Science, Innovation and Technology Committee

Oral evidence: Science diplomacy, HC 838

Tuesday 17 March 2026

Ordered by the House of Commons to be published on 17 March 2026.

Watch the meeting

Members present: Dame Chi Onwurah (Chair); Emily Darlington; George Freeman; Kit Malthouse; Freddie van Mierlo; Samantha Niblett; Dr Lauren Sullivan; Adam Thompson; Martin Wrigley; Daniel Zeichner.

Questions 276-359

Witnesses

I: Lord Vallance of Balham, Minister for Science, Innovation, Research and Nuclear, Department for Science, Innovation and Technology; Seema Malhotra MP, Minister for Indo-Pacific, Foreign, Commonwealth and Development Office; Rhys Bowen, Director, International and Economic Security, Department for Science, Innovation and Technology; Nathanael Bevan, Director, Global Technology Directorate, Foreign, Commonwealth and Development Office.

Written evidence from witnesses:

• Department for Science, Innovation and Technology

Examination of witnesses

Witnesses: Lord Vallance of Balham, Seema Malhotra MP, Rhys Bowen and Nathanael Bevan.

Q276   Chair: Welcome to today’s meeting of the Science, Innovation and Technology Committee. We are grateful to Minister Vallance and Minister Malhotra, together with their officials, for joining us for the final session of our science diplomacy inquiry following sessions on threats, health and life sciences, quantum, and space. I happen to know that it is Minister Vallance’s birthday today, so happy birthday. I fear that my first question is not going to be much of a birthday present.

Lord Vallance: This isn’t my first ever Select Committee on my birthday, and I had an operation on my thumb this morning, so I am living the dream at the moment.

Chair: Well, we will try to ensure that you are comfortable, at least.

I do hope that you are able to respond to questions on science funding, because the cuts to science funding, particularly for the STFC, have caused widespread concern, as has been heavily reported in Research Fortnight and other publications. Many scientific organisations have written to the Committee, and I thank them for making contact. Recently we heard evidence from research organisations, and I have written to Lord Vallance and Sir Ian Chapman on behalf of the Committee. Lord Vallance, could update the Committee on conversations between the STFC, UKRI and DSIT to agree a solution to the cost pressures facing STFC?

Lord Vallance: Yes—thank you very much. I will start by saying that this Committee and many others have commented previously that UKRI lacked a strategic focus, had too many priorities and would benefit from further direction and fewer priorities, and also that it needed greater transparency, accountability and a cultural shift to a less cautious approach to funding innovation. What Ian Chapman is trying to do is make those changes, so it is not surprising that what is going on at the moment is not straightforward.

The STFC thing is particularly difficult, and it has been for a very long time. When STFC was first formed, the proposal was to take the research bit out of the council and put it in EPSRC. That was resisted very heavily at the time by the community; they wanted it together because the big facilities and the research programmes go together. This has a long history. I think it is not in a good place at the moment, and we are trying to get it into a good place. I want to deal with two or three different bits.

The first is the postdocs. There are something like 324 postdocs funded across STFC, some in astronomy and some in physics. The ones that did not get started—there was a group that did not get started this year—were in theoretical physics. They missed an international deadline of 31 January. That affects between 12 and 15 or so postdocs. I do not know why that happened, and I do not think it was the right thing to do. They should not have missed it, and we have had that discussion. The money for those postdocs is still available. That can happen now. They are going to work with the universities, their advisory council and the community to make sure that we get that out. If it is not appropriate to get it out now because they have missed the deadline—from everything I hear it is appropriate to get it out now—there would be double next year. There is a guarantee that the postdoc funding—the early research career funding—will carry on through the spending review. So I think that that was a mistake that was made.

Q277   Chair: How did that mistake happen?

Lord Vallance: I can’t really get to the bottom of how that mistake happened. As far as I can see, there was time to get it sorted out. I do not know exactly how it happened. We have been through it, though, and I think somebody thought it wasn’t such a big deal. I think it is a big deal and we can get that right. UKRI have taken the message around that. It is 15 out of 324, but it is an important 15 and we need to get it right.

Chair: Yes, it is absolutely important.

Lord Vallance: Very quickly, we will get that out to get that in the right place.

In terms of the overall funding, STFC increases its funding—it is basically flat over the course of the spending review, but there is a section for applicant-led research, which is essentially going up a little bit over the course of the spending review period. What Michele Dougherty is trying to do now is make sure that the balance between the international facilities, the domestic research infrastructure funded by STFC and the research programmes is correct.

I know there has been reference to the Drayson partition. It is important to recognise that that was not a partition in any sense of money coming from somewhere to save people; it was simply a way of thinking of those three pots of money and saying, “We want to try and keep those as whole as we can.” What has happened, of course, is an overspend, and that has happened year on year. It happened during that time as well, and that overspend has to be met from within UKRI funding. It is not that you can go to Treasury and say, “There’s an overspend because of foreign exchange on facilities.” That is not the system. It never has been and it isn’t now.

Q278   Chair: There are two things there. First, the overspend needs to be met within UKRI, but does not necessarily need to be met by postdocs or within STFC. Secondly, we have made the point repeatedly that it is possible to hedge against overspends, such as on foreign exchange. I do not think that your response explains why the overspend accumulated in that way, and why it was necessary to take it out of STFC.

Lord Vallance: First of all, the postdoc thing is completely separate. It wasn’t a saving thing; it was a mistake because of the timing of when allocations were given. That amount of money is not significant in relation to this. That is not to do with this.

By the way, they do hedge against foreign exchange, but you cannot hedge against everything; you cannot get it completely right, and they never have got it right. There has been an overspend because of that foreign exchange, and because of the number of projects that have been committed to. If you look at the increase in expenditure in STFC, on that particular area, for the past five or six years, there has been a 20% increase at a time when the domestic funding has increased by 11% in UKRI. That means it has to be met—and has had to be met—from other parts of UKRI. That means that other research programmes and other research councils have less money to give out.

Ian and Michele are now trying to get this under control so that there is a much better handle on how things want to be prioritised against long-term programmes, domestic facilities, applicant-led research and international subscriptions. That is the consultation, or the engagement, that they have gone out to the community with. That is coming in in March and April, and they will take it to their committee in June, with their expert advisory group and probably with some international input as well, and then we will make a decision on how that looks over the remainder of the spending period.

Q279   Chair: Thank you. Have you asked the Treasury to approve the classification of international subscriptions, such as CERN, as international treaty obligations? That was a suggestion for how to address this issue going forward.

Lord Vallance: We have this with all the international subscriptions, including things like Horizon. People around this table will recognise that the Treasury does not say, “Oh, don’t worry about that. Come back if you overspend and we will take it, because it is an international obligation.” That is not how it works. The expectation was that, within the budget we were given—we got the biggest increase in science funding ever in the spending review—we would meet those obligations.

That is precisely the process that is being gone through now, and it is why Michele Dougherty has asked people, “What are the things that matter most in your area?” We are not going to be able to fund absolutely everything. That is true in every research council—every research council has that problem—but that is the exercise that is being gone through at the moment. There are no cuts currently taking place, and the new grants are coming out in two or three weeks, but there will be a need to squeeze between those areas and decide where the community most wants to take the reductions.

Q280   Chair: Between which areas?

Lord Vallance: Between the projects, the applicant-led research, which I am very keen to protect, the domestic facilities—UKRI has said it will take control of reducing the cost base of those—and the international subscriptions.

Q281   Chair: The overspend is only in international subscriptions and domestic facilities; it is not in projects.

Lord Vallance: The overspend in the past has been in international subscriptions because of foreign exchange; in projects taking place within those international facilities, which have either been delayed or there have been too many in there; and in domestic as well. For domestic, STFC and UKRI have said, “We are going to take that and manage that cost base.” The others are the ones being engaged on at the moment to see where people want to think about making the squeezes.

In the past, UKRI has absorbed overspend by taking money from other places to put it in there. Once they have all the information, they will make a decision about how best to manage that across the whole portfolio, but in the first instance it is right that STFC looks at that.

Q282   Chair: I have two final questions before we move on. Professor Jon Butterworth told us that the UK’s name would be “mud” at international meetings later this month unless a solution is found to this specific issue of international subscriptions funding. Do you agree?

Lord Vallance: Everybody who has an international subscription that is their favourite thing will always say that if any change is made to it, that will be a big problem. We have been in regular contact with CERN and Mark Thomson, and we know that we remain the second biggest contributor to CERN; that is not decreasing. There are some specific projects that will be discussed in the usual way, and there will be choices that he needs to make, the other contributors to CERN need to make and we need to make about which ones take highest priority. Again, it is not right to portray this as some massive cut to things. It is not; it is about managing a budget responsibly and being clear how much of that we can afford to do with international subscriptions. To reiterate the point, we are and will remain the second largest contributor to CERN—that is not under threat.

