Committee (1st Day)
Clause 1: Establishment of ARIA
Clause 1 agreed.
1: After Clause 1, insert the following new Clause—
ARIA’s purpose is to fund projects with high transformational potential in pursuit of a sustainable and resilient society, planet and economy.”Member’s explanatory statement
The purpose of this amendment is to provide a broad sustainability purpose for ARIA which will ensure that it funds projects which align with core strategic challenges such as decarbonisation and which are sustainable.
My Lords, I shall also speak to Amendment 26 in my name. I thank the noble Lords, Lord Fox and Lord Browne, for their support for these amendments. I declare my interest as a director of Peers for the Planet and as an engineer and project director for Atkins.
There was much discussion at Second Reading of DARPA, the agency that has inspired ARIA. DARPA succeeded in changing the world because it took enormous gambles, failing often but with a few projects that succeeded, more than justifying the payouts and creating trillions of dollars in value. This freedom to take risks and to fail is its most important characteristic. That is exemplified by the second project that DARPA funded, Project Orion: a proposal for a manned spacecraft propelled by nuclear explosions. The head of DARPA at the time astutely stated that one of the main challenges was doing that in such a way that the occupants were not killed. While that particular high-risk project did not succeed, for obvious reasons, many others did: the internet, stealth technology and Moderna’s Covid-19 vaccine, to name but a few.
ARIA certainly takes that lesson from DARPA to heart, as described in the Bill: getting bureaucracy out of the way and giving a high-calibre team based on programme managers the freedom to deliver high-risk, high-reward research. But there is another vital lesson to take from DARPA which I referred to on Second Reading: a clear purpose for the organisation. Everything that DARPA does is defined by its aim of ensuring the technological supremacy of the United States armed forces. In 1958, the USA fortuitously hit upon a combination of factors for a research organisation—a clear purpose, freedom to fail, programme-manager-led—that literally changed the world. The US has taken this purpose-oriented approach in all its DARPA derivatives since, including ARPA-E and HSARPA.
To have the longevity and political staying power that DARPA has demonstrated, ARIA needs to have a purpose, and that purpose needs to be closely coupled to the strategic goals of the nation. Foremost among those strategic goals are the UK’s net-zero and environmental goals. Giving ARIA a broad sustainable purpose will allow a flexible approach to research, while at the same time being aligned with the innovation strategy that highlights the need to direct innovation towards
“our top priority societal missions … like the climate and biodiversity crises”.
It will also ensure that projects and proposals that would be contrary to those strategic goals do not progress.
Attempting to reverse engineer DARPA is not a guaranteed route to success, but we need to take the benefit of real-world experience in learning the lessons of why DARPA succeeded and giving ARIA the best chance of success, which is what we all want.
We know how vital R&D is to achieving our net-zero and environmental targets. For example, the International Energy Agency has stated that almost half the emissions reductions required by 2050 are expected to rely on technologies that have not yet reached the market. In this area, what must be done—the key enabler to make net zero politically possible across the world—is to create green energy at a price point that is cheaper than fossil fuels. So, we need nothing less than revolution in net zero and environmental R&D to make our goals possible.
That brings me to the specifics of my Amendments 1 and 26. Amendment 1 is very simple. It states:
“ARIA’s purpose is to fund projects with high transformational potential in pursuit of a sustainable and resilient society, planet and economy.”
This amendment would give ARIA a broad sustainability purpose in line with the points I have made, and in that sense, I believe, would fulfil the need to orient ARIA towards alignment with the most important strategic goal of the nation, and indeed the world.
In crafting the amendment, I have listened carefully to feedback from the Minister during the progress of the Bill in the other place, in that the Government do not wish to unduly constrain ARIA. That is why the amendment is written around a broad sustainability purpose, not a specific net-zero objective or mission. My amendment is not about saying that other streams of research not specifically related to net zero or the environment cannot progress; just that any such streams must not be contrary to, and preferably support, the core strategic challenges. Having a broad purpose and key priorities in setting the direction of the organisation is what the amendment seeks to achieve, while still retaining the flexibility the Government want for ARIA.
My Amendment 26 would ensure that consideration for our climate and environmental goals is embedded within ARIA’s functions. It is modelled on similar government provisions in other legislation, including most recently in the Skills and Post-16 Education Bill. As noble Lords will be aware, the Committee on Climate Change, given the advice that there is a need for a coherent approach to achieving net zero, has made it a priority recommendation for 2021 to ensure that all government policy decisions are compatible with the Government’s climate commitments.
In this sense, the amendment would align this Bill with other amendments the Government have put forward across a range of recent legislation, such as the skills Bill, the Financial Services Act and the Pension Schemes Act. To meet our goals, we need carefully to consider the systems aspects of net zero and ensure that consideration of these goals is embedded into all government policy and legislation where it is practical to do so.
Given how critical R&D is to achieving our goals, I hope the Government will agree that such considerations really need to be present in this Bill in order to align it with their broader strategy. It is not about stopping projects that are not directly related net zero; rather, it is about ensuring that the impacts in the context of compatibility with our climate commitments have been properly considered and factored into decision-making. It is a question of consistency with other legislation.
In summary, consideration of sustainability goals and functions in the Bill has wide support across the academic community, including from Professor Richard Jones, the science policy expert who has been involved in much of the thinking around the formation of ARIA. The amendment provides an excellent opportunity for the Government to maximise the benefit from the £800 million of funding, to demonstrate to international partners at this critical point post COP a new model for climate and net-zero aligned R&D, and to develop the new technologies that we will need to help the UK and the rest of the world achieve our targets. Finally, it would ensure longevity and long-term political support for the organisation, irrespective of the Government of the day, something the whole of Parliament can get behind. I beg to move.
My Lords, I am very pleased to follow the noble Lord, Lord Ravensdale. Two of the amendments in this first group are in my name, Amendments 25 and 27, and I want to speak to Amendment 27 first. It is grouped with Amendment 1 because we start by debating, quite properly, the purposes of ARIA as an agency. What is it here to achieve?
As the noble Lord, Lord Ravensdale, said, we are not seeking to replicate DARPA but to learn from it. DARPA said that its sense of mission was part of the reason for its success. However, that mission in this context was originally
“to prevent and create technological surprise”.
That is an interesting concept—to prevent technological surprise happening to the American Government and, at the same time, to create technological surprise on its own part. One might say that you could substitute “create technological advantage” in the latter case. Interestingly, in more recent years, when DARPA staff were asked what they regarded as their mission, they said it was to be part of “shaping the future”. Indeed, I think that is where our starting point should be. We want ARIA as an agency to be part of shaping the future.
My problem with Amendment 1—actually, I do not have a problem with Amendment 1, because you could stretch the language of sustainability anywhere; that is its advantage but also its problem. I am not sure I understand what the board of ARIA, or its leading members, would interpret as being outside the scope of the sustainability criterion. Does it actually help them? I am not sure that it does. If anything, they might feel that it constrains them towards certain missions. The DARPA example we ought to learn from is that, in practice, it set out to define for itself a range of missions within the organisation.
I note that sitting next to the noble Lord, Lord Ravensdale, is the noble Lord, Lord Broers. I take from his Second Reading speech the thought that the programme managers are at the heart of this system, and the programme managers are chosen in relation to the programmes that DARPA is pursuing. I suspect the same will have to be true for ARIA—that it has to decide, “What are our programmes?” The programmes, in my view, might be mission-led—for example, related to adaptation to climate change—but at the same time they might be technology-led. For example, they might be to pursue AI and the data economy or to look at cell or gene therapy. There is a range of those possibilities. We need to give ARIA, as an organisation, the flexibility to decide the missions that it thinks fulfils its purposes. The missions will develop over time, but the legislation cannot change repeatedly over time, so the legislation should be sufficient to enable ARIA to select the missions it wants for the future.
My Amendment 27 is in this group. A report of July 2016 produced for DARPA about innovation in DARPA isolated four “sources of success”, as it put it, the first of which was the “limited tenure” of the leading executive members
“and the urgency it promotes”—
nobody was appointed for a period exceeding five years. The second was a “sense of mission”, which I was just talking about. The third was “Trust and autonomy”—both giving DARPA autonomy but also within the organisation trusting and giving autonomy to the programme managers in particular. The fourth was:
“Risk-taking and tolerance of failure”,
which of course we are setting out to incorporate into this legislation for ARIA. I add that DARPA interpreted this as meaning “Move fast and take risks”—do not spend a great deal of time trying to assess all the risks, because you could lose the opportunities in the process.
Amendment 27 seeks to replace the language of Clause 3, not because I have any objection to the purposes set out in Clause 3; my objection is to the drafting. It says:
“ARIA may give particular weight”—
I am afraid I do not understand what is meant by “particular weight” or how people who read it subsequently will know what that means in this context—
“to the potential for significant benefits”.
We are all agreed about “significant benefits” and we know what they are because they are in Clause 2(6) above. It then refers to
“research … that carries a high risk of failure.”
It is awfully close to being a piece of legislation that says that ARIA should look for projects that are quite likely to fail because those are likely to give the most significant benefits.
This is not the approach that legislation should take. Legislation should be more deliberate. I thought: what are Ministers actually looking to do in this clause? I agree with the noble Lord, Lord Ravensdale, in his Amendment 1. Ministers—and we—are looking for ARIA to seek to have transformational effects. I think we are agreed about that. That is why Amendment 27 refers to “transformational effects”. I have also included a reference to the possibility of technological advance through
“the development and exploitation of … research”.
I do not think that is mentioned elsewhere but I think it is helpful because, actually, many of the advances that have occurred, including in DARPA’s programmes, were not themselves the object of the mission but were the result of the process of discovery and curiosity and the exploitation of research.
Turning to the question of benefits, where the realisation of benefits is uncertain but is expected to be significant and “significantly to exceed costs”—although that may not be necessary—ARIA must accept, under Amendment 27,
“that the projects it supports may entail a high risk of failure.”
It is a very simple proposition whose language is plainer than the original drafting. ARIA must look for significant benefits, transformational effects and understand the potential for technological advance through the exploitation of research, but accept that where significant benefits can be achieved, there may be a high risk of failure.
This drafting is longer, but by being so it is also a bit more sequential regarding the way in which ARIA would be asked to do its job. However, it is not trying to tell ARIA which technologies to use, which missions to undertake and what precisely it should set out to do. If we want to do that, we have a shedload of it in UK Research and Innovation. There are institutes with specific objectives and challenge funds with specific objectives. There is the Industrial Strategy Challenge Fund, and “challenges” for the ageing society, clean growth, AI and the data economy. There are many ways in which we can set out using our research and innovation resources to try to deliver specific objectives. In my view, ARIA is not about that; it is about trying to achieve transformational effects by thinking outside that framework. I do not want us, through this Bill, to put into legislation a framework that inhibits ARIA’s ability to think laterally, horizontally, outside the box: to think about technology in ways that are different from the rest of the UK Research and Innovation landscape.
Finally, Amendment 25 is a probing amendment for precisely that purpose: what is the point of ARIA if it duplicates what UK Research and Innovation is doing? We should therefore make it clear to ARIA that it should at any given time take into account the strategy of UKRI. If it does not, the risk of duplication is high. ARIA, by its nature, should be seeking to do something which UKRI is not.
I hope that my noble friend the Minister will see some merit in both these amendments, even if we might disagree at this stage about the drafting.
My Lords, I rise to support Amendment 1 and the amendments in this group that are about giving a purpose to ARIA associated with climate change and the environment. I declare my interests as a non-executive director of Frontier IP and the chair of BGF’s Clean Growth Advisory Board.
As the noble Lord, Lord Lansley, has indicated, ARIA’s success or failure will depend, crucially, on recruiting outstanding programme managers. These people will need to be interpreters and matchmakers well networked in industry and academia, with an excellent understanding of science and technology, strong lateral thinking skills—many of the things the noble Lord has already mentioned. They will also need to be tough risk-takers, but not gamblers. They will be hard to find, yet finding the right people is going to be critical to this success. Finding them will be the first constraint. Inevitably, they will have specific areas of expertise.
With a limited initial budget, focusing ARIA, at least initially, on the critical challenge of climate change and the environment will be a great way both to help address our greatest challenge and to support the UK economy. But it will also provide a valuable focus for the recruitment of these key individuals—the people who initially occupy these absolutely fundamental posts.
I would like briefly to intervene on this important group of amendments and should declare an interest as a member of the board of UKRI, which is very relevant to the issues we are currently considering. I am not acting as a spokesman on behalf of UKRI, but drawing on the experience that we have had there.
I welcome any attempt to bring greater diversity and innovation to our funding landscape. We do not want a monolith; we want lots of different ways of getting funding and lots of different requirements. Anything that adds to the diversity of the funding landscape I welcome as a good thing. However, I have two or three questions on which I hope that the Minister will be able to give some assurance.
First, the task of ARIA is often described as high-risk, high-reward research. In a way, Clause 3, to which my noble friend Lord Lansley, has referred, is an attempt at setting out in legal prose “high risk, high return”. It is great that ARIA will have that as its objective, but my one concern when I hear this language is the implication that all other public funding for R&D could not be high risk and high return and that it is in some sort of boring bureaucratic pot where everything is safety first and low return. I would be grateful for the Minister’s assurance that it is also perfectly possible for the agencies of UKRI and indeed other sources of public funding for R&D also to engage in high-risk, high-return research. It would place too much weight on ARIA’s shoulders and eliminate diversity if we said that it is the only agency that can act in that way. Having that authoritative assurance from the Government would be of great value in ensuring that our whole research ecosystem carries on performing in an innovative way.
Secondly, I want to reflect on the lessons that can be learned from the Industrial Strategy Challenge Fund, to which my noble friend has also referred, and seek another assurance from the Minister. When Theresa May’s Government put substantial funding—over £2 billion—into the Industrial Strategy Challenge Fund, Innovate UK, the main agency for delivering that programme, travelled to America to look at what ARPA did. It said, “These programme directors at ARPA are fantastic—we should have the ARPA model of programme directors in order to deliver the Government’s Industrial Strategy Challenge Fund”.
