***Please note this transcript from the webinar "The Missing £4 billion: making R&D work for the whole UK "has been automatically generated and may not be entirely accurate. If you see something that needs correcting please contact [email protected].

Jen Rae: Well hello, and welcome to this launch webinar of our research on the Missing £4 Billion and i'm Jen Rae and I'm Head of UK Innovation Policy Cities and Regions.

Jen Rae: At Nesta which is the UK’s innovation foundation and it's really great to have so many of you join us and I'm watching the ticker go up. We're now at 156 people

Jen Rae: On the line which is amazing and I hope that you enjoy the discussion that we're about to have on a very important issue for the UK.

Jen Rae: And in a moment. I'm going to hand over to the report authors to go through their findings from the research and then we'll have a panel discussion and joining us

Jen Rae: on that panel and it's going to be chaired by Jennifer Williams, who's the political editor of the Manchester Evening News.

Jen Rae: And we've got the MPs Neil O’Brien and Liam Byrne joining us and we've got the Vice Chancellor and President of the University of Manchester Professor Dame Nancy Rothwell

Jen Rae: And also, Ravi Gurumurthy, who is Nesta’s CEO and I think we'll have a very lively discussion with that panel. And there's also time for you to ask your own questions of the author and then we've co-authors, but also the panel.

Jen Rae: And before we begin with the presentation on the report I wanted to talk a little bit though why commission. There's research from report authors.

Jen Rae: And so in essence long argued for innovation and that is more inclusive and the benefits more people in places across the UK.

Jen Rae: And we've also argued for an innovation system in the UK, that's more experimental and more driven by the evidence of what works and also based on solid data of what

Jen Rae: where innovation is happening. I mean, to me, that report sits right in the middle of of those aims and it looks at the world of R&D and innovation and

Jen Rae: The UK has long standing regional imbalances in the economy, which I think is an area that has been characterized by lack of good data and evidence

Jen Rae: And in the report, the authors argue and calculate the large parts of the UK are missing out on R&D funding to the tune of £4 billion, which is the report title.

Jen Rae: And the question whether this is the most effective way of distributing public money and bolstering private investment in R&D and innovation.

Jen Rae: It has implications for cities and regions, and particularly ones that have metro mayors and a;so implications for national institutions like the UK Government and I would expect the panel to dig into some of those in much more detail.

Jen Rae: There's no doubt that it's a timely report, and I have to say when Tom and Richard and I talked about doing it, it felt really quite radical but the world has moved on in that year. And we've had the post election.

Jen Rae: If rhetoric from the current government around leveling up in the UK and

Jen Rae: We also had the Chancellor and committing to a really quite substantial increase in the amount of money spent on our end and in the UK through the public. And then, of course, we've

Jen Rae: Got. It's a very hard question to answer about what the economy will look like. And in the post-Covid 19 recovery period.

Jen Rae: So this report represents for Nesta one of the first pieces that we are releasing over the coming weeks. And that looks more about the role of innovation in that post-Covid 19 recovery.

Jen Rae: And we'll be publishing a second report that builds on some of the ideas that are in the missing £4 billion report, and particularly looking at

Jen Rae: Where innovation can be supported across the country, but also in different parts of the economy and will also be looking at and from

Jen Rae: This crisis that's had a quite a terrible impact on people and places across the country. What could be the opportunities for lasting change.

Jen Rae: And so with that I'm going to hand over to Tom Forth and Richard Jones our report authors and so that they can tell you a little bit more about their analysis. And why do you think it means that there's going to be substantial change in the UK innovation policy.

Tom Forth: Thank you very much, Jen. And so

Tom Forth: The way we're going to do this is I'm going to go

Tom Forth: First and then Richard will go second. So I'll do the first half of our talk through the paper and Richard will be the second. I am Tom Fourth, I'm the head of data at the Open Data Institute Leeds and let's get stuck in

Tom Forth: So the first question is, why does the regional distribution of R&D matter that's quite an important question. There's a certain

Tom Forth: Angle that says we should just spend all of our money on R&D where it generates the most return

Tom Forth: It's a question to which the answer I have is, yes, I agree. And we don't currently do that and what we've looked at in this report is where we do spend the money and where we think it could be better spent

Tom Forth: But first of all, I think there's some important background around productivity and the strength of our economy.

Tom Forth: So if we look at the next slide, that should then

Tom Forth: Shows that so

Tom Forth: The title says it all. Most of the UK is below average in wealth and productivity that's of a kind of northern European level.

Tom Forth: But said it's also within the UK what we see when we look at the productivity of the UK is that we have some quite high productivity areas in the southeast.

Tom Forth: Some around Aberdeen largely related to oil and gas, but other things as well. And then most of the country with a few little exceptions think places like Cheshire, which is really quite low in productivity and we've compared it here to Germany, you'll see quite a lot of

Tom Forth: You see quite a lot of data here that compares

Tom Forth: The UK with France and Germany. And one of the comments very good will have lots of Northern Ireland soon.

Tom Forth: Don't worry. So what we say here is that in terms of productivity that's output GVA per hour works. The UK is really even further behind than we are on GDP per capita.

Tom Forth: It's worth saying in these comparisons that people in the UK work quite a lot more than people in France and Germany. So when we turn look at actual GDP or GVA per person. The difference is less

Tom Forth: Extreme but you still will find that a lot of the parts of of the UK Northern Ireland Wales North England parts of the Midlands

Tom Forth: among the lowest in terms of GDP per capita for northern Europe, so we're more similar to East Germany, South Italy, Spain, than we are to countries like France, Belgium, most of Germany, etc.

Tom Forth: So that the outcome of this imbalance is what we see on the next slide.

Tom Forth: Basically, the UK has

Tom Forth: I hope that wasn't the next slide.

Tom Forth: That's the next slide. And so what we have is that we have some regions of the UK. They're extremely productive economies London or southeast generally

Tom Forth: Which produce very high GPA per person. So people working in those jobs are being paid well they're doing jobs for businesses that make significant profits that are able to

Tom Forth: Pay high rents and generate a thriving and prosperous economy and we have other parts of the country Yorkshire would be one of them. Wales northeast of England.

Tom Forth: Where GVA per person is significantly lower. And what happens within the UK is that we run quite correctly, a transfer union.

Tom Forth: Where taxes are raised in one part of the country. And then the money is spent in other parts of the country as a rule of thumb for example in Yorkshire, the taxes raised in Yorkshire, do not pay for the NHS in Yorkshire paid for by taxes in other regions.

Tom Forth: Basically, we think that that's not in the long run an ideal solution. So we would like to see more of the regions of the UK and the nations of the UK able to pay

Tom Forth: More of their own way within the UK. I think it's just what people would want to do they want to stand on on two feet. The question is how can we make that happen.

Tom Forth: We need to increase the productivity of those regions and R&D is one way that we suggest you can do that. It's not the only way. But it's one way that you can do.

Tom Forth: So the next slide justifies some of the thinking about that there's some really interesting papers that are linked to within our report john real instance, some really interesting stuff recently with us data.

Tom Forth: But what we do see is that high investment in R&D.

Tom Forth: Over time does seem to increase productivity of regions. So not only do we see that the productivity of regions with higher end is higher, but we see that over time where we have invested in R&D the productivity increases more quickly.

Tom Forth: And there's more discussions about. But if it's jump ahead to that to the next one, just to understand the UK is position.

Tom Forth: Among other similar countries in terms of r&d spending. I think this is something for us to think about quite a lot because we rightly believe that the UK is a world leader in r&d

Tom Forth: The UK in terms of its universities is one of the most intense creators of scientific knowledge for our size we punch well above our weight.

Tom Forth: The question is do we do as well in other areas of the outputs of R&D, things like patents business growth productivity, etc.

Tom Forth: So if we look at the next slide about where we are, what we see is that the UK is an innovation economy, similar to Italy, Spain and the Czech Republic in terms of the percentage of our economy that we dedicate to our end

Tom Forth: In this graph, what I've done, and do throughout the report is we split spending on our end into two components. One is business spending which is

Tom Forth: On the y axis and on the x axis is all other spending most of it is spent in universities with money that was raised by the government.

Tom Forth: And some is charity spending often again spent in universities and we just see on this, on this graph what the situation is that Italy, Spain, Czech Republic and the UK or in the lower leagues of R&D spending.

Tom Forth: Belgium and France significantly ahead of us. And then in the elite group, you've got countries like Germany, Switzerland, South Korea, Japan. So on the next slide. We look at how this has changed. I think this is quite important. So the UK.

Tom Forth: Was where it is now.

Tom Forth: 20 years ago we've not really moved so since 1997 spending on our end in terms of

Tom Forth: The percentage of the national economy has risen by the lowest of any country in our comparisons, except for France and France was already quite a long way above us.

Tom Forth: But what we'll see is that if you look at the country like Belgium for example, Belgium was in a very similar position in terms of r&d intensity

Tom Forth: In 1997 and as since really invested, both in the public sector and in the private sector.