Q283   Chair: But we are cutting our expected contribution to CERN.

Lord Vallance: We are not. There are some projects, including the LHCb upgrade and ATLAS, that are being looked at.

Q284   Chair: That we had committed to.

Lord Vallance: Yes, there were lots of things that were committed, and they are being looked at now to see which ones we can afford. We are in regular contact. I was on a call with Mark Thomson a few weeks ago, thinking about the options for LHCb, because I recognise it is an important thing. That is why the community and the expert panel that is being put together with the STFC need to look at how to rank these projects—I do think it is a good idea to have an international view on that as well, which Michele is getting—so that we are clear about which ones take highest priority. We are not saying no to LHCb forever; we are just saying that at the moment it is not making the cut, and we need to look at what the options are for the future and when the money for that really kicks in. I think that is good management of the budget.

Q285   Adam Thompson: Good afternoon, all. Lord Vallance, I have another question for you. We have talked about Michele Dougherty. She appeared in front of the Committee two weeks ago, and she pointed broadly at historical over-ambition as the cause of the issues that we are facing at the moment. I understand that since then, others, online and elsewhere, have disagreed with that perspective. I wonder what your perspective is on the cause of these issues. More broadly, given that we are putting large additional volumes of money into science research at the moment, how can we ensure that we never find ourselves in this situation again?

Lord Vallance: That is precisely what Ian Chapman and Michele Dougherty are trying to do. We have been in this position year on year for many years, and they are trying to get better control of the cost base for the different components here. They are looking at what the options are and what the impacts of those options are. At the June meeting they will have a full impact assessment that goes to the STFC council.

On the causes, there is no doubt that foreign exchange is one. Of course, there has been a big change in both foreign exchange and inflation over this period, and I do not think anyone could have predicted exactly how that was going to happen, so that is an unusual thing that skewed it further. There are also, as there always are in every research council, in every area, too many projects for the amount of funding that we have. That is always going to be the case, whatever we do. This is a prioritisation question, and it is right that they are trying to do that in a way that is obvious and transparent for people, and asking, “Which are the things you want to trade off?”

When we think about some of the facilities that are being put in, whether that is ATLAS or LHCb, there are projects that come along with them—it is not just the facility; it is the actual project—and those need to be prioritised against other things and tensioned against other areas. That is true in every research council. NERC had a similar issue with the cost of fuel for its ships. These are pretty common occurrences. I do think—and Ian has said this—that this has not been handled well, and the communication has been poor. I hope they are getting on top of that now; that is important. The postdoc thing was a completely avoidable problem that should not have happened.

Q286   Daniel Zeichner: Good afternoon, Lord Vallance. You say there are no cuts taking place, and yet people are telling me that there are redundancy notices and they have been asked to model 10%, 20% and 30% reductions. To them, that absolutely feels like cuts. How can you square the two positions?

Lord Vallance: What I said was that no cuts have taken place. They are being asked to model it because in that envelope of £842 million roughly per year, there are too many things for the amount of money we have. That means that not everything is going to be funded. That is the process that is being gone through at the moment, and that is why there needs to be a trade-off between those different areas. We then need to look at what the impact of that is by doing a proper impact assessment, and then make a decision on what the funding is going to be going forward.

There is a bit of prediction in that because foreign exchange is going to fluctuate over that period, so we cannot be absolutely sure. The second thing that is going to change is that existing projects will come to an end, so there may be short term-pressures that do not turn into long-term pressures, where you can open things up again. That is the life of any research council. I do not think this is really different in terms of what is being asked at the moment.

If at the end of that, in June, STFC come back and say they want to cut areas A, B and C in order to make this work, then that is a cut, obviously, because you cannot fit everything into that envelope. The question is, what is the best way to do that to end up with the maximum benefit to UK science both nationally and internationally, and to do that with the community? I believe that is what they are doing. It is worth reflecting that we have a physicist leading UKRI and an extremely distinguished astronomer leading STFC. They are the right people to work this through with their expert bodies.

Q287   Daniel Zeichner: Do you accept there is a problem for the PPAN community with it being part of STFC, and would you consider changing that?

Lord Vallance: I do, actually. I went back and looked at the establishment of STFC. The proposal was to take that out and put it in EPSRC, which is the physics council. The explanatory memorandum of the time says: “There was significant opposition to the suggestion to transfer PPARC’s”—or PPAN, as it is now—“grant giving functions to the Engineering and Physical Sciences Research Council (EPSRC) due to concerns about the adverse impact of the separation of strategic facilities planning from the grant giving responsibilities.”

Q288   Daniel Zeichner: So you would not exclude revisiting it.

Lord Vallance: I absolutely do not. It is actively being revisited. It is one of the things on the table, and it is one of the things that UKRI wants to hear about from the community.

Q289   Chair: Before we move on to science diplomacy, I think the Committee is reassured that the impact on postdocs, which was extremely concerning, is being addressed. You believe it will be addressed.

Lord Vallance: There is nothing to stop that being addressed. I do not know what the right way to do it is—double the money next year or release the money now. That is what they are looking at, but the money is there. That can be solved.

Q290   Chair: But I am concerned about the acceptance I seem to be hearing that it is normal and natural that research councils would be overspending and would have too many agreed projects to fund and so would have to model cuts. Is that what I am hearing?

Lord Vallance: No, it’s not. That is the situation. What I said was that there is almost always more demand than there is ability to fund. That is always the case.

Chair: Absolutely—that is true across every Department in Government.

Lord Vallance: Absolutely. That is normal. There is an issue that needs to be sorted out now in terms of where we are today—this is what Michele and Ian are trying to do—and that is to make sure this does not happen again where there is an overspend, with one thing that is outside everyone’s control, which is foreign exchange, because you cannot hedge for the whole thing; you can only hedge for certain variabilities.

Q291   Chair: We can look at that in more detail, but how are you addressing the bad financial management that has led to consistent overspends?

Lord Vallance: I do not think it is fair for people in the past to be accused of bad financial management. I think people were trying to do their best to get good projects out and get them into a system that they thought could accommodate it. The reality is that the expense in this area overran; it went to its allowed overrun. What happens is that they get an increase of x% each year that they can go up to. If everyone goes up to that, the whole thing is overspent. What happened is that that has gone up to its overspend; therefore, other research councils and other parts of UKRI have had to come in. I really do not think it has been bad financial management, but I do think we are at a very important stage now to get this to a position where we have much better cost control over domestic funding and other areas.

Q292   Chair: Can we agree that the ambition is that the predicted expenditure should meet the actual expenditure?

Lord Vallance: Yes, of course.

Q293   Chair: And so anything that does not do that is failing?

Lord Vallance: That is where things have been and that is what we are trying to get sorted out. There is a bit of that that happens in all of them, and it is not how I want things to be. This is not how it should be and we want to get this straight. That is exactly what Ian and Michele are trying to do. It is painful and it is going to cause noise. We just need to get it right and make sure that we do not cause noise and damage in the wrong place. That is what is going on now.

Chair: I look forward to the responses to the questions that the Committee has sent you. We are going to move on to looking at science diplomacy.

Q294   George Freeman: Welcome, Ministers. Lord Vallance, when you and I were in Government together—I as a Minister and you as the chief scientist—we did a lot of work to push the last Government to recognise the global race for science and technology. You particularly set out the own-collaborate-access framework. We set up a national science and technology cabinet—equivalent to the NSC—and we got science and tech in the integrated review.

I have two questions: the first is to invite you to comment on what has gone on in the new geopolitics in the last 12 to 15 months and how that has changed our strategy and thinking. Extraordinarily, we have seen President Trump announce that he intends to annex Greenland and to dismantle large parts of NASA through DOGE, creating a huge opportunity for us to lure back top, often British, scientists from NASA. We have seen President Trump’s Administration signal that they are no longer committed to clean energy in the way that they were. That is in addition to all the war and the tensions in the South China sea, where I am a trade envoy.

Can you reflect on the big picture of how rapidly the landscape is changing and whether we in Government have changed any of the objectives? We will get into some detail in a minute, but could you comment generally on the extraordinary landscape and what it means? I, for one, welcome your and Ian Chapman’s commitment to the three buckets. It seems that we need to have a focus on growth, excellence and strategic sovereign interest, but what does that mean in this new landscape?