I can remember the debate that took place. The Treasury said “Hang on, how much are these programme directors going to be paid? They can’t possibly be paid more than is set by our pay rules”—the pay limit was, I think, £100,000. The Treasury then also said, “We need a committee to scrutinise that the money is being well spent and, to ensure it is making progress, a monthly report would be about right”. Then BEIS, which I do not think completely trusted the Treasury and saw this as a BEIS operation, said, “BEIS also needs to have a committee that meets to scrutinise the success of this programme director; we have slightly different criteria from the Treasury, so our committee should meet once a month”. It averaged out—at the start; it may have got better—that every fortnight there was some supervisory committee or other checking that this programme director was delivering the objectives.
That is the slow, painful process of bureaucratic accretion. It is marvellous that ARIA is, we are assured, going to be free of all that. It would be quite good, however, if other parts of research funding could also be free of those constraints. Indeed, the Government have several reviews on at the moment that are relevant to this, including the Tickell review of bureaucracy and a new grant review of UKRI.
I also hope that the Minister can assure us that, wherever possible, especially if these proposals emerge from two reviews set up by the Government, freedoms being extended to ARIA will also be enjoyed by agencies working under UKRI or other departmental bodies. The problem of bureaucracy must be solved across the whole swathe of R&D funding, not just by creating one institution outside the constraints that everyone else has to work under. I would like an assurance that lessons are being learned, both for the functioning of ARIA and from these two reviews now under way.
Thirdly and finally, we can already sense—not least from the opening presentation from the noble Lord, Lord Ravensdale, on the purpose of ARIA—a fascinating debate about missions versus technologies. I have frequently had that debate with my friend Professor Mariana Mazzucato, who has brought the language of missions into public policy, which is excellent. However, I always say to her that the Kennedy moonshot did not arise because a bunch of PPE-ists—speaking as one myself—sat around saying, “Wouldn’t it be wonderful if we sent someone to the moon? That would really get the media’s attention; let’s do that, Mr President”, but because of prior investment in general-purpose technologies, including rockets. It was a deep understanding of what the technologies might be capable of that led to the formulation of the mission.
One can resolve this by wordplay, by making “backing technologies” one of the missions, but the point made earlier about preventing and creating technological surprise tells us that, really, DARPA was always envisaged as driving American leadership in technology. We have the opportunity to choose missions only because of prior investment in underlying science and technology, which turns those missions from empty fantasies into deliverable objectives.
I very much hope we will have an assurance from the Minister during the course of our scrutiny today that ARIA will strike a happy balance. It should be able to fund general-purpose technologies without knowing exactly how they will prove useful, while suspecting that something of that power and significance will have use. It may also wish to fund specific missions or challenges, but it would be a strategic mistake to put all its eggs in one basket. It is the interaction of technological investment capabilities with missions and challenges that really drives innovation. I very much hope that ARIA will pursue both approaches.
My Lords, I apologise for not taking part at Second Reading; I was at the COP 26 climate talks, which are of obvious relevance to this group in particular.
I begin by reflecting on the model for ARIA—DARPA, which was of course military. We have talked a lot about risk-taking, which is usually interpreted as the risk of failure to achieve your objectives. When we think about the origins of this—the child very often showing some characteristics of its parent—we can also think about the risks attached to achieving your outcomes but causing unintended effects. With DARPA, there was Agent Orange in the Vietnam War and the drone warfare of the Gulf War, and it is now working on killer drones and robot warriors.
Looking at the model of DARPA, researcher Annie Jacobsen, author of The Pentagon’s Brain: An Uncensored History of DARPA, talked about how it very much became embedded in what has been described, including by US Presidents, as the military-industrial complex. Giving a mission is very important, in order to avoid institutional capture. That is one of the reasons why I speak in favour of Amendments 1, 21 and 26. We have not yet had the chance to hear from the noble Baroness, Lady Chapman, but I think her Amendment 21 is in a sense similar to Amendments 1 and 26, except that it provides a more regular review mechanism.
If we think about what ARIA is for and look at some of the proposals put forward, we see that the CBI described it as
“an international lynchpin for business investment”
that is to “ultimately deliver new products”. McKernan said that it was
“a public sector, new technology seed fund”
whereas, by contrast, the Russell Group described it as
“multidisciplinary research teams with the capacity to take a holistic approach”.
That brings us to the debate that the noble Lord, Lord Willetts, was just addressing, which was also raised by the noble Lord, Lord Lansley—and why I would express opposition to his Amendment 25. There is a danger in focusing on technology rather than on mission. We want to focus on mission and on the problems that we need to solve—and Amendment 1 very much focuses on the great problem that we need to solve. Discussion thus far has focused very much on the climate emergency, but it also talks about a “sustainable … society”.
Technology is usually defined as being about bright, shiny metal things which will bring a solution to problems in society, whether climate or social—but do solutions lie in social innovation? To take DARPA, even during the Vietnam war, its projects involved anthropologists and sociologists. We have to ask the question, if we have a mission, of how to make sure that we do not get trapped in the idea that the answer is technology. Maybe the answer is in innovation of different kinds.
Amendment 1 aims to tackle what have been called the “wicked problems” preventing the UK and the world from meeting the sustainable development goals, goals that the UK and the whole world are signed up to solving by 2030. So this amendment, or something like it, is truly essential for this Bill in order to set this new agency on the right path, and it should be mission rather than technology led.
My Lords, I will speak to Amendments 1, 21 and 26. While the noble Lord, Lord Lansley, made a compelling case for his Amendment 27, I would probably part from him on the wider issue of mission. I was grateful to the noble Lord, Lord Willetts, who set out quite a few of the issues, and particularly for his underlining once again that the Treasury is at the heart of undermining almost every single good idea that ever occurs to government.
I regret that I was not present for the Second Reading of this Bill as I was on a train en route to the COP conference, but I had a chance to read the record of the debate. Much of it has been reflected in today’s debate, particularly the point, made by a number of noble Lords, that ARIA lacks the clear purpose which they feel will be necessary if it is be successful. Noble Lords, including the noble Lord, Lord Ravensdale, pointed out again today that that purpose was at the heart of the success of the US Defense Advanced Research Projects Agency. The noble Lords, Lord Ravensdale and Lord Davies of Brixton, and my noble friend Lord Fox, all gave some guide as to what such a purpose might be in playing a key role in addressing issues of sustainability and climate change.
Amendment 1, as we have heard, would establish a broad sustainability purpose for ARIA. Amendment 21 would set the core mission in a slightly different way, very much focused on net-zero emissions, and Amendment 26 is again different, focusing on ARIA having to give due consideration to the net-zero target and other environmental goals. As this debate has indicated, there are essentially two questions to be determined. The first is whether there should be a specific purpose or mission for this body, and whether such a purpose or mission would help or hinder it in delivering the sort of transformative success that we all hope it will deliver. The second question is, of course, that if we conclude that a sense of mission would assist, what that mission should be.
On the first question, although the Secretary of State and others in the other place were happy to cite DARPA and its successes as the model when extolling the virtues of this proposal, the reluctance to give it the clear focus that DARPA had seems a mistake. DARPA had a clear mission, a purpose: not to be surprised by technology and, hopefully, to surprise others with it. It had a clear focus, which was the threat posed by the Soviet Union and the need to maintain the competitive scientific and research advantage over it that Sputnik and other programmes had caused the US to worry it was losing. That sense of purpose was critical in driving that early success. I fear that without a clear focus for our advanced research agency, it will lack the direction and urgency that DARPA had, and which is required to achieve transformational change.
It is clear to me that a purpose, a mission, will be very important to ARIA’s success. If so, surely there is no more compelling case than to focus the work and energy on the climate and ecological emergency that we face. That is a long-term issue, as the noble Lord, Lord Ravensdale, pointed out. Tackling those challenges will require massive innovation and ingenuity, and the development of practical applications from that.
If the purpose of DARPA was to protect the national security of the United States by retaining its scientific edge against the threat of the Soviet Union, today, the threat from climate change, although very different, is some orders of magnitude greater. It is an existential threat to all humanity, and to bring a halt to climate change or stop it running completely out of control will test us to our utmost—it will test our ingenuity, our practical application and our ability to deploy all our resources. If we do not harness our advanced research agency to that task, future generations will surely look back on such a decision with a real sense of astonishment.
The noble Lord, Lord Lansley, said that DARPA was really about shaping the future. This agency should be about shaping the future, but we must ensure that there is a future to shape. Unless we tackle the climate and ecological emergency, there will not be.
My Lords, I shall make just a few comments. I declare my interests, as I did on Second Reading. I spent most of my active life, 40 or 50 years, doing things that ARPA was doing—that we were doing in IBM in the United States—and I have spent more recent years working with the Queen Elizabeth prize and now with the Draper Prize of the National Academy of Engineering of the United States. I declare my membership of that academy, the Chinese academy and the Australian academy, as well as the royal academy here.
The noble Lord, Lord Willetts, raised a lot of cogent points, but the mission of ARIA—I wish “Invention” was replaced by “Innovation”, but that is a small point —must be, to distinguish it from UKRI, to take projects all the way through until they are fully implemented, fully available for people to use, commercially sensible and affordable, and to solve an important problem. A lot of what UKRI does is the essential discovery and understanding of how the world works, and these things should be different.
One thing is very much in common: you need creative people. In ARIA you probably need creative engineers—there will be scientists as well; most of these things are mixed—and creative engineers are no different to creative musicians or creative artists. They do not like being told what to paint, what to compose, how to compose or how to paint. That would turn them all away.
I test my credibility by quoting Donald Rumsfeld. ARIA is all about “unknown unknowns”. I have been sitting down for the last two hours reading all these amendments; we are trying to tie down ARIA so that we understand what it will do, when it will do it, how often it will report on doing it and everything else. That is not what we are trying to create. We will destroy the thing before we ever give birth to it.
I support these amendments, because the challenge that the noble Lord, Lord Ravensdale, has come up with, and others have supported, is the climate problem. That is huge and wide. I do not think it is a constraint that will really trouble creative people at the moment. In fact, I have met a lot of people who are very successful in one field of research and have abandoned that and moved into the field of climate and what they can do about it, because they feel that is the best place to apply their creativity and intellect. I urge the Minister and everybody who will take this through: let us not strangle the poor thing before it begins.
My Lords, it is a pleasure to follow the noble Lord. He is completely right when he says that climate is a broad enough canvas on which people can paint. Broadly speaking, I do not mind painters and artists painting whatever they like, whenever they like, on whatever they like—if I am not paying for it. But we are paying for this, and it is not unreasonable for us to say that we would like ARIA to turn its attention primarily to the climate emergency, the very thing that is threatening our existence on this planet. That is a sufficiently exciting challenge to set ARIA.
The noble Lord, Lord Lansley, was very persuasive and I understand the attraction of allowing maximum freedom, but the risk is that it becomes directionless. For a quite small organisation, as ARIA is, that is a risk, so my view is that ARIA needs a core mission.
The Government want ARIA to have maximum flexibility and be able to back projects as it sees fit, free of any political interference or unnecessary bureaucracy. The noble Lord, Lord Willetts, explained very well how deadening that could be. We certainly have no wish to enter into the kind of situation he described, but a research focus or a mission could be achieved without that risk. He said that no one could have set out to achieve the moon landings without being able to look back and build on existing technology. That is completely right, but we do not have the luxury of that at this moment. We have a very real, immediate risk that we need to address, which is why we favour making the mission one of climate.
We all want ARIA to succeed. This is quite a good Bill from a cross-party working point of view because we all want it to work, but asking the board to come up with its own mission—or, even worse, not having a mission at all—would not assist ARIA and could set it up with a weakness, or even to fail. We all need direction, purpose and a sense that what we are doing is contributing to a greater good, so telling ARIA to back any scientific research and to do what it sees fit would be a mistake. The board will anyway spend its first few months deciding how it is going to make decisions. We are not attempting to tell it how to do that, but it would have no framework or sense of the UK’s priorities, and I just do not think that is necessary. It would be a mistake and, if we corrected it, that would not diminish ARIA in any way; in fact, it would be strengthened.
Amendment 1, Amendment 21 in my name and Amendment 26 seek to assist ARIA by setting its mission as supporting innovation that would help to combat climate change. It seems obvious to many of us, following the conclusion of COP 26 last weekend, that we have to move faster on this issue. The role for technology, science and invention is obvious. Governments need to act with speed and to work to a strategy, so setting up ARIA and not asking it to work on climate as our national priority just seems like a massive missed opportunity. If we do not set that objective, we will look back and wonder why.
It is our Government’s job to move decisively in this area. New technologies need to be scaled up and grown, but first they need to be invented and that is an obvious role for ARIA. Innovation needs to happen quicker than the planet is warming. That means an active state doing everything we can with our universities, research community and venture capital. I hope I do not need to go into all the arguments that we have heard in Glasgow over the last couple of weeks, and I hope no one in this Room still needs to be convinced of the need to address climate change. Suffice it to say that food insecurity, infrastructure vulnerability, mass migration and civil unrest are some of the existing and anticipated effects. ARIA’s £800 million would be a drop in the ocean but it might just be the catalyst we need to bring about the innovation that could make a difference.
Buildings with energy-efficient heating, cooling and lighting, the gene editing of crops, protein substitutes, waste heat recovery, hydrogen, advances in renewable energy—there are people in this Room who know far more about these things than I do—are just some of the technologies in need of support that are already proving capable of having an impact on temperature rises, and newer technologies are still emerging that ARIA is perfectly placed to invest in. Some of those could be considered moonshot ideas, but surely that is the point of ARIA.