Tom Forth: A key feature of this graph, I think, is that the angle of the lines is pretty similar. So when you look at South Korea, which is the country which has boosted it's R amp D, the most

Tom Forth: It has done so at a, at a ratio, whereby. It's not just business that has increased spending on our end

Tom Forth: The government has also spent on time and date. And that's the same in Austria, Germany, Switzerland and Denmark.

Tom Forth: The only exception is that Japan and Sweden, we can think about why they might be different, but most countries that have managed to increased R amp D and R amp D intensity have done so in both the private and the public sector. So now we'll go on to looking at within the country.

Tom Forth: So we've got some some graphs here that look at where within the UK we spend money on r&d and how that compares with our competitors and this is kind of the main theme of the of the report.

Tom Forth: So first, we're looking at France.

Tom Forth: There's in the top right there is a region called El de France that is greater Paris is one of Europe's centers of both public sector R amp D and private sector r&d

Tom Forth: So there's few regions of Europe and few regions of the world that are so intense at doing r&d and what's quite interesting is that both business and the public sector investor and Francis three further regions with really quite high end spending.

Tom Forth: Province out does also that's

Tom Forth: Over and burnouts which is Leon and its surroundings Grenoble, which is to lose. So it has three regions of high on the intensity and the main pattern that we see here is that where business spends on our end in France. The government also spends

Tom Forth: Germany is very different. So if we look at the next slide, we see the Germany does something really different.

Tom Forth: So over at the bottom right is Berlin.

Tom Forth: And what we see is that business spending on R&D is quite low in all of the places that I've helpfully labeled light blue instead of purple.

Tom Forth: Those are provinces that were formerly there's a states that are formerly of the east of Germany, and there is still quite low business spending on r&d simply because the economic system was was in a mess.

Tom Forth: At reunification, but we see that the government, universities and charities in Germany, spend a huge amount of money on R&D in these places, designed to generate

Tom Forth: Growth so Germany runs quite an interesting system of r&d whereby it has many regions have extremely high and the intensity, but it seems to spend it state money in a way to support the east as a conscious leveling up equalizing agenda, unless we look at the UK, which is our final graph.

Tom Forth: So the UK is really quite interesting. We have two regions East of England and southeast England where the government spends quite a lot, but business spends a huge amount of money on r&d we have

Tom Forth: Two regions Scotland and London where business doesn't seem to spend very much an r&d but the government is spending a lot

Tom Forth: And what's quite interesting is we seem to be spending our r&d money in the regions where business isn't spending r&d money, but unlike in Germany, where there's a clear desire to

Tom Forth: equalize the economy of the country. This is actually boosting some of our most successful region. So, London and Scotland are some of our strongest and most productive economies, we're spending a lot of public money there.

Tom Forth: What I think's important in this graph. For me, the really important ones are towards the left the West Midlands, the East Midlands, Northern Ireland, the northwest of England.

Tom Forth: So these are regions where business is spending quite a lot of money on research and development.

Tom Forth: And yet, a private sector, the public sector doesn't seem to be matching or joining in with that business activity.

Tom Forth: So the biggest example of that is clearly the West Midlands, but as I say, West Midlands East Midlands northwest England and Northern Ireland, all have this pattern, whereby businesses are spending a lot of money.

Tom Forth: And the government doesn't seem to join in, because I understand that a little bit better on the next slide of what's may be happening there.

Tom Forth: By just picking some regions from France and Germany and comparing them to the regions and nations of the UK. So what we see is that

Tom Forth: London and Scotland are similar to Brandenburg and Thuringia, which are former states of East Germany. So we have this weird situation where

Tom Forth: The geography of our investment seems to be to boost the economies of London and Scotland as if they were former communist provinces and states.

Tom Forth: It to me doesn't make much sense. And what we noticed is that East of England and the southeast of England are like the most r&d intensive regions of France and

Tom Forth: Germany. So, Cambridge is a bit like Munich, just five times smaller, but effectively. These are similar places. So the southeast of England is very similar to

Tom Forth: Leon and Grenoble in France, which is prevent or naps and then I think, again, what really stands out here is that there are almost no regions of Europe, which are similar to

Tom Forth: The West Midlands, the East Midlands, Northern Ireland and Northwest England. There is nowhere in Europe where businesses are spending so much on our end date.

Tom Forth: But government is spending so little, and there are many more regions of Europe that are like

Tom Forth: Wales, Yorkshire and the Humber the northeast of England that is areas where R amp D is low, but in the business and in the private sector in the public sector. So the real odd ones out the places where we have nothing similar are those those places like the West Midlands, so

Tom Forth: I think we've got the last slide from me now.

Tom Forth: This is my my simple pitch for all of this is that we have an opportunity to make Liecester like Lyon and I suspect that on a

Tom Forth: Very nice summer day like this. It's not hard to imagine that, but I only mean specifically in terms of

Tom Forth: The R&D properties of a place so less than could be likely on it has the private sector investing in r&d that Lyon does it just doesn't yet have the state capacity.

Tom Forth: And we could make Derby like Dortmund it's quite hard to find a German city that started with a D. But there you go. I found one and Make Trafford Park. So that's the huge industrial estate.

Tom Forth: To the west of Manchester like Toulouse Aerospace Valley. So we have in Trafford Park and in most of in huge amounts huge parts of Cheshire between Manchester and Liverpool.

Tom Forth: We have huge private sector spending on research and development, and we have some public sector spending, but we have far less than what we would expect in a in a similar

Tom Forth: Country in Europe. So that's my part of the report I move on now to Richard Jones, who will talk through more about how we got here. And what we might do.

Richard Jones: Great. So thank you. Thanks Tom. So the next slide. So this next section, little bit of discussion about how we got to the situation and

Richard Jones: The first thing to say is this is complicated. And I don't think anyone particularly set out at the beginning to do down the Northeast, but this is science policy is complex. What

Richard Jones: The situation would regard as a kind of emergent phenomenon that's arisen from that. So if I look at the next slide.

Richard Jones: Though really we discuss actually the history of science policy in some detail and in the way that this has emerged over really quite long time over decades.

Richard Jones: I think they're really three things isolate here. I think there has been some conscious a conscious process.

Richard Jones: Not necessarily of focusing it in any geographical location, location, but of focusing resources on particular centers. We spent a long time, the last few decades.

Richard Jones: With the perception that our public r&d budgets are being squeezed and a rational response to that was trying to maximize the value for money by concentrating resources in a few places.

Richard Jones: There, I would also say that the definition of excellence here is really largely an academic run one rather than one that's about translation or industry relevance.

Richard Jones: I think there is some evidence of home bias, probably not deliberate, but just the way things happen is it's easier to find out about what proposal what calls are coming up. If you're, if you're able to go to the meetings.

Richard Jones: Proximity does make a difference. And then I think. Finally, there have been some very big capital investment decisions that haven't been totally bomb proof.

Richard Jones: In the process that they went through and a big capital decision of course ties up revenue spending for many years. But I think overall, there's this

Richard Jones: Is actually the sociologist Robert Merton introduced the idea of the Matthew effect, based on this famous first from the gospel and actually Merson applied this to

Richard Jones: To science policy, first of all,

Richard Jones: There is a natural tendency in things that when you when you're doing well, you get more ever ever places got a strong scientific into infrastructure many good scientific researchers, then naturally it'll attract funding and that process is a way of

Richard Jones: Constantly magnifying what might be quite small biases to to get the situation and we've got so see that in the next slide.

Richard Jones: Is an example actually the Wellcome Trust not actually I kind of crazy public funder. I suppose Wellcome Trust very important biomedical charity. And here we see

Richard Jones: The, the funding the Wellcome Trust has given out compared to the research strength as measured by the ref

Richard Jones: You'd expect if the processes were right that the Wellcome Trust was funding excellent wherever it could find it you'd expect a fairly linear relationship and it kind of is. But it's not quite so

Richard Jones: London se Well certainly the southeast, a nice do really quite a bit better. So the proximity. It's a small advantage. It keeps getting magnified.

Richard Jones: The next slide we see that again. And it's not in different contexts innovate UK as our national innovation funding agency its

Richard Jones: Okay, its mission statement is to be business lead you'd expect it's investments to follow where business R&D are so here we've plotted business r&d versus innovate UK spending once again that there's

Richard Jones: A pronounced

Richard Jones: Tendency for for work closer to the decision making centers to get funded.

Richard Jones: How's this going to develop in time. Well, people. This is a complex system people make decisions responding to the situation as they find themselves in.

Richard Jones: How the next slide, you can see one way in which these adjustments do take place one for those of us in the northwest that's rather painful.

Richard Jones: A few years ago Aster Seneca decided to relocate their entire R&D operation from Cheshire to East Anglia.