Lord Vallance: You are absolutely right; the landscape has changed enormously. Not only has it changed with the big players being in different places, but there are also many more countries that are enabled in science and technology now than there ever have been. If you go back 20 years, a handful of countries could perform at the very top. That is not true any more; there are many more. We need to recognise that and recognise that we have not done as well as we could have done in terms of turning that science into products and into scaled companies. That has been a very big focus and a big change. If you have a strong science base in the private sector, that leads to national security and resilience as well.

What has changed? Obviously, we have gone back into Horizon, and I am very pleased that we have because we need that strong link to Europe. We are continuing to forge strong relationships with the US, but it is not straightforward at the moment, because it is tied up with a trade deal as well. We have been careful about how we have engaged with China in areas that are mutually beneficial in science and technology.

The big change—I believe now is an important moment to be doing this—is to back those technologies that we think we absolutely need. That is the own-collaborate-access framework come to life. Just this week, we announced a very big, advanced commitment to fusion and to quantum, on top of the advanced commitment to AI and the compute infrastructure. Those sorts of moves, which will favour the private sector coming in, are increasingly important.

Q295   George Freeman: We are going to pick a couple of those up. On own-collaborate-access, we have had a number of witnesses who have said, “Look, we get the framework, but we’d like some more detail on what being in the own space or being in the access space means for us.” Do you have some examples from, say, the last 12 or 18 months? Of course, we did get back into Horizon, and I was very proud to have overseen that in the last Government, but in the new geopolitics, are there areas where you have shifted your advice—“We were in collaborate, but we are now in own; we have to do that ourselves, or have to collaborate with somebody else”?

Lord Vallance: What we have just done on quantum is a clear indication that we want to be in the own space on that. We will still collaborate and access, but we want to be in the own space. It is very clear that we cannot be completely in the own space in AI, so we are going to have to collaborate, and we need to make sure we know which bits of that we must have in the UK. In fusion, we are in an own space.

George Freeman: Great. I will hand over, because I know we are going to pick up on quantum.

Emily Darlington: I think Seema wants to come in.

Seema Malhotra: I just wanted to add some FCDO perspective. I am here both in my capacity as Minister for the Indo-Pacific and as the Minister for growth in the FCDO. It is important to recognise how the UK remains a top-three science and technology nation globally, and that impacts how countries relate to us and want to work with us. In a more complex world, where we have seen the battle of the superpowers, science and technology is top of the list in conversations about how nations look at derisking their supply chains and investing in capabilities for themselves.

There is an important role for Britain here. We are still seen as a very strong science nation, with our history and capabilities. We have strong international relationships and a reputation that has trust—trust that what we say is what we mean, and trust in terms of our research and capabilities. That is increasingly important when we think about diplomacy. Science and science diplomacy now operate in a much more fragmented world, and how we work with other nations through this shifting global landscape is extremely important.

I will just highlight a couple of examples of how we are working through science, whether in growth, national security or problem solving, and bringing capabilities. We have done that with Asia, with our climate programmes, supporting countries to develop their own capabilities to tackle their more local challenges, such as with food security and how crops might need to be more resilient both in terms of drought and also now in terms of floods. That was an important conversation on my recent visit to the Philippines.

There are also examples of where, although we are a smaller nation and do not have a large market domestically, the capabilities that we are now developing and sharing through partnerships are incredibly important to our relationships with those countries. I will highlight one example that I saw recently and then conclude. It was in Singapore and with the partnership that had gone on with Aurrigo, which is a technology that was developed in Coventry. That is part of the 10-year strategy with Changi airport on how it will look at greater automation and that innovation being the best in the world for this situation. That will be a core part of how it develops its operations and processes for the new terminal.

What we can do in partnership and how we build those partnerships through an environment of trust between our nations is an important part of how science plays a role in that. We are looking to the development of prosperity and security of our countries together.

Chair: Thank you very much, Minister Malhotra. It is good to hear how you are reflecting the role of science in international partnerships and international partnerships in science. I know we want to go into more detail on some of the key aspects of sovereignty and supply chains, which relate to that. I am going to go to Freddie and then Emily.

Q296   Freddie van Mierlo: This follows on nicely from what you were saying. As a Minister in the FCDO, it is good to hear you speak of the importance of science, and that the UK leading in science is good for us internationally. But I noted that in the upcoming Government soft power strategy there is no mention so far of science and innovation in this country, and there are no science-based companies or representatives on the Soft Power Council, which was announced purely by the FCDO and the Department for Culture, Media and Sport. Where do you see science fitting within that strategy?

Seema Malhotra: Thank you for that question. Soft power is also part of an ecosystem that includes and works together with many aspects of our relationships. There is a new strategy in development. Looking through the membership of the Soft Power Council, it includes universities, and it looks at how we work together across culture and the Foreign Office. The British Council is on there and is an important player with our education network and others.

It is important to recognise the role of the science and tech network—the STN—that was formed last year and recently had a relaunch. It is co-funded with DSIT and is an important pillar of our UK science diplomacy toolkit. It has around 130 staff in 65 locations around the world. That network has been important in work that I have been doing as well as the Minister—not just our work in the Indo-Pacific. But as one example, they were pivotal in how we put together—

Q297   Freddie van Mierlo: Sorry to interrupt, but how will that specific institution then link into the Soft Power Council and the strategy that you are bringing forward?

Seema Malhotra: I will make a comment about that, but to finish off on why the STN is significant, it looks at scientists, capabilities and expertise that are on the ground, and it links them back. The STN was pivotal in how we put together the AI innovation summit in Malaysia last autumn, which was important for ASEAN’s work on AI going forward.

In relation to soft power and the Soft Power Council, there is work looking at a new strategy. In terms of soft power, it is an important part of the ecosystem that we have. It does not exist on its own, and includes work that we are doing with some of the world-leading cultural, education, science, media and democratic institutions. All of that together is what helps underpin the UK’s consistently strong performance in global soft power rankings.

Q298   Freddie van Mierlo: But how will scientific institutions have a voice in that strategy? You mentioned that there are universities on the Soft Power Council, but I think I only saw one, which was the University of Oxford, and it does not specify that it is there in a scientific capacity. The rest of the members are all laudable and good institutions—the BBC World Service and all kinds of cultural capital that we can be proud of—but how will the scientific voice be inserted into that conversation?

Seema Malhotra: You raise an important point about the membership of the council, as it was formed. In terms of soft power and how we work across the whole of the Foreign Office, as I have just shared, we do look at areas such as culture, sport and science together. Developing the strategy will be work that takes in input from across the whole of the Foreign Office. You are right to highlight science. When I mention the British Council and education, that is also connected with the work we are doing through Chevening scholarships. One of the scholarships we launched at the end of last year was for women in STEM, so we do look at how we connect science into what we are doing more broadly through other aspects of our work in the Foreign Office.

Q299   Emily Darlington: I am going to pick up on your point about Chevening scholarships. We have just withdrawn the visas for everyone on Chevening scholarships. Were you aware of that, Minister? What are you doing to make sure that that work is not affected by our immigration changes?

Seema Malhotra: Sorry, I did not hear the first part of the question.

Emily Darlington: The Home Office has just withdrawn the visas for all Chevening scholarships. Were you aware of that? Also, what conversations have you had with the Home Office to make sure that its changes do not impact important programmes like the Chevening scholarships, or people like the woman doctor from Afghanistan who had a place and was due to come here and update her medical skills, but who has now had her visa withdrawn?

Nathanael Bevan: Hi, I am Nathanael Bevan, the director of global technology. Sorry, that is not something we are aware of in terms of discussions directly with the Home Office, other than that they are looking at those visas.

Q300   Emily Darlington: Well, the visas have been withdrawn. Could you please look into that and write to the Committee about the Foreign, Office’s view? It sounds like you were not consulted in those discussions. I know that it would be of interest to Minister Vallance as well, given their importance to our science collaboration. As a Committee, we would be interested to understand the cross-Government view on that.

Seema Malhotra: I am very happy to write to you.

Q301   Emily Darlington: I want to come to some of our wider questions. This inquiry has really been about how our soft power happens. With science, it happens in the work we do and the way we collaborate through universities and partnerships. However, we have also heard and talked about the importance of regulation and standards. We have the oldest standards institution in the world, and we were also among the first to start a proper intellectual property regime. Lord Vallance, how are we working to promote these things? From the FCDO’s perspective, how does that help us to achieve standards in our trade deals and increase standards and regulation in new areas of technology in those countries that we have emerging relationships with on these things?

