD graduates in the UK, and of the 4,500 Research Council funded Doctoral graduates each year, over half move out of higher education.

Taking their skills outside the world of research…to the benefit of business, and to the benefit of our wider economy.

International collaboration

But at the same time, we cannot simply look inwards to stimulate research and innovation.

The challenges that face society today and economies that have globalised over recent decades mean that research and development has to be driven by international collaboration.

Britain is already in a strong position to lead that collaboration.

The high quality of UK research already makes us an attractive destination for inward investment from global industry and business…both through collaborations with researchers, and through businesses establishing enterprises here to take advantage of our research base.

But we want to build even stronger international ties.

The UK Research Council has already established teams in China, India, the US and Europe…leading collaborations that have profound economic and societal impacts.

For example the RCUK Energy and Digital Economy programmes, and the Department of Science and Technology in India have together developed a £12m programme, Bridging the rural-urban divide…looking at ways to make rural living an economically, socially and technologically sustainable option in both the UK and India.

The economic rise of the likes of India, China and Brazil is not a threat to the British economy, but instead an unparalleled opportunity.

A chance to change the fact that we export more to Ireland than we do those three emerging economies combined.

And a chance to establish a UK presence early to ensure that our companies and our researchers can seize the huge opportunities in new and expanding markets… and ensure that we can continue to attract the best and the brightest to the UK.

Our reforms to student immigration balance that need. Tackling abuse of the system, whilst keeping the door to high quality students.

We will continue to welcome the brightest and best to our world-class academic institutions.


International collaboration, research collaboration, and business collaboration are all critical to maintaining the UK’s world leading research and development base.

And at a time where money is tight, when we have to ruthlessly prioritise those areas of spending that are most likely to support economic growth, our research base and the skills of our citizens come top of the list.

And more than that we are committed to helping our researchers take those groundbreaking discoveries and those new innovations to market right here in the UK.

Our plan for growth is driven by an ambition to see things..

  • “Designed in Britain”
  • “Created in Britain”
  • “Invented in Britain”
  • “Made in Britain”

The Council for Industry and Higher Education has always led that cause from the very front…to secure the growth, the jobs, and the support that families need through our recovery.

I am eager to ensure that the Government does its bit to realise that ambition, and I look forward to working with you in the years to come.

Thank you.

Published 7 December 2011