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by Liam Kirkaldy
02 July 2014
Future development

Future development

In the list of great Scottish inventions it is notable that penicillin, the most effective life-saving drug that the world has ever known, was famously discovered by accident.

The story starts in 1928 with Alexander Fleming forgetting to cover up a dish of bacteria in a rush to go on holiday. A few days later, he returned to his lab and found the dish still lying out. Complaining to a colleague about the amount of work he had to do, he picked up the dish to show him the mess his lab was in, when he noticed there was one area, containing a mould called Penicillium notatum. It had stopped bacteria from growing.

Just over a decade later the first patient – a 43-year-old policeman named Albert Alexander – was treated with the drug developed from Fleming’s discovery. Alexander had scratched the side of his mouth while pruning roses and had developed a life-threatening infection of his eyes, face, and lungs. He was injected with penicillin and made a complete recovery in a matter of days.

Innovation and invention has long formed a part of Scotland’s national psyche and it is little surprise that the issue has become a political football in the debate over Scotland’s constitutional future.

And like most issues in the debate, the question of what independence would mean for R&D in Scotland is contested at almost every level.

Everyone agrees it is important. Life sciences in Scotland leads the UK, with around 600 Scottish organisations either directly or indirectly linked to life sciences, employing more than 32,000 people. In monetary terms, the industry makes more than £3bn a year.

Neil McInnes is Head of Technology, Scotland at Grant Thornton LLP, a company that supports innovative firms in developing various types of technology for the market.

He says: “A lot of business is involved in R&D and they might not always be the obvious ones like tech companies, life sciences and biomedical. Actually, some of our more established manufacturing companies are very innovative and do a lot of research and development as well. What we do in the R&D area is specifically aimed at helping them obtain the right kind of grant support and tax credits around qualifying research and development – so the Government provides pretty significant incentives for companies involved in qualifying R&D. But as always with a lot of tax regimes the devil is in the detail and the process is quite complex around what is qualified and what is not.”

Navigating the territory is a real challenge for tech firms, particularly if their background is in science rather than business. The Government offers tax breaks for firms engaged in R&D and also introduced a new ‘patent box’ regime – essentially the idea is that profits that are generated from a patented process, or generated from a bit of the business that has a patented process within it qualify for corporate tax at 10 per cent instead of the usual rate.

McInnes says: “The UK market aims to encourage companies to be innovative and to patent and to protect and develop those novel ideas and innovations. So we help with that – we make our clients aware of what is available in terms of grant support, tax support and how to navigate their way through those schemes.”

The schemes may be complex but the UK landscape is generally a fertile one for firms engaged in the area. Still there is a recognition that Scotland’s inventors could benefit from more support to continue to compete in a global market.

He says: “It is quite interesting, we did a piece of research around a year ago off the back of the Dyson report – by Lord Dyson of vacuum cleaner fame – which was commissioned by the Government to look at how attractive the UK was in terms of innovation and to benchmark that against other places in the world.

“He made various recommendations, some of which, like the enhanced R&D tax credit and the patent box are direct results of those findings and recommendations. But we took that and went further – asking how we measure against the rest of the world, and if a company was looking to set up, where in the world would they go?

“The UK measured up well. We looked at a lot of factors beyond just tax and government incentives – we looked at the academic base in a country, the infrastructure, and various other qualitative measures and the UK was in the top quartile of that. As you would imagine, the US was high and Japan was up there but the UK measured up pretty well, and then obviously since then we have seen the tax credits and patent boxes which can only help.”

McInnes summarises the general consensus within industry, that the UK and Scotland are pretty well placed in terms of providing a base for inventors and innovators to come up with new ideas.

The same consensus extends to Scotland’s universities, which are usually described as ‘punching above their weight’ in terms of attracting research funding from UK-based research councils and charities.

This is the view propagated by a 2013 UK Government study on science and research, painting the picture of Scotland as a net beneficent of spending.

It says: “In 2012-13 Scottish higher education institutions secured £257 million of UK research council grants (excluding research council institutes and infrastructure). This represents 13.1 per cent of the UK total, significantly more than its 8 per cent of UK Gross Domestic Product (GDP), or 8.4 per cent of the UK population.”

In this sense, independence is not a particularly attractive proposition for researchers and academics who believe they are getting a good deal at the moment. Hugh Pennington is an Emeritus Professor of Bacteriology at the University of Aberdeen and a member of the academic wing of the pro-union campaign, suitably named ‘Academics Together’.

His concern is that a post independent Scotland would lose access to research funding currently administered through the UK-wide framework.