Lord Vallance: It is a great point. Standards and regulation are critical, and we have a very strong presence in the standards bodies. We are very well respected in that space. If you look at what we have done for new things such as quantum, we are the first country to have laid out a regulatory pathway and to have started defining standards. If you look at areas such as AI, we have leant into trying to define the necessary standards, and we will do more of it.

In my previous job, and indeed in this one, I have been to some of the standards bodies. I think they are the unloved part of this. Everybody knows about regulations, but the standard settings determine what happens for years and decades to come. We are very aware of that, and it is part of the science and technology framework. It is exactly how we consider every area we think of, in terms of whether we can grow in the UK: can we also be the country that influences and develops standards? I do not know whether you want to say anything more, Rhys, because you are quite involved in this.

Rhys Bowen: To build on that, there is a big programme of work going on, as Lord Vallance has set out. There are two particular things that I will point to. As we have been optimising the science and technology network for the period ahead, we are reinforcing the posts in Geneva and Paris for the ITU and OECD. That is largely in respect of their particular roles, on telecoms and space in the case of the ITU, and on a variety of areas in the case of the OECD, but most recently on AI standards. We think it is really important, and we are trying to match it with the team’s resources.

Seema Malhotra: I will add a couple of points. It is important to be part of the conversation on standards. That is also about interoperability and being able to work much more closely with countries in science partnerships. Through our international science and technology partnerships, the FCDO prioritises four areas, one of which is being part of developing and influencing norms and standards internationally. I mention that because it is important in influencing Government debates in multilateral forums. It is also important in how we then develop standards and governance standards and address potential misuse of technology by state and non-state actors as well.

Q302   Chair: Can I clarify something? Obviously, the UK was a leading proponent of standards development over many years, and I am very familiar with the telecoms ones, but then we ceded the ground to private sector companies, particularly in telecoms and other areas. Can you tell me how many and what resources, such as FTEs and so on, are on standards development? Do they sit in the FCDO or in DSIT?

Seema Malhotra: I will make one point and then I will bring in Rhys on where it crosses DSIT and the FCDO. We are a leading member of the OECD’s global forum on tech, as one example. We see this as an important part of our strategy, but in terms of the split, Rhys might want to come in.

Rhys Bowen: The technical standards team is within DSIT. As you know, it has a history, particularly in telecoms standards, but is now also looking at wider areas. It works with other partners and with Government as well to do that.

Q303   Chair: Sorry, we are running out of time. So all our international standards involvement and engagement is run out of the DSIT technical standards body?

Rhys Bowen: With other partners in Government as well, but it is co-ordinated from within DSIT. We work with British companies and British consultants in the technical bodies to make sure we have the right standards technical expertise to work on, for example, 6G.

Q304   Emily Darlington: I should declare that BSI is based in my constituency. BSI is responsible for the majority of the ISO standards nationally. It is not part of Government, but it is very well respected; it is often integrated into our international diplomacy and is very integrated into some of the Government’s work. How important is it as an institution in doing that, and do you have any thoughts about how we change that relationship?

I want to press you on intellectual property, because it is quite important both domestically and internationally. With AI, copyrights are quite important, but we have traditionally had some real issues with China about protecting intellectual property. That is part of some of those global discussions, so I want to press you on the intellectual property regime, which is of course still one of the best in the world.

Lord Vallance: I am happy to take the IP thing. Rhys, do you want to say anything more about the standards group?

Rhys Bowen: I will simply say that we have a community across Government, and the wider community sets standards. Ofcom is part of that, and the BSI is part of that. There is a collaborative approach to prioritising our work on standards and then executing that within international organisations.

Lord Vallance: On the IP side of things, we have a very good IP system in this country; it works extremely well. Interestingly, China now has a very strong IP system, and they are very keen to protect their own IP, so they have changed quite a lot in the past decade. I do not think there is any suggestion that we are watering down any of our IP protection. We also have national security measures around R&D, in particular, that look specifically at risks around intellectual property and leakage of that intellectual property. Some of those teams are run out of DSIT, and one is run out of the FCDO, on specific individuals. There is strong IP protection.

Nathanael Bevan: Could I come back briefly on the Chevening point? Our understanding is that the visa brake scheme for specific countries, including Afghanistan, Sudan, Myanmar and Cameroon, is where the Chevening scholar applications have been affected, but we are absolutely not stopping all visas for Chevening scholars. It specifically relates to the Home Office visa brake measures.

Chair: We need to move on now; perhaps you could write to us with regards to the specifics of the Chevening, as well as the prioritisation for standards.

Q305   Martin Wrigley: Lord Vallance, it is good to hear your description of AI as “collaborative quantum” that we would own, and that we would be owning fusion as well—I was delighted to see you at a fusion place in the news yesterday, I think. Announcements this morning talked about big investments in quantum, in particular, to add to those in AI, but we seem to be having a certain amount of cognitive dissonance in this whole process.

You talk about quantum as a space for us to own. The Committee heard evidence from a company based in Haywards Heath called Universal Quantum. It was funded by the German Government to provide the quantum researchers there with a prototype, yet we get the Google Willow chip for quantum centres in the UK to work with, rather than investing in the companies in the UK—I am in technology more than research, so I see development and all that sort of stuff coming through. The stress I saw in the early press this morning was about encouraging companies to go from start-ups to scale-ups. The key thing about that is giving contracts to those people and using Government spend for what we are delivering, rather than putting it overseas, to encourage those people.

I have a particular hobby horse: a company called Palantir, which is currently delivering the NHS federated data platform. I have been reading the contract; it is a classic for bleeding IPR. We pay Palantir to employ UK engineers from Accenture and Pricewaterhouse, off the top of my head, to implement solutions using Claude and Anthropic, yet the UK Government owns none of the answer. We have no systems at the end of it; we have a service. It is a service contract. The intellectual property rights are owned by Palantir. We are paying it half a billion pounds over seven years. How does that fit into any definition of sovereign capabilities or helping to build UK industries?

Lord Vallance: Let me deal with quantum and fusion. If you look at what quantum was announced, it was precisely about procurement; it was precisely putting an advanced procurement option on the table for quantum for British companies, to be bought in Britain and to build a quantum computer here. It is the same with fusion: a commitment to build an integrated fusion plant with all the ecosystem around that to develop UK supply chains that will have global reach. Those are two very clear examples in the last four days of exactly what I mean by supporting this and giving contracts that are about procurement. You unlock far more investment with a procurement contract than you ever can with a grant. For the past 50 years, this country has invented, discovered and been brilliant at the early stage. We are now really good at start-ups, and we are losing companies at the very stage when they should be growing.

Lots of things need to happen and are happening around regulation—the Regulatory Innovation Office, and so on—but procurement is critical. That is why we have done those contracts and why, as Spencer Livermore, the FST, talked about at the weekend in The Guardian, we are looking at having a team to look specifically at procurement of innovation across Government. You cannot do this with a standard procurement system. You need to look at innovation and you need to accept the risk that comes with that, because some of the things you procure are not going to work.

Q306   Martin Wrigley: I am absolutely delighted that you said that, because that is exactly what I believe we should be doing. That is really good news. I was going to probe you further about what the announcement this morning was saying, because I have been preparing for this and not following the livestream. Does the £1 billion that is coming in fall outside the current spending review?

Lord Vallance: Yes. There is £1 billion coming in this spending review on quantum, which has a big R&D part to it. It has grants for companies, skills development and all the things you need to happen. The thing on top of that is £1 billion to say that we as a country will buy a quantum computer. We are starting the process to say which companies might be able to provide it and which companies might be part of that, whether it is software companies for quantum—we have fantastic software companies in the UK—or hardware companies. That process will start now, but the procurement will not, because there is nothing to buy. That will be in the future.

Q307   Martin Wrigley: Well, there clearly are things to buy. Universal Quantum is delivering prototypes to Germany for people to work on, so there are things being done.

Lord Vallance: Well, there was one delivery. Cambridge announced, as part of this, £130 million to acquire what is a quantum computer now, but of course none of these are the quantum computers that are scaled and able to work in the way we want. That is what the £1 billion is aiming to do.

We need to do this far more often—to put down this sort of pull factor from procurement—to ensure our companies know they have a contract here in the UK.

Q308   Martin Wrigley: I am absolutely delighted to hear you say that. We have a break clause in the Palantir contract, three years after it started, which by my calculation is something like next year. Can we look at breaking that up and changing it to re-implement it with sovereign technology, since we have the skills in this country? Accenture and Pricewaterhouse are doing a lot of the work on it. Palantir is not the long-term solution we need in the NHS. This would guarantee those AI jobs and skills and that building of AI systems in the NHS in perpetuity for UK firms.

