Enterprise and Lifelong Learning Committee, 18 Mar 2003

Meeting date: Tuesday, March 18, 2003

Official Report 324KB pdf

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“Chips for Everything” (House of Lords Report)

Item 4 on the agenda is the House of Lords Select Committee on Science and Technology's report "Chips for Everything", which deals with two specific recommendations. Information on the report and observations from the Institute for System Level Integration have been circulated to members. The concern is not just about the institute itself but about the whole Alba project and the implications for that project if the House of Lords committee's recommendations are implemented.

I welcome Ron Dunn, who is the chairman of the Institute for System Level Integration, and Professor Steven Beaumont. I shall ask them to say a few words, and then we shall ask some questions.

We thank the committee for seeing us at rather short notice. We have already spoken to the convener about the issues raised by the House of Lords report, and we are grateful for the help that he has already given us.

I do not want to rehearse all the issues and the history, as you all have a full paper on that. As you know, the ISLI is an institute that has been established as part of the Alba project with the aid of Scottish Enterprise and the support of four major universities in Scotland. Our remit is to develop the skills and research base associated with leading-edge electronic design and to help to transform the electronics industry from one that is based strongly on manufacturing into one that is much more design based and associated with a great deal of product ownership. Focusing on the technology known as system on chip, we occupy a unique position in the UK as a result of the foresight shown by Scottish Enterprise and the partner universities, in terms of our positioning, our remit and our constitution. In particular, we are unique in the way in which we engage with industry, and we are located in a major industrial research park, which is the focus of the Alba project.

Over the four years or so that we have been in existence, we have grown from a very small organisation to one with 100 students and 25 research projects, which are fully sponsored by and carried out in close association with industry. We are already growing our portfolio of projects with Europe through frameworks 5 and 6. I would like to put what we are doing into the context that the committee was discussing this afternoon. We are already associated with three start-up companies, and we are just about to announce a new business plan competition. We hope that some of the graduates from the institute will be able to spend a year putting together a business plan and funding for a start-up company to develop the technologies that we specialise in. We are very much not an academic institute, although we have academic roots.

The Alba project itself has been successful in transforming the electronics industry. In Livingston, we have the UK's largest system-on-chip design centre. There are now a number of spin-off companies and some inward investors are capitalising on the talent pool that the institute has created and are helping to carry out the process of transformation.

In October 2001, the House of Lords initiated an inquiry into the general landscape of electronics design, the semiconductor industry and electronics manufacturing in the UK. It received from Scottish Enterprise a comprehensive set of evidence, which fully described the Alba project, the institute and other components of what we were trying to do.

The findings of the report reinforced the findings that led Scottish Enterprise and the electronics industry to support the Alba project in the first instance five or six years ago. It is a pity that the House of Lords did not take evidence in Scotland, although it received written evidence from Scottish Enterprise. One of the recommendations of the report is to fund a centre of excellence in system-on-chip design in the UK, irrespective of the fact that the institute and the Alba Centre already exist in Scotland. That is our major concern.

We agree with many of the House of Lords recommendations, particularly with regard to the growth of the research budget in the UK, which we think is extremely important in helping us to engage more strongly with the institute and with industry. We also agree with the notion that a UK-wide institute should be established. We have found that in order to develop the institute, we have to work closely with industry south of the border, in Northern Ireland, in Europe and internationally. We already teach students in Japan through our distance learning programme.

We welcome the recommendations of the report, but our main concern is that the outcome of implementation would be the creation of a competing institute or perhaps several competing organisations elsewhere in England. We have seen such fragmentation affect Scotland's ability to prosecute its microelectronics research business. It is noticeable that in other areas the Department of Trade and Industry is spending substantial money in micro systems and nanotechnology, but none of that money seems to be coming north of the border.

We are concerned that if the report is implemented in the way that the House of Lords committee is suggesting, which the DTI is picking up, we will create a fragmented landscape within the UK. We will create unnecessary competition for the Alba project and there will be significant wastage—that is probably a bad word to use—of public money spent on the Alba project and on the ISLI.

We would welcome the committee's support in pushing what we believe to be the correct agenda, which is that the institute's activities should be enlarged and spread out across the rest of the UK, perhaps from several sites. More important, any recommendations on budget spend by the UK Government should apply to the UK as a whole and should not stop at the border.

Thank you very much. That was very helpful.

I would like to make another point if I may. Our proposal is that we would participate in a UK-wide initiative. Were we to do so and were we to take a leading role in that—bearing in mind that we have five years' experience, whereas any start-up in England would have a base of zero—there is a great deal that we could contribute to the House of Lords initiative, such as expertise, tooling, designs, intellectual property and course material. That could result in the overall UK initiative getting off to a rapid start and being delivered in much shorter time scales than the House of Lords might otherwise anticipate.

