Brexit: Impact on Universities and Scientific Research

03 November 2016

Moved by Lord Soley

That this House takes note of the potential impact of the United Kingdom’s withdrawal from the European Union on funding for universities and scientific research.

 

Lord Bilimoria:

My Lords, when I visited CERN in Geneva, I realised that the experiments that led to the famous Higgs boson discovery, ATLAS and CMS, were both headed by British scientists: Professor Dave Charlton from the University of Birmingham, and Professor Sir Tejinder Virdee from Imperial College. And of course it was Sir Tim Berners-Lee who actually created the world wide web at CERN. Then, this year, we had the gravitational waves proving Einstein’s theory of relativity, 100 years later, with 1.3 billion light years being measured. Who were two of the principal scientists behind that? Professor Alberto Vecchio and Professor Andreas Frieze—EU scientists at the University of Birmingham. What makes this country great—this 1% of the world’s population, as my noble friend Lord Kakkar said—is not our natural resources but our talent. The jewel in our crown is our universities, which are the best in the world, along with those in the United States of America.

 

I declare my various interests, including being the proud chancellor of the University of Birmingham, chair of the advisory board of the Cambridge Judge Business School and the president of the UK Council for International Student Affairs, representing the 450,000 international students in this country, of whom 180,000 are from the EU.

 

I say that we achieve all this excellence in spite of underspending on HE. We spend way below the EU and OECD average, and we are well behind the United States of America. When it comes to our research and development spending as a proportion of GDP, South Korea spends double the percentage that we do and we are way below the EU average, let alone that of the United States. What is scary is that the proportion of GDP spent on R&D, 1.6%, has been falling from 1985 to 2013. Will the Minister acknowledge this?

 

We heard from my noble friends Lord Rees and Lord Smith and others that at the University of Cambridge, around 16.5% of university staff are EEA nationals. When it comes to PhD students, that figure is 27%, and for MPhils, it is 21%. Look at the awards: UK institutions have won more ERC awards than any other country—989 compared with France’s 577.

 

On the implications and opportunities of leaving the EU on science and research, the University of Cambridge’s response is that,

 

“it will create significant challenges for Universities. We recognise that there is a great deal of uncertainty”.

 

Everyone has said that today. But the university also said that the political instability raises significant questions in the following areas. It refers to,

 

“our recruitment and retention of the brightest and best staff and students regardless of nationality … the future of our substantial European research funding”,

 

and the point that many noble Lords have touched on,

 

“the extensive global network of the University’s collaborations”.​

Sixty percent of the UK’s internationally co-authored papers are with EU partners. The mobility of our scientists is phenomenal—I have given you just one illustration. Professor Alice Gast of Imperial College, one of the top 10 universities in the world, said:

 

“Foreigners improve the creativity and productivity of home-grown talent, too”.

 

They enrich our universities, both academics and students.

 

Cambridge was the highest recipient of EU funding allocated under Horizon 2020, about which lots of Peers have spoken. I want to ask the Minister about intellectual property. In the event of Brexit—which may not happen, by the way—the value of any EU-based research for exploitation may be limited. Does the Minister agree with that? The UK has played a key role in shaping the design and implementation of the EU’s research programmes to ensure that the funding has been allocated on excellence. That has not been mentioned so far. Legislating for the ERA could have potential negative impacts on our current world-class systems.

 

People talk about the drop in the number of EU applicants, which is real—will the Minister confirm that? But the other aspect is that as the Royal Society said, the scientific community often works beyond national boundaries on problems of common interest and so is well placed to support diplomatic efforts that require non-traditional alliances of nations, sectors and non-governmental organisations. This is known as science diplomacy.

 

I conclude by saying that what worries and saddens me about this whole situation is that here we are talking about excellence and Britain being the best in the world, and yet my noble friend Lord Smith spoke about hate crime. I have lived in this country since I came here from India as a 19 year-old student in the early 80s. In 35 years I have never experienced any hate crime except for this year—and this year I have received it in abundance. Whether it is tweets, emails or letters, I cannot even repeat what people have been saying to me. It has saddened me. And yet this is the country that Liam Fox talks about opening up to the world. The world is laughing at us. They see us as closing up to the world, inward looking and insular, not open, not diverse, not plural, not tolerant and not brilliant. The headline of an Indian newspaper would read: Lord Bilimoria—this is not the Britain that I know and this is not the Britain that I love.

My Lords, in his first Budget in 2010, the Chancellor said that the Government would,

“have debt falling and a balanced structural budget deficit by the end of this Parliament”.

—[ Official Report , Commons, 22/6/10; col. 168.]