Richard Jones: Why wouldn't they. This is a completely irrational decision for them it gay, gay, it gives them access to 14 times more public sector R&D than they had in the northwest. So this, again, this shows you how

Richard Jones: As time goes on. Advantages and disadvantages get amplified and magnified and we send the next slide.

Richard Jones: Hasn't happened yet, but

Richard Jones: We've seen a very remarkable increase in private sector R&D spending in the West Midlands not yet been responded to by the private private sector. So the West Midlands as a as an example of a high

Richard Jones: Private sector innovation economy, we can't take that for granted. If the public sector is not going to match that. So what can we do about this if it goes to the next slide, a few thoughts on

Richard Jones: How we should address this.

Richard Jones: And the first point I want to make is a point about scale. So have you seen the next slide, this really tells us where. So why is our report called the missing 4 billion.

Richard Jones: It comes from assessing what's the scale of the problem here. And what I show here is a very coarse grained graph if we imagine taking

Richard Jones: Public Sector R&D spending and pounds per person. We look what the averages in London, per se. Nice. So that's if you like the part of the UK. That is the successful northern European innovation based knowledge economy London se and the East got about 220 pounds per person.

Richard Jones: Spent by the taxpayer on r&d. Now if we look down around the rest of the country. The rest of the country. It's a row. It's around half of that.

Richard Jones: So if you asked the question, how much extra money would we need to give those other regions to do that. Leveling up to use the term that we were now familiar with.

Richard Jones: It's about 1.6 billion to the north about 1.4 billion to the east, the middle is both East and West 570 million to the to the southwest.

Richard Jones: And then what, Wales and Northern Ireland 660 million. I'm gonna scale is roughly similar per person, Wales, Northern Ireland, just have slightly lower populations.

Richard Jones: So we get this number 4.2 billion. And we really wanted to stress this number, not because I think this is the right thing to do, that we should

Richard Jones: equalize it per head of population, but I just want to give a sense of scale and the 4 billion numbers, particularly important for two reasons. One is it's quite big, but it's not ridiculously big

Richard Jones: Let's look at if we look at the numbers, some other numbers.

Richard Jones: Out of the current UK at well last year's UK are a budget with 7 billion that's in fact gone up to a bit more than 8 billion in the current settlement.

Richard Jones: So the government's expressed a commitment to increase public spending on our end to 22 billion.

Richard Jones: So this number is entirely commensurate with what the government has proposed, we need to do to increase public sector spending.

Richard Jones: Another number. I want to compare it with as we're on the bottom. How much spending or was done by by the English are the days.

Richard Jones: We often hear Tom and I, when we make these kinds of arguments. People say, Well, you know, we've known about this for years and we've tried to do. We've tried to do something about it, but nothing works.

Richard Jones: Nothing that we've tried ever worked and our point is. Well, the reason why nothing has worked is because we've never tried at scale. The are in that the RDS had a

Richard Jones: Mission to to increase the level of our level of innovation in the regions and they spent about 100 million pounds a year trying to do it.

Richard Jones: It's obvious that that scale was just too low, they probably did some good things, but it was not material and it wouldn't have made a difference. So we need to really think at this level of scale. If we're going to make any progress.

Richard Jones: How do we do it different places. They've got different needs to go to the next slide, we'll see what what we mean.

Richard Jones: Is very important a slide that Tom showed earlier, showing the relationship between governments public spending and including charity spending in their public spending and business spending.

Richard Jones: I think it's very helpful to divide this up into four quarters. So if you take a look at the next one we can stick a couple of lines down that exact traditional in the lines of courses is moot.

Richard Jones: So we've got four different quadrants where we've got really different problems. If we take a look at the top right, hopefully that this will give that

Richard Jones: We've got places that have got high public sector R amp D and high private sector r&d. That's great. This is what we want to emulate

Richard Jones: The, the East of England, the southeast. These are places that are absolutely the kinds of knowledge economies that we want to have so

Richard Jones: There's absolutely nothing wrong with those places. We need to make the most of that we probably need to unlock some of

Richard Jones: The constraints that stop us benefiting from that those fantastic economies even more. Maybe we need to do something to spread out the prosperity for them to places, there are. I don't

Richard Jones: You know, we're looking at quite a course geographical scale here. I know you know if you went to Norfolk or brookland or the Midway towns, you wouldn't see the prosperity, you see.

Richard Jones: In Cambridge or Guilford, so I'm not saying there's nothing to do here in terms of spreading around spreading that out. But this is this basically is what we want to get to for goes to the left. And next quadrant.

Richard Jones: Then what we should see here is, I think, a really strong case for more public investment as Tom said already, we've got the private sector making their choices the private sector is

Richard Jones: Choosing the sectors in which they think these places specialize in they're investing in R&D. But as we know, economics, tells us that the

Richard Jones: Firm's will never invest as much in R&D as would be justified by the, the social return because the difficulty of capturing all the benefits

Richard Jones: So these are places where there are essentially R&D spillovers, just waiting to be captured. So this is

Richard Jones: That quadrant is essentially you know the pound notes lying on the floor of the, the economist streams. There's a huge opportunity there and the decisions are easy to make. Now the next set of things are slightly more tricky if we go down. If we look at

Richard Jones: York from the Humber northeast Wales, Northern Ireland Northern Ireland slightly less so Northern Ireland's doing quite well in business r&d. In fact,

Richard Jones: Here we've got low public R&D and low business r&d so here we need to build capacity from a low base.

Richard Jones: In some cases we've seen some really quite good bets made already so in Wales. I think that the Welsh Government made. I think as a sensible bet on compound semiconductors and they backed out with public spending.

Richard Jones: In the universities translational research 30s. And that, I think there's that there's some good results in that northern islands made

Richard Jones: Some impressive things in around cyber security and other areas. So it's not that there's nothing at all. There's often things that will come build on.

Richard Jones: But also I think areas where you know where we have to do entirely new things. This would be the place to look. So if you wanted to develop a hydrogen economy, for example.

Richard Jones: You know, I'd be looking into side and the Humber as a place to get going, an entirely new industry.

Richard Jones: And then finally on the on the bottom right, we have those places that already have

Richard Jones: Very high public sector R&D, not so much business R&d there. I think the focus has to be on you know what's going wrong. Why are we not getting the link from the public sector to

Richard Jones: The private sector and the Scottish Government has got a target for increasing business R amp D, which I think is very sensible and, you know, we probably do need to think about the value for money of further public investments in those places.

Richard Jones: So let's

Richard Jones: The next slide. What else could we do. Well, one thing that we could do is we could think about evolution. Now, we think about. I mean, I think everybody knows that Germany is a quite a decentralized state. And so much of the German R amp D system there's substantial

Richard Jones: Deviation in Germany, but perhaps less known as even France is a very central Napoleonic state actually does devolve an awful lot more than the UK does in its in its R&D spending.

Richard Jones: Evolution has the advantage that it allows it gets us closer to the knowledge that the people who know what

Richard Jones: What the potential growing sectors are choices can be made closer to the places where where the impact of those are felt, and we think that that's a strong an important thing to do.

Richard Jones: So finally we do make a series of quite

Richard Jones: quite detailed recommendations. So for those people are interested in the details of how UK RI works and how we should do things.

Richard Jones: I'd stress the 4 billion says that these need to be quite radical interventions. This is a long standing problem and it's not going to be solved by a few little tweaks.

Richard Jones: We have our recommendations come into three categories we do talk about UK are either national funding agency that brings together all the Research Councils and the

Richard Jones: Innovate UK and I think that does need as it goes to the next, the first bullet point. We do need some cultural change at UK UK

Richard Jones: has not taken place into account and its funding mechanisms in the past that the Research Councils have actually rather as a matter of policy said that they don't do regional policy, I think that does need to change a little bit. If we have the next point.

Richard Jones: We do need some formal representation. I think for the nation's and and regions in the in the structures of UK RI, and we need information about that. And I think we do need some more place based funding instruments as the next point says

Richard Jones: So we do have a strengthened places fund, which is currently very small. I think it's a good thing. And it's been a helpful catalyst, but it needs to be built on

Richard Jones: But I think we do need more institutions. So the next the next point takes us to, how are we going to do this if we

Richard Jones: If we just increase the amount of money in the system and we don't increase the places that can absorb that. Then we'll just reproduce the existing

Richard Jones: Imbalances so we need new R&d institutions. Our view is we haven't talked about it in the store, but it's mentioned in the paper, a big area where the UK is lacking compared to Germany in particular is in

Richard Jones: A government funded translational research institutes, like the famous frown offer Institute's or like it tree and Taiwan. So I think a very strong focus should be made on those. And then the next point. If I can get the next point.

Richard Jones: Given the strain that the economy is going to be under we need to really design in the links between the public sector and the private sector right at the outset we really need to be able to convert this

Richard Jones: As soon as we can from public investment into private sector investment, growth, jobs, improve productivity, we think innovation districts manufacturing innovation parks, which create these ecosystems. The way to do that.