Lord Vallance: I cannot comment on the DHSC contract with Palantir; I am not in that Department and I do not know the details. What I can comment on are the two areas where we think we can do procurement of innovation and where we will really go for it, which are DHSC and MOD, where this can be applied very effectively, for all the reasons you say. We have companies here and, in a way, this is now more urgent than it has ever been. When we did not have start-ups, it did not really matter as much. Now we have lots of start-ups; every day we do not get this right, we run the risk of them going elsewhere. This is really crucial.

Q309   Martin Wrigley: Will you put pressure on those Departments to look at those break points in contracts, and other bits and pieces, to re-implement with UK purchasing and to use the purchasing power of the Government to build our UK businesses?

Lord Vallance: We are looking at how to get an effective system for Government procurement of innovation, often from SMEs, implemented fully. I cannot commit on what other Departments are going to do in terms of the existing contracts they have, or how—

Q310   Martin Wrigley: These are existing contracts with break points, so the break points must be exploited to move to UK solutions—sovereign solutions—otherwise we just continue doing the same stuff.

Lord Vallance: We are not continuing. We are doing something very different.

Martin Wrigley: Good—thank you.

Q311   Daniel Zeichner: We are interested in the process for coming to these decisions. Turning to the space sector, for instance, in the industrial strategy there were six capabilities outlined. Earlier this month, Minister Lloyd announced that they had been reduced to four. Without debating the wisdom or otherwise of those choices, how have you come to those decisions?

Lord Vallance: Space is obviously an area that does not fall directly under me; it falls under Minister Lloyd. She has refined those down to four key areas that she wants to go after, and those have been arrived at in consultation with the UK Space Agency and others as areas where we think we really have potential for competitive advantage and can do something domestically that would be important.

A lot of the funding for space research goes through ESA, as you know, and our commitment to ESA is quite significant at the moment; it went up in March, and I think it was £1.8 billion at the 2025 ESA ministerial meeting. She is trying to get some focus on key areas where we can have critical mass, and I believe that that is important.

Q312   Daniel Zeichner: I agree, and I admire the ambition in all this. My one doubt, going back particularly to the quantum point, is: are we too late? Has the horse already bolted, in the sense that others are already well advanced on this? Can we viably do it ourselves?

Lord Vallance: In space?

Daniel Zeichner: Both space and quantum.

Lord Vallance: In quantum, I think there is no question. We have a very advanced system in the UK. We have invested in it for many decades. We have the National Quantum Computing Centre, which is the only place in the world that has six different modalities all in one place for people to try out. We have some of the best quantum error correction companies in the world here and several different technologies. I think we are in a pretty good place on quantum.

Ultimately, who is going to win out on this, we do not know, but I think lots of countries would fall over themselves to get what we have in quantum. We should go hard to win. If we do not go hard to win, I can tell you one thing for sure: we will lose.

Daniel Zeichner: Quite right.

Q313   Samantha Niblett: I will come back to what you were saying, Lord Vallance, about the desire for us to get start-ups to become scale-ups and then grow. Minister Malhotra said that we are still in the top three countries for science and technology—we know that; we have so much to be proud of. What steps are the Government taking to increase domestic late-stage investment, so companies do not have to rely on US investors? You mentioned regulation and procurement, but can you expand on that a bit?

Lord Vallance: The aim is to unlock as much private sector capital as we can. If you look at investment in UK companies, at the seed stage and the early stage we have a lot of domestic capital; when you get to late-stage funding, domestic capital is really quite low, and we get much more from overseas. We need to have more domestic capital going into late-stage funding. That is why the British Business Bank was given more money at the spending review and the Budget to be able to invest directly in those companies, to derisk them for further private sector investment. One side of this is the British Business Bank and the National Wealth Fund derisking.

The second area is the Mansion House accord and the Sterling 20, where we are beginning to see those companies now investing in this type of asset. What I hear from industry is that the moment this starts properly, there will be a floodgate of investment, because people will gain confidence in this. We are also looking at what sort of scale-up funds might make sense to make it easier for people to invest in a fund rather than directly in scale-up companies.

Unlocking that domestic capital is crucial. I have said this several times, so I am sorry if I am boring people with it, but it is quite notable that Canadian pensioners have done extremely well out of British science. Wouldn’t it be nice if British pensioners did well out of it?

Q314   Samantha Niblett: I want to circle back to Palantir. I am mindful that the title of our inquiry is “Science diplomacy”, and when it comes to Palantir, I sometimes wonder which is the dog and which is the tail, and which is wagging which. I question the message it sends to our own brilliant start-ups and scale-ups and our fantastic tech companies when we keep awarding contracts to behemoths Stateside, but a rather bigger concern is when the founders and CEOs of those companies express opinions that are essentially anti-democratic. CEO Alex Karp said recently that AI will weaken the political capital of “highly educated, often female voters who vote mostly Democrat,” while increasing the power of working-class men.

I sometimes question Governments that decide it is okay to engage with these people. We know that Lord Mandelson facilitated a meeting between Palantir and the Prime Minister when he visited the States, but there are no minutes for that. Here, we are talking about trying to make procurement better so that organisations and companies in this country can get contracts with the Government, yet contracts are being awarded without a tender process to the likes of Palantir. I do not know about anybody else, but I feel like I am screaming into the void. Everybody else, including our constituents, is looking at this and thinking, “What is going on?”

Who is in the decision-making chair when it comes to these contracts being awarded to Palantir? I know it started under the last Government, but the current Government have continued in the same vein. Who can essentially pull the rug from under the decision? How can we take a backward step, take a moment to catch our breath, and think about whether this is the best thing to be doing?

Martin Wrigley: Especially with the police force, which they are about to try to get another contract for. Can they be taken off the list?

Lord Vallance: Again, the Palantir contract was made under the previous Government and it is under a different Department. I cannot comment on the details of that, but I hope I have been clear in describing a very different way of doing contracts: putting British companies there and procuring innovation here. That has two effects. First, we can procure more innovation into Government, which we need to do, and secondly, it gives that first customer for tech companies in the UK. That is why a sovereign AI fund has been put together, of £500 million, with investment potential, to start giving those initial investments into companies. Together with BBB, the procurement pool and trying to get the regulatory environment right, that is what we need to do to grow companies here. We need to do it because they will then become global companies, and we cannot get above-average growth in this country if we do not have science and technology companies. That has to be a very clear aim right the way across Government.

Q315   Chair: I think everyone on the Committee agrees on that, but the contract extension for Palantir was under this Government. My understanding was that DSIT had—

Emily Darlington: And the MOD contract was under this Government.

Chair The MOD contract was under this Government. My understanding is that DSIT has a sign-off on all IT contracts over £8 million; that is what we were told by the Digital Minister. Are you saying that there is nothing you can do now to address companies like Palantir in our supply chain?

Lord Vallance: I have described how I want to change things going forward in terms of domestic; in terms of Palantir, I think that is a matter for DHSC. It is a contract with DHSC, and if there are issues around that, they are the ones that need to look at that. I cannot.

Q316   Chair: DSIT has no responsibility for IT contracts across Government?

Lord Vallance: It may well be that the digital part of DSIT does; if so, I am unaware of it. I can find out and write to the Committee.

Q317   Samantha Niblett: I have just one further question. While we are talking about investing in UK companies versus always looking to the US, there was recently an announcement that OpenAI would be investing here in an R&D function, and there was a bit of a merry dance. Being slightly cynical, I found it slightly less easy to dance, not least because I saw something today about how OpenAI announced earlier this month that it would delay the launch of “adult mode”, which was previously slated for the first quarter, saying it was prioritising other products—essentially sort of saying, “Well, we won’t show porn, but we’ll show slightly smutty stuff instead.”

I just wonder how much this Government are apportioning science diplomacy to sort of hand over powers—the OpenAI thing links directly back to the AI and copyright consultation, on which I am pleased to say we are expecting an update this week. I just wonder how this Government can look at these things objectively and think it is the right decision to either be really comfortably in bed with OpenAI—we announced an MOU last summer, talking about the ways that we might work with OpenAI—[Interruption.] Sorry, I’m going on a bit, aren’t I? When we are talking about wanting to invest in companies here, that is fantastic, but I feel we need to pause and question some of the contracts we have with some American providers.

Emily Darlington: I think what Samantha is trying to ask is: who is in the driving seat for some of these contracts? Is it the FCDO and trade deals, or is it the domestic strategy around sovereign technology?

Lord Vallance: Sovereign AI is a DSIT thing, and that group is there to try to get sovereign companies going. For contracts—that is, departmental contracts: a functional contract that people are putting in for from any individual Department—there is the Government Digital Service, as Rhys has mentioned, which I think links to the other Departments in terms of how it provides that, whereas a contract for something in Health or the MOD will be a Health or MOD decision.

