15
Examination of witness
Professor Graeme Reid.
Q16 The Chair: Good morning. Welcome to the EU Services Sub-Committee’s second public evidence session as part of its short inquiry on research and education. This session is being broadcast on parliamentlive.tv. A full transcript is being taken and will be made available to you to make any corrections shortly after the session.
I welcome Professor Graeme Reid, who is chair of Science and Research Policy at University College London. You are very welcome. I will ask the first question to open. What were the aims of your 2019 review into future UK frameworks for international collaboration on research and innovation? What were the report’s key recommendations?
Professor Graeme Reid: Good morning, Baroness Donaghy and others. Thank you very much for the opportunity to meet you today. Successive UK Governments have consistently expressed a desire to associate with EU research programmes. That has been an unwavering policy plank throughout the Brexit debate, but association with these programmes is not entirely within UK control.
The then Science Minister commissioned a report from Sir Adrian Smith and me into plan B: what should we do if, despite all best intentions, the UK does not associate? We did not make an assessment of whether association was a good idea; there are plenty of other people who have expressed views on that topic. We stuck to our brief and looked only at what would happen in the event that we did not associate. We consulted widely during the preparation of the report. We found the consultation quite challenging, because there was universal enthusiasm for future association with European research programmes, to the point that many consultees found it uncomfortable to discuss alternatives. Across the country we found ourselves having to tease out views on alternatives rather than being faced with gushing enthusiasm on the topic.
That said, we made a number of recommendations, the first of which was that in the event that we do not associate with European programmes the UK will face an abrupt change in funding arrangements after decades of European collaboration. Our first proposal was that the Government introduce measures to protect and stabilise the research base during this time of abrupt change so that a rapid change can be turned into something resembling a transition.
Our second recommendation was that we should take advantage of this position. It might not be the one that people want to be in, but if that is where we are, we should turn it to our advantage and take a more global perspective to research collaboration rather than the fairly strong focus on Europe that there has been in recent decades. We thought that the UK needed to behave a bit more like a competitor, particularly in competing for talent and business investment in R&D. There are lots of people chasing after the best researchers and business investment. If we are to retain and increase our share, we need to behave like competitors.
With that in mind, we made a specific recommendation about the better alignment of immigration policy with research policy. Historically we have had an immigration policy that is focused largely on regulating entry to the UK. We argued that that should be accompanied by a policy of finding the most talented people and persuading them to pursue scientific careers in this country so that we would add an extra dimension to immigration policy.
Finally, we recommended something that has now been called a discovery fund, a flagship programme of research support at the frontiers of knowledge providing sizeable awards of long duration to the most talented scientists who we can attract to the programme. That was it, in a nutshell.
Q17 Baroness Neville-Rolfe: Thank you very much indeed, Professor. How important is international collaboration, research and innovation? Can you give some examples and say whether it is location-based or a matter of getting talent to come here, as you hinted in your response to our Chair?
Linked to that, are the Government currently doing enough to support global research and innovation collaboration for universities and businesses? As your very thoughtful report notes, the creation of UKRI and the Government increasing investment in R&D—I think they plan to increase investment to 2.4% of GDP—shows that there is a focus on this area in government and a wish to get it right.
Professor Graeme Reid: If I take these in turn: how important is international collaboration? International collaboration is woven into the very fabric of research. It is not an extra that is bolted on top; it is so woven in that it becomes almost challenging to find examples of research that is done without international collaboration. To put a bit of scale into this, just over half of the scientific papers coming from the UK research community have at least one international co-author. Some research is done in the UK with people who have chosen to come and live here, having originated elsewhere. Is that international collaboration or not?
Other research is done in facilities that are shared between nations because they are of a scale or character that would be difficult for any one nation to run on its own. CERN in Geneva, the high-energy physics lab, is one of the better known ones, but there are many other facilities that operate with different degrees of formality. If you look at vaccine development for Covid, you get a flavour of just how international that endeavour is.
How important is it? It is absolutely fundamental to research. Is government doing enough? Sort of yes, no and maybe is the answer. I think that people close to science policy tend to be enthusiastic collaborators internationally, so you find that UKRI puts a pretty strong emphasis on its international agenda and government policy tends to have quite a strong international flavour to it.
The limiting factors tend to come at the interface between science policy and other policy domains. For example, I just said that Adrian Smith and I thought it would be a good idea if immigration policy included a strand of reaching out and attracting people to the UK—being not just a gatekeeper but a hunter gatherer.