My Amendment 21 suggests that ARIA might have regard to that as its core mission. It would need to publish a statement every two years—that does not seem too onerous, bearing in mind the warning of the noble Lord, Lord Willetts—on the steps it would take with regard to the mission. I suggest that the mission should be Section 1 of the Climate Change Act, and thereafter ARIA’s mission would be set every five years and approved by regulation. I accept that there may be other mechanisms by which to implement the aim of providing ARIA with a mission. If others, perhaps even the Minister, wish to suggest some then I am sure they will have our support.
It might help if I explain the thinking behind expecting ARIA’s mission to be approved by Parliament. If the Government were to agree to making climate the priority, there would be strong cross-party support and the agency would get off on a strong footing; everyone would be willing it on. As things stand, we all know that ARIA’s early decisions—whatever the Government attempt to do later in the Bill about transparency, or the lack of it—are going to be picked over and could be used to undermine the agency, and we do not want that to happen. Giving it a mission that was understood and supported would be in ARIA’s interests. There is no doubt that the agency’s activities will become known one way or another, and the lack of transparency combined with the lack of a mission is just a recipe for political pressure and concern in future, which none of us wants to see happen.
Amendment 25, proposed by the noble Lord, Lord Lansley, seeks to prevent ARIA duplicating research funding by UKRI; that seems sensible and I am interested in the Minister’s response to that. The explanatory statement for the noble Lord’s Amendment 27 says that it
“would provide a framework for the decisions about projects by the Agency”.
Having listened to the noble Lord, I can see why he is suggesting that. Clearly, I prefer my amendment, but I wonder whether the Minister thinks the noble Lord’s amendment might in some way assist the agency.
My Lords, I will speak in support of Amendments 1 and 26—to which I have added my name—and Amendment 21. Like the noble Baroness, Lady Brown, and the noble Lord, Lord Oates, I have to tender my apologies for not contributing to the Second Reading debate. I was not at COP 26 or on my way there, I was actually in this Room in the Committee on the Armed Forces Bill and speaking to amendments in my name and which I had supported. I regret that I was unable to be there.
I agree with the arguments put forward by a number of noble Lords and I do not intend to rehearse them. Because I was not at Second Reading, I read the debate very carefully and a number of Peers raised the issue of lack of purpose of ARIA and suggested a climate change purpose, which I support. The Minister pushed back on this. He said that solving particular national challenges falls
“very much within the UKRI remit”
and a programme to develop these challenges would be decided by the national science and technology council in due course. He may be in a position to tell us how long that “due course” will be today. It would be interesting if he was.
Finally, he commented that:
“It would clearly be inappropriate to create another new body to do essentially the same thing.”
He said that ARIA’s leadership would be responsible for setting its strategy and—here I quote the issue I am really interested in—upholding
“the autonomy which is at the heart of this new agency”.—[Official Report, 2/11/21; col. 1200.]
That is what I want to explore. I hope I have not misrepresented the noble Lord’s response but if I have, he will have the opportunity to correct me.
It is clear that ARIA enjoys some autonomy but it is not unlimited. In fact, in exercising its functions as set out in Clause 2(6), it “must have regard to” a number of things and they are very broad. I will read them in short:
“contributing to economic growth, or an economic benefit, in the United Kingdom … promoting scientific innovation and invention in the United Kingdom”—
there is the word “innovation”—and
“improving the quality of life in the United Kingdom”.
That is pretty broad. So, it is constrained to do that.
Clause 5 states:
“The Secretary of State may give ARIA directions … in the interests of national security.”
These directions must be complied with and I fully appreciate why that is there. I understand it and I think it is necessary, and I do not expect the Minister to expand on that.
However, I do expect him to expand on the potential significant restriction that is in Clause 4. Clause 4 grants the power by which the Secretary of State may make grants to ARIA. Clause 4(2) states:
“Grants under subsection (1) may be subject to conditions.”
Clause 4(3) refers to one particular condition, for some reason, in the absence of any others: that the grant may need
“to be repaid (with or without payment of interest).”
I was intrigued by that and thought there was bound to be an explanation of what the Government have in mind. What limitations on the autonomy of ARIA are going be put in these conditions? Why do the Government think they need this restriction?
As always, I reached for the Explanatory Notes. I will quote them because they make very clear the purpose of this:
“This Clause provides the Secretary of State with a grant funding power in relation to ARIA.”
I had worked that out. They then state:
“The Secretary of State can make grants subject to conditions. In particular, the conditions may require the repayment of financial support with or without payment of interest.”
They simply restate the clause.
I am still at a loss to understand. I hope that if the Minister chooses to reject any of these amendments on the basis of the restriction of autonomy, he will give the Grand Committee the opportunity to understand what restrictions the Government intend to put on the autonomy of ARIA. That will help us, at the appropriate time, to decide whether these restrictions—I do not believe they are restrictions; I will come to that in a moment—are actually restricting any autonomy which it is likely to have. If that is the issue on which these amendments stumble, it needs to be described in a wee bit more detail.
However, my argument is that these provisions do not seek to create a new body to do essentially the same thing as the national science and technology council, but of course we will not know what that is until we see what the national science and technology council does under the leadership of the Prime Minister. In the context of a world in which we have clear national priorities, we are told that we cannot allow an autonomy for this institution that we would not allow for any other institution; that is, to act against the national interest. I remind the Minister that the pursuit of a sustainable and resilient society is one of the four overarching objectives set by the strategic framework set out in the integrated review. That framework, in the Government’s own words,
“establishes the Government’s overarching national security and international policy objectives … to 2025.”
The provision to constrain ARIA from acting against that is clearly in the stated agreed national interest.
In relation to the Climate Change Act, that is a national obligation. Surely, we cannot anticipate that ARIA would act against that national obligation of net zero by 2050, or the imperative of adaptation to climate change, or the environmental goals which have been, and are being, developed in this Parliament. In a sense, red lines are being put around ARIA but they are about national imperatives, which are shared by everyone, including the Government. They are desirable for all the reasons that noble Lords have set out but, I have one question for the Minister, which I would like him to answer either now or at some point before Report: what do the Government expect the CEO and the board of ARIA to want to do which would be inconsistent with these provisions? I guarantee noble Lords that should it wish to do any such things, the Government would seek to restrict its autonomy because it would be acting in an undesirable way.
My Lords, this has been a fascinating debate. I thank all noble Lords for their contributions. I was delighted to hear the defence of basic research made by the noble Lord, Lord Willetts, and the point he made about bureaucracy in the rest—it should be said, the larger part—of research funding was well made and echoed many of the Second Reading comments.
However, there is a danger that we are taking the DARPA bait a little too seriously. The Government have played this into all their communications. Let us look at what we are comparing. DARPA has a huge budget, many times bigger than even the best budget we could expect for ARIA. It has been there for decades. The noble Lord, Lord Willetts, mentioned Mariana Mazzucato. What she is very good at is pointing out how the technologies developed in DARPA have then been picked up by technology businesses within the United States, some of them part of the “military-industrial complex”, as the noble Baroness, Lady Bennett, put it, but of course Apple is one of her best examples and even the noble Baroness, Lady Bennett, might have one of those to hand. The mobilisation of this technology is absolutely key, which is why what the noble Lord, Lord Broers, had to say was so important and why the project management part is such a central point.
I refer back to the points that started to be made through Amendment 25, proposed by the noble Lord, Lord Lansley. At Second Reading, the Minister deployed the words of Professor Dame Ottoline Leyser, the chief executive of UKRI. He quoted her telling the Public Bill Committee in the other place that
“the priorities that the Government and Ministers set to solve particular challenges for the nation … fall very much within the UKRI remit”.—[Official Report, Commons, Advanced Research and Invention Agency Bill Committee, 14/4/21; col. 8]
The implication—and almost the stated point—was that because UKRI is covering this, there is no need for ARIA to cover it.
We should also take the Minister at his word. Throughout the debate so far the Minister has asserted that the way in which ARIA will tackle challenges will be fundamentally different from how UKRI will do it. That appears to be the Minister’s central point for having ARIA in the first place. If he means what he says, and the Government mean what they say, there is no worry in having these two organisations setting off to work in similar areas, because they will tackle the problems in different ways, and one has substantially different aims from the other. Therefore, I am not so exercised by this issue as the noble Lord, Lord Lansley, obviously is, because clearly there will be problems that both ARIA and those sponsored by UKRI will work on, and they may have the same direction but the route to solve them will be different—and there is more than one way to solve a problem.
I shall speak to Amendments 1, 21 and 26, to which I put my name. I congratulate the noble Lords, Lord Ravensdale and Lord Browne, and the noble Baroness, Lady Chapman, on tabling the amendments.
The purpose of Amendment 1, as we heard, is to provide a broad sustainability purpose for ARIA. Amendment 21 is to ensure a broader mission, and Amendment 26 would tighten that mission around net zero—all of them pointing in the same direction. Some noble Lords were unable to speak at Second Reading because they were at COP 26. For anybody who has had any doubts around the centrality of technology in helping us meet our climate goals, I hope that those doubts have been dismissed by the events. The noble Baroness, Lady Bennett, talked about “shiny things” with regard to technology, which made it sound as though she did not approve of it—but I think that she probably does. I do not know.
Technologies such as carbon capture and storage, hydrogen fuel cells, and energy storage are all going to edge us towards our goal. I expect the Minister to step up and say: “Ah, yes, these technologies are already very much part of the UKRI agenda.” I agree—but one thing is clear: the current technology envisioned, which is already in research, will not alone do the job. You do not have to listen just to Greta Thunberg to believe that. I had the words “unknown unknowns” in my speech, as well; there are unknown unknowns that need to be discovered and invented to get us to our goal. It is quite clear that these leaps in technology are absolutely going to be needed if we are to get close to the greenhouse gas goals that we have set ourselves. The Minister might agree with that.
Amendment 27, proposed by the noble Lord, Lord Lansley, which I believe is a great improvement on the wording of Clause 3, talks about
“transformational effects and large-scale benefits”
arising from “advances in technology”. Where do we need those most? Where do we need them more than anything? At the moment, it is around the field of climate change, where the aims have to be bold and the risks of failure may be higher, but the rewards are vital.
To this end, if we are to take the Minister’s Second Reading speech at face value, what better institution is there to undertake this bold research than ARIA itself? This is a field in which researchers and scientists must not be held back by the fear of failure and in which the stakes are existential for many communities. That is why Amendments 1, 21 and 26, which bear my name, are really important. They seek to make that existential challenge the focus of what this institute will do initially.
Throughout the debates so far, the Minister’s tone has been that it is not for us to set the direction of ARIA. He says the chair and CEO will be at the helm, supported by the board, and that these officeholders will be the arbiters of ARIA’s direction. This is UK citizens’ money. ARIA will spend at least £500 million over this Parliament, with £300 million more if the next Government decide to honour it. It is not unreasonable for the UK Parliament to focus this money on the number one problem that will affect people—not just people in the UK who are stumping up the cash but our nearest and, indeed, most far-flung neighbours.
When this research centre was first mooted, it was in the context of it tackling a moonshot project. I do not think we need to look that far into the solar system.
My Lords—ah. I caught the expression on the Minister’s face, and I apologise for delaying his remarks. This is my first Bill Committee and I would like to say a few brief words in support of Amendments 1 and 21 and a word about the amendment in the name of the noble Lord, Lord Lansley.
We are, after all, discussing something new. I spoke at Second Reading—those who missed it were spared that experience—and said:
“We are discussing an experiment”.—[Official Report, 2/11/21; col. 1169.]
In some ways, it is an interesting occasion. I presume that we will find out from the Minister that even the Government themselves do not know what it will be like, because it is in the nature of the thing that we do not.
The Committee and the Bill team have been spared the amendments I tabled, because as a new Member I submitted them too late. Nevertheless, some of the amendments I drafted relate to some of those on the Marshalled List, in particular relating to climate change as an objective that should in some way be associated with ARIA’s work. It is quite a timely moment to be discussing this in Committee. COP has just finished, there will be a debate in the House tomorrow on its aftermath, and, as it is the most existential crisis facing planet earth, as one noble Lord said, I do not see any reason why ARIA cannot play a part in trying to deal with the issues we face.
When I was very young, we had a model of Sputnik in our living room; I do not know how it arrived. I look back now and realise that that was what triggered ARPA and DARPA, which to some extent we are basing our discussion on now. As the noble Lord, Lord Lansley, said, it was to prevent surprises. The United States Government did not like that surprise, for sure.
As the noble Lord, Lord Lansley, also says in his Amendment 25, we are not here to create a body that duplicates UKRI. I listened with great interest to the noble Lord, Lord Willetts, who has an enormous amount of experience in this field. When you talk about the bureaucracy involved, that strikes a chord with everybody, maybe on this Bench as well, including—if I may use this phrase—my noble friend Lord Broers, who referred to his wish to change the Bill’s Title.
My first amendment was to change the Bill’s Title. I know you normally do not spend time thinking about it, but perhaps when the Minister replies he could at least explain why the Government themselves, who introduced the concept of ARPA, subsequently changed its name. It would be helpful to know some of the thinking that led to the change of name to ARIA, whatever the “I” stands for.
As we know that this is based to some extent on the experience of DARPA, I can report that I spoke recently to two Americans who are very interested in what we are doing here. The American Chemical Society and someone in the State Department expressed great interest in what we are discussing. They are looking to see how we develop this idea and put it into practice.
My last point to make at the outset is that the relationships between ARIA and the other bodies in the scientific landscape will be very important. Someone already quoted Dame Ottoline Leyser of UKRI, and I know that she said, I think before the Select Committee, that it will be vital to maintain relationships with key players right across the system. There is a range of other bodies. My noble friend referred to the new council for science and technology, chaired by the Prime Minister, and we also have a new set of relationships with the Chief Scientific Adviser, both in his existing capacity and in his new capacity as Chief Technology Adviser. I hope that we can explore some of those in Committee. Forgive me for saying this, but it would have helped if we had had some idea of what the framework document is due to say because, as I understand it, it will describe some of the relationships that the Government have in mind that ARIA should have with other major bodies in the rest of the scientific world.