Chair: We do have to move on, but that speaks to a lack of joined-up government when it comes to digital government and digital government transformation. We all know how important legacy systems are in any transformation. What the Committee is saying is: where is the oversight and the understanding of the legacy systems and their implications for sovereignty? We do not seem to be getting an answer, so perhaps our Committee Clerks can put together a letter that can elicit an answer about legacy systems, our digital and technology sovereignty, and responsibility across Government, such as it is. This is an issue that is very important to the Committee, and it is also an issue that is quite important to my constituents, in terms of knowing whose side their Government are on and who is driving Government technology.

George Freeman: Our constituents.

Chair: Our constituents.

Lord Vallance: I suggest you get the Digital Minister to come and answer this question, because that is their responsibility.

Chair: We will take that on board.

Q318   Martin Wrigley: I want to talk a bit about investment in quantum and also to clarify some of your earlier comments about changing the procurement processes. How far and wide will you be able to set the new procurement processes? The DSIT Minister told us that DSIT had a say in every big system that came in and had a sign-off on those systems. We are not seeing it, so we need to make sure that your new procurement ideas are promulgated across the whole of Government and the whole of purchasing new technology systems and new things. In the same way, how will you use your position to educate external investors about how, as a Government, as a Parliament—as a body—we are spending our money on buying these new systems from UK companies so that we can, as you said earlier, maximise the amount of private investment that then follows on, with the confidence from those contracts? How are we going to educate the investors?

Lord Vallance: Well, that has already started happening. If you look at the response to the announcements we have made over the last few days, investors already see that this is derisking things for them and they can start to think about investment. I think you will see much more of that. We engage with investors a lot. I do not underestimate the scale of the challenge I am talking about here. We are talking about getting going on some of this new procurement approach. It is a big change and it is not something that Government has done before, and I do not think changing the entirety of the Government procurement system is going to happen quickly.

Q319   Martin Wrigley: But you are aiming to change the entirety of the Government procurement system.

Lord Vallance: I am aiming to make sure that Government procures innovation, does so repeatedly, and is comfortable doing that through SMEs.

Q320   Martin Wrigley: And is comfortable biasing that towards the UK—giving the UK opportunities first to go for those capabilities.

Lord Vallance: The two announcements that I have just described do exactly that.

Martin Wrigley: Good. Thank you.

Q321   Chair: We have heard repeatedly as part of this inquiry that small businesses in particular do not know what the Government’s priorities are. They do not know, when we talk about sovereignty, what part of quantum or AI we are looking for sovereign capability in. How will you address that?

Lord Vallance: A Sovereign AI Unit has been set up in the Department; it has just been established. It has £500 million specifically to go out and look at sovereign AI. That will be the route for AI, and there is a quantum team for quantum, but I agree that it is difficult for very small companies to navigate Government.

Q322   Chair: So they will answer our questions as to what the priorities are—what we are good at in quantum and what AI we want to be sovereign in. They should be able to answer our questions.

Lord Vallance: Yes.

Chair: Excellent.

Q323   George Freeman: I want to pick that up. Lord Vallance, your comment that the ambition now is to own quantum and fusion is a big statement, and I am cheered. The ambition to own sovereign industrial capability is long overdue and great, but I want to unpack it. When you and I secured the £2 billion for the quantum programme at the end of the last Government, it seemed to me that Germany had a very clear model—it knew where it was strong in the supply chain and it was going to back German engineering expertise—and, if I may say so, France had a typically French approach of getting all the quantum people into the Élysée, having a glass of champagne and “La quantum pour la France”.

I was looking at the different applications and thinking that our approach must be to crowd in global investment in some key areas. In the race for a computer, I agree that we have good strength. In positioning, navigation and timing, I wanted to set a moonshot around a 2K clock. In encryption, couldn’t we make London the first square mile that has quantum encryption? I was trying to pick some areas where we could realistically crowd in and dominate.

Is it really realistic that we could own the quantum field? It seems to me that it is huge and we need to be a bit more subtle. I think that speaks to the point about investors and companies. If we are clearly saying, “Look, we’re not going to own the race for a quantum computer, but these are the bits we are going to own,” then I think it will help unlock investment and, geopolitically, help us work out who the natural allies are.

Lord Vallance: Now we have got the announcement that we are going to do this, the next phase is to look at all the companies in the UK, look at the companies that want to be in the UK and look at the components that we think we are good at, and work out the contracts to try to pull those things through. As you know, the own-collaborate-access framework is very clearly meant to say that if you think you want to own something, of course you are going to collaborate and you are going to have to access internationally as well. It is not that you can do only one of the three things. If you access, you have made a decision, “I’m not going to do any of the rest; I’m just going to try to access it.” If you collaborate, you are only going to collaborate because you can provide a bit of the answer. I think we can provide a lot of the answer in quantum, which is why I say it is on the own side of things.

Q324   George Freeman: In that case, I want to pick up something that seems to me to be completely key to delivering that ambition: the industrial strategy. I think there is sometimes a confusion in policy in Whitehall between technology and industry. Industries develop and nurture technologies, and sometimes technologies, if they are insurgent, create new industries.

I want to return to space, because you and I both know that the space industry is key as an adopter. It is pulling through quantum, encryption and the technologies that will drive spectrum use. It is absolutely at the front of hard power and soft power, which is why it is a key strategic sector. Given that we are now at war in Europe, given that President Trump is insisting that we work more closely with our European partners, and given the extraordinary change in geopolitics, don’t we have to change our position on space? For example, on OneWeb, I was overruled by the Treasury, which wanted to get rid of that asset. They were worried, but it now seems to me a huge strength if we are going to work more closely with Europe.

On dual-use procurement, there are huge opportunities for UK Earth observation military applications, but the message we are getting from companies is that there is no clear market signal. It is not clear whether the UK is in the European defence budget or whether UK space companies can contribute. Can you help to shine a light on the importance of industries, and particularly space, in pulling through technologies? What can the space sector expect in terms of its role in this?

Lord Vallance: Industry is essential. You do not get any of this without industry, so we have to have domestic industry. An important development in space is that all the Departments have come together, and there is an all-Government strategic implementation plan being put in place. That was long overdue. We had fragmented space in different Departments. You will remember from your time that you had a little slice of space, with the big slice being in the MOD, some being in DEFRA and some being in other places. They are coming together.

Q325   George Freeman: I had three Ministers of Defence Procurement in my two years. Who chairs that body? Who is leading it in Government?

Lord Vallance: Liz Lloyd is leading that.

Q326   George Freeman: Does that include the MOD?

Lord Vallance: She is bringing together things across Government to try to make sure we have a single Government implementation strategic plan.

Q327   George Freeman: On OneWeb specifically, do you think the new geopolitics changes the Treasury’s calculation that, frankly, we do not need to be, and should not be, actively using that company, and our golden share, to put ourselves at the heart of a European space constellation? Doesn’t the new geopolitics—President Trump insisting that Europe does more defence and that we have a leading role in sat comms—change that dynamic? Isn’t it time to pick up the OneWeb shareholding and revisit it?

Lord Vallance: We are a shareholder, as you know. It is obviously part of Eutelsat now, and we have a 10.9% shareholding there. As you say, we have a special share consideration. We are using that for certain things, including looking at domestic resilience in terms of communication in remote areas, such as the Shetlands and elsewhere. That is a much more active engagement.

Chair: Minister Malhotra, did you want to come in on OneWeb?

Seema Malhotra: I was going to come in, and I think Nathanael might briefly.

Chair: We do need to move on.

Seema Malhotra: I was going to make one broad point, actually.

Chair: What is the broad point on? We do not have very much time.

Seema Malhotra: The point is specifically about the conversation about how we are supporting UK-based companies. It is important to remember that one of the priorities of our science and technology network is supporting the UK industrial strategy.

Chair: Sorry, Minister, but you have mentioned that a number of times. We need to move on.

Q328   Emily Darlington: As we were talking about our role and soft power, I want to ask about ODA. It is important—I think many people might not realise this—that much ODA funds science collaboration and science projects. We saw the ambition of getting to 0.7% cut down to 0.5% and then to 0.3%. When the move to 0.7% happened, a lot of things were retagged as ODA, including science collaboration and science projects. In now lowering it to 0.3%, are we relooking at tagging things as non-ODA to make sure they are not cut? Do we see the 0.3% and the cuts as a cap on our research funding, or is it something that we are not using to cut further collaborations? I will come back with what some scientists are saying, but I want to get your initial reactions to how the cuts are impacting UK science and its collaborations, and what we are doing to make sure they are not cut.