Richard Jones: But finally, I suppose our most important point, I think, is this one. I think we can't do this without the illusion of substantial r&d funding to cities and regions.

Richard Jones: And indeed devolve nations.

Richard Jones: There is that there is this isn't something that can happen straight away though i think that that is very legitimate counter argument to this fact. The next point.

Richard Jones: People will legitimately say okay, if we if we devolve money to the cities and regions, how can we be sure that they have the the the analytical capacity.

Richard Jones: That the legitimacy, the robustness of institutions and processes that will allow us to do that. That's a very common argument that one hears in London in Westminster.

Richard Jones: And I think, frankly, it's not without foundation, but the right answer to that is not to say, well, we can't give it to the cities and regions because like we can't trust them to spend it properly.

Richard Jones: The right answer is to say, well, we need to build that analytical an institutional capacity in those city regions as soon as we can.

Richard Jones: In the nature of the nature of the English evolution settlement being so patchy, it means that probably some places do have that capacity, other places don't and we'll have to have some kind of transitional arrangements discuss that in the report in detail.

Richard Jones: So that really concludes our analysis. I think we've set out

Richard Jones: I think the data when you look at it is pretty clear that the UK is got itself into a very

Richard Jones: Strange Situation with a very strong mismatch between the where R amp D investment takes place and where the investment is needed most. In order to grow productivity and allow regions to improve their economic performance.

Richard Jones: I think it's an intractable problem. I think it's difficult problem. It's not actually a totally intractable problem. And I think we've suggested some actually rather practical steps that will allow us to make progress on this problem. So thanks very much.

Jennifer Williams : Thank you, Tom. And Richard that was absolutely fascinating and lots to get our teeth into the next 15 minutes was

Jennifer Williams : My name is Jennifer Williams.

Jennifer Williams : And certainly a lot of what's in this report on what was being talked about in that presentation can certainly change with a lot of the themes that we've been writing about and covering

Jennifer Williams : For the last probably five years, but has particularly risen up the political and economic agenda over the last year and probably going to be more magnified and complicated now by

Jennifer Williams : By the recovery from COVID so i think it's it's very timely and this discussion is very timely and thank you for everybody who's

Jennifer Williams : tuned in for this afternoon's discussion and I'll quickly introduce our panel and then we'll go over to some opening remarks from all of them, and then I'll probably throw a few questions in and then we'll take some questions from you guys, so

Jennifer Williams : First up is Neil O'Brien Conservative MP for for Harborough and cofounder of the think tank onward, former advisor to the Treasury.

Jennifer Williams : And after him. We have Liam Byrne Labour MP for Birmingham Hodge Hill and Labour candidate for West Midlands Metro Mayor

Jennifer Williams : And also, former two sections treasury and someone from my neck of the woods. Professor Dame Nancy Rothwell President and Vice Chancellor of University of Manchester, which also is where I went. And finally, last but not least, Ravi Gurumurthy, CEO of Nesta, who have

Jennifer Williams : obviously been behind today’s report. So I will stop laughing now I will hand over to Neil to give some opening remarks, if everybody could stick to around five minutes because I think we're running

Jennifer Williams : Over and then we

Jennifer Williams : Think you're on mute know

Neil O'Brien: Off as well.

Neil O'Brien: Thank you very much. Thank you so much.

Neil O'Brien: For having me. This is a hugely important piece. It's great in lots of different ways and

Neil O'Brien: Not least, is because it recognizes the scale of the problem. The scale of what needs to happen if we're actually going to make any kind of difference to to these challenges.

Neil O'Brien: And I like the recognition of the links between the public and private investment that

Neil O'Brien: Sort of for way topology of the different problems in different parts of the country. I like very much and I

Neil O'Brien: Published on this kind of issue myself earlier in the year, looking at and kind of Matthew effects in not just innovation, but in transport policy and in housing and in culture.

Neil O'Brien: were constantly more is given to those already have. It's a big problem in in this country. So I like the recommendations I agree with the recommendation about spending a quarter of the uplift

Neil O'Brien: To bring up the level of places that have missed out before the fact when I wrote the original advice on the 2.4% target and the arguments for having that target.

Neil O'Brien: But one of the crucial arguments, was that we would be able to boost spending in areas that have missed out previously without having to rob

Neil O'Brien: Areas that were already doing well. So this is the whole point of the exercise for me. So let me start off with

Neil O'Brien: Something more

Neil O'Brien: So I feel, I feel mixed emotions about which is this point about where the evolution is the right way to go on this. So just to rehearse the arguments against for a minute and

Neil O'Brien: The first problem is there's no default ill or 40 and lots of different parts of the country here in Leicester. Sure. Obviously we don't have a combined authority. So it's difficult to make my constituency unless

Neil O'Brien: It's a enjoying the same advantages of people in Lyon because we don't have kind of evolved authority. It's not like to happen anytime soon. So that's a problem which you recognize

Neil O'Brien: And I also slightly worried about divorcing cities from the hinterlands, particularly in the West Midlands, the West Midlands combined authority versus the wider region, even if we did have

Neil O'Brien: These authorities everywhere I slightly worried about creating a lot of management or the need for a lot of management of scientific

Neil O'Brien: Decision making, and research decision making and given that we have quite a bad lack of capacity, even in the center at the moment. I think that is a concern, if I may also have a concern which both authors raise in this piece and elsewhere about jam spreading and

Neil O'Brien: They actually mentioned the nano program and whether you end up with lots of duplication and it's kind of anti collaboration.

Neil O'Brien: And so I think there's there's a good question about, there's a lot of those arguments for for some evolution of

Neil O'Brien: research budgets, but I personally would be more minded to try and drive it with a hard target and

Neil O'Brien: I like the idea of having a committee of UK or I but ultimately, you've got to give it a hard target about the percentage of expand happens in different regions that only way you'll get

Neil O'Brien: I rebalancing, but once I will post a bit proposals for new institutions outside the, the leading regions, I strongly agree with. I think that's a really good idea. So

Neil O'Brien: I think yes, more translational centers. Absolutely. Though I would love to see some more work on what makes such places. See, don't fail.

Neil O'Brien: And in Sheffield, and in Warrick the two places that are probably most often cited, you know, exceptional individuals have played an important role and

Neil O'Brien: I've been different issues and different places. So understanding why these things doing don't work. You know, we've tried to replicate some of those things with

Neil O'Brien: catapult network. Some of the most successful and I was quite understand.

Neil O'Brien: Why such things work. Well, I don't work well would be a brilliant further paper for for authors and yes absolutely city innovation districts manufacturing innovation districts very

Neil O'Brien: Positive, but those. I like the idea of them. I think the idea of trying to build on some of the enterprises have this kind of quality of bringing leading firms together.

Neil O'Brien: About them, how do you then fit what you're doing with R amp D funding with other things you might do in terms of capital allowances and other

Neil O'Brien: Tax breaks. I think would be would be interesting. I think the evidence on capital allowances targeted on poor places is pretty good. Seems like things like regional

Neil O'Brien: Collective assistance beadwork and did help level of places. And I like the idea of changing up our eyes, culture and the committee, but I think he does have a society got to have a hard target.

Neil O'Brien: Behind it, and the report talks about expanding various existing schemes which is a good idea because you can get going more quickly and boosting up those schemes.

Neil O'Brien: And the already have a decent regional bounce. I think is sensible, but the two things I would add really on top of this report are firstly trying to have

Neil O'Brien: More focus on business and private sector and we care about regional Rd and balances because we care about regional economic imbalances and

Neil O'Brien: You know, businesses are less weightless and ideas. And so if you are focusing your increase in regional r&d spending on things are particularly business focused

Neil O'Brien: And you've got more chance of having a stronger economic effect. So I would go for things like increasing high, which I think is a good scheme very well balanced across the country.

Neil O'Brien: Focused on you know University Business collaboration I build up the altar and arrow and our deposit those industries have got

Neil O'Brien: And similar things for the life sciences, and I would increase smart grants even more in the R&D polar regions, you've mentioned like Yorkshire.

Neil O'Brien: And and i would definitely above all probably give a budget to SPRi and really follow up call review of a couple of years ago and I

Neil O'Brien: Think Richard has pointed out in a couple of his blogs. Yeah. One thing that is really different and the UK and the US is the lack of that direct funding into businesses.

Neil O'Brien: Government r&d investment going directly into into businesses. So I think that is another thing I'd add to sharpen the focus of this as well as the overall totals. And then on top of it leads off into this wine. The question about

Neil O'Brien: Kind of industrial policy and looking beyond direct r&d policy. I really welcome to focus on the industrial Commons in the paper.

Neil O'Brien: And you know there is a reinforcing relationship between having a low Rd intensity in the UK and having de-industrialized more than any other country in the G20 since 1990

Neil O'Brien: And if you all have good private sector jobs outside City centers, you've absolutely got to have strong manufacturing because it's less tied to those centers.