I shall leave it there and try to cheer the Minister up by saying that I will sit down and, as far as I know, no one else is following me, so the floor is his.
I thank the noble Viscount, Lord Stansgate, for his intervention. When he was unable to complete his remarks at Second Reading, he said that he would come back in Committee and add to what he had said—which makes a change from what normally happens, with people coming back to repeat their Second Reading speeches. It is good to hear from the noble Viscount.
I am also delighted to hear the unequivocal support from the Opposition Benches for that great neo-conservative, Donald Rumsfeld—quoted by both Cross-Benchers and the Liberal Democrats. A great man indeed.
Amendments 1, 21, 25 and 26 create requirements that seek to narrow, or to have the Government direct, ARIA’s funding. Amendment 1 would require ARIA to pursue projects that contribute to a sustainable and resilient society, planet and economy. Amendment 25 seeks to specify a relationship with UKRI. Amendments 21 and 26 would set ARIA’s core mission as to support achieving the target established in Section 1 of the Climate Change Act. Once achieved, ARIA’s mission would then be set every five years by government by an affirmative SI. Of course, I thank noble Lords for tabling these timely and topical amendments, particularly given the partial success at COP 26 last week.
Starting with Amendment 1 from the noble Lord, Lord Ravensdale, let me point him to Clause 2(6), where, in exercising its functions, ARIA must have regard to contributing to economic growth, promoting scientific innovation and invention, or improving the quality of life. These considerations ensure that ARIA’s activities are geared towards beneficial outcomes, which will of course include sustainability and resilience. Of course, this broad characterisation of the benefits of ARIA’s activities does not represent the limits of ambition for individual ARIA programmes, or substitute for ARIA’s unique tolerance to failure as set out in Clause 3.
That brings me on to Amendment 27 from my noble friend Lord Lansley. I have heard consistently from the scientific community that ARIA must have high risk tolerance to succeed, and indeed that gets to the heart of what ARIA is all about. It is therefore important, in my view, that we express that idea precisely. My noble friend’s alternative articulation of risk tolerance, for which I thank him, does not specify the particular weight that ARIA may give to this type of activity, and I think that is crucial, particularly for the NAO’s assessment of whether ARIA’s activities are in line with its stated functions.
My noble friend also talked about Clause 3 and asked: what it is there for? The reason why we have done this is important, in that it is crucial for the NAO’s assessment of whether ARIA’s activities are in line with its stated functions. I also highlight to my noble friend the difficulty in this type of activity of assessing either the costs or the benefits up front. In essence, I am just going to have to agree to disagree with my noble friend on the current drafting. Obviously, I prefer the Government’s drafting, which I think is more than adequate.
I turn to the points made by my noble friend Lord Willetts. I very much agree with him that high-risk, high-reward, blue-sky research is also done in UKRI but without the unique freedoms that ARIA will have in this case. In fact, I agree with him that ARIA will be a useful proof of concept, if you like, for how we can perhaps better fund R&D in future. We will of course learn any lessons that arise from both its successes and, possibly, its failures, and we will share those lessons with UKRI to see how they can influence future policy.
On Amendments 21 and 26, the Government continue to effectively prioritise funding to respond to national and global challenges. UKRI has a broad portfolio of projects that it funds to tackle climate change across 12 different areas, including adaptation and resilience, clean energy, sustainable industry, agriculture and transport. Specific projects include using wood to build skyscrapers in order to reduce emissions and developing technology to generate electricity through waste. In the innovation strategy published this summer we announced that we will establish a new innovation missions programme to tackle some of the most pressing challenges confronting the UK in the coming years.
My noble friend Lord Willetts mentioned the ISCF, and I agree very much with his remarks about it. We were well-intentioned in introducing it and we have learned the lessons. We should reflect that at the heart of the ISCF programmes were Minister-set missions, which were very much tied to the politics of the system. We must not be tempted to go down that path again with ARIA.
In response to the noble Lord, Lord Browne of Ladyton, it is indeed the case that ARIA can fund research projects on climate change—as I said earlier, climate change targets are a desirable thing—but ARIA can fund other projects as well, which I think is the important clarification. Nevertheless, we expect ARIA to have and articulate a clear strategy, as any well-functioning organisation should, but it is very much our view that that should be set by the expert and visionary leadership that we will have in place for ARIA, not by politicians.
I am concerned that the effect of Amendment 21 in the name of the noble Baroness, Lady Chapman, while well-intentioned, would be a somewhat continuous chopping and changing of ARIA’s core mission. The kind of high-risk research that ARIA will pursue may take many years to realise the benefits of, and preliminary findings may only just have been realised—to take an example, antimicrobial resistance—before the organisation had to pivot to tackling another problem, such as food insecurity.
I very much agreed with the remarks of the noble Lord, Lord Broers, about not wishing to constrain the activities of ARIA. As a fellow electrical engineer, it gives me great pleasure to agree with him, although he is much more distinguished than I ever would have been in the field. It was many years ago that I did my last engineering and I very much hope not to have to go back to it at some stage.
Much of what I have said so far speaks to the spirit of Amendment 25. I agree to a certain extent with my noble friend Lord Lansley; it will be important for ARIA and UKRI to co-operate and perhaps in some cases even co-fund some projects. However, we should never forget that UKRI will be only one actor in the somewhat complex landscape in which ARIA will operate, and co-operation will also be required with many other organisations. On the best way to engender this co-operation, let me satisfy the noble Lord, Lord Fox, by once again quoting Professor Dame Ottoline Leyser, who said
“the kinds of relationship that one wants to have with key players across the system are not things for which you necessarily legislate. They are about maintaining open lines of communication and building high-quality personal relationships with different actors in the system.”—[Official Report, Commons, Advanced Research and Invention Agency Bill Committee, 14/4/21; col. 14.]
It will clearly not be in the interests of ARIA blindly to duplicate activities taking place elsewhere or being conducted by other bodies. However, I certainly agree with the noble Viscount, Lord Stansgate, that it will very much be in ARIA’s interests to maintain a consistent, ongoing dialogue with UKRI to understand the current work and opportunities in the UK R&D landscape.
I hope I have provided noble Lords with all the reassurances they need that ARIA will be an organisation with the clear strategy and purpose of pursuing the most ambitious research and innovation, led by people of the highest calibre with an extraordinary vision to define what we hope will be a unique approach. I hope, on that basis, that the noble Lord will feel able to withdraw his amendment.
I thank all noble Lords who have taken part in this excellent and illuminating debate. I think it has demonstrated a clear feeling that there is a problem to be addressed in terms of what ARIA is to do—
“a brand in search of a product”,
as was said in the report of the House of Commons Science and Technology Committee. The real advantages for the Government in considering the purpose of the organisation are that it is all about maximising the chances of ARIA’s success as we take it forward.
I will draw out a few key points. The noble Lord, Lord Lansley, got to the heart of the matter in asking whether the organisation should be technology-led or mission or purpose-led. He made some very strong arguments, but I come back to what the deputy director of DARPA said in his evidence to the House of Commons Science and Technology Committee:
“having national security as the mission frames everything”
that DARPA does, having that high-level purpose within which the technology is developed.
I also emphasise some of the points made by the noble Baroness, Lady Brown, and the noble Lord, Lord Broers, about the value of setting that goal and creating some inspiration behind the organisation—using it to inspire and bring in the right people—and the importance to its success of the programme directors.
The noble Lord, Lord Oates, emphasised the importance of that sense of purpose, and the competition with the Soviet Union, for DARPA when it was set up in 1958 in response to the launch of Sputnik. It is easy to forget the panic at that time; it was Lyndon Johnson who envisioned a day when the Soviets would be
“dropping bombs on us from space like kids dropping rocks onto cars from freeway overpasses.”
For very different threats, we need to take the same approach that the US did in 1958, rethinking our innovation systems to meet our climate goals. The noble Baroness, Lady Chapman, emphasised the importance of bringing the whole of Parliament along with this organisation, and building support across Parliament for it in the long term. Taking that long-term view is another key point.
We will come back to this, and I look forward to further discussions with the Minister. On that basis, I beg leave to withdraw my amendment.
Amendment 1 withdrawn.
Schedule 1: The Advanced Research and Invention Agency
2: Schedule 1, page 6, line 18, leave out paragraph (c)
My Lords, in moving Amendment 2 I will speak also to Amendments 6, 8 and 10 in my name. These are all probing amendments that concern the governance of ARIA and its board, so I am dealing with much more mundane matters than we covered in the first group. There are a lot of different aspects in this group so I apologise in advance for taking a little time in my opening remarks.
Amendment 2 is about the size of the ARIA board. It deletes paragraph 2(2)(c), which allows between two and five executive members to be appointed to the board in addition to the chief executive and the chief financial officer. As with the governance arrangements relating to commercial boards, paragraph 2(4) requires there to be a majority of non-executive members. Therefore, the minimum size of the ARIA board will be twice the number of the executive members, plus one. If there are two additional executive members, the total number of executives would be four, the minimum number of non-executive members would be five, with a minimum board size of nine. If, however, the full complement of five additional executive members was appointed, the board would comprise seven executive members, with a minimum of eight non-executive members, making 15 in total. There is, however, no limit to the number of non-executive members and hence no upper limit on the size of the board.
I believe that this design is flawed and could result in an unwieldy and ineffective board. Some years ago, in the wake of the financial crisis, Sir David Walker produced a review of corporate governance in banks and other financial services entities. His report included an annexe, which dealt with optimum board and committee size, based on evidence from a number of sources. Sir David said that the optimum board size was between eight and 12, and that beyond 12 a board was prone to
“passive free riding, dislocation and ‘groupthink’”;
in particular, the likelihood of groupthink increased “exponentially” above 12.
I will quote some of the rationale for this:
“This importance of size is due to the cognitive limit to the number of individuals with whom any one person can maintain stable relationships, this limit is a direct function of relative neocortex size, and this in turn limits group size.”
My own direct experience of a number of boards in different sectors over the years is pretty much in line with the Walker report.
At Second Reading I emphasised the need to avoid groupthink in ARIA, and I hope the Government will look again at their design for ARIA’s board. Many listed companies have only the chief executive and the CFO as board members, which helps limit overall size and keep the board effective. Is it really necessary to have a minimum of any extra executive members? Why not just set an upper limit on the size of the board—at, say, 12—and let the rule on the majority of non-executives drive the remaining appointments?
Amendment 6 is designed to ensure that the culture of ARIA is kept away from the Civil Service and government, about which I also spoke at Second Reading. It states that non-executives cannot be either Ministers of the Crown or employed by a government department and paid out of public expenditure. There is a precedent for a prohibition on Ministers and civil servants in the Bank of England legislation which governs appointments to the Court of the Bank of England. It is now in the Bank of England Act 1998, and I have largely copied that drafting, although I have added a prohibition regarding positions held within the five years preceding the appointment. It is clearly important that the central bank is formally independent of government. In the case of ARIA, formal independence is not the issue; rather, it is very important to be independent of the prevailing mindset in Whitehall. I hope that the Minister will agree with me on that.
My Amendment 6 would preclude the appointment of the Chief Scientific Adviser as a non-executive and I therefore also support my noble friend Lord Lansley’s Amendment 5, which is in this group. I am also less than clear that the role of the Chief Scientific Adviser, which centres on advice to the Prime Minister and Cabinet on scientific matters, makes it necessary for him to sit on the ARIA board.
Amendment 8 is rather different. It would delete paragraph 7(2)(a) of Schedule 1, which says that ARIA must pay to or in respect of non-executives such pensions and gratuities as the Secretary of State determines. This is in addition to remuneration provided for under paragraph 7(1). This is archaic drafting whose purpose is lost in the mists of time. No one pays the pensions of non-executives nowadays. Certainly, that is true in the private sector and I would be astonished if it were not also true in the public sector. As for gratuities, do we tip non-executives? We certainly do not in the private sector.
My last amendment in this group, Amendment 10, is about the quorum for the ARIA board. Paragraph 10(2) of Schedule 1 has a sensible requirement for a quorum, set at half the number of its members. My amendment 10 merely says that, within that smaller number, the half making up the quorum, there needs to be a majority of non-executive members, which is in line with the overall composition of the ARIA board. The composition set out in paragraph 2 means that a majority of non-executives on the board can be achieved by just one more non-executive member than executive members. That in turns means that a quorum of one half of the total could be achieved with only one non-executive member present. It is certainly true that commercial boards often transact formal business, such as the declaration of dividends or approval of announcements of transactions after markets have closed, with very small numbers, often just the chairman, the chief executive and CFO. I suspect that there will be very few issues of that nature on which ARIA will need to decide.
My concern is that significant decisions could be made without proper non-executive oversight and agreement. For example, paragraph 17 of Schedule 1 allows for ARIA to enter into partnerships or joint ventures—I have amendments to probe these powers later on. I do not think it would be good governance for the executives to be able to vote on the use of, say, joint venture powers using a quorum which, in extremis, would have a single non-executive member present and clearly could be outvoted. I hope that my noble friend the Minister will agree with me that that would go against the spirit of requiring a majority of non-executive members on the ARIA board. I beg to move.
My Lords, I am very glad to follow my noble friend Lady Noakes, who has typically managed to make some penetrating remarks about the prospective corporate governance of ARIA. All the amendments in this group, including mine, are probing amendments; that is the nature of debate at this stage. I hope the Government will take on board some of the things my noble friend has said, think about them carefully and perhaps bring forward their own amendments. What she had to say about the size of the board and the desirability of setting a limit on the number of executive members in order to keep the size of the board as whole under control makes perfect sense, as does the point about committees of the board.