That was extremely helpful, as was your written evidence. I invited Lord Oxburgh to come and give evidence. He was willing in principle, but was unable to do so because of previous appointments and, to be fair, we asked at short notice. He certainly was mindful of some of the issues that the report has thrown up.

Members should note that an article in one of the Sunday newspapers pointed out that Robert Crawford and a number of other people have already taken the issues up with the Secretary of State for Trade and Industry, to make her aware of them, as well as with the House of Lords select committee.

The fullness of your submission and the additional comments that you made mean that my question will be even briefer. Having visited the project and met both of you, I do not need to be persuaded of the merit and value of what is happening at the Alba Centre. The nub of my question is whether the select committee's principle omission is its apparent misunderstanding of the role of the Alba project and the ISLI. The select committee seems to think that the project and the institute are a university-based initiative, which is not the case, of course.

I hope that the Enterprise and Lifelong Learning Committee decides to make submissions to the Minister for Enterprise, Transport and Lifelong Learning, the DTI and the chairman of the select committee. If we do so, all parties concerned will be clear about our worries. Is the nub of your concern that the select committee proceeded on an inaccurate understanding of what happens at the campus? If so, and if that lack of awareness leads the select committee to recommend the introduction of something de novo down south, are you also concerned that that could lead to duplication and a reinvention of the wheel?

Yes; that is the nub of it. As I said in my introductory remarks, the House of Lords select committee's remit was very wide. Indeed, it began its work by looking at a specific aspect of electronic design and at some of the underlying technology. I suspect that, having received evidence from Scottish Enterprise and others, the committee was persuaded of that evidence and moved its thinking in the direction of system-on-chip design. In doing so, I suspect that the committee overlooked the fact that Scottish Enterprise's evidence highlighted what is going on in Scotland.

It is also worth saying at this point that there is a view that the Alba project has a Scotland-only remit and that the institute exists only for the benefit of Scotland. Indeed, our dealings with the DTI support that view. It is fair to say that we exist to act as a magnet to bring companies and experienced people to Livingston and Scotland, but we view the entire UK as our marketplace. There has been a misunderstanding about the way in which the ISLI operates—I would not want to put it more strongly than that.

I am not sure who was responsible for your submission? Was it a joint piece of work?

Yes.

I would like you to help me with the chronology of events. Did the institute become aware of the select committee inquiry only recently?

Yes.

The inquiry began in October 2001 and took evidence throughout 2002. I think that you said that Scottish Enterprise made a submission to the select committee. Did the institute collaborate on that submission?

I do not recall being asked to make a contribution to the submission. You could say that there was a failure of communication between the authors of the Scottish Enterprise evidence and us.

How did that come about?

As the select committee's remit was to look at the electronics industry in general, Scottish Enterprise's evidence to that committee probably came from its electronics cluster group. That said, we have not examined that possibility in detail. Although the evidence referred to the Alba project, it did not take direct input from us.

Scottish Enterprise did not speak to you about the submission?

No.

As we know, before the report was issued, it would have gone back and forth between people in draft form. Was there a read-out from Scottish Enterprise or others?

No; there was nothing at all.

That is a worrying set of circumstances. Do you want us to urge the Minister for Enterprise, Transport and Lifelong Learning to take the view that the Executive should participate in the UK Government's response to the report?

Yes.

A House of Lords select committee report is, of course, not a Government report. What has been your transaction with the Minister for Enterprise, Transport and Lifelong Learning?

We have received good support from the Executive's enterprise and lifelong learning department, which has made representations to the DTI.

I am interested in the timing of that. When did that representation take place?

I guess that it took place about three weeks ago.

Yes. It took place about three or four weeks ago.

The DTI would have received the correspondence a week before the House of Lords debate.

Was the correspondence from the Scottish Executive Minister for Enterprise, Transport and Lifelong Learning?

Yes. We also asked the Secretary of State for Scotland to make representations to the Secretary of State for Trade and Industry about our concerns. That was done. We have had very good support from the Scotland Office.

Is that information in the public domain?

Not that we are aware of. However, Lord Sainsbury made a statement during the debate in the House of Lords on Friday that indicated that there had been some communication, in that he recognised the existence and the excellence of the ISLI and said that its capability would be taken into account in any DTI recommendations that come out of the report.

I did not follow the debate on Friday. Was there any suggestion that the DTI would consult on that response? I have not yet seen any response from the DTI.

There was no specific DTI response other than Lord Sainsbury's statement, which was made in reply to the speeches of the other lords in the debate. I understand that he was speaking on behalf of the DTI when he said that our capabilities would be taken into account.