That is some way from where immigration policy sits at the moment. I understand why immigration policy is focused on the regulation of entry, but it limits this country’s ability to bring in talent. Similarly, there are entirely proper controls over public spending that inhibit the use of public money in other countries and in partnership with other funding agencies that may have different criteria for awarding research grants.
Finally, there is a long-standing and perhaps unresolvable tension between the regional distribution of research funding in the UK and our national performance on a world stage. I think that these are among the factors that limit the Government’s support for international collaboration or in some other way moderate it.
Baroness Neville-Rolfe: Would it be fair to say then that the 2.4% of GDP is not the problem? Is it these other institutional and distributional and immigration issues that could make the biggest difference if you were in our shoes and trying to write a report?
Professor Graeme Reid: I think the 2.4% is an issue. This country underinvests in R&D in the public and the private sectors. The 2.4% target was a very helpful way of framing national ambition. To my mind—I have written briefly on this topic before—the only plausible pathway to 2.4% includes attracting a higher level of foreign direct investment in R&D from global corporations. I do not see how we get to 2.4% without a strong international dimension.
Q18 Lord Sharkey: Good morning, Professor Reid. It is very good to see you again. Could you give us some idea of the scale of the UK’s scientific collaboration with EU member states relative to collaboration with other parts of the world? Then could you tell us about the differences in the importance of EU funding for different academic disciplines, parts of the UK or universities?
Professor Graeme Reid: Thank you, Lord Sharkey. The European Union has put together a uniquely effective mechanism for international collaboration. The mechanism consists of two things. First, there is a protocol within which researchers can collaborate, which means that a collaboration is not built from scratch every time. You start with a platform already in place and then you customise that to the needs of the project. That makes collaboration unusually easy to pursue. As if that was not good enough, the EU then goes on to lubricate the whole process with a bit of money. I would put it that way around: the protocol is the thing that is irreplaceable; the money is replaceable.
Against that background, we looked at two different measures of international collaboration. First, we looked at the co-authorship of scientific publications. On that measure, international collaboration as a whole has grown by well over 100% in the decade running up to 2017-18. The top countries with which the UK collaborates has not changed much over that period. Five of the top 10 come from outside the EU, so only five of the top 10 are member states. Our largest by far is the United States, and the fastest-growing collaborations are with China, Australia and Spain.
The other measure that we looked at—and we went deliberately to a quite different part of the research and innovation system—was levels of foreign direct investment by firms headquartered outside the UK. This connects to Baroness Neville-Rolfe’s last question. More than half of business investment in R&D in this country comes from firms headquartered overseas. This is a really big part of the UK research base.
Overall, levels of foreign direct investment in R&D have increased by about 70% over the decade that we looked at. The USA is again, by some margin, the largest source of foreign direct investment. The EU is not a particularly large or fast-growing area of foreign direct investment. Something that the Office for National Statistics calls “the rest of the world” is the area of most rapid growth that has now overtaken the European Union and is catching up with the US.
I cannot help but observe that, despite highly effective arrangements for research collaboration in Europe over a number of decades, the EU does not come at the top of the charts of our international collaboration in science. That, frankly, surprised me when we pulled together the data.
You then asked about the difference between different academic disciplines.
Lord Sharkey: Yes, and regions of the UK for the universities.
Professor Graeme Reid: Overall, if you look at the proportion of total UK research being funded through the European framework programmes, Horizon and its predecessors, the proportion comes out at a bit over 3%. That might be a smaller number than you expected, given the profile that this has had. What is all the fuss about if it is only 3%? One reason for the fuss is that, while that 3% is the overall figure, in some research domains the proportion of funding from the EU is rather higher. In archaeology and software engineering, more than 30% of research funding comes from the EU. In chemistry and architecture, the figure is more than 20%. There is a long list available, which I would be happy to send you, showing proportions of research income coming from the EU. It varies quite considerably from discipline to discipline.
There is also quite a difference in geographic distribution between the EU and UK funding. This is another reason why that apparently small overall figure provokes such strong interest. There is a particularly striking difference in the way regional development funding, rather than Horizon Europe funding, is distributed around the UK. Some parts of the UK, notably Wales but also parts of the north of England and the south-west of England, have quite a high dependency on European regional development funding for their research and development. That regional development funding will come to an end. There is no negotiating outcome that allows that to continue. As well as the transition that we will go through on classical research funding, the research community in some parts of the country will go through an additional transition on regional development funding that has been focused on research.