My three amendments in this group also to try to establish how the Government are going to address the membership of ARIA. The first, as my noble friend said, is Amendment 3, which would remove the Chief Scientific Adviser from the board. By the way, this is no reflection on the Chief Scientific Adviser now, in the past or in the future. The point is that if we want ARIA to be independent and autonomy is an essential part of its role, does it make sense for the Chief Scientific Adviser, whoever she or he may be, to be sitting on that board trying to make decisions that are, almost by definition, different from the decisions being made by the rest of the research and innovation landscape? Indeed, the Chief Scientific Adviser is now the head of the new office for science and technology strategy.
If the CSA is leading the strategy for science and technology across the landscape, you might say that surely, they should be there, so that ARIA fits into that strategy. That is precisely the problem: ARIA should not be led in the same strategy as the other parts of the research and innovation landscape. Does it not create an inherent conflict of interest for the Chief Scientific Adviser to be setting the strategy on the one hand and departing from it on another, which is potentially what ARIA will be doing?
Amendments 5 and 7 in my name ask whether the appointment of a chair by the Secretary of State for Business, Energy and Industrial Strategy should be subject to some scrutiny. I have not gone to the step on this because I do not think the criteria are met for this to be an appointment that is subject to an agreement of or a recommendation from a committee of the House of Commons. However, given the existence of the Science and Technology Select Committee and the work it does in the Commons, it would be extremely helpful for it at least to have a hearing and to make some of its own remarks. That would help in the process of giving some democratic accountability to the initiation of the board itself. ARIA is going to autonomous, relatively independent and determined in large measure by its board. The appointments of the chair and the chief executive in the first instance are very significant in this regard.
Amendment 7 is precisely about the appointment of the first chief executive officer. I think the Government are currently searching for both chair and chief executive. The first chief executive officer appointment is not going to be made by the chair, so it is particularly important that there be a degree of objective scrutiny of that appointment. Subsequent appointments will be a matter for the chair and the non-executive members of the board.
I hope that the Government will at least recognise the potential merit of the Science and Technology Committee having a hearing in each case and offering its views.
My Lords, I strongly support what the noble Lord, Lord Lansley, has said regarding his Amendments 5 and 7. One of the amendments lost to the Committee was drafted very much along the same lines, although mine made it. This is a very important issue. The work of the Select Committee in the House of Commons is superb. The former Minister, the noble Lord, Lord Willetts, knows all about it.
This is a very important principle, especially as we are discussing something so new and there is so much about it that we do not yet know. It is essential for the Select Committee to explore these matters with the chair and chief executive designate. I would go further than the noble Lord and make the appointments subject to the agreement of the Select Committee. Indeed, I regard this as an important principle to apply in general across many appointments made by government, many of which could be made subject to the agreement of the appropriate Select Committee.
As to the amendment from the noble Baroness, Lady Noakes, I found myself wondering, especially in regard to Amendment 2, whether her remarks about the ideal size of a board apply to the membership of a Committee stage of a Bill. Are we too large a group of people around this table effectively to conduct our business? I have an open mind on that, and I look forward to hearing what the Minister says in reply.
My Lords, I will speak only briefly, primarily about the amendments from the noble Baroness, Lady Noakes. They all reflect best practice in corporate behaviour and should be taken very seriously. The one that goes even deeper than that is Amendment 6, which looks at the prohibition of civil servants and former Ministers from being on the board for five years. That is really important and thoughtful—that we do not import Civil Service groupthink, which is well protected in other venues and continues for long periods of time. Not to have that on the board is a major protection for the qualities that you want ARIA to have.
My Lords, I am now going to indulge in some groupthink by agreeing with the last speaker and the noble Baroness, Lady Noakes. The Government fail to take her advice on corporate governance at their peril. All her amendments are sensible and ones that I hope the Minister, who clearly will not endorse them today, will be able to take away, think about and maybe amend a little to put the Government’s thumbprint on them. I suggest that it would be helpful to look at them seriously.
Amendments 5 and 7, as we have heard from the noble Lord, Lord Lansley, seek to inculcate the House of Commons Select Committee into the appointments process, at least at some point within it. Noble Lords will see, later on in the Bill, that Amendment 32 also seeks to carve out an ongoing role for that Select Committee. Clearly, if I were to stand by Amendment 32, Amendments 5 and 7 would also make a lot of sense, in that they will be there at the beginning.
It may be out of kilter or otherwise, but this set of amendments really looks at the membership and members of the board. I have a quick query, which may just be me getting things confused. The Minister kindly sent around the draft of the SI on conflicts of interests. Of course, this may come in when we come to talk about the fourth group of amendments. It refers to “members” throughout, and I am not clear what a member of this organisation is, which made me think that I am not actually clear what the legal structure of this organisation is. I think there is some work to do to help me—if no one else—through. Is this an incorporated association? Is it a company limited by guarantee? What is it? Until we know that, some of the other things that we need to discuss will become very difficult.
My Lords, I will quickly put on record our position on this. I am also fascinated to find out why this issue of the Chief Scientific Adviser is there. I can imagine why, and I am speculating as to why, but I would like to know what the Minister had in his head in proposing that.
I put on record our support for Amendments 5 and 7 in particular. One of the themes from us on this Bill is about trying to enhance democratic engagement with ARIA—not control or oversight, but we think that there is space for some engagement there.
At Second Reading I raised the appointment of the chair and the chief executive by the Government. Can the Minister make clear that these appointments will be subject to the normal code of practice, or whatever exactly it is called, for public appointments? Will it be subject to the same process as the majority of public appointments?
This group of amendments relates to the balance that we need to strike between ARIA’s independence from and accountability to government, which is a difficult balance to draw. I shall begin with the amendments relating to the composition of ARIA’s board.
Amendment 2 from my noble friend Lady Noakes would limit the executives on ARIA’s board to just the CEO and the CFO. I appreciate the spirit of her amendments, trying to ensure that ARIA is an agile body with a streamlined board, but we have decided that the number of executives should be at least four. We have said that in the interests of representing the different executive functions within the organisations. Similarly, we have imposed a maximum number to try to keep it as efficient as possible.
As the majority of the board members need to be non-executives, in our view, that means that the minimum total number of board members will be nine, to ensure a majority of non-executives, and our expected maximum is 15. We believe that this is very much in line with standard practice. It is not usual for legislation to specify quoracy arrangements, and the Bill’s current provisions mirror some of the procedural arrangements that are in the Higher Education and Research Act. I am also happy to confirm that it is not our intention to offer non-executive members pensions or gratuities—I do not want to get into a definition of gratuities—but it is commonplace to ensure that the provision is available.
The drafting that we have used is also found in the Higher Education and Research Act 2017 for UKRI non-executives under paragraph 7(2) of Schedule 9, and indeed in the Energy Act 2013 for the Office for Nuclear Regulation’s non-executives under paragraph 11(3) of Schedule 7. I therefore do not see that Amendment 8 in the name of my noble friend Lady Noakes is necessary.
I turn to Amendment 3. In our view, the Government’s Chief Scientific Adviser will bring a somewhat unique perspective to the ARIA board in their independent advisory capacity, with awareness of science and technology across government. It is important to emphasise that he or she will be on the board in their capacity as an independent adviser, not in their science and technology strategy capacity. Indeed, it is perfectly possible for there to be two different people in those roles. It is also important to emphasise that they will not do so on a privileged basis. Other non-executives will have been appointed for their expertise, their wide experience and their special knowledge of different facets of the research and development system, and they will equally provide ARIA with independent advice in the best interests of the organisation and its objectives, as the Chief Scientific Adviser will.
Before my noble friend moves off this particular point, he will know, and the Committee will have observed, that in paragraph 18 of Schedule 1 the Government are proposing to take a power to substitute somebody else or some other office for the Chief Scientific Adviser. What my noble friend was just saying gave me the impression that this is something that might be contemplated in circumstances where the two roles that he refers to are held separately.
That is the exact point. At the moment they are occupied by the same person, but at some point in the future there might be other arrangements. It is just to ensure that the Secretary of State has the maximum flexibility.
I turn to the recruitment and appointment of ARIA’s board members. I am happy to confirm to the noble Lord, Lord Davies, that we will of course follow the normal and usual procedures for the appointment of directors and non-executive directors of public bodies. Amendment 6 seeks to disqualify a non-executive member if the individual has been a Minister of the Crown or a person employed by a government department. While I understand that the likely intention of this amendment—which will perhaps make my noble friend Lady Noakes and some of the contributors on this grouping unpopular—is to ensure that we have the highest calibre of individuals represented on ARIA’s board, I believe it could have the opposite effect. It would undermine the Secretary of State’s ability to run an open and fair recruitment process, as it would narrow the search field on a somewhat arbitrary basis. It could also prevent the appointment of an individual with demonstrable scientific or technical experience—some of whom may well be in this Room today—just because that individual had served in public office or as a civil servant. That seems very unfair to me, and I see no obvious logical reason for depriving ARIA of such expertise.
Amendments 5 and 7 would require the Secretary of State to inform the Commons Science and Technology Committee before appointing ARIA’s first CEO and chair, and to make arrangements should the committee wish to call them for evidence. As noble Lords are aware, we are currently recruiting for the CEO role. We will launch the chairman recruitment following the conclusion of that process, so that we are able to recruit the right person to work alongside the CEO as a complementary leadership team. I can confirm that we will of course write to the committee on the announcement of both positions; it may then choose to invite the appointee to give evidence to it on their vision and functions in ARIA. I strongly submit that it is not for the Government or Parliament to specify in legislation what a Select Committee should or should not do. It is perfectly capable of deciding for itself whether it wishes to summon individuals to give evidence—or not, as the case may be. Given the robust appointment process and the committee’s standing powers to invite witnesses to give evidence, I really believe that a special provision in legislation for a pre-appointment hearing is not necessary.
I acknowledge that the balance between giving ARIA the autonomy that I think everybody here is agreed it should have and ensuring a certain amount of accountability to government, the National Audit Office, et cetera, is an issue on which noble Lords will hold different views. It is a difficult balance to strike, but I hope that I have been able to convey to the Committee why we believe we have the correct balance as it stands. On that basis, I hope noble Lords will not press their amendments.
I asked some specific questions about the future legal structure of ARIA and the nature of who its members are. I do not think the Minister had time to answer.
I will write to the noble Lord with the legal details he requires.
My Lords, I can probably help the noble Lord, Lord Fox. In the case of public corporations created by statute, it is quite common that they are the members. It is not usually drafted as if the board is a separate legal entity.
The non-execs and execs, or just the non-execs?
No, the members. The members are executive and non-executive, as defined. They comprise the body. That is quite normal in public sector formulations. While I referred to the board when I introduced my amendments, that is not set out in legislation because they are the members. In common parlance, I was talking about the creation of the board of the agency.
I thank noble Lords for their support and their contributions to this short debate, and I welcome the noble Lord, Lord Morse, to our deliberations. I heard what the Minister had to say. He has decided that there will be four executives and therefore a minimum board size of nine, but I do not think he really engaged with the substance of my arguments on why the potential for 15—or, indeed, more because the Bill does not limit the size of the board to 15—which was a little disappointing.
When the Minister dealt with whether or not there could be payments for pensions or gratuities to non-executives, he said that the Government do not intend to do that but are going to put it in anyway. Actually, this is really old drafting, which I can point to in many old statutes, which have not been used for many years, for very good reason, and there really is no need to carry on drafting in this way.
I could go on but I am not going to answer the individual points made by the Minister in response to my speech. I hope he will go away and read more carefully the content of the debate because I think there are some issues that he did not deal with in his reply, and I will certainly read his remarks more carefully when I see them in Hansard. I anticipate returning to some of these issues on Report. In the meantime, I beg leave to withdraw my amendment.
Amendment 2 withdrawn.
Amendment 3 not moved.
4: Schedule 1, page 6, line 21, at end insert—
“(ba) a representative of the Welsh Government,(bb) a representative of the Scottish Government,(bc) a representative of the Northern Ireland Executive, and”Member’s explanatory statement
This amendment would require representation from the devolved administrations on ARIA.
My Lords, I start by declaring an interest as chancellor of Cardiff University. Given the current climate, I think I need to make it clear that it is an unremunerated role.
The amendments in this group deal, in one way or another, with the representation within ARIA of the interests of the nations and regions of the UK. My Amendment 4 seeks to gain some clarification from the Government—it is, of course, a probing amendment —as to the purposes and modus operandi of ARIA, and to make the point that because it will operate within areas of devolved competence, it must listen to the voices of the devolved nations.
As it stands, it is difficult to get a handle on exactly how ARIA will operate. The list of things it is able to do is comprehensive. It can take an equity stake, carry out its own lab work, contract with an academic or industry team, create prototypes, market products, convene conferences, operate outside the UK—and a whole lot more. It is to be granted great freedom and there is, as noble Lords have said, an emphasis on lack of bureaucracy. It is to be ambitious and tolerant of failure.
In the debate in the other place, Greg Clark MP, chair of the Science and Technology Committee, complained that it was not clear whether the emphasis would be on “blue-sky research” or whether it would turn existing ideas into “practical applications”. Clause 2(6) says:
“ARIA must have regard to the desirability of … contributing to economic growth, or an economic benefit, in the United Kingdom”
“improving the quality of life in the United Kingdom (or in the United Kingdom and elsewhere)”.
These are worthy thoughts but there is no obligation to take account of the nations and regions of the UK.
The funding of ARIA directly by the UK Government impacts on devolved powers in relation to higher education and economic development. The Bill creates a new reservation in respect of research and innovation. I accept that this is not altogether new, because there is already a reservation for UKRI, and there is indeed great strength in not having research silos. Partnership is vital, both within and across the UK and internationally: partnership between universities—where most blue-sky research originates—and between universities and commercial companies, which exploit that research. To amend the Bill to spell out that there must also be partnership between the UK Government and the devolved Governments will simply strengthen ARIA.