Our understanding is that the Government is considering its response to the report. Unusually, the debate took place before the Government formulated a formal response to the report. We have a breathing space and an opportunity to influence the response.

I do not know if you can help me with this—perhaps the clerks can—but I am interested in the mechanisms of anticipating what the DTI will do with the select committee's report.

I might be able to help with that. I spoke informally to Iain Gray, the Minister for Enterprise, Transport and Lifelong Learning, to highlight the issue after I had had the initial meeting with Steven Beaumont and Ron Dunn. He shares our concern and I understand that he has been in touch with the ministers in the DTI verbally and in writing. However, I do not think that it is clear when we will get the DTI's formal response to the report.

I take it that our witnesses would like us to instruct the Executive to take note of the situation—although it sounds as if it has already done so—and to get an explanation from the minister of his intended next steps in relation to the devolved responsibilities.

There is an important monitoring issue. As I said, we are concerned about any funding mechanisms that roll out as a result of the situation. Our understanding is that the DTI can spend its money across the UK or it can decide that its funding will stop at the border. Obviously, if the funding stopped at the border, that would make it difficult for us to participate as a full partner in any new development south of the border. That is a major concern.

I understand your concern but I think that, strictly speaking, your understanding of the DTI is wrong.

I think that it would be entirely appropriate for us to make further inquiries of the minister and the Secretary of State for Scotland. I do not think that it would be appropriate to go beyond that at this stage. Although I am sympathetic to paragraph ii of the ISLI response, I do not think that we could do what it asks at this stage.

I think that we should reinforce the position that the minister—backed up formally by Robert Crawford—has already put to the Secretary of State for Trade and Industry, which is that, if the two recommendations from the House of Lords select committee are implemented, there would be serious implications for the future of the Alba project.

I agree, but I would not want us to labour under a misapprehension about how the Government will respond. The House of Lords select committee is important, but it does not represent the Government.

We need to ensure that the secretary of state is aware of the implications of accepting the House of Lords select committee's recommendations before she prepares the Government's response. If we do that after she has prepared the response, it will be difficult to get the Government to change its mind.

That is right. It was important that, during the House of Lords debate, Lord Sainsbury recognised that the Alba project had been running successfully for a number of years and that the ISLI had been an important part of it. We now want to influence the formulation of the Government's formal response and to try to steer it in our favour.

An exact date for the DTI's formal response has yet to be set, but we have been told that it is expected in the next few weeks, so time is of the essence.

I am happy to proceed on the basis that Brian Fitzpatrick outlined. We have produced several significant reports that have not been fully adopted and implemented by the Government. Brian Fitzpatrick went to the core of the matter. The report's status is important relative to the outcome. One should not take as read what is in the report simply because it is in the report, particularly as there is a window of opportunity. I am sure that our deliberations and our providing some form of support for the minister's comments are bound to help. We should write to the DTI and the Secretary of State for Scotland.

We all agree that we want to do that.

In addition to recommending the establishment of a single national research institute, the House of Lords select committee talks about proposed nanotechnology centres. Would they be a parallel development? Could a nanotechnology centre be based in the research institute?

We do not think so. Nanotechnology is a much broader technology, whereas the research institute is narrower and more focused. However, the DTI has recommended a micro systems centre as well as a nanotechnology centre, and I understand that those two proposals are merging.

Is the National Physical Laboratory the potential centre for that? A location is not named.

We are not aware that the NPL is a candidate centre. The rumour is that the nanotechnology centre is likely to go to the Birmingham area.

Are there other institutes in the UK that are as developed as the ISLI and Alba are, or are we in the lead?

We are in the lead. Tremendous interest has been shown from around the world in the Alba project and in the structures that have been created. I am aware of nothing in the UK that has the same remit, positioning and objectives as the ISLI. Of course, other research centres exist. The micro systems and nanotechnology centres are likely to be purely research centres. In Scotland, we are engaged in training, professional development, education and the research and industrial development agenda, together with an economic development remit. That combination of missions is unique.

It is recommended that the research institute should be industry facing. I take it that centres south of the border or elsewhere in the UK are not more industry facing. Are there institutions that are less academic and more economic development orientated?

Organisations such as the Faraday centres and possibly the virtual centres of excellence have a similar focus on supporting industry and doing industrially relevant research. A substantial injection of research funding has helped to support them. We would appreciate the committee's support on the report's recommendation that research funding should be expanded for design, which tends to be neglected in several technologies, not simply in electronics technology. The House of Lords select committee's report highlights the comment that, because design is not considered an academic research subject, it is poorly funded. Amazingly, the Engineering and Physical Sciences Research Council's research portfolio for electronic design is worth about £7 million. That industry is worth billions worldwide and a substantial amount of money to the Scottish and UK economies.