I am labouring the point about regional development funding, because I feel that it has not had as much attention as it might in the Government’s planning for the future beyond the EU. We have been promised something called the shared prosperity fund, which would replace regional development funding. The most recent promise was that we will hear more at the spending review next month. I look forward to that, but I have to say that this has been promised now for several years.
Q19 Lord Sharkey: I will resist the temptation to ask you why archaeology is so successful in procuring EU grants, but I take it from what you were saying that Horizon funding may not be the dominant mechanism for UK-EU research in innovation and collaboration.
Professor Graeme Reid: If I may, I suspect that archaeology gets this level of profile in the EU because of the research interests of some countries within it. It is a good example of how the research portfolio takes shape if it is a compromise between 28 member states rather than optimised around a single country.
Is EU funding the dominant mechanism? This is a very interesting question. European Union funding makes up quite a small percentage of total R&D investment across the member states of the European Union—3% to 5%, according to how you do the arithmetic. European programmes themselves are not a dominant part of the funding landscape. However, they provide mechanisms by which many research networks can take shape. I think they have a catalytic effect that encourages many collaborations beyond those that are under the EU headline. We have yet to discover whether those bilateral collaborations will thrive when the catalyst is removed.
Q20 Baroness Prashar: Good morning, Professor Reid. Your review focused on proposals for UK domestic alternatives to association with Horizon Europe. If the UK does not associate with Horizon Europe, should the Government seek to replicate EU funding domestically? If so, how much might this cost, and where could that funding come from?
Professor Graeme Reid: Thank you, Baroness Prashar. If we do not associate with Horizon Europe, I see no plausible way of replicating EU funding arrangements; nor do I see a particularly strong case for doing so, even if it was possible. First, we cannot replicate a collaborative programme involving 28 countries when we are not one of the 28 countries. Whatever affection there is for the EU collaborative programmes, we have to recognise that outside the EU we will want different funding arrangements. In any case, our international funding should now be taking a global perspective rather than focusing entirely on the nearby continent or the European Union.
That said, we should not be at all frightened of copying good ideas. The one part of the European funding system that stands out in that respect is the European Research Council, which I have to say has been put together with quite a lot of UK influence but with a high degree of clarity of purpose, structure and effectiveness in the funding achieving its desired aims.
I would not describe the so-called discovery fund that is being put together in the UK as a replacement for the European Research Council. I do not think that is what it should aim to do. Instead, it takes some of the most attractive characteristics of the European Research Council, optimises them specifically around UK interests and then adds it to the current portfolio of funding options. If we find ourselves outside the European Research Council, I find the discovery fund approach rather appealing. If we have to be in that position, this is a good way to respond to it.
You ask about the cost and the source of the funds. Broadly speaking, if we want to maintain the same volume of research, it will cost us the same amount of money. That means that we are looking overall at a cost of somewhere around £1 billion to £1.5 billion per annum. That is just how much it costs to do. There is no way of modifying that figure if we want to maintain the volume.
Where should it come from? This is a very interesting question. The Government have already promised to make good financial losses from our exit of the EU but have not been completely clear about where the money will come from. While we were in the EU, the money we contributed to EU research programmes was embedded in the UK’s subscription to the EU. The money we got back appeared in many ways like free money. It was not being tensioned against other forms of research and innovation expenditure; it just seemed to arrive.
Now that we are outside the EU we will no longer benefit from that arrangement. The money we put in, should we participate in EU programmes, or the money that we put into international collaboration if we are outside the EU programmes, whichever way it works, will be tensioned against other options for public spending. I will not be surprised if it ends up being tensioned against options for UK spending on research—maybe not immediately, but it will not be long before the Treasury asks, “Do you want to spend it on a domestic programme or on international collaboration, because you can’t have both?” It is not far away, even if that is not the approach that is taken immediately.
Q21 Baroness Couttie: Good morning. You have touched, in response to previous questions, on the answer to the question that I am about to ask, but I would like to understand a little bit more about how you think the Government should support the academic disciplines, geographic regions and institutions that will lose out if we do not associate with Horizon Europe.