“I would be concerned about access to the UK-wide framework – particularly to research councils but also to the big charities like the Wellcome Trust, from the vibes coming from the research councils themselves, but also from David Willets at BIS.

“However you measure it, the research universities in Scotland do extremely well from being part of the UK – in medical research but in other areas as well, by population share or whatever way you look at it – we do extremely well. It is very competitive and we compete and win.

“So the concern is that in the event of independence that would not continue, there is absolutely no international parallel where two separate countries share research funds on the scale that we currently do – and that is basically what the White Paper suggests – that we continue with that system as it is.”

The UK-based Wellcome Trust funds research in Ireland but not on the same basis as it does in the UK, with the Irish Government expected to match any funding provided by the charity. The Better Together argument is that neither the remaining UK nor charities which collect the majority of their money there would see an interest in funding research in what had become a foreign country.

“There is a no international parallel for that, there are plenty of examples of international collaboration but they are on a much smaller scale. Ireland gets money from the Wellcome Trust but the Government there has to match it. Nordic countries have a pooling system with a formal structure for collaborative work, but the bulk of the research there is actually funded nationally for their own ends. It is also highly unlikely, I suspect, that English taxpayers would be happy about sending more money to Scotland if it became an independent country – which is what they do at the moment. There would also be a question over the big charities too because most of their money is raised south of the border so they would obviously be looking at their policies about funding what would be a foreign country. Then the Wellcome Trust would be funding in Scotland in the same way it does in foreign countries, which requires the country it is sending money to match what it gets from them.”

Pennington continues: “There are a lot of aspects that make a strong case for not perturbing the system. Constitutional change of the magnitude of independence would make life much more difficult and it is highly unlikely that, for example, the research council money would continue to flow to Scotland. Now there is nothing to stop Scotland from setting up its own research council like Ireland has but we would be competing from a much smaller base.

“I worked for the Medical Research Council and I think one thing driving the excellence of the research we have – which everyone agrees we do have – is the competition for biding for money within a big system, it drives success and we are only behind the US in terms of achievements and my own view is that we are top internationally in the results we deliver per pound – we are far more efficient. So we have a very good system that has been fine tuned over a hundred of years – it has evolved, it has not been changed by any big revolutions but in a sense, independence would mean a very big change.”

But like every other aspect of the referendum debate, the effect of independence on research funding is contested by both sides. Access to the UK research framework is something that would be negotiated post-independence, while the Yes campaign group – Academics for Yes – argue that the great deal supposedly enjoyed by Scottish institutions is not as favourable as it seems.

Professor Murray Pittock, a member of Academics for Yes, says: “Independence would offer the Scottish Government and Scottish universities a chance to align economic benefit and research more closely. It would, as the Scottish Government expects, allow for the continuation of the relations with the current RCUK on a shared or subscription basis, it would foreground and sharpen Scotland’s international profile within the European Union and help, encourage and develop direct partnerships with small European countries.”

The group have also provided Holyrood with its own research on public R&D spending, which it says demonstrate that Scotland’s R&D expenditure as a share of GDP is anomalously low when compared with our European neighbours.

The analysis says that Germany’s R&D share of GDP in 2011 was around three per cent. The UK average is 1.75 per cent, while Scotland’s is even lower, at 1.25 per cent. The EU average is 2.2 per cent.

The commonly quoted figure – contained in the UK paper – is that Scotland gets 13.1 per cent of research council funding, though it has just 8.4 per cent of the UK population. But evidence from Aberdeen University Vice-Principal Professor Bryan MacGregor shows that Scotland receives just 7.6 per cent of funds for ‘independent research organisations and infrastructure’ (and under 5.5 per cent for the last two years). 

Taking the funding categories together, Scotland – with 10.9 per cent of academic staff – has received 10.6 per cent of research council expenditure in the last eight years. Weighed against a 9.2 per cent share of GDP, Macgregor says this leaves a potential funding gap for a Scottish government of just £35m. Yes campaigners argue this is hardly the funding shortfall that unionists have claimed would exist.

Discussing the figures, Dr Steven Watson, chair of Academics for Yes, says: “It is natural to argue that the full powers of independence gives Scotland the best chance to bring its R&D spend in line with small innovative nations, by choosing policies and investments better shaped to the R&D needs of Scotland. An independent Scotland will then be able to redress the innovation gap in R&D expenditure that has opened up under Westminster’s watch.