Thank you. That was extremely helpful. I take it that the committee agrees to the proposal outlined by Brian Fitzpatrick and supported by David Mundell that we write to the Secretary of State for Trade and Industry and the Secretary of State for Scotland.

I would like to discuss what we will write about.

Fire away. We have finished taking evidence, so we will have an open discussion among committee members only.

I am troubled by the circumstances in which this situation has come about, and I am not sure about the urgency of the matter. If it is being impressed on us that it is urgent, that is fine. However, on a broad reading of the House of Lords statement, it strikes me that a report is sought—or has been ordered—on a whole series of measures. I do not understand how the DTI can say that it will respond to all of them in a matter of weeks. For example, a review has been sought in relation to venture capital funding.

We have to go by what we have been told. The DTI has said that it expects to make a formal response in the next few weeks.

Will that response be a white paper?

No. The direct response to the Lords select committee's report would be made in the same way as we receive responses to committee reports here. The report was originally published in November, so the DTI has had a significant period in which to respond.

Do we know whether the response will say that there will be a white paper?

It is our understanding that the DTI does not know what its response is to be; it has not been finalised. The DTI has simply told us that it will respond in the next few weeks.

I am also concerned about what has been going on at Scottish Enterprise. Was it just a misapprehension as to the nature of the inquiry, or does it go further than that? I was quite anxious to learn what Professor Beaumont had to say about the absence of any communication between Scottish Enterprise and the ISLI. That is quite serious.

I think that it is correct to say that most people were not aware of the House of Lords inquiry. To the best of my knowledge, no one in the Executive was aware of it. I spoke to Iain Gray three weeks ago, and he did not know of the existence of the inquiry, let alone the report. Brian Fitzpatrick is right to say that that shows the need for us to keep a much closer eye on such things. We have ignored the House of Lords—we tend to know what is going on in the House of Commons, but not the House of Lords.

Before we get there, let us be sure. Given the strategic importance of the issue, I cannot understand how Scottish Enterprise can say that it managed to make a submission to a House of Lords select committee without having scoped out the nature of the inquiry and its likely impacts on Scottish Enterprise activity. I urge that we find out what happened—chapter and verse.

We will take that as a proposal. I suggest that we write to Scottish Enterprise, enclosing the Official Report of the evidence that we received today, and ask for their explanation of what has happened and the lessons that may be learned for the future. Our successor committee may then consider the response to our letter.

I agree, but I am not sure of our line on what our minister should do.

He should do what he has already done: point out to Patricia Hewitt the potential impact on the Alba project and on the institute of the implementation of the House of Lords select committee's recommendations.

Are not you going to ask Iain Gray to do anything further?

Mr Gray is pursuing the matter and presumably he will be trying to persuade the Secretary of State for Trade and Industry that if the recommendation is accepted, the core of the new institute should be based in the existing institute in Livingston. That is my understanding of the minister's position.

I do not entirely agree, in the sense that we do not know what the DTI's response to the report will be. We should say to the DTI, Patricia Hewitt, our own minister and the Secretary of State for Scotland that the report has been drawn to our attention and that we are concerned that the work of the Alba project and the ISLI may not have received the attention that we feel it deserves. We should make it clear that the excellent work that is going on here should be explored before any recommendations are implemented.

Precisely.

Members indicated agreement.

Item 5, which I mentioned at the beginning of the meeting, is simply to put on record the committee's gratitude to our clerking team, as this is our final meeting during this Parliament. We have the best clerking team in the Parliament. I also thank the Scottish Parliament information centre, which has provided us with an excellent service, and the reporting, broadcasting and security staff, along with all the others who have provided us with support and advice. Finally, I thank all members of the committee, past and present, particularly Annabel Goldie, the deputy convener, and the lead members, Brian Fitzpatrick, Marilyn Livingstone, Tavish Scott—who could not be here today—and Andrew Wilson. Operating a lead member system has made the functioning of the committee easier. On the whole, we have been quite successful. We have produced some good reports and we have conducted our business in a reasonably friendly manner, despite our limited political differences.

We have been fortunate in having a reasonably non-sectarian convener, although the mask slipped every so often. [Laughter.] We have also had some very good interchanges with the various enterprise ministers, often at short notice, about the work of the committee. That has been valuable.

Convener, you have convened the committee expertly, as we might have anticipated that someone of your calibre would. I congratulate you, Annabel Goldie and Marilyn Livingstone for seeing us through the duration of the Parliament. Consistency of committee membership throughout a Parliament has been shown to be important in enabling a committee to tackle the issues. I echo your thanks to everyone else who has been involved.

You are all welcome to come to Hamilton North and Bellshill to canvass for me.

Meeting closed at 16:56.