It would of course be a waste of resources for there to be unnecessary duplication or unintended gaps. One can forgive us for being concerned to dot a few “i”s and cross a few “t”s, because this is not a good time to launch an organisation with such vague terms of reference and so few controls on a substantial pot of public money. Hard on the heels of the scandals of billions of pounds wasted on PPE and test and trace, this is not a good time to say, “We need less control of how taxpayers’ money is spent”, rather than more. It is difficult to see that a board which, despite the arguments about its size, remains a small group of people, with the danger of groupthink, which has been referred to, and whose appointment is entirely within the Secretary of State’s control, can be guaranteed to serve the interests of the whole of the United Kingdom. There needs to be a voice from outside the magic inner circle.
I also want to press the Minister on how she sees ARIA working with higher education institutions, which are themselves bound by strict rules of financial probity and strict accounting rules and which, up to now, have worked with the grain of the strict rules that bind UKRI and other research councils. I agree with the noble Lord, Lord Willetts, and others that there are many times when these rules can seem overly restrictive, so there is a strong case for a new organisation of this type, but, as the Bill stands, it seems unlikely to deliver what is required throughout the UK. The structure puts all the cards in the hands of the UK Government. It needs to be balanced with voices from outside.
Let us remember that ARIA has very big boots to fill—in Wales, in particular: those of the EU. Wales was a main beneficiary of EU funding to the UK, and the Welsh Government chose as a steadfast policy over many years to concentrate much of that EU money on research, particularly higher education-based research with a regeneration agenda. ARIA funding is modest in comparison with the amount of money that has been spent in Wales in that way, but it can still play a significant part if it is spent efficiently and effectively.
I accept that the Government have tabled amendments later which relate to this, but noble Lords will be aware that they have been laid rather later than the amendments in this group. The contents of the promised MoU—although the promise is extremely welcome—are so far unknown. I will listen to the Minister with great interest. I hope that either now or on another day, she will explain to us in some detail what the government amendments are intended to do. I hope they will cover many of my concerns. I beg to move.
It is a pleasure to follow the noble Baroness. I have a lot of sympathy for what she says and would be very happy to support her proposal. I will speak briefly to Amendments 9, 23, 29, 33 and 34 in my name. Trying to make sure that efforts to address regional inequality run through everything the Government do is a bit of an obsession for us. We know that investment in science brings prestige to local areas and supports quality jobs when projects succeed. It is a source of immense local pride.
Amendment 4, moved by the noble Baroness, Lady Randerson, requires representation from the devolved Administrations of Wales, Scotland and Northern Ireland. I completely understand where she is coming from. We are very keen to nail down in some way through the Bill a commitment to ensure that there is representation and fairness across regions. ARIA should be mindful of regional inequality when making its decisions, including, importantly—the Minister might comment on this—where it chooses to base itself. When she sums up at the end, can the noble Baroness indicate whether she has had any discussions with the Welsh Government or in Scotland about how they feel about taking part in the way she proposes? Are they seeking to do that? Has she thought about including some of the English regional mayors, who might also have a role to play?
I can sense the Minister thinking, “Oh my goodness, what are you trying to do to my new agency?”, in involving all these people, but the point we are trying to make is that this cannot have an ivory tower attitude. It needs to take its responsibility to the prosperity of the entire UK, as all government agencies should, very seriously. One way or another, we need to do everything we can to make sure that what the Government would call levelling up runs through everything they do, including ARIA. This is not just about special projects which can be promised and then quite easily taken away; this needs to be a golden thread that runs through this agency and others.
This is not just about the north-east, although it is certainly very important for the north-east. Every region ought to expect that it will benefit from the creation of ARIA. Where I come from, in the Tees Valley, we have a particular talent for oil, gas and energy, and we are starting to specialise in renewables. The benefits of ARIA’s activity could support not just existing ventures but the development of skills in those fields.
My Amendment 9 would allow ARIA to establish committees in specific regions of the UK. I have tabled it to reflect the importance of considering the benefits to regions of ARIA’s activities. Amendment 23 adds to the list of ARIA’s functions so that, as well as
“contributing to economic growth, or an economic benefit, in the United Kingdom,”
as it says in Clause 2(6)(a), it should
“have regard to the desirability of … increasing prosperity across each region of England, Scotland, Wales and Northern Ireland”.
I do not really understand why the Minister would not want to include that.
Amendment 29 would allow the Secretary of State to stipulate that certain grants must be used to support activity in particular regions. I am aware that that would definitely fall into the category of interference from politicians but sometimes, unless we tease this out and put on the record how important these issues are to us, they can become less important and be missed.
Amendment 33 would establish an advisory board to ensure that ARIA supports the reduction of inequalities between each region and nation of the UK. The point I really to make through Amendment 34 is that ARIA should measure and report on what it is spending by region, which is not an unusual request. I accept that this does not have to be in the Bill, but I would like to know what the Minister thinks about it and whether he would be prepared to agree that ARIA should share information in this format. When the annual report is published, readers could obviously do their own analysis and work out what has been spent in which region. However, I think we have learned from reporting on gender and other issues that if something is measured and required to be reported on, it is seen as important and as a priority, and that then flows through into decision-making. I just want to test what the Minister thinks about these proposals in general, if not any of the specific amendments. This is an issue that we will want to return to on this Bill and others as well.
My Lords, I rise briefly to support the noble Baroness, Lady Randerson, in her Amendment 4 and to speak to the sentiments behind my noble friend’s Amendment 23. I have discovered that, in this Committee this afternoon, there are really two ways of dealing with amendments. One is by tabling them in time and having them printed, and the other is by speaking to them having written but not tabled them. So it is my pleasure to say to the noble Baroness that I drafted several amendments about the very point that is made in Amendment 4. I drafted a range, one of which went further than that of the noble Baroness by saying that the appointments should be made by the Welsh Government, the Scottish Government and the Northern Ireland Assembly, not on their behalf.
When the Minister comes to reply, I gently suggest that the Government must not allow ARIA to be seen as some golden triangle element. It would be fatal to its prospects of success if it is seen in that way, especially if its headquarters happen to be anywhere within a line surrounding Oxford, Cambridge and London; that would be a tactical mistake. I genuinely put it to the Government that, whatever the language of the Bill, they must have some regard to the United Kingdom as a whole and allow the four nations to feel that they are fully represented and involved in its work.
My Lords, I support our using our full capabilities across the regions; however, while they should all be represented, we have to be careful in trying to spread everything all over the place. I cite a specific example that has been important to British industry. In the 1960s, several people, including myself and Sir Eric Ash, who was then head of electrical engineering at UCL and went on to be rector of Imperial College, tried to co-ordinate the semiconductor industries in this country. At that time, America also had a problem as it looked like Japan was going to take the semiconductor business, run away with it and leave everybody else behind. In America, Ronald Reagan got together with industry and formed Sematech, in Texas, which sort of saved them. The industries all got together and worked.
When we tried to do it, it was too difficult, because there were efforts in Edinburgh, Southampton, London, Cambridge, Newport and Manchester. Nobody realised that we had to co-ordinate those efforts in a rather tight way that also perhaps meant putting things in one location.
At that time the Belgian Government saw the possibility and a few leaders there, Roger van Overstraeten chief among them, decided that they would have a shot at doing this in Belgium. That institute now has 4,000 people and an annual budget roughly equal to ARIA’s: €600 million. We could have done it. We had more talent at the beginning but we could not get around to facing the fact that in certain instances, proximity is very important if you want to pull off really high-technology advances. Again, this is a world issue. America has had to wake up its industry again and realise that it is not necessarily good for the world for Taiwan and South Korea to dominate; it would be a rather dangerous thing. So I think American industry is going to be reawakened.
I say a word of caution: while we want to draw from all of the regions, we may not be able to do some of the big projects spread out over the regions.
My Lords, I will comment on Amendment 4 in the name of the noble Baroness, Lady Randerson. We must not lose sight of the fact that the board is there to contribute to the total purpose or mission of the organisation, and we need to be very clear, when looking at getting those with some relationship to the devolved Administrations, precisely why they are there. I question whether there is a devolved dimension to, for example, the focus of ARIA or determinations about particular projects. These should transcend any issues that arise at the national level.
In addition, the amendment says that there should be
“a representative of the Welsh Government”.
I believe very strongly that boards should not have representatives of anybody on them. Board members should be selected because of their contribution to the totality. Indeed, if we look at examples of boards that do have individuals nominated either by or with the consent of the devolved Administrations, those people are never ever drafted as representatives. They are usually drafted as members who are appointed in a particular way. It is really important that we do not lose sight of the fact that we are trying to create a unitary board dedicated to the mission of the organisation. I query whether there needs to be input from the devolved nations to that process because of the nature of ARIA, but even if there were, I am absolutely clear that they should not be “representatives”.
Furthermore, if we look at the size of the board, which I addressed in the previous group of amendments, if there are four executives there are likely to be five non-executives, and that includes the chairman. So there would be a chairman, four executives and three people appointed who are in some ways related to the devolved Administrations—although none, under this formulation, representing England—but none, or perhaps one, appointed for the general skills and abilities they bring to the party. I hope that noble Lords will think carefully about whether it is appropriate in this instance to act in accordance with the way the noble Baroness’s amendment is drafted.
My Lords, as co-chair of the Midlands Engine APPG, I am very supportive of the levelling-up agenda and have a lot of sympathy with the amendments in the name of the noble Baroness, Lady Chapman. My only concern is the additional bureaucracy inherent in looking at the regional distribution of investment.
Building on the point made by the noble Viscount, Lord Stansgate, another lesson learned from DARPA was that the headquarters of DARPA was located away from many of the main research centres of the United States, which avoided the inevitable capture of research funding by institutions in a particular area and really encouraged the take-up of ideas from all parts of the country. I thank the Minister for writing to me on this but I hope that the Government will look further at how the location of the ARIA headquarters fits into the levelling-up agenda.
My Lords, I offer Green support for the intention of all these amendments, although I agree with the noble Baroness, Lady Noakes, that “representative” is not quite the right approach. Ideally, we would see the devolved Administrations and Westminster getting together to ensure that there was representation from the nations that fitted together in terms of making a cohesive board with the right set and range of skills, and it would be a co-operative process that ensured that we had those nations involved.
I was very taken with the comment by the noble Baroness, Lady Randerson, about the “magic inner circle”. That is something that we absolutely have to break up when it comes to innovation and new thinking in the UK. Just because it seems to fit here, we need to make sure that we are drawing on not just a handful of the most well-funded and well-resourced higher education institutions but on all our higher education institutions. We also need to think about what further education institutions, of which there are many around the country, may be able to offer.
On that issue, I want to reinforce the points made by the noble Baroness, Lady Chapman, and the noble Viscount, Lord Stansgate, about where this will be based. I do not know whether the Minister will be able to do this now or possibly at some point in future, but I think the Committee would be greatly reassured if she could tell us that it will not be in the Oxford-Cambridge-London triangle but somewhere else.
My Lords, I want to express the hope that the Minister is going to tell the Committee that consultations have taken place with the Scottish Government, the Welsh Government and whoever the appropriate people are presently to represent the people of Northern Ireland about the issues raised by Amendment 4, and that she can satisfy the Committee that this has all been agreed. If not, I can tell her that it has the potential to be quite a serious issue in Scotland.
My Lords, this has been an interesting debate. I fully associate myself with the words of my noble friend Lady Randerson. To put it plainly, we have heard around the Committee a strong feeling that the nations of the United Kingdom have to be fully engaged in this agency in some way, although, to echo the last speaker, the way in which that can be worked through is something we can all be flexible about. I think we all look forward to the debate on Amendments 37 and 40 to hear what the Government's thinking is about those.
On Amendment 9, having some eyes and ears around the regions as well as the nations is essential. Regarding most of the amendments from the noble Baroness, Lady Chapman, she is right to stress that inequality is a central issue and it should be a focus of what we do. However, I would point out that while a lot of people have mentioned London in the context of being rich and well funded, it is not just a matter of region because within a region there can be huge variation. I shall use the example of the London Borough of Tower Hamlets, which I declare I have a home in. There we have some of the richest people and some of the most deprived living a few yards apart.
The noble Lord, Lord Ravensdale, raised the issue of HQ locations. Some noble Lords may know that the European Medicines Agency was due to go into Tower Hamlets but now, for reasons they will all know, it is not. So I will mention that I am supporting the campaign by my colleague in Tower Hamlets, councillor Rabina Khan, to locate ARIA in Tower Hamlets and take the place of the European Medicines Agency. It would be a good development around there and something that I think would be very constructive.
Although I do not fully agree with the wording of the amendments from the noble Baroness, Lady Chapman, I think there is a sense in there that we need to get a hold of. How does this agency engage? How does it not become isolated in the golden triangle or somewhere else? That is the question to which we seek some response from the Minister. That is the issue we will take to Report, whether in amendments such as this or in a new version that seeks to make sure we have engagement across the whole country, national or regional.
My Lords, I thank the noble Baroness, Lady Randerson, for her remarks on these amendments. Many points were raised that I agree with, including a number from the noble Baroness, Lady Chapman. I will address the different elements of this group in turn.
First, I should be clear that it is absolutely the Government’s intention that ARIA increases prosperity across England, Wales, Scotland and Northern Ireland. This is reflected in ARIA’s existing functions, which require it to have regard to contributing to economic growth or economic benefit in the UK or, for example, improving the quality of life. There is no need for specific additional powers to allow ARIA to operate regionally; the Bill as it stands already allows ARIA to do so. Addressing regional inequality is at the heart of our levelling-up agenda and innovation strategy, driving greater benefits from our R&D system to more places across the UK.
I will now address head-on the proposed location of ARIA, because there is none. No decision on the location of these offices has been taken. As a funder, the contribution the new agency makes will result from its project portfolio and funding decisions; it is not an infrastructure project. ARIA will have only a small physical presence at its headquarters, the location of which will probably not be agreed until the appointment of the chief executive officer. That may have some bearing on where it is to be located. I cannot make the commitment that it will not be based in the London-Cambridge-Oxford arc, but that is not our intention at this stage. We have a completely open mind as to its location.