Professor Graeme Reid: I see parts of this as being relatively straightforward and other parts of it being extraordinarily difficult. There are some disciplines that receive over 30% of their research income from the EU, presumably because those disciplines attract high priority in EU funding. Does that mean that they should automatically attract high priority from UK funders? I do not think it is obvious that they should. We face the rather harsh reality that as we move from some decades of receiving funding from Brussels to getting funding through the UK Government, there may be some quite significant reprioritisation.
The approach that Adrian Smith and I suggested was that we should have a period of protection and stabilisation that allows funding agencies and government to understand the consequences of reprioritising rather than allow reprioritisation to happen by default. But we did not shy away from the fact that reprioritisation will happen. I am not in a position to say what the level of investment in archaeology, classics or law should be. These are all particularly well served by the European Union. It will be worth having a discussion over a significant period of time about their position in a much more UK-funded landscape. That is the difficult bit.
Now the easier bit: I think it is reasonable to argue that the UK Government were able reduce their own investment in regional development because the EU was making sizeable investments of its own. When EU regional development funding comes to an end, it would be reasonable over the medium term for the UK Government to substitute for that loss and maintain a funding distribution that is not far removed from the current one.
This is purely regional development funding for R&D. The position on regional development is a bit easier. I feel that we are going to go into several years of perhaps quite heated debate on academic disciplines.
Q22 Lord Bruce of Bennachie: Universities UK has suggested that if we associate with Horizon we might get only about 50% back, which is clearly unacceptable. You also said that foreign direct investment from the EU to the UK was surprisingly low, but given that we were in a single market, one wonders why that would have been necessary.
All this will change, but given the work that you have done, you need almost to stand back and ask whether, if we were starting from scratch, you would identify changes in funding, regardless of whether we associate with Horizon or not, that you can put to the top of the pile and say, “This is the priority that we should pursue”. If that is the case, could you say which areas you think are the priority? Your exercise will be valuable anyway. Staying or completely leaving, it is still a good moment to review what we are doing, but what then do you believe the priority should be?
Professor Graeme Reid: If I could take the FDI point first, why do companies bother with FDI in a single market? One of the factors that attracts business investment in R&D to the UK is the quality of our research base. Companies come from all over the world to build laboratories in the UK to be in close proximity to researchers whose output they value particularly. That works within the European Union as it works in other parts of the world.
I will offer two examples in answer to your other question. Brexit has acted as a catalyst. It has made us reflect on our own funding regime and ask whether it is optimal. Over a number of years, support for the highest-quality research at the very frontiers of knowledge has suffered a bit as more emphasis has been put on research with more obvious application and purpose. The European Research Council, which I mentioned earlier, was particularly effective at supporting research at the frontiers of knowledge. Curiously, it tends to be that research at the frontiers of knowledge that big business finds so attractive and wants to collocate with. The discovery fund should not be seen as an alternative or a substitute for the European Research Council. It is absolutely worth doing, whatever the outcome of negotiations.
I draw your attention to one other area. The ability to collaborate internationally often depends on being agile, being able to respond quickly when unexpected opportunities cross our path. The UK research funding system is dominated largely by grant awards that are issued through competitive processes. A shrinking proportion of the funding is unstructured and at the discretion of universities to use in an agile way. Sir Adrian and I proposed the creation of something that we called an agility fund, whose express purpose would be to make the research community more responsive to unexpected opportunities.
We are not the only country with this problem of being tied up in grant awards rather than being able to move quickly, so if we can solve this problem, we will gain an advantage over many competitor nations. One part of the world that I think has higher levels of agility than us is the United States. It has that in part because so many of its best universities have large endowment funds that already give them resources that they can deploy within the institution rather than always going to an external funder. Our universities do not have that position, but an agility fund could give us some of the same characteristics as our US competitors.
Lord Bruce of Bennachie: That is a very interesting recommendation. In the past, the complaint has been that we are very good at frontier research and not so good at applied research, but you are saying that we should prioritise frontier research and maybe link it up to that kind of agility fund.
I wonder also whether the universities need to do more about setting up their endowments. Certainly a lot of universities keep writing to me suggesting they are looking for that kind of money. They are not going to get it from me, but they might get it through the connections. Is that combination the way forward?
Professor Graeme Reid: You are absolutely right. Many universities would like to have endowment funds to rival Harvard or Yale, and perhaps one day we will see that. It gives them levels of agility that we can only dream of. The pure and applied research debate is perennial. It is all a question of balance. I feel that the difference between the two is sometimes overstated and that we underestimate the appeal particularly to big business investors in getting close to research at the very frontiers of knowledge.