Neil O'Brien: And and i think the the UK historically has just had a terrible blind spot in on industrial strategy.

Neil O'Brien: And very weak state capacity in the center. You know, when we started doing industrial strategy stuff in 2016 when trees make him in

Neil O'Brien: You know, had our first meeting and babies and all the people came along. We're historians have problems with

Neil O'Brien: Britain's post war industrial structure. You didn't get people who are experts on the brilliant things. The South Koreans were doing all the Japanese or whatever.

Neil O'Brien: And so I think we've got to get over it kind of mental block about that, think about some way like Taiwan.

Neil O'Brien: 25 million people in 1987 they had no chip makers. Now they have the world's leading Chip Maker. How did they do that, trying to understand

Neil O'Brien: And you know how it fits into that wider industrial strategy is crucial and how it fits into wide economic policy. So on tax. You know, I think I've said before,

Neil O'Brien: The UK has opted to have a low rate of corporation tax law headline rate but terrible capital allowances and that choice so called broadening the base and lowering the rate

Neil O'Brien: And Israel is kind of common sense of the Treasury, but in fact it's it's choice that has massive sectoral and regional

Neil O'Brien: Consequences and we've got to sort of understand where that is, in fact, what we want to keep doing and because all the productivity.

Neil O'Brien: In manufacturing productivity growth this back quarter of our productivity

growth nationally

Neil O'Brien: For regions like whales or the West Midlands, it's more like 40 or 50% of productivity growth since

Neil O'Brien: 1997 so if you want to have an initiative series productivity growth in these kind of places and regions.

Neil O'Brien: You've got to be serious about it, but you've also got to be serious about the way that fits into kind of wider industry.

Neil O'Brien: And not just manufacturing, but other capital and knowledge intensive industries and what you're doing for them in the tax system or generally

Neil O'Brien: So I think it's a brilliant paper basically agree with the whole thing. I wonder about whether going for evolution.

Neil O'Brien: And means that you're fighting in Whitehall on two fronts. You're not just fighting

Neil O'Brien: Against the culture of spending everything in Oxford, Cambridge in London. You're also then trying to make the case for the evolution to some places and not others.

Neil O'Brien: And but that's like, Well, I think the paper is great. I think is really important, and I hope that we can

Neil O'Brien: Grasp the challenge in government and use this record investment and we're making you know 20 in the gross up to 2.4% up to the OECD average to really drive an improvement in r&d investment in places of

Neil O'Brien: Historically missed out

Neil O'Brien: With bad consequences for their productivity and wealth.

Jennifer Williams : thanks, no thanks very much. As you move straight on to silly him and get his thoughts.

Liam Byrne: Thanks so much for inviting me on

Liam Byrne: And I want to add my congratulations to the authors of this report that the longer that you spend in public life in our country. The war mysterious. It is

Liam Byrne: That we are so clear about the problems that we can front and also unable to do anything about some of the problems which are the most stubborn so

Liam Byrne: I remember having precisely this conversation with Paul Jason who was in the science Minister back in 2009

Liam Byrne: And I just finished a stint as the first regional minister in the West Midlands and it was

Liam Byrne: Pretty clear that the very low share of science spending that we had been awarded in the West Midlands was a critical part of the challenges that we had

Liam Byrne: With productivity and growth and the arguments that I think Paul's racing gave me then are pretty much the same arguments that I've heard

Liam Byrne: At the launch of every single report on this topic. Over the last 11 years in facts and I published my own report on this Robbins rebooted back in 2014

Liam Byrne: Which made the case for a very radical expansion of hype and coupled with radical expansion of university enterprise zones, because

Liam Byrne: It seemed to me that when I looked at best practice in the ag sector. What we're beginning to see word some brilliant universities Manchester prominent amongst them, and that we're creating absolutely world class global platforms.

Liam Byrne: You know participation in big science infrastructure, whether it's Hadron Collider or Newton funds.

Liam Byrne: And critical in making sure that we had a significant stake in the future of global science and but there were also a wealth of institutions that were doing remarkable things with SMEs.

Liam Byrne: And I think University enterprise zones would have been a good way of actually giving that a bit of structure and shape and a bit more and ambition.

Liam Byrne: The reason this report is is so important, though, is, is that timing in politics is everything.

Liam Byrne: And there are three reasons why the timing for this report is incredibly significant. So the first is what lies ahead. So the OB are the Bank of England, their projections for what is about to happen to our economy.

Liam Byrne: Is basically that we're going to go from lockdowns and meltdown. So the Bank of England for class mean in in a region like mine that we will see unemployment rise to about 320,000 next year.

Liam Byrne: That is more than double the unemployment that we have today. That is about the same level that we had back in 1987

Liam Byrne: And and you know furlough is bad enough, you lose about 10% of your income if you're on furlough

Liam Byrne: If your friend on the tender mercies of Universal Credit, you will lose about half of your income. And if you're a young person, you will lose two thirds of your income so

Liam Byrne: There is a significant need now for a new plan for full employment and there's a very good template for that which is the 1944 White Paper on full employment that any barrier launched

Liam Byrne: Well, before the end of World War Two, setting out the full panoply of leavers that we need in order to get the regional economies by country and back on the feet.

Liam Byrne: The second significant reason though is the collapse in university income. So I think I read in the Financial Times today, the

Liam Byrne: Vice Chancellor is Nancy, you know, colleagues are warning about 2.2 billion pound hit to researching count because of the collapse of international student income.

Liam Byrne: That is going to hit you guys in Manchester, really hard. It's going to hit us in Bermuda incredibly hard and that genuinely imperils a significant amount of

Liam Byrne: R&D plans that we have in the pipeline. And so this isn't a luxury. This is an emergency. We've got to sort of find answers to this. And I suppose the third reason is that no one wants a restoration

Liam Byrne: No one wants to restore the economy that we had before.

Liam Byrne: The collapse of the Corbyn project here in the UK and the Sanders project in the US also implies that people aren't looking for revolution, either.

Liam Byrne: And so the question that we've got is, what does the Reformation look like. And there was a very good letter I think from

Liam Byrne: The guys at the Prince of Wales Sustainability Initiative at Cambridge today that just made the point that most of us want to build back better

Liam Byrne: We want to genuinely accelerate our arrival at a point that is zero carbon and we're not going to do that without significant quantities of r&d so

Liam Byrne: I think that is fast becoming a consensus, but for those three reasons this report needs to go alongside the independent report on the future of further education that serene diamond is sharing

Liam Byrne: And as two fundamental inputs to the spending review and that really soon. Like, is it is working on

Liam Byrne: So the reason that I like this report and the reason I want to sort of slightly knock aside some of the familiar

Liam Byrne: reminders that new list has given us about the sort of classic objections, is that, you know, we have to recognize that

Liam Byrne: Significant parts of our country are trapped in a low pay, low skill equilibrium and they've been there for a long time.

Liam Byrne: These are the places that have suffered the most significant import shocks over the last 20 years and they are also the places that austerity has hit hardest over the last 10 years

Liam Byrne: So if you take the places that voted for Brexit and you map the places that took a big import shock.

Liam Byrne: And then you look at what happened to public spending, there's a very close relationship. So when we fail to get this right, there are political consequences.

Liam Byrne: And so the question, therefore, is how do we not only build back better. But how do we jumpstart a number of parts of our country onto a completely different kind of future

Liam Byrne: And that entails a plan to save the good jobs we have and fund the new jobs we need that has to be underpinned by a radical

Liam Byrne: New architecture and a radical new funding settlement for r&d across the country. Now, the great tragedy of public policy in our country is that when you look around the world. These

Liam Byrne: Institutional answers are widely available. So in your mentioned South Korea. That is a really good example. We all love offering Germany.

Liam Byrne: And I would throw into the mix. The Office of the Chief Scientist in Israel. And when I spent time in Tel Aviv is a guy who

Liam Byrne: Was putting $500 million a year into a country the size of Wales, just to fund new business startups that took good science developed in our universities and turned it into jobs and income and growth and for the future. So

Liam Byrne: The challenge that I think the community has got and is that they need to kind of answer this question about who's R&D is it

Liam Byrne: So we're all we all remember that question put in the new cancer debate on Brexit about, you know, who GDP, are you talking about, well, you can post a similar question.

Liam Byrne: He leaders who aren't who's already talking about. So we spend a lot of money on R amp D, but it often goes into spending and programs.

Liam Byrne: That does not benefit communities like mine, and he's Birmingham and hasn't benefited communities like mine, and he's Birmingham. For the last 10 to 20 years the patterns of

Liam Byrne: Southern patents poverty that we have in Birmingham are exactly the same as when I was first elected 15 years ago.

Liam Byrne: So we're going to have to do something else as well. And this focus on translational research is absolutely right. So,

Liam Byrne: I think that there are probably three shifts that are going to be needed. So one is the quantum of money needs to go up significantly

Liam Byrne: £4 billion is about is about the right number. These are the right kind of orders of magnitude. When you look at what's implied by leveling up

Liam Byrne: And I saw a report last week that implied, you need to spend about 19 billion in order to level up transport spending.