Despite the Chancellor’s tough talk about austerity and cutting public expenditure, the reality is that public expenditure as a percentage of GDP has continued to increase. I thank the noble Viscount, Lord Younger, for leading this debate.

Yesterday, it was announced that the Government will spend £746 billion in 2015-16, rising to £765 billion in 2018-19, compared with £692 billion in 2010. Government spending is increasing and, as a percentage of GDP, our national debt is rising. According to the OBR, it will now peak at 81% of GDP in 2015-16. This means that the Chancellor will completely miss his target to ensure that net debt is falling relative to GDP by 2015-16.

We have a perception of austerity that has simply not been matched by reality. Yesterday, the Chancellor acknowledged that we are at least another four years away from that target. To build on what the noble Lord, Lord Skidelsky, said, if we are borrowing £300 billion more than the Chancellor said he would in 2010, why should anyone believe him this time around? The OBR has predicted that public expenditure is going to have to fall to 35.2% of GDP by 2019-20—the lowest level since the 1930s. Let us remember that the 1930s were pre-welfare state days. Can the Minister confirm that that is really achievable?

In order to achieve those cuts, it is predicted by the OBR that the defence budget, which is already negligently too low, will have to be cut by 60%. Can the Minister confirm that that might have to happen, although it is hoped that it never will. However, I was delighted to hear that the Government will be giving money to veterans, including £2 million for the Gurkhas. I was privileged to have been brought up with the Gurkhas. My late father, Lieutenant-General Bilimoria, was commissioned to the 2nd Battalion, Fifth Gurkha Rifles (Frontier Force), and was president of the Gurkha Brigade when he was commander-in-chief of the Central Indian Army. I was privileged to have been brought up with two Victoria Cross holders from birth—they were living legends. Therefore, I thank the Government for doing that.

However, it is the low level of interest rates for a prolonged period, at the level of 5% that led to the financial crisis from which we suffered. Yet today we are being propped up by interest rates that are 10 times lower—at 0.5%. Government borrowing has been increasing year on year and expenditure on debt interest has contributed to it. It is more than £1.27 trillion and is costing us £1 billion a week—more than the entire defence budget.

Does the Minister agree that interest rates might have to rise? The Governor of the Bank of England made a ridiculous statement that he would start increasing interest rates when unemployment fell below 7%. Unemployment is at 6% now and interest rates have not gone up, but they will go up at some stage, and if they do the debt interest levels will go up. The SNP made the mistake in its budgets with the oil price and its budgets are shot to tatters at the moment. Will the Minister give his views on future interest rates?

Wearing my hat as chancellor of the University of Birmingham I have seen that our higher education sector is one of the jewels in our crown. I am delighted that the Government are about to announce loans for postgraduate studies. On the other hand, we highly underinvest in higher education as a proportion of GDP compared with the OECD, the EU and America. On R&D and innovation, the patent box is all very well—it is stored—but if we invested the same proportion of GDP as countries such as America, the OECD and the EU, we would help our productivity hugely. Our current account deficit has reached 5.2% of GDP, which is worse than Italy and France. Our fiscal deficit of 5% is almost double that of the United States, let alone Germany which has just 0.2%.

As the noble Lord, Lord Adonis, said, skills are so essential. I am proud to be an ambassador for Studio Schools. Last month I opened the Vision Studio School in Mansfield. That is the sort of initiative that I am glad the Government are backing. Tax breaks to apprentices are excellent but, on the other hand, the word “entrepreneurship” was completely missing from the SME Bill. Entrepreneurship should be the cornerstone of our future growth. I launched the 10th anniversary of the Cambridge University Centre for Entrepreneurial Learning this week. That is what we should be backing. The Sirius campaign, backed by UKTI, bringing young entrepreneurs to Britain to develop their businesses, is a great initiative that the Government should be doing.

The Government are doing a lot, but are they doing enough on the big things? We have a tax system that is so complicated that the tax code is now 17,000 pages long. The Office of Tax Simplification is an oxymoron. Our corporation tax rate is low but our income tax rate is too high. Capital gains tax is too high. The Indian restaurant industry which we supply and the Bangladesh Caterers Association UK are constantly complaining about VAT and asking for it to be reduced. Our hospitality and tourism industries say that VAT is far too high. We do not have a competitive tax system.

The noble Lord, Lord Rose, in his excellent speech, spoke about confidence. We need confidence, productivity, and a better educated and more entrepreneurial workforce who think globally. Government expenditure should be at a believable rate: 35% is unachievable; 40% would be a realistic rate. We could then balance our books and have an educated, productive, confident and enterprise-based economy so that, even as 1% of the world’s population—that is all we are—we can continue to punch above our weight.