That is the bit that these firms cannot do. Big business will develop its own products. What it cannot do is research at the frontiers. If we ask, “What is the distinctive role of government in supporting research?”, the bit that only government can do is to support research at the frontiers of knowledge. In applied research there is an important role for government as well, but government is no longer the only actor.
Q23 Lord McNally: Professor Reid, you said that we should not be afraid of copying good ideas, and you referred to the European Research Council as a good example. Are there any other good examples in Europe that we should be seeking to emulate, and any that we should avoid?
Professor Graeme Reid: I have not made an appraisal of the effectiveness of European research funding schemes, but I will offer you some personal impressions, based largely on hearsay and reputation. The exception to that is the European Research Council, which I have spoken about already, and unless you want me to say more I will leave my earlier comments as the answer to that bit of your question.
EU regional development funding has been a very good thing to have, but less impressive has been evidence about its effect. I cannot help but observe that the places that have attracted the highest levels of regional development funding have not shifted their position in the league table of prosperity. They have received large amounts of public money over long periods of time but remain in essentially the same position on the prosperity charts. You have to question whether that funding has been used optimally when it has not raised relative prosperity.
The other area that I mentioned but we have not yet had an opportunity to discuss is EU support that is directed at the private sector. Here my sense is that there is quite a mixed picture. On the one hand, there are initiatives—one called Clean Sky comes to mind—that support innovation in industries across many countries on areas that these industries would find difficult to advance one nation at a time. Looking at cleaner aircraft, for example, is a monumental research challenge shared by the aerospace industry globally. The ability of the EU to convene companies across the European Union has been extraordinarily valuable.
On the other hand, when we were putting our report together, we had a decidedly mixed picture from other businesses that had explored European research and innovation programmes. Some of them complained about excessive levels of bureaucracy and about arrangements that were so compromised by the involvement of 28 member states that they were not serving the interests of that sector in the UK. There are, without question, successes that we can learn from, but we should not get too rose-tinted about EU funding. At its best it has been wonderful, but it is not always the best.
Q24 Lord McNally: Government Ministers have been increasingly self-confident about our capacity to go it alone in space and with space-related industry and are putting money behind that idea. How realistic do you think that is?
Secondly, I notice you said that China was number 2 in investing in research and development. We have run into political problems with China about their investment and their technology. Are there countries that seem to avoid the problems that we have or in fact is China a good partner in research and development?
Professor Graeme Reid: I am not going to claim a great depth of expertise on either of these points. On space, the UK is a very active participant and partner in something called the European Space Agency. That is not, as I understand it, an EU institution; it is a European institution rather than an EU one. Indeed, a number of institutions have Europe in the title that are not EU institutions. So at least to a first level of approximation, our relationship with the European Space Agency is unperturbed by Brexit.
Are the Government right to be so bullish about prospects for the UK space industry? I am not sure that I can give you the answer to that. It seems to me to be rather a good idea to experiment with launch platforms at opposite ends of the British Isles. I really do wish it well; I think it has potential. But I would not put much weight on my views on that one.
You mentioned China. The data that I have includes China within a much wider span of countries, including places like Singapore and South Korea, which are highly research intensive and have sizeable connections with the UK. China is rapidly increasing its investment in research and rapidly moving up most of the league tables that are about either research input or research outputs. Clearly, we have some delicate political relationships with China.
I will observe that as we take a more global perspective, we will have to get used to managing a larger number of more delicate political relationships, because that is what the world is like. One of the consequences in moving from a relatively orderly European Union into a wider world is that the relationship between diplomacy and science will get stronger and more important. I presume that China is an early example of that.
Q25 Lord Thomas of Cwmgiedd: I was going to ask you about agility funds. As you have explained this quite well, can I concentrate on two aspects of it? First, how would you envisage the fund working? Who would make the decisions? Secondly, is there any way this can contribute to the problem you have also identified: namely, the possibly relative lack of success of regional funding in increasing the prosperity of the parts of the UK that it was intended to help?
Professor Graeme Reid: I will take the questions separately. On how it would work, I would award the funding in response to past performance. If I am applying for a research grant, I am asking for money on the basis of future promise. Universities also receive a block grant through something called the research excellence framework, which rewards the documented and audited performance of the university in the recent past. I would add the agility fund to that. We have a ready-built allocation process and a ready-built quality assurance mechanism, so I would just add it to the existing funding mechanism with only the most modest addition to the administration. So, actually, I think it goes out the door quite easily.