Liam Byrne: Around the country, so actually spending £4 billion to level up r&d seems to be pretty good value.

Liam Byrne: And the second thing that we have got to do is we've got to connect this r&d spending to SMEs.

Liam Byrne: So SMEs need to be much more significant players in the r&d business. The money can't simply go to Jaguar Land Rover in my region.

Liam Byrne: It's got to go much more broadly than that and and third, it's got to work to connect Effie and he much better than we have. And much better than we do today. And at the end of the day, innovation is driven by people

Liam Byrne: And unless we're able to spend this money in a way that

Liam Byrne: Pulls through good people from further education into higher education. And then on and then we're not going to get the yield that we need. So, and I like models like the front hall for that provide

Jennifer Williams : I just, just get

Liam Byrne: Yeah, I'm going to

Jennifer Williams : Finish later. Yeah.

Liam Byrne: And I would look very hard at how you create an equivalent of the Office of Israel's officer, the chief scientist in every region.

Liam Byrne: And then crucially you we've got to design these systems which will look different in every region.

Liam Byrne: For making sure that FA and SMEs upon pass the mic, so well done on the report, I think we've got a little bit of a way to go, but I hope it's required reading and treasury in the run up to the spending really

Jennifer Williams : Thanks, Liam. So let's jump in there. Just want to make sure that we've got time for

Jennifer Williams : questions at the end, I should move straight on to Nancy. Thank you.

Nancy Rothwell: Thanks very much indeed. And recognize and we sort of time we want to take some questions. Let me just make a few brief points.

Nancy Rothwell: Thank you, obviously, to Tom and Richard and two other commentators and other countries have been cited and there is a common feature of them, Germany, Taiwan, South Korea, Israel massive R&D spend massive many

Nancy Rothwell: Much, much bigger than we have. So there is something about the quantum

Nancy Rothwell: And I do think that's important because I don't think this should be about taking away from successful regions, just to prop up others. I think it should be about making sure there's less successful regions can come up

Nancy Rothwell: And one of the reasons I particularly like the report, I would do as a scientist is it's based on data and analysis and evidence, it isn't special pleading.

Nancy Rothwell: It's. Here are the facts, see what you like and you can actually model different ways in which you can apply this

Nancy Rothwell: And there are various different models which you could apply. We could have some devolution coming from Greater Manchester, of course, with the most evolved region.

Nancy Rothwell: In England, at least where the default health care budget, but there are other ways of doing it. And I do agree that we need specific targets.

Nancy Rothwell: So the UK is brilliant at the arbiter of r&d and without that we won't have anything to do develop or translate. So I do think we need to make sure we protect that research base.

Nancy Rothwell: But clearly, a lot of this is not about research excellence in its classical sense before star reference, we would call it in universities.

Nancy Rothwell: It is about making sure those discoveries are translated into regional benefit and and to have the brief things to say firstly

Nancy Rothwell: Ritual is part of discussion. I was in about, you know, how would you do the leveling up and there is no doubt that there are certain parts of the country where if you drop to research institute into it, it would simply not succeed.

Nancy Rothwell: That just isn't the skills space in the region. There isn't the infrastructure so long duration is incredibly important.

Nancy Rothwell: But the benefits of that have to spread out more widely. So they're not just concentrated in a small space. So I think it is looking at what were called additional r&d spend be

Nancy Rothwell: Developed which would have wider benefit, but then there is another part two. Of course, there is the real development, which is where you put the factories, the factories can go almost anywhere.

Nancy Rothwell: So for example, if you're going to put a nuclear power plant, you're not going to put it in central Manchester or Leeds or Liverpool, any more than you will put it in Central London.

Nancy Rothwell: So there are different ways and means for different regions and they are the intense r&d you'd put in thriving cities. Some of the other more

Nancy Rothwell: Down, down the line, whether it's manufacturer of codes and so on, you might put further away. And the last comment I want to make as far as up from Liam's which is yeah, we are facing.

Nancy Rothwell: A difficulty at the moment with COVD, not least because we expect to lose a lot of international students and they massively subsidized research in this country.

Nancy Rothwell: But we also have an opportunity because there's always a tendency to tweak things around the edges.

Nancy Rothwell: Covert has given us a real discontinuity, it's given us an opportunity, think about doing things differently that combined with a parent government commitment to leaving r&d this report and many others. I think gives us a big opportunity. Thank you.

Jennifer Williams : Thanks. Nancy and

Jennifer Williams : Move on to Ravi, just for some comments.

Ravi Gurumurthy: Thank you very much. And let me just make five quick points. And first of all, I really liked about the reports and it's cool that you published long side of it was that it starts to illustrate the potential trade offs between

Ravi Gurumurthy: Approaching R&D based on prioritizing research excellence versus where existing privates r&d spend is high or low, or where productivity is weakest

Ravi Gurumurthy: And I always fear in these debates the politicians and governments will try to say that

Ravi Gurumurthy: We can have everything and take a rather Panglossian approach this and say we can have excellence and we can focus on where private already exists already. And this just shows actually that is quite big choices to be made.

Ravi Gurumurthy: And there's also, I think, a choice between short term and long term effects if you do pivot more towards places which have lower capacity.

Ravi Gurumurthy: And I imagine in the short term, that will produce a low return, but are we prepared to be patient. In order to build the long term returns that we want. And I think a second reflection was rather like Liam.

Ravi Gurumurthy: This conversation feels very familiar to me. I've actually been out of the country for the last six years in the US. It's about 10 years since I was involved in energy policy, and some of the conversations are about innovation.

Ravi Gurumurthy: And what is most striking is just how evidence free this conversation is. So in most other domains. So in development economics or health

Ravi Gurumurthy: There is a wealth of empirical evidence about what works, whereas in this conversation. There's lots of correlations. There's lots of data seems to suggest

Ravi Gurumurthy: But there's not very much hard evidence about whether if you allocate money to businesses versus universities as I think Neil was suggesting, or if you focus more on

Ravi Gurumurthy: Diffusing versus the frontier. What actually makes a difference. And I think that if we're going to not have the same conversation in 10 years time with similar level of

Ravi Gurumurthy: Detail, we need to actually build the evidence base and experimentation over the next 10 years that has been done in so many more difficult fields to actually do experiments in

Ravi Gurumurthy: The third thing is the report talks a lot about creating new institutions to R&D. My fear is on a dosage so

Ravi Gurumurthy: We may well end up with grand ambitions and grand rhetoric, but then you look at the means and they all wastefully woefully out of kilter, and

Ravi Gurumurthy: Having been in the US, you just see what it, what it takes to actually things in a big way. So if you take the John Hopkins advanced physics lab.

Ravi Gurumurthy: Obviously that benefits hugely from military R&D, but their budget is well over a billion a year.

Ravi Gurumurthy: And if you take even something like the Chicago Pearson Institute, which focuses just on conflict studies and not even r&d in this sense, they are endowed with 100 million pounds to go and study do experimental research on conflicts and again I fear that we will end up with a

Ravi Gurumurthy: Grand rhetoric, but no real dosage. And the fourth thing relates to COVID and I think Liam's already touched on this if universities are facing a 5 billion pound

Ravi Gurumurthy: shortfall as a result of student income, which I think is about a third of their revenue.

Ravi Gurumurthy: Obviously this is going to hugely hits their capacity to do research, but it's also an opportunity to reconfigure the relationship so government does step in

Ravi Gurumurthy: And actually support those universities. What do we want to do with those institutions to try and pivot them to support R&D better and I think

Ravi Gurumurthy: In the case of universities. It's directly undermining that the business model of many of those institutions in other areas, we might see Kobe produce a lot of

Ravi Gurumurthy: political momentum to build that better and greener and

Ravi Gurumurthy: I think particularly when it comes to green industrial transformation, the kind of money you're talking about so totally transform transport electricity eating is massive.

Ravi Gurumurthy: And that's where the alignment of the relatively small r&d spend with a bigger industrial transformation funds through

Ravi Gurumurthy: Through that will be critical. So to give you an example 10 years ago, we made a decision to increase UK electricity output from renewables to 30%

Ravi Gurumurthy: And spend about 9 billion a year on subsidies that was that that was the most important driver of innovation.

Ravi Gurumurthy: In the area, but the R&D funds that were put in alongside that so enable UK organizations to capture the benefits. I think we're particularly important in the northeast.

Ravi Gurumurthy: And finally, I think the example of East Germany is interesting because it just shows what happens when something is a political imperative, so

Ravi Gurumurthy: If we actually thought that the survival of this nation depended on leveling up if it was that level of priority, and we were proud to stick at it for the long term.

Ravi Gurumurthy: Then I think you could start to see the kind of change and dosage, that is required and, you know, if you take climate change back in the 2000s.