“My own calculations show that by bringing R&D as a share of GDP more in line with our European neighbours - I conservatively chose 2 per cent - Scotland would see a 50 per cent rise in annual R&D expenditure across all sectors: this amounts to an additional £1,100 million pounds per year in R&D. The broader economic impact of bringing Scotland’s R&D spend into line with small innovative nations is hinted at in the recent Nesta report, ‘Small is Beautiful’, which suggests it could be worth £12 billion per year increase in Gross Value Added to the Scottish economy by 2019.”

The Nesta report – arguing that small countries can lead in innovation and pointing to changes that Scotland could make to emulate the success stories in places like Finland, Israel, Singapore – was seized upon by Business for Scotland, though it contains recommendations to be implemented regardless of the referendum result.

But if the debate over independence played out within the academic community seems to be just as fraught with conflicting claims as every other sector, there is one area in which there is a consensus – immigration.

Pro-union campaigner Hugh Pennington summarises the concern very neatly. Although stressing that the changes he desires would not require independence, Pennington summarises the general view.

“The current policy is daft and changing it is a no-brainer.”

Those involved in R&D at every level in Scotland have experienced problems with immigration, with blocking talented researchers from working in British institutions and universities deprived of additional funding brought by oversees students.

The ground gained by UKIP in the last round of European elections has concerned the sector and the more that the UK postures itself against the EU, the more chance that Academics for Yes will be able to recruit.

As Pittock puts it: “People are concerned about both major political parties being committed to an in-out European referendum, in what has been largely a poisonous atmosphere of anti-European reporting at all levels of the UK media. So in terms of engaging, one thing which Better Together haven’t dealt with since the beginning of the campaign is the risk of losing European funding from an increasingly anti-EU UK, and one with a real possibility of an in-out referendum which may lead to withdrawal from the EU.

“You can see the tension that exists between, for example, the trend of UK government policy on immigration and EU funding, and of course that trend is also visible on a global scale in terms of the UK not being open to business from Commonwealth and overseas countries, as well as the antipathy towards EU migration which was very clear from UKIP’s victory in the European election across England and Wales.”

But despite the campaigning from Academics for Yes and Academics Together, there remains a sense that the independence debate is not one that many academics are particularly comfortable with. This can partly be explained by the nature of academia, with those in the field so used to the idea of impartiality that they seem to be lost in the back and forward of the current debate. But speaking to members of the community reveals something else, more than just the hangover from a lifelong habit for staying out of politics.

There is a feeling within the Yes side that more experts would come forward if they were not so concerned by what it would mean for their careers in a sector they claim is still dominated by a pro-union old boys network. Conversely, those on the unionist side point to a perceived hostility towards the experts who find themselves on a collision course with the nationalist movement. Academics on both sides have views to contribute, but on a personal level they wonder what is in it for them.

But if academics are almost as reluctant as businesses to nail their flag on the mast and publicly pick a side, the debate is certainly going on. This must be a frustration for those who are campaigning, though as Pittock points out, if the debate going on in Scotland’s universities has been a more subtle one, it has also avoided some of the pitfalls of the kind engulfing Scotland’s pubs and social media streams. Academics are not politicians after all, and a less febrile debate has its advantages.

Pittock says: “In terms of taking a stance then in comparison to the general population then I would say yes, activity is lower in universities. I think there are a variety of reasons for that and it would not be helpful to scare monger, but academics have a professional commitment in many ways to look at both sides of the question and there is not meant to be a partisan political atmosphere on any kind of issue. And I am sure there are members of Academics Together who think that an independent Scotland would be fine but that on balance it is too risky and there are no doubt members of Academics for Yes who think that an independent Scotland is what they want but that of course there are risks.”  

He continues: “So I think people do recognise each other’s positions and I think that in nearly all cases the people from the two organisations actually get on very well. Having academics on both sides of the question means that you don’t get the kind of tabloid or social media style tail chasing or abuse and that is a great thing but it doesn’t mean there is not a debate happening, just because it isn’t very overt. There are lots of agreements to be had on individual issues.”      

The debate over independence and its effect on research will continue. But in some ways it is in itself a distraction, since the sector will need to change regardless of the result in September. The nature of innovation demands that countries change and in the world of R&D, standing still means falling behind. The Nesta report highlights the areas of strength that Scotland has to build upon, such as the quality of its university research, but it also identifies areas of weakness, such as the relative underinvestment in R&D and the need for greater public service innovation along with stronger links between business and academia.

Referendum or not, these are the areas that will need to be focused upon.  

Read the most recent article written by Liam Kirkaldy - Sketch: If the Queen won’t do it, it’ll just have to be Matt Hancock

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