Nathanael Bevan: I will come in on the ODA R&D questions. As part of the overall reductions to ODA, R&D will be affected, but we still have a significant commitment to R&D as part of ODA. If you look at the four shifts that the FCDO has set out under ODA, one of them is from donor to investor. Our science collaborations internationally will remain an important part of that, so that we are able to use R&D to solve global challenges in health, climate, inclusive growth and humanitarian issues.

Q329   Emily Darlington: What percentage of that 0.3% will be spent on R&D collaborations?

Nathanael Bevan: What was agreed in the spending review 2025 and has been published in the Treasury document is £1.7 billion across four years for ODA R&D specifically. It remains a substantial commitment. There will be an ODA announcement following this, which will provide details across the spectrum.

Q330   Emily Darlington: What are the priorities within that ODA spend?

Nathanael Bevan: The four priorities that we have set across Government are global health, climate, inclusive growth, and humanitarian and conflict. ODA R&D is spent across five Government Departments, and what is important is that this is the first time that all five Departments have come together under a single coherent set of objectives, with delivery mechanisms underneath that. FCDO and DSIT Ministers have led that process jointly with their colleagues across Government.

Q331   Emily Darlington: Patrick, do you want to come in on how we are protecting some of the research projects that were classified as ODA—maybe wrongly—and making sure that we do not see cuts through our research council spend?

Lord Vallance: The first thing to say is that the science and tech spend has come down proportionately—it has gone from 0.7% to 0.3%. Do I wish it was still 0.7% on ODA? Yes, but it is not. What has happened, which I think is important, is exactly what Nathanael was just saying. We have now got a much more coherent Government way to spend that money, so a good thing has come out of this: it is much more joined up than I have ever seen it in the past, and that money will be spent really well.

I have been clear in DSIT that we need to look at the non-ODA and ODA together. With the industrial strategy partnership fund, we are going to look at both ODA and non-ODA, so we are trying to achieve our aims using both sets of money. You are quite right that there was game-playing in the past with what was tagged as ODA or non-ODA. I think that has cleaned up now, and we should be unambiguous that our international spend is both of those things. Where we can use them together to achieve an end, it is much more powerful than just relying on one or the other.

Q332   Emily Darlington: A quick last question for each of you: what is the impact of these cuts on UK science? To Minister Malhotra, what is the impact of these cuts on the UK’s soft power reputation?

Lord Vallance: Cutting science is never easy, as we started this meeting by saying. When you do not have enough budget for something, it has an impact. It has had an impact—there is no question about that—internationally and domestically.

Q333   Emily Darlington: But do you know how many research grants have been lost, how many people have lost their funding, and how many jobs might have gone because of the cuts?

Lord Vallance: It has gone down proportionately. It has gone from 0.7% to 0.3%, so it will be that degree of reduction in grants across the board. What we are trying to do now is be more co-ordinated so that we can at least ensure that you have the maximum spend going to things. It has an impact.

The other thing that cuts have an impact on is training. The UK has been great at training people who then become friends for life as part of this. That is an important part of ODA. Together with Minister Chapman in FCDO, we have a set of principles for how we want to use ODA. We have five Departments coming together, and it is going to be a much more coherent ODA spend to try and protect some of those key areas.

Q334   Chair: I am sorry, Emily, but we will have to move on.

Emily Darlington: I just want to ask him to write to us with the number of jobs lost and grants cut.

Chair: Minister Malhotra, will you respond?

Seema Malhotra: I think what is really clear is how committed we remain to international development, and we recognise the need to modernise our approach. None of us wants to see the cuts, and we have committed to coming back to 0.7% when we can.

Alongside the progress we have made in international development, the world has changed, and we have to change as well. It is important to recognise—I see this when I am abroad—that our partner countries are looking for a different relationship in many areas. Alongside being donors, we are also partners, investors and reformers, and we must recognise the work we are doing—whether that is in global health or in supporting countries to tackle climate change.

To give an example, when I have had conversations, they have really led people to ask, “Can we come to the UK? Can we meet your scientists? Can we meet your researchers? Can we look at how you have developed technology to see what we can apply back in our country?” There are changes going on in those respects, and that is why it is important to recognise the fact that this is not the whole story. It is part of the overall story of how the Foreign Office, working with DSIT and across Government, is still extremely focused on not only R&D but how we can work in different ways to support countries to apply technologies to their own situations and environments.

Emily Darlington: But that is the funding that was just cut.

Chair: Thank you very much. We now have to go to Freddie for a key subject on which I hope we can spend a bit more than the five minutes remaining.

Q335   Freddie van Mierlo: I want to take us to life sciences, healthcare and the US-UK pharmaceutical deal—I know that is your background, Lord Vallance, so I am sure you will want to come in on this.

In your initial framing of this discussion, Lord Vallance, you mentioned quantum, AI and fusion as areas where you want to see greater UK investment from the Government. You omitted life sciences from that; was that a slip of the tongue or part of the strategy?

Lord Vallance: I knew it was coming—I knew you were going to ask about it. Life sciences is obviously critical, and it is a key area in the UK. We have great talent, huge amounts of research going on in universities and two major international global companies in AstraZeneca and GSK. It creates wealth for the country, and it creates health for the country.

It is crucial that we have this as a growing area. We have many biotechs—many more than anywhere else in Europe—and we need to grow those into scaled companies through the mechanisms that I was talking about earlier. That includes unlocking private sector capital, which we are working on, and regulation, which is somewhere that the MHRA has done an amazing job, as it is now seen as one of the very go-ahead regulators in the world. That includes clinical trial performance, where we were already ticking up our performance to attract people back. Critically, it also includes procurement, and that comes around to the deal and how we think about making sure that the NHS can be a procurer of innovation. It is that innovation that really makes patient improvements—this is a health and wealth point.

Q336   Freddie van Mierlo: The UK-US pharma deal explicitly links—probably for the first time—an increased willingness from the UK to pay for medicines and to procure, as you say, with an export deal of 0% tariffs for medicines. The UK is already delivering on its side of that bargain—we are going to see NICE raise its thresholds in April this year, or next month—but we have not seen anything from the US side on allowing that 0%. As far as I am aware, we have had nothing in writing, so are you confident that that is going to be delivered on?

Lord Vallance: Two things are happening. First, there are talks going on every week, and there were people out in the US last week to discuss getting finalised wording on these things. That is in process, and we will see the finalised written confirmation in due course. We have also already started, with the pharmaceutical and medtech industries, a series of pieces of work to come up with implementation plans right the way across the deal. That has already started; we are expecting to see a read-out in June, and we want to get on with this quickly.

Q337   Freddie van Mierlo: Explicitly, the NICE thresholds are already rising, and I have heard of companies already engaging with NICE on that basis. That is in the works, and I think the lowering of the VPAG threshold is also happening.

Lord Vallance: And zero tariffs are happening.

Q338   Freddie van Mierlo: Okay, so you are very confident that is happening, despite the fact that we have nothing in writing.

Lord Vallance: Yes.

Q339   Freddie van Mierlo: Okay. I want to come on to a question about something you put in a letter to this Committee—

Lord Vallance: The only thing I can say on tariffs is that I cannot predict the future of how tariffs from the US are going to alter any more than anyone else can in any area whatsoever.

Q340   Freddie van Mierlo: On that point, something in writing might be helpful.

In your letter to the Committee, you wrote that the estimated cost of that deal to the NHS would be £1 billion over the length of the rest of this Parliament and that it had to be met with existing DHSC and NHS funding within the spending review that took place. You also said that it is not going to impact frontline services. How is that going to happen?

Lord Vallance: Look at what has happened to the percentage spend on medicines: it has slipped from about 14% of NHS spend in 2013 down to about 10% now. That has been ultimately to the detriment of patients. We need to get the origins of the NICE process re-established: we have to say no to certain things in order to be able to say yes to the things that really work well and do a good job, but then we need to make sure those medicines are rolled out ubiquitously across the NHS. We cannot have patchy use; it needs to be for everybody. That is what is happening as part of this deal. That will benefit patients and will reduce NHS costs ultimately.

Look at what has changed. I was thinking about this the other day. When I was a junior doctor, if I saw a young man in his 20s who was gay and who had a cough and a temperature, that man had pneumocystis pneumonia and would die from AIDS. If someone has an HIV infection today, their life expectancy is as long as the population average, provided they are treated. It is the wrong way to view the whole thing as some drain on the NHS; this is exactly how we change practice and improve the outlook for patients, provided we can get it done properly and equitably across the UK. That is the aim.