Ravi Gurumurthy: we institutionalize the cross party commitment in the Climate Change Act. And that's, I think, has had some durability, even through a big recession and austerity.

Ravi Gurumurthy: How do we institutionalize this commitment to leveling up so that it has the kind of heft that's required and that we can learn from Germany on. So to sum up, I think we need political commitment as long term.

Ravi Gurumurthy: Is realistic about trade offs and with a dosage that's required to achieve outcomes, but we also need to be prepared to do a period of experimentation and evidence building to inform better choices.

Jennifer Williams : Thank you. Fabulous. And we are running out of time. I have. I'm just going to put one question to you guys because I'd like to

Jennifer Williams : Move on to people who probably have more interesting questions to me. There's an FAA has been mentioned a number of times by various panelists and so has obviously the question about the difference between

Jennifer Williams : City focus around this and perhaps the kind of investments in research might see in South Manchester.

Jennifer Williams : And the debate around outline satellite towns and you could you could extrapolate that to other parts of the country.

Jennifer Williams : So my question would be, how important is it that FA is brought into the fold on this and how would you bring or is the current model of it being largely and at focus thing. Okay. Start with Neil.

Neil O'Brien: And let me take this point about the cities and the rest of the country and

Neil O'Brien: One reason that I am interested in having things like directly into business rather than via universities.

Neil O'Brien: Is exactly that. I think you are able to reach parts of the country that if you if you just do the kind of UK thing and think of R&d as a university thing we are

Neil O'Brien: You know, we have great universities, but we are also kind of excessively obsessed with them as the only vehicle for our public Rd investment and then you have a way of reaching norm core cities and you have a way of helping parts of the country that have been underperforming

Neil O'Brien: On R&D. So I think

Neil O'Brien: That's one of the multiple reasons why I'm attracted to the idea of things that are closer to a direct investment in businesses.

Neil O'Brien: Also, I just to arrive is very good point about how do you measure success. I think you know it's fundamentally very, very difficult in R amp D policy because the chains of events can be so long.

Neil O'Brien: But I do, I do think that trying to get directly into into firms and to things that they want to do gives you a closer chance of success. I often cite figures about the proportion of UK r&d public r&d spending that is

Neil O'Brien: Close to market compared to Asian countries, which is much more close to market. Now some people to see whether the stats.

Neil O'Brien: Are meaningful, but everything I've seen suggests that are our balance and pay as Asian countries is very much towards kind of primary research, rather than most to market stuff is more likely to relatively quickly turned into economic growth. So that's, that's where I'm coming from.

Nancy Rothwell: Could I just comment on that.

Nancy Rothwell: I think is extremely important and fundamental problem in this country is there is virtually no mobility between

Nancy Rothwell: Different parts of post school education certain parts of the world. You can go to a little community college and go on to Harvard or Stanford.

Nancy Rothwell: That's pretty hard in this country for all sorts of structural reasons, but it's a big gap. And it's a big failing because a lot of young people.

Nancy Rothwell: Don't want to necessarily go into research or on to university, they don't know what they want to do, actually. But some will then later want to

Nancy Rothwell: So I think having that mobility and potentially that mobility in both directions, is something we should really try and work on

Nancy Rothwell: It also does address in part your comments about not just the big city centers, but the outlying regions because there are a lot of colleges and outlying regions, whereas there are not that many universities few notable ones, of course, but but in the suburbs.

Richard Jones: Can I add to that.

Richard Jones: I think it's a really important point. I think

Richard Jones: Some of the answers have been touched on already. I think

Richard Jones: The kind of translational research that's to do with manufacturing of all kinds, is something that that naturally sits outside City centers because

Richard Jones: I think there is some importance in having R&D you know translational with manufacturing close to the actual manufacturing plants.

Richard Jones: Neil mentioned Taiwan, which I think is a fantastic example and replace the policymakers, or to spend more time looking at

Richard Jones: They, they have a really great translational research facility

Richard Jones: And that's, you know, it's in a kind of a scruffy industrial part of that country. It did produce Taiwan semiconductor manufacturing Corp actually must be the largest spin out from a government owned

Richard Jones: Translate research literature. Have you ever

Richard Jones: So I think, but by citing some of these facilities closely linked back there needs to be close to the link back to the basic research that Nancy was talking about, which is going to kind of generate

Richard Jones: Future ideas if you can get that link between the basic research.

Richard Jones: Mining, you know, really focused manufacturing driven research that may take place outside City centers and then link that to the skills based to and I absolutely I completely

Richard Jones: Agree with Nancy on this. We need to have a way of getting a much more joined up landscape where people can start out doing, you know, an apprenticeship at the age of 16 and they got a really clear articulation route into into

Richard Jones: In universities, if that's what they want to do. They can emerge with PhDs and

Richard Jones: Go on to be leaders and that way you know I think in the past that happened much more than it

Richard Jones: Does. Now if I look at people a generation ahead of me in, you know, the chemical industry, particularly loads of them starts apprentices and they got PhDs and they became industry leaders.

Richard Jones: Really important. We don't see much more of that. So I think that this is part of building different institutions and Patrick, you know, rethinking institutions, a little bit in the way that that Liam mentioned

Richard Jones: To be able to demonstrate some of looms constituents that this research really is, you know, breaking out of that that trap that he talked about about, you know, then the low skills low productivity.

Richard Jones: Bad equilibrium left 70 places or got set into

Liam Byrne: So Jen, that the one player. I've got for Ravi and his team is to join forces over the next month with ceridian diamond and the team leading

Liam Byrne: The work on the College of the future, because I think what you're beginning to see in Northern Ireland and Wales and indeed in Scotland is some pretty radical

Liam Byrne: reorganization of the FAA he relationship and it's it's England, actually, that is lagging behind and it's the regions of England that are lagging behind worst the wall.

Liam Byrne: And and so at the spending review. This is a really important thing to kind of pop in there. And, but, I mean, just to just to go back to the beginning of the Industrial Revolution for sort of 32 seconds, you know, in

Liam Byrne: In an industrial revolution Birmingham, you know, we became famous as the home of the lunar society. What, what was magical about the lunar society.

Liam Byrne: Was the way in which people from very different backgrounds came together to admittedly drink a lot once a month but share ideas, a great deal.

Liam Byrne: At the moment, the, the interaction between the small business nationally lead research is weirdly poor

Liam Byrne: And so the kind of interaction that was pretty normal in 18th century Birmingham.

Liam Byrne: doesn't really happen anymore. You don't have business people who just sort of pop into the local university to use a bit of kit.

Liam Byrne: And they don't do the same, you know, more will actually do it with the fee sector and but just that the there's a rigidity that actually makes innovation harder.

Liam Byrne: And we've just got to create in each Great place in our country and much more of a marsh, actually. So yeah, let's give it some institutional strengthen institutions starch and but actually it's the weaving of things together that needs to be a hell of a lot easier than it is today.

Tom Forth: Just super quickly from a when we did some work with about Manchester combined authority on independent prosperity review, we found some really

Tom Forth: On known strengths of Greater Manchester one that popped out was university of Salford brilliant at something called lean construction.

Tom Forth: No one in national government knows about that. And that's one of the reasons why when we've talked through this, I share Neil O'Brien's concerns about things getting lost in evolution.

Tom Forth: I don't see how we ever get to the stage where people understand that in Salford there is a university that's world leading at this lean construction techniques.

Tom Forth: And if they were forced to work by probably a mayor with FA colleges right across great Manchester and it would mostly be in Salford Bolton and Wigan which nearby.

Tom Forth: They need to be forced I think to say employing 2000 people and apprenticeships and works work sites across Manchester becoming the best builders in the world of these these cheap tall buildings.

Tom Forth: That is our end. That's what we need to say, and the challenge for me is I couldn't have told you that about Manchester two years ago.

Tom Forth: And I have no idea what the similar thing is in the West Midlands, even though I lived there for three years. I lived in in East Birmingham not

Tom Forth: Just, just next door to Liam's I've no idea. So it has to be someone who's quite close, who can find out what the opportunities are because otherwise we'll miss them.

Neil O'Brien: Just to come back about that is basically why I'm not totally against this idea of evolution and

Neil O'Brien: There is an important role for evolution in kind of the discovery of interesting things that just weren't ever percolate up to the center.

Neil O'Brien: And it's a question of balance, really, I think, how much do you want to have coordinated things and center. And how much do you want to keep going to devolve

Neil O'Brien: So no, I absolutely take your point. And it was interesting, once we started doing the evolution program. We started learning more about interesting opportunities that are out there. So I completely get your point on that.

Liam Byrne: And it could be that its mission driven. So, you know, one one way in which you short circuit. A lot of that is that you know you organize pots all funding that has to be shared around particular missions and those missions are defined regionally rather than

Jennifer Williams : Everybody. There's a question here, which I will read out, but I think it is directed at Richard and Tom and I've

Jennifer Williams : Now lost it. Hold on.