Amendment 23 would impose a new duty and reporting obligations on ARIA in this regard. It is my view that these system-wide ambitions should not be the statutory responsibility of a small new agency that represents about 1% of UK R&D spending. As we have stated previously, UKRI is the public R&D funder with system-wide responsibilities. Tackling systemic issues, such as the overall regional distribution of R&D funding, falls firmly within the UKRI remit.
ARIA’s purpose is to pursue the most ambitious research and innovation projects, where the benefits are long-term and uncertain, wherever in the country they are located. ARIA should not be subject to the political priorities of the Government of the day, no matter how long-standing or important those priorities might be. I believe that seeking to quantify its economic impact in every region of the UK and submitting that for outside assessment, under the shadow of this statutory obligation, would incentivise exactly the same risk-intolerant approach that we are seeking to liberate ARIA from.
We are in danger of expecting ARIA to spread itself too thinly, against the recommendation of the Royal Society and the House of Commons Science and Technology Committee that it focus on a very limited number of programmes. ARIA cannot be expected to be active in all regions of the UK at once, so I suggest that Amendment 34 is not an appropriate obligation to place on the organisation.
We have spoken at length about the importance of providing ARIA with independence and equipping it to take risks and tolerate failure. A board appointed by the Secretary of State advising ARIA where to direct its funding represents an extraordinary level of political control over ARIA’s activities. It is completely inconsistent with the decisions on project-level spending being taken by technical experts based on a deep understanding of the relevant field and the scientific merits of the proposals.
In a similar vein, Amendment 4 looks to add a representative from each of the devolved Administrations to ARIA’s board. Ministers in Scotland, Wales and Northern Ireland are unanimous in their support for the important principle of ARIA’s independence. We have had close discussions with Ministers and officials at all levels in all three devolved Governments throughout the passage of the Bill.
We have agreed a mechanism for input with the devolved Governments which will be set out in an agreement between the four Administrations of the UK. The agreed text of this MoU will be shared before Report, but it is contingent on the government amendments we will come to discuss later. The final version signed by all parties will be published before Royal Assent. All four Administrations of the UK are committed to upholding the important principles of ARIA’s strategic autonomy, operational autonomy and minimal bureaucracy. Similarly, all are committed to facilitating ARIA’s seamless operation throughout the UK.
There will be a new forum of the Government Chief Scientific Adviser and their counterparts and equivalents in Scotland, Wales and Northern Ireland. This forum will jointly communicate the scientific priorities of all four Administrations directly to ARIA’s executive leadership. In keeping with ARIA’s independence, there will be no obligation on ARIA to act on this input, but at least the input from all areas of the United Kingdom will have been seen. Given that this mechanism has been agreed, I do not believe there is a need for alternative arrangements.
Amendment 29 seeks to introduce a specific power of direction for the Secretary of State to exercise a granular level of control over ARIA’s R&D spending. This runs completely contrary to the organisation’s core design principle.
For these reasons, I hope that, while I have made the Government’s commitment to reducing regional inequality clear, noble Lords will understand that these amendments would be misdirected, however well intentioned, and that they might have a detrimental effect on ARIA’s ability to fulfil its unique objectives. On the original point of the noble Baroness, Lady Randerson, about higher education accounting and finances, it is slightly outside the remit of this discussion, but I commit to write to her in due course. I hope that the noble Baroness will feel that her amendments are not needed.
I very much thank all noble Lords who have taken part in this discussion. I would say to the noble Baroness, Lady Chapman, that the Welsh Government indicated their concern at the current proposed structures—before the Government tabled their amendments—at the creation of a new reservation without mandated representation on ARIA’s governance. The Scottish Government also indicated that they are unlikely to grant a legislative consent Motion unless they have representation. Clearly, the Government have done a lot of work since these amendments were tabled. There are amendments to which I assume we will come next week, unless we work very fast this evening, and the current view of the Scottish and Welsh Governments will become clearer then.
I thank the Minister for the details she supplied. We will obviously know more about the MoU before Report. The amendments in this group have, however, enabled us to discuss an important set of issues. It is important that we do not confuse having a concern across the regions and nations with the idea that one would expect there to be growth everywhere. However, that highlights the need for this body, especially if it is a small body, not to be placed in the usual place with the usual suspects. It has a relatively modest amount of money to spend in the big scheme of things—it sounds like an awful lot of money, but in the big scheme of things, it will not transform things unless it is very well spent.
If the body is well placed and carefully placed, its location alone will bring kudos to that area. However, it is not precisely about where it is placed. It is about how it spends its money—which universities it invests its money in and which companies it establishes or invests in and where they are placed. That is very important indeed if the Government are going to fulfil their promises.
I will, of course, withdraw the amendment. I very much hope that the discussion we have had means that I will not have to bring back a version of it on Report. I agree with the noble Baroness, Lady Noakes, that “representative” is not the best term but it means that it represents an input for the devolved Administrations. That is what I was trying to indicate rather than that anyone on that body would behave as a delegated representative. With that, I will withdraw the amendment.
Amendment 4 withdrawn.
Amendments 5 to 10 not moved.
11: Schedule 1, page 9, line 35, at end insert—
“(aa) produce a value for money study, and”Member’s explanatory statement
This amendment would ensure that the National Audit Office produces a value for money study of ARIA.
I think this set of amendments really gets to the meat of our concerns. These amendments are all about transparency and the ability to scrutinise what ARIA does. I am pretty confident that we will return to this as the Bill progresses.
I will quickly run through the six amendments in my name in this group. Amendment 11 requires the NAO to produce
“a value for money study of ARIA.”
Since tabling this, I have spoken to the noble Lord, Lord Morse, who unfortunately has had to leave us. He says that this can be incorporated into the usual audit. Can the Minister confirm this? In that case, I would be very happy to agree that this amendment would not be necessary.
Amendment 12 would ensure that the annual report includes
“a list of all projects supported in the financial year.”
This is the least we should be asking for. I thank the Minister for providing a draft SI that would require members of ARIA to disclose any relevant interests. That is helpful and welcome, but I am not quite sure what his sending it means. I note that he said in the email accompanying it that it is for illustrative purposes, so I do not quite understand what he is saying. Will members of ARIA be required to register their interests or not? Either way, without a published list of supported projects it is not possible to tell whether any published interest—if that is what the Minister is proposing; I am not sure that is what he is saying—conflicts with a decision of ARIA. We need to be able to make sure that it does not.
“would ensure that the annual report includes whether any funds have been given by ARIA to companies which list members of Parliament in their company registers.”
Given recent events, it is probably obvious to noble Lords why this amendment has been tabled. We are keen to ensure that parliamentarians do not lobby for companies in which they have an interest and which then become beneficiaries of grants from ARIA. It is very obvious why we want to do that at this point. I accept that the register could be cross-checked with the list of grants awarded but it is far more transparent and straightforward if the existence of any recorded interest could be highlighted in the report that ARIA makes itself. I assume it would be helpful to the board of ARIA too to be aware of any such interests so that it can take them into account and assure itself that the proper processes are being followed.
Amendment 14 would ensure that the annual report includes whether any funds have been given by ARIA to companies listed in the Electoral Commission’s register of donations and loans to political parties. Similarly to the last amendment, this one would help ARIA to assure itself that no lobbying or purchasing of influence could possibly have taken place.
Amendment 15 would ensure that a Minister of the Crown must make a Statement to both Houses of Parliament on its annual report. This is important because, as we said on the first group of amendments, MPs and Peers would be interested in a project supported by the public purse. Ministers should see this as an opportunity to promote the work of ARIA and to celebrate the inventions and research projects made possible by the agency. Of course, there are bound to be awkward questions—when are there not?—arising from projects that have not worked. But Ministers should not worry about that, as they can argue that the risk is built in, that Parliament has agreed and understood, that many ideas will fail, at least initially, and that we have supported that approach. We want adventurous research, but many of us want to know what is being done. That is because we are curious, supportive and interested in this area of activity, and we want a chance to discuss it.
I shall leave the noble Lord, Lord Ravensdale, to speak on his Amendment 16, but I indicate our support for that as well. Developing an environmental and social governance strategy is a really good idea and may address many of the concerns that I have had previously about regional inequality. ARIA is in any case going to have to devise a decision-making process and criteria to help it make its decisions, so an environmental and social governance strategy could be very helpful, I imagine, in teasing out a means by which ARIA can ensure maximum benefits in relation to our desire to combat climate change and reduce regional inequality. We would be very happy to support that.
My Lords, I shall speak to Amendment 16 in my name. I thank the noble Lord, Lord Browne, for his support with this amendment and the noble Baroness, Lady Chapman, for the support she indicated.
This amendment is closely related to the sustainability amendments that I discussed in the first group. The arguments made there on alignment of ARIA with these objectives apply, so I shall not repeat them here. It simply calls for ARIA to develop its own environmental, social and governance strategy to consider the impacts of the exercise of its functions and the projects that it funds. It is another means of embedding climate and sustainability considerations in the organisation, alongside my Amendments 1 and 26 and Amendment 21. It would allow the board of ARIA to consider its own strategy for alignment with environmental and climate goals, so it is consistent with the other amendments.
Embedding sustainability goals in the governance structures of organisations is increasingly important to ensure that organisations consider the impact of their operations and set clear and measurable goals. That ties into a point that I made earlier about considering environment and net zero as a system: there is a need to embed climate considerations across all companies and all public bodies to ensure that our overall goals are met.
ESG strategies are increasingly common across public and private companies, as noble Lords will be aware. I note that other government-created bodies are developing ESG strategies. For example, the Financial Conduct Authority has recently published an ESG strategy, and the national infrastructure bank has a requirement to develop an ESG strategy in its framework documents. Bringing ARIA in line with other government organisations would again ensure consistency and its playing its part in the principal strategic goal of the nation.
My Lords, I shall talk to Amendment 16, which I am hopeful that the Minister will tell us is unnecessary. I also strongly support my noble friend Lady Chapman in the amendments she has tabled, and I shall speak to that shortly.
I support Amendment 16 simply because, in today’s global arena, setting an environmental, social and governance strategy is seen as an important benchmark for how responsible organisations operate. This will be a responsible organisation and should comply with the norm that is increasingly being imposed on all organisations that operate in the economic environment.
I admit that I added my name to this before my research revealed that in September 2020 the Government published a procurement policy note, PPN 06/20, which requires key ESG-related themes to be evaluated in all UK central government procurement from 1 January 2021 through the use of a social value model. The social value model is divided into five broad themes, many of which have arisen in our debates this afternoon, each containing one or more policy outcomes to be achieved that must be evaluated, expressly, through specific ESG objectives. These are: Covid-19 recovery, tackling economic inequality, fighting climate change, equal opportunity and well-being. This procurement policy note applies to all contracts awarded by UK central government departments, their executive agencies and non-departmental public bodies which are regulated by the Public Contracts Regulations 2015.
I draw Members’ attention to paragraph 11(1) of Schedule 3 of the Bill:
“In regulation 2(1) of the Public Contracts Regulations 2015 … in the definition of ‘contracting authorities’, at the end insert ‘or the Advanced Research and Invention Agency’.”
This procurement note applies to ARIA in respect of every contract it awards. Therefore, it will be obliged to impose an ESG obligation on everyone with whom it contracts. It would be a nonsense for it not to have an ESG obligation itself. I may have misunderstood this, but it seems to me that, while I will still support Amendment 16 until I hear otherwise, this may take care of the second half of it—indeed, it may take care of it all.
I hope I will be persuaded by the Minister that somehow or other this obligation is placed on ARIA, if not in this way, and that this amendment is unnecessary. If it is not, it seems to me entirely inconsistent with the legal obligations placed on ARIA not to have an obligation on it that it will impose on everyone else it contracts with.
I turn to the amendments spoken to by my noble friend, of which I am very supportive. They impact on the issues which occupy the other place today—maybe we should all stand back and wait to see how they play out there and then adopt whatever the House of Commons now requires of its Members. I support all these amendments, for all the reasons my noble friend explained to the Committee so well.
The noble Lord was chastising the Explanatory Notes earlier for not explaining. On this occasion, I think the Explanatory Notes explain that the purpose of paragraph 11 of Schedule 3 is to exclude ARIA from the application of the Public Contracts Regulations. It does not include them.
I apologise for wasting the Grand Committee’s time. I go back to the simple argument I made in relation to Amendment 16; in today’s global arena, setting an environmental, social and governance strategy is seen as an important benchmark of how a responsible organisation operates. This will be a responsible organisation, so it should therefore have that obligation. I do not understand why it should be excluded from passing that obligation on to people to whom it gives public money.
My Lords, I support my noble friend Lady Chapman’s Amendment 11 in particular, as well as others such as Amendment 15.
On value for money, I would like the Grand Committee to imagine the circumstances in 2026 when there is a massive row about something that ARIA has done, the chair of the Public Accounts Committee holds an evidence session and the National Audit Office is brought in, as it would be, to look at what went wrong. I am drawn to refer to this potential future situation because of advice that the NAO itself gave to the Select Committee in the House of Commons when it was first considering what, by the way, the Government then called ARPA.
I shall refer briefly to some of the areas that the National Audit Office says it would consider when it comes to considering the value for money in an organisation like ARIA. Its briefing says:
“Based on our experience, we would normally look for … a clear statement of the ultimate policy objectives – readily understandable to those charged with running the organisation and to those holding the organisation to account … a statement of what success will look like into the future – short, medium and longer term – which is particularly important for programmes where ultimate success may take years to realise … a roadmap which sets out the steps to deliver success along with a realistic assessment of the resources required and their timing – our work frequently points to a risk of optimism bias at the start of new programmes … a clear agreed sense of how risk should be managed, including the organisation’s and sponsoring department’s appetite to tolerate failure in pursuit of the objectives; and … an agreed approach to considering progress towards meeting the objectives.”