Q341   Freddie van Mierlo: I get what you are saying, and certainly given my experience of working in that industry, I would make the argument that investment in medicines, rather than incurring treatment costs down the line, saves money over the long run, but have you modelled that specifically with regard to this deal? What is it going to cost the NHS and how much is it going to save?

Lord Vallance: That speaks to the very difficult problem of how you view the economics of this, because we have traditionally viewed it as a narrow health economic thing rather than a total macroeconomic issue, and I do not think the work has been done across the whole system to look at the whole macroeconomic benefit, including employment benefits and so on. It is a very key area that we need to get to.

I have no doubt that getting these medicines in will have direct patient benefit. That is really important. If we go to the other extreme, which is if we do not get medicines launched in this country, we will end up disadvantaging patients over months and years before those medicines become available. That is a very bad situation. There is a simple, pragmatic health need here. I think the broader question of how you value innovation is a key one that needs a lot more work done on it.

Q342   Chair: Thank you. We are almost finished; we have just a couple more minutes. I am struck by the fact, Lord Vallance, that you said that the figure mentioned—that only 10% of the NHS budget is spent on medicines—is wrong. You may well be right there, but do you have any evidence that can back that up or that suggests that the 14% figure might be right?

Lord Vallance: I do not for a moment know exactly what the right figure is. My point was that we have gone down from 14% to 10%. A consequence of that is patients are not getting access to medicines quickly in the UK. We know that we have patchy uptake in the UK—what you get depends on where you live. One of the very reasons why NICE was put in place was to avoid postcode prescribing, as it was called in those days. We know that that is happening, and we know that medicines do good, and therefore we know that spending a bit more on getting those medicines across will benefit patients.

Q343   Chair: I suppose that you could make the same argument about spending more on medtech or on prevention. I just want to understand—again, perhaps you can write to me—why you are so convinced that spending more on medicines as a proportion of the NHS budget, rather than in absolute terms, will undoubtedly be to the benefit of patients.

Lord Vallance: I think the same is true for medtech.

Q344   Chair: Is it just about spending more on everything?

Lord Vallance: We cannot scale the NHS by doing more of exactly the same. You can see what will happen with the cost. Innovation is critical to advances in medical care. I have seen masses of it over my lifetime as a doctor; you can see things have changed out of all recognition. That improves care, but there is a big macroeconomic question, which needs to be looked at now, on how we value that sector in the UK.

Q345   Freddie van Mierlo: There is an important point around how the UK is going to capture the value from its increased spend on medicines, particularly in relation to industry here in the UK. You mentioned AZ and GSK but how are we going to make sure that, as we become a slightly more attractive market to do business in, we are capturing that value here in the UK and it is not simply going abroad?

Lord Vallance: We are already seeing changes. UCB has announced £500 million to build a new R&D centre in Windlesham in Surrey, directly as a result of the fact that it thinks the environment is better. Convatec has put £500 million in a new Manchester R&D hub. Prologis has said that it will spend £3.9 billion across life sciences and advanced manufacturing. You can see the change in sentiment already. There is a long way to go to get that in exactly the right place. We also know—exactly as I have described for quantum and other sectors—that our companies that are coming up into being slightly bigger than start-ups are very attractive to buy and take somewhere else. We should try to keep those companies in the UK.

Q346   George Freeman: As the former Minister for Life Sciences, I want to ask if the change to the NICE thresholds in the US-UK deal is conditional on America confirming the most favoured nation mitigations? Is that the link?

Lord Vallance: The deal is the deal; it is the totality of the thing.

Q347   George Freeman: I have not seen the deal. Does it include confirmation of the most favoured nation status?

Lord Vallance: Most favoured nation status is being discussed now with the US. People were out there last week discussing it. That is what we now have to get out into the writing, so we have the full thing.

Chair: I think that is a no.

George Freeman: I am looking at the chair of the all-party parliamentary group for life sciences.

Chair: I will bring him in, as he was not able to join us.

Q348   Kit Malthouse: I am sorry I was late; I was on a Delegated Legislation Committee. I wanted to ask for detail on that, and about the sequencing. We have two moving parts: the NICE thresholds and the MFN deal. One is conditional on the other, presumably.

Lord Vallance: The deal is the whole thing, yes.

Q349   Kit Malthouse: Right, so if we do not get MFN, the NICE thresholds will not move?

Lord Vallance: I am not going to comment on individual bits of the deal at the moment because the deal is still being finalised, in terms of getting it written down, but we need to do things to improve the commercial environment in the UK come what may. We need to do that if we are going to get investment in companies here—

Q350   Kit Malthouse: So you are going to raise the thresholds whether we get MFN from America or not?

Lord Vallance: No, the deal is the deal. It is being discussed at the moment. Varun Chandra was out there last week discussing MFN. I cannot say anything more about it until we have the information.

Q351   Kit Malthouse: Right. I am sorry to pursue this, and sorry that we are keeping you at this Select Committee of the House of Commons, but the entire industry is obviously waiting with bated breath for what is going to happen. They are trying to understand the sequence. Have we agreed that we will raise NICE thresholds but that is conditional on the rest of the deal landing satisfactorily, let us say?

Lord Vallance: The Prime Minister met with CEOs of industry a couple of weeks ago and discussed exactly what is going to happen. We have working groups with industry to implement the deal. They have started already. We expect a read-out from those in June. I expect the full deal to go ahead.

Q352   Kit Malthouse: I’m sorry, maybe I am being a bit stupid, but are you saying that we will unilaterally raise NICE thresholds, even if the rest of the deal does not go ahead, and that you have already started to do that work?

Lord Vallance: The work has started. We are waiting for the output of how we are going to do that. That will be read out in June and we will then—

Kit Malthouse: Is that a yes?

Lord Vallance: I am not going to pick apart the deal now.

Q353   Kit Malthouse: Are NICE thresholds going up or not?

Lord Vallance: We are in the middle of negotiations and the plan is that the NICE thresholds will go up in April.

Kit Malthouse: Come what may?

Lord Vallance: I am not going to pick apart the deal. Industry is expecting NICE thresholds to go up. I am expecting NICE thresholds to go up. That is the plan.

Q354   Kit Malthouse: Right, but with the other bit of the deal we do not know, and it may or may not come to pass?

Lord Vallance: It is being discussed at the moment, and I expect it to be solved very soon.

Kit Malthouse: But NHS commissioners and all the rest of it can expect drugs to be more expensive come what may.

Lord Vallance: The NICE threshold is due to go up in April.

Q355   Chair: So we could be in a position where NICE thresholds go up, but we do not have a most favoured nation deal. That is what we are hearing. It may be a small chance in your view, but it is a possibility.

Lord Vallance: At that point, it would be a choice to make. The plan at the moment is that NICE thresholds go up, all of the deal happens, and we create the environment that we need in the UK to have a thriving sector. That is what everyone is expecting.

Q356   Freddie van Mierlo: Is it your view that we should do that anyway, regardless of what happens with the export deal?

Lord Vallance: I do not think that that is ultimately my choice, but I have told you what the position is at the moment and that is where we are. We are very close to getting it solved.

Q357   Kit Malthouse: You just gave us a view that you think you need to do that to have a thriving industry.

Lord Vallance: It is my view that we need to have a thriving industry.

Q358   Kit Malthouse: Okay, so the corollary is that when the Committee last saw you, you said that the NHS should spend a higher proportion of its budget on drugs—on pharmaceuticals.

Lord Vallance: Yes.

Q359   Kit Malthouse: So if the prices go up, that is going to be even more challenging for the NHS to go from 9% to, I think you said, something like 14% or 15%. Do you think that if you put up NICE thresholds unilaterally, the percentage of drug spending in the NHS may actually go down in the short term?

Lord Vallance: Well, 14% was what it was, and we are now at about 9% or 10%. I did not say that we need to get back to 14%; I said that I think it should be higher than where it is now. To do that is not only about prices but also access—making sure that we do not end up with patchy introduction of medicines across the UK and that we instead have ubiquitous uptake. The point of NICE at the beginning was to make sure that we did not get postcode prescribing.

Chair: We are going to have to finish here because we have kept both Ministers and officials longer than expected. They said that they would dedicate their time to us, and we very much appreciate the time that they have spent with us. I am sure that they will have gained an impression of the Committee’s real interest in this subject of science diplomacy and its impact on everything from quantum investment to how much we pay for medicines on the NHS. We have agreed a certain number of follow-up questions and correspondence. Thank you very much to our witnesses for their contributions.