Jennifer Williams : That you have already

Ravi Gurumurthy: I think you might have been answered in racing.

Jennifer Williams : It's a conversation about London. Yeah, I do.

Tom Forth: I will, I will.

Jennifer Williams : Be asking a question. It's simple, it's simple, and it was about London and

Neil O'Brien: Cannot say sorry I can see it's okay. He says, do we really think that business innovation in London is so low. Is this data skew towards manufacturing and doesn't capture services innovation.

Neil O'Brien: And do we have evidence of public sector r&d spend in London, boosting the private sector or is it that we invest in the creek institute that there's lots of basic research as little impact will under the economy.

Richard Jones: I'm sorry I have to spoil the system because I just typed in an answer to that, which is clearly the wrong thing to do.

Jennifer Williams : Just me being stupid.

Richard Jones: Though, I think, I think the first thing says, to be fair, actually, if we look at the numbers, there has been an increase in business r&d in London in in the last year or two, I think.

Richard Jones: I you know that there is a constant issue about Miss measurement, which suggests that particularly an additional area, we may we may not capture all the

Richard Jones: All of the of the activity you know that the the measures kind of hold

Richard Jones: I vaguely suspect. I mean, one of the things that makes. I mean, we haven't really gone into a great detail about where these statistics comes from one of the things that vaguely cheers me up about the statistics is that

Richard Jones: There are two sources of business R&D statistics. One is a survey which produces the bird numbers.

Richard Jones: And one of the attacker that the R&D tax credits and I vaguely cheers me up at the aggregate level, they are there more or less the same.

Richard Jones: And I generally assume that companies don't leave money lying on the ground, and I think that the fact that the business that the r&d tax credit. I mean, I would be surprised if huge amounts of r&d tax credit, we're not

Richard Jones: We're not being claimed how. Having said that, I set the definitions probably do exclude innovative activity that is not formal R&D and that's probably more likely to take place in knowledge intensive business services and in

Richard Jones: In in in and kind of things things things things digital. So I think it's possible. There's that there is more interactive activity in London than the statistics suggest, I suspect it's not, though in areas like the life sciences, and I think, you know,

Richard Jones: What, why would you set up a major corporate r&d lab in London. It's, you know, it wouldn't make business sense yeah so

Tom Forth: So from me. I am certain that the data underestimates the amount of research and development that happens in London, specifically in financial services and the creative industries.

Tom Forth: But I don't think it underestimates it that much. So it does, it does make the result slightly less start, but it doesn't change the story.

Nancy Rothwell: But I just thought I mean something we haven't touched upon is is the regions that were saying need the leveling up

Nancy Rothwell: Happen to be an awful lot cheaper to put things in to employ people on for them to live there and the regions that I've got a lot on it, it's going to be a key factor in the future, you know, young graduate

Nancy Rothwell: Trying to buy a property, heaven forbid, in parts of the country and then their level of employment is going to be very different. So, financially, it makes sense as well.

Richard Jones: Can I just add one thing, because I want to say this, so that Tom doesn't have to say it one recommendation we do make which is kind of token, rather than actually substantial is that there shouldn't be London waiting in queue are

Richard Jones: And you know, it's not a lot of money, but it's an important symbol. And of course, when you say that people come back and say, well, that's terrible. It's so expensive to do research in London, we need to have extra money to compensate for it.

Richard Jones: No, that's the market telling you what's going to your R amp D.

Neil O'Brien: Somewhere else

Tom Forth: Do it in Birmingham do it in Manchester, build the Salford don't

Jennifer Williams : Absolutely. I'm going to come to one final question. Apologies. We've not had time to do anymore, but it's been such an interesting debate is good to kind of get actually intimate rather than skip over too fast and the question

Jennifer Williams : In a post Covid-19 world. Do we not need to support the demand side of innovation and left behind communities which might not registering the conventional supply side.

Jennifer Williams : Technological push model eg social innovation links transforming public services and this kind of comes back to something I was wondering as well. Around the foundational economy and how that links in

Jennifer Williams : With what you're talking about because presumably there's going to need to be a fresh look at the way that that side of our economy is working paste code as well. And I don't know whether anyone wants to come in first or not.

Tom Forth: Just to get in first and then get out quickly. I think there are some real

Tom Forth: Really hard challenges to solve social care would be an area where we have not increased productivity, we just, we just really struggle to do it.

Tom Forth: And we know that it's such a hard problem to solve that. It's going to take quite a lot of money to increase productivity and social care but

Tom Forth: Nothing else really matters, all that much like this. The scale of the when, if we could increase productivity and social care by 20% more than somewhere else is just enormous because of the amount we spend so

Tom Forth: There is huge opportunity for that too often, I think that gets dismissed as not not quite scientific enough and that's that's rubbish. Basically, it's absolutely what we should be aiming for.

Liam Byrne: I think the only thing I'd add to that Jennifer is

Liam Byrne: The transition to a low carbon world is going to bring significant challenges for lots of people. So we talked about just transition

Liam Byrne: In fact, we're going to need a program for just transitions, because the impact that people have got is not just, just the transition to a low carbon world, but it's also

Liam Byrne: A radical increase in automation and and now it's the impact of contagion as well. And if you live on a poor estate in inner city Birmingham.

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Liam Byrne: And you are a taxi driver, but the taxi that you've got is not, it's, it's an old kind of vehicle and you live in a house that is pretty badly insulated.

Liam Byrne: And there's significant costs coming down the line for you. And so actually creating investment programs that remedy.

Liam Byrne: Those poor carbon infrastructures in a way that creates jobs, rather than destroys jobs is going to be a really significant thing that we are going to have to do over the next four to five years now.

Ravi Gurumurthy: Just two particular examples to come in, following on from Liam. If you take heating, we basically got to rip out 26 million boilers. In the next 15 years

Ravi Gurumurthy: And we could try to accelerate that low carbon transition is a highly labor intensive.

Ravi Gurumurthy: Process and we can do so right now when borrowing is cheap. So that's a good example of something that's I think we should prioritize and the second point I'd make is this diffusion challenge so

Ravi Gurumurthy: In education, you've had a huge investment in randomized control trials to try and work out what works in teaching

Ravi Gurumurthy: The education and Foundation has led it but actually translating that knowledge of what works into change behavior in the classroom.

Ravi Gurumurthy: Is just not happening because we don't really understand how you

Ravi Gurumurthy: Turn evidence into action. So I think we need to have a lot more of an investment in that

Ravi Gurumurthy: That side of things interesting COVID it as an example of where when you break through the existing institutional constraints and force people to change their routines.

Ravi Gurumurthy: People do adopt new things and I think we have to work out what's the way of shifting the demand side for innovation, not just producing more evidence, particularly in the social and public sector where that's

Ravi Gurumurthy: Where actually we're further ahead than in then in that field. We've been talking about so far.

Neil O'Brien: Yeah, I strongly agree about this point about education and education technology is one of the fields where I would be

Neil O'Brien: Most important to try and accelerate things I've been to the basic question. There will never be a better moment than in the crisis that we're about to face to

Neil O'Brien: demand side things to try and pull through net new technologies, the one, the one thing I'd add to that is just trying to use R&D along with every other conceivable budget to try and protect they continue to just and solve the institutions that big businesses that

Neil O'Brien: Do such a lot of UK R&D. And one of the weaknesses of the UK economy is that in the second half of the 20th century.

Neil O'Brien: A lot of those big industrial primes just got the stuffing knocked out of the wall or disappeared altogether. And that is a

Neil O'Brien: Permanent disadvantage when you get compared to us like Germany. And if you think about when Tom about trying to turn

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Neil O'Brien: Derby into Dortmund because they made me think of what's happened with Rolls Royce and just doing everything we can to keep in one piece. Those kind of big industrial primes that are 30 central to

Neil O'Brien: Us having any kind of industrial R&D future and is a really important thing over the next couple years, or for as long as this, this sort of make a crisis goes on.

Liam Byrne: And Neil is like about this because we can't take our eye off the fact that the scale of the capital investment, but it is going to be needed. Next year just to

Liam Byrne: Bring down the unemployment that the Bank of England is forecasting is enormous. So

Liam Byrne: You know the fiscal math in the West Midlands implies that we need a three and a half billion pound capital stimulus next year alone.

Liam Byrne: Just to deal with unemployment that may go up to 320,000 so when we're thinking about

Liam Byrne: Programs. If this scale. The, the art will be to try and do it in a way that is good for innovation, good for productivity and as Neil says, you know, good for the preservation of some of those anchor institutions in our r&d supply chains.

Jennifer Williams : Thank you very much to everybody for joining. We are one minute over, but I think that's not too bad. Thank you to everyone who's followed the discussion. Everybody's asked a question and commented

Jennifer Williams : I'm sure we can carry on the conversation on Twitter to all of the panelists and it's been an absolute pleasure.

Jennifer Williams : Enjoy the rest of your day.