Lord Thomas of Cwmgiedd: You would not leave it to politicians.
Professor Graeme Reid: In the report, we suggested that we should have a bit for politicians. Before joining UCL, I spent part of my career in the Civil Service. In my Civil Service career, working for David—now Lord—Willetts, I lost count of the number of times he would return from a foreign trip saying, “I’ve been offered a collaboration if we can put so much money”—usually tens of millions of pounds—“on the table”. My response was always, “That’s wonderful, Minister, but I don’t have tens of millions of pounds for you”. It would be for Lord Willetts to advise how many of these he now thinks were good ideas. My instinct at the time was that there were some very good ideas, but we were not agile enough to grab these opportunities.
We have said in the report that instead of being apologetic about the inability to support political engagement on scientific collaboration, we should set aside maybe not a huge amount of money but a certain amount of money for that express purpose and let Ministers be accountable for how well that was spent. That would be a healthy discipline in other ways, too. The bulk of the money I would allocate in response to past performance and for the express purpose of seizing fast-moving opportunities.
On the regional question, my strong instinct is not to confuse this with regional development. There is a strong case for spending public money to build the scientific strengths of institutions across a wider spread of the UK, not evenly spread everywhere but certainly more widely distributed than we now have. I would not conflate that with the agility agenda, which I think is pursuing a different role.
Lord Thomas of Cwmgiedd: Thank you very much indeed, Professor.
The Chair: I think you were saying the right things to Lord Thomas there. Thank you.
Q26 Lord Cavendish of Furness: Good morning, Professor. What opportunities exist for the UK’s research and innovation sector after the transition period, and what arrangements need to be put in place to embrace these opportunities? My instinct is that, post Brexit and post Covid, SMEs will play an important part in our economic recovery, and their access to research seems to me rather a problem.
Professor Graeme Reid: If we do not associate with Horizon Europe, I suspect that the research community will be feeling rather bruised and will perhaps shrink in on itself a little bit. That would be unfortunate. If we find ourselves in this position, against the wishes of almost everyone in the research community, I think that is the time to be bold. We have an extraordinarily strong starting point. By objective measures, we have a very strong science base that is respected all over the world. We are just a little country off the coast of Europe and we are home to four or more of the world’s best universities, again measured objectively—not measured in the UK but measured by people from outside this country. We have a proud tradition and a proud culture of challenging convention, thinking radically and speaking freely. These are all fundamental requirements of strong research.
Although I absolutely take the point about smaller firms, by objective international comparison this country is one of the better places in the world for university-business collaboration. We face challenges but other people face even bigger challenges. We start from this terrific position, and with relatively minor tweaks to policy we could turn that into a really wonderful vision for the UK in the world of research and innovation.
I will repeat things I said earlier, but with a better alignment of research policy and immigration policy, with funding instruments that are designed specifically to attract international partners to UK research and by cashing in on research strengths across a broader range of the country, bringing regional development into the agenda, we would be able to set out an ambitious, bold and exciting vision for this country. It would be challenging to bring everyone in the scientific community with us, but it would be a very good example of where effective leadership from government and the funding agency would help us all adjust to a world that we did not want but is the one that we are in.
Lord Cavendish of Furness: Thank you. That is rather encouraging. I had a bit of a sound problem when you were talking earlier about, I think, a protocol for international co-operation. Was that a good idea that you felt we should replicate?
Professor Graeme Reid: I think I referred to it a couple of times. One of the things that has been so effective about the European Union is that it has provided a protocol for researchers in member states to use as a starting point for collaboration. You do not negotiate everything from scratch every time; you start with the framework of the project already in place and then customise that around the needs of the individual project. Doing that globally is a lovely idea but, my goodness, it will be difficult. I would call that aspirational.
Q27 Lord Vaux of Harrowden: Professor Reid, normally when we are talking about Brexit and so on we tend to get reports that are rather negative and talking about what we have lost, so it is a nice change to be looking at a report that is forward looking and quite positive. What response have the Government had to the review? Have you been consulted on proposed domestic arrangements following the end of the transition period?
Professor Graeme Reid: Thank you for the kind words about the report. Our brief was to put forward constructive and ambitious proposals in this scenario. We tried to stick to our brief. One of the things I think we both feel rather proud of is that we avoided the temptation to assess whether association was a good idea. We stuck entirely to the scenario in which this was not happening.
At no time did we expect a line-by-line response from the Government. That was not part of the deal. Indeed, we have not had one. I have been involved in periodic discussions since the middle of 2019 and even earlier on the domestic arrangements that might be introduced if we do not associate. I have had discussions with officials in the UK and UK diplomats in Brussels and I have been to Brussels a couple of times to brief on the development of the report and the contents of the report.
The UK Government have published an R&D road map, which draws on the language of the report in a number of areas. Plans are being developed, should they be needed, for funding instruments if we do not associate. Those plans, again, draw on the language of the report. When you are the author of a report, you become attached to words and phrases and I spot them.
Lord Vaux of Harrowden: Are the Government acting on this and being suitably positive and sufficiently positive?
Professor Graeme Reid: I feel comfortable about the way in which the report is being absorbed into policy thinking. While the negotiations are going on, none of us knows whether this report will be acted upon as a primary agenda or whether the Government will draw mainly on the things that we say are worth doing, even if we continue to associate. The report was conceived from the outset as plan B rather than something that you could expect the Government to have acted on at this stage.
Lord Vaux of Harrowden: I have a quick clarification question about FDI—foreign direct investment—which you mentioned was going to be very important in the 2.4%. As someone who used to work for a big American technology company buying companies here in the UK and in Europe, I think it would be fair to say that when we bought those companies, it was not necessarily always positive from an R&D point of view. What tended to happen was that the R&D that we were buying was then exploited potentially elsewhere. Is there a risk that if we go down that route of relying on FDI we lose the benefits of the research and development, or am I missing the point there?
Professor Graeme Reid: You are not at all missing the point. It is absolutely right to point out that risk. However, I would put that in a wider context. If we look at business investment in R&D over the last decade or so, indigenous UK firms collectively have been flatlining on R&D investment.
There has been almost no increase at all in the overall level of R&D investment from UK-headquartered firms over the last 10 years, while R&D investment from firms headquartered overseas has been growing steadily and has overtaken the level of investment from UK firms. Some of these overseas firms have been in the UK for so long that we almost forget that they are headquartered somewhere else. They are so embedded in the fabric of this country that we forget that they are not entirely UK. One of the great strengths of research in this country is its cosmopolitan nature, which extends into the private sector as well as the academic sector. It is a hugely enriching part of research in this country.
On the 2.4% agenda, to my mind the arithmetic is inescapable. About two-thirds of R&D investment in the UK is done by business and, as I said, just over half of that comes from businesses that are headquartered outside the UK. If the Government are on a path to 2.4%, I cannot see how they can do that while ignoring such a large block of the R&D investment in this country and indeed a block which the UK is particularly good at attracting. If it was my job to get to 2.4%, one of the first things I would want to do is work out how we can get more investment from outside the UK.
Q28 The Chair: Professor Reid, you mentioned several times the importance of stability during whatever transition period—transition with a small “t”, not the official one—before we move on to whatever our new world looks like. What would you suggest are the key elements for providing that stability? You mentioned immigration and substitute funding for regions, but do you have any key thoughts on that area?
Professor Graeme Reid: At its heart, this is about what it feels like to be a researcher in the UK, perhaps having chosen to come here from a starting point in another part of the world, and to read hysterical press coverage about the effects of Brexit, go home to your family and explain to them why it is a good idea to stay here.
If we could take away the urgency and the cliff edge that appear in so much of the commentary and turn that into a period where there is time to think and reflect on the realities of our position rather than the way it is presented sometimes, that would take away some of the risk and perhaps some of the fear that I think any reasonable researcher would feel when confronted with so much uncertainty.
More than anything else, that was what underpinned our “protect and stabilise” proposal. I am pleased to say that that line of thought seems to have been absorbed into policy a bit. I think there is a recognition that we are talking about the lives of individuals here rather than something abstract.
The Chair: Thank you very much indeed for that. That concludes your grilling for the hour. Professor Reid, we are very grateful to you for your time. I neglected at the start to say that the review was jointly presented with Professor Sir Adrian Smith, and I should put that on the record. You mentioned it during the session. We are incredibly grateful for the richness of the contribution and outlining quite an important review that looks forward and not just back. Thank you very much for your time.