My point in raising this is to ask the Minister whether he will make some comment in his reply on the role of the National Audit Office in the running of ARIA and whether indeed it is expected to produce a value-for-money report.
My Lords, I can probably help the noble Viscount. It is a shame that the noble Lord, Lord Morse, has not stayed with us. I think what I am about to say was referred to in the opening remarks of the noble Baroness, Lady Chapman.
Because the Comptroller and Auditor-General is specified as the person to examine, certify and report on the statement of accounts, the National Audit Act 1983 gives the Comptroller and Auditor-General the power to do value-for-money audits in the way that the National Audit Office does for all government and public departments. The power therefore already exists and there is no need for Amendment 11, as I think the noble Baroness herself conceded; it is simply not an issue. A power for the Comptroller and Auditor-General to carry out a value-for-money audit will exist and the audit will be carried out in the normal way that the National Audit Office undertakes its value-for-money audits.
Again, this is an interesting group of amendments, and the noble Baroness, Lady Chapman, and the noble Lord, Lord Ravensdale, should be congratulated on tabling them. Bearing in mind what the noble Baroness, Lady Noakes, has just said, I was already planning to focus on Amendments 12, 13 and 14 and not to talk to Amendment 11, and that is probably a good idea.
However, I say to the noble Lord, Lord Browne, that I do not think his work was wasted because one way or another he has managed to uncover the fact that the Government have decided deliberately to exclude this requirement that they expect every other central government purchase to meet. The Minister has a serious question to answer as to why that is being left out.
Amendments 12, 13 and 14 cover an important issue. I do not think we need to underline, after the week or 10 days that we have just had, why it is in the interests of ARIA itself for it to be seen that there is no conflict and there are no issues around where the money is being spent. In a sense, these amendments or versions of them, will help ARIA in its own housekeeping. Of course, the Electoral Commission will register donors. As the noble Baroness, Lady Chapman says, we then need a list of all the companies and then to go to Companies House to find out who is registered as being in control of those companies. Making it easier also makes it clearer to the ARIA administration what it is dealing with.
I go back to the statutory instrument that we are not debating today, which talks about conflict of interest—so it is clearly relevant. It says that a member of ARIA must disclose any “relevant interests” promptly on appointment. The trouble with that is that I do not think that many people can consider their donations to be a relevant interest, but they are relevant with respect to an organisation of this nature. So something clearer needs to be spelled out, either in the statutory instrument or in the primary legislation. I would prefer it to be in the primary legislation.
When that is done, in listing the companies that are being supported, I suspect that the Minister is going to stand up, in the same way as he is going to stand up when we debate the freedom of information stuff, and say, “This work needs to be kept under wraps and kept secret”. There is a balance to run on this, and if there is an issue we need to find a third-party agency to scrutinise it on behalf of Parliament. But to hide specifically through national security or proprietorial security is wrong, because in that darkness—even if abuses are not happening—the perception of abuse will happen, which will harm ARIA before it even starts.
I have just a word of disagreement on some of this. Short-termism has been our problem; we must keep the timescales long enough. If you keep pulling the plant up and looking at the roots, it will not grow. On the other hand, one thing that we should practise from the beginning is what is in Amendment 16 from the noble Lord, Lord Ravensdale. The one thing that technologists have made a mistake on in the last decade or two is not to bring social scientists in early, to really look at the implications of what their technology will do. I strongly support that amendment, but I have severe reservations about the others.
I thank noble Lords who have contributed. These amendments relate to ARIA’s annual report and to other information to be provided to Parliament. As set out in Schedule 1, ARIA’s accounts must be prepared annually, alongside an annual report, which it will send to the Secretary of State, who must lay the report in Parliament.
Addressing Amendment 11 first, I am happy to assure the noble Baroness that ARIA will be audited by the National Audit Office—and I reassure the noble Viscount, Lord Stansgate, on that as well. The point was also well made by my noble friend Lady Noakes that the National Audit Office will be able to conduct value-for-money examinations of ARIA; the National Audit Office never shows any reticence to do precisely that. Indeed, it is able to do that as per the National Audit Act 1983 in the usual way, and the same controls apply to many other public organisations. As some of my spending schemes, within my responsibility, have been subject to National Audit Office examinations, I can assure noble Lords that it is extremely rigorous, as indeed it should be.
Other amendments relate to the specific contents of ARIA’s annual report. I agree on the importance of robust transparency and reporting arrangements in this regard. That is why ARIA’s annual report will align with the Government Financial Reporting Manual, which, for example, could require ARIA to publish information on its aims and achievements, performance, organisational structure, corporate governance and accountability.
On the list of projects that was asked for in Amendment 12 by the noble Baroness, Lady Chapman, publishing a list of delivery partners is not one, in my view, for primary legislation. The details of the annual report will be part of the framework document and, of course, the annual accounts will provide details of exactly where ARIA spends its money.
In response to the points raised in the amendment by the noble Lord, Lord Ravensdale, and the point made by the noble Lord, Lord Browne, on environmental and social governance issues, the Treasury’s sustainable reporting guidance already includes advice on issues such as resource efficiency and on procuring sustainable products and services. These are standard arrangements that are in place for all public bodies. I submit to noble Lords that it is therefore not necessary or beneficial to add further obligations in the Bill.
Amendments 13 and 14 would require ARIA’s annual report to include a statement on whether any funding has gone to institutions with connections to members of this House or the other place or listed in the Electoral Commission’s register of donations and loans to political parties. Of course, I entirely understand why the noble Baroness wants to raise these points at the moment to contribute to her party’s campaigns, but I do not believe that this Bill is the right place to deal with the issues that she raised. ARIA will operate at arm’s length from government, outside day-to-day political influence. The values of integrity and honesty that are required to run such an organisation are indeed qualities that we are looking for in the current recruitment of ARIA’s CEO.
Furthermore, it is my strong belief that sufficient measures are in place to ensure appropriate propriety in ARIA’s activities. Under the principles in Managing Public Money, ARIA will be expected to carry out its functions “in the public interest” and to the appropriate “high ethical standards”. As ARIA’s accounting officer, the CEO will be accountable to Parliament for ensuring the propriety of all ARIA’s activities. I hope that this has given the noble Baroness the assurances that she is looking for—I suspect not. Nevertheless, ARIA will always be expected to work with integrity and held to account by Parliament for its activities.
I move on to amendments focused on information provided to Parliament. Amendment 15 would require a Minister of the Crown to make a Statement in both Houses on ARIA’s annual report. As I have already outlined, that annual report will be shared with the Secretary of State who will then lay it before Parliament. This is a standard arrangement for all arm’s-length and non-departmental public bodies, which ensures the appropriate accountability. Indeed, it is not usual for a Minister to make a Statement to both Houses during this process. If I may be so bold as to say so, if I turned up to make a Statement for every one of the arm’s-length bodies and organisations that are the responsibility of just my department, it would probably fill up half the time available in the House. I submit that it is not necessary or required for Parliament to do that. Of course, parliamentarians can and do pose questions to Ministers in both Houses on the content of various reports and documents that are produced by arm’s-length bodies; it is not necessary to put in primary legislation that we should make a specific Statement for this particular one. All the processes of accountability for Ministers are there in the usual way.
In response to point raised by the noble Baroness, Lady Chapman, about conflict of interest, regardless of whether we make regulations, ARIA will of course be required to have its own conflict of interest policy in line with the standard expectations across public bodies. The Civil Service Code and the Code of Conduct for Board Members of Public Bodies already set out the overarching principles to ensure that conflicts of interest are appropriately handled. The code of conduct states that board members must comply with the rules of their body which, as a minimum, require public declarations of interests. Of course, it also requires them not to participate in discussions or decisions in which the member has a financial interest or is in danger of being biased.
Combined, these reporting and accountability measures provide Parliament with the opportunity to appropriately discuss and scrutinise ARIA’s use of public funds. I hope, therefore, that I have provided sufficient reassurance to noble Lords that it is not necessary to pursue these amendments.
I thank the Minister for what he said, but if he thinks that this is some short-lived political campaign on my part, he is mistaken. The issues of the potential for conflict of interest and the need to protect ARIA from accusations of cronyism were raised in the other place before the Summer Recess and they are certainly not a reaction to the current crisis in which the Government find themselves, but we cannot pretend that that is not happening. I fear that the Government have not shown themselves in the best light this in recent days or weeks, and we feel that these protections are needed for the benefit of ARIA. This is not about making a political point or having a go at the Minister or the Government at all; it is about protecting something that we all sincerely hope works and changes lives in this country. That is what we are about here. If I thought that the assurances that the Minister just gave were sufficient, I would certainly be happy not to return to this. Of course, I withdraw the amendment for today, but we will be coming back to this.
Amendment 11 withdrawn.
Amendments 12 to 16 not moved.
17: Schedule 1, page 10, line 23, leave out paragraph (a)
My Lords, I beg to move Amendment 17 and shall speak also to Amendment 20 in this group. These are probing amendments designed to explore the extent of the powers given to ARIA by virtue of paragraph 17 of Schedule 1. Sub-paragraph (1) of paragraph 17 says that ARIA can pretty well do what it likes, and this is expanded by some particular powers in sub-paragraph (2). The two I have focused on in my amendment are sub-paragraph (2)(a), which says that ARIA may borrow money, and sub-paragraph (2)(d), which allows ARIA to form and participate in partnerships and joint ventures.
My concern is that these powers will be used to create liabilities for the state and hence, ultimately, for taxpayers, beyond the resources that we were led to believe would be devoted to ARIA. As I remarked on Second Reading, there is a world of difference between placing a bet of £500 million or £800 million and underwriting someone else’s credit card. In the former case, there is the hope of winning very much more than the initial £500 million or £800 million, although, obviously, the possibility of losing the lot. In the latter case, there is the possibility of an unlimited amount of additional money being needed if the funds raised by the borrower failed to produce any return.
ARIA will be a public sector body in every sense of the term. It gets its money from the Treasury, it is subject to public sector audit and accountability arrangements and its key personnel are appointed by and paid in accordance with the directions of the Secretary of State. It is always accepted that the state stands behind public sector bodies. That has been the case for as long as I can remember. If they fail, their liabilities are underwritten by the state. That is why there is usually a raft of controls placed on those bodies, including restrictions on the power to borrow money. The Treasury has an obvious interest in ensuring that public sector bodies do not create uncontrolled demands on public finances and, as a public sector body, ARIA’s borrowing will, I believe, automatically score as public sector borrowing. Will the Treasury really allow that to happen without controls?
I have focused on the borrowing power in sub-paragraph (2)(a), but my comments apply also to the ability to participate in partnerships and joint ventures, which are often structured in a way that means liabilities can be left with one of the parties to the venture. Private-sector counterparties would be queueing up to enter into arrangements which could possibly leave the state with the requirement to pick up the bill for failure. Similar dangers also apply in relation to companies which are allowed to be formed under sub-paragraph (2)(e), but I failed to table its deletion for today’s debate. I am not against partnerships, companies or joint ventures; they all have a part to play in working with private sector organisations. What I am against is the ability of ARIA to enter into arrangements that impose potential financial burdens on government finances without any controls or consents being required.
As it stands, Schedule 1 might allow some ex post interventions once the Secretary of State became aware of things that cause financial concerns beyond the initial amounts of money committed to ARIA—£500 million by the end of this Parliament—but the main tool he has is an extremely blunt instrument because it is related to replacing the members of the board. Even here he is restricted, as under paragraph 6(3) he can sack non-executive members of the board on any grounds he “considers appropriate” but, to get rid of an executive member, his power under paragraph 5(2) is restricted to grounds of “national security”. The real villains are more likely to be the executives than the non-executives, but the Secretary of State’s powers to deal with those individuals are, perversely, concentrated on the non-executives.
The notes given to noble Lords on this side of the Committee for today’s groupings said that my amendments would limit ARIA’s novel funding mechanisms. That gives an insight into what these powers are about. They are positively designed to allow ARIA to go beyond the resource envelope that has been announced for it. Calling funding “novel” might sound progressive, innovative and all those good things that ARIA is said to be focused on, but to those of us who have been around financing for rather a long time, it just sounds like another way of doing things to get around rules and restrictions. That would be okay if there were not ultimately recourse to public funds, but the Bill does not require borrowing to be on a non-recourse basis. It leaves public finances at risk to an unspecified degree.
I look forward to hearing from my noble friend how she thinks this very real risk will be managed in practice and how the Government have concluded that ARIA’s powers are compatible with sound public finances. I beg to move.
My Lords, I support the noble Baroness, Lady Noakes. I had not had the pleasure of hearing from her at such length as we have today, and I am very impressed by her contributions. The issue of borrowing money is a concern. There is clearly the potential for financial risk but also significant reputational risk when a level of borrowing might emerge that may seem unduly risky. I am concerned about that and interested in what the Minister will say to prevent that concern doing any damage to ARIA.
My Lords, rarely have I got to the end of a speech by the noble Baroness, Lady Noakes, and been crying out for more. On her second amendment, I wanted to know what she had against partnerships and joint ventures. I do not think there was a clear under -standing as to why that is a particular concern, given that many research processes go ahead collaboratively as joint ventures, partnerships or co-projects. I am interested to know, because I am sure there is a good reason; I just do not know what it is. While we are talking about that amendment, I would be pleased if the Minister could confirm that, whatever relationship ARIA is putting together, the National Security and Investment Act applies. I assume that to be the case.
Coming back to borrowing money, which I think is intriguing, there is a fine balance here. My noble friend Lord Oates and the noble Lord, Lord Willetts, talked about the dead hand of the Treasury. I can relate to that with considerable experience from when I was sitting on the Aerospace Growth Partnership. Even though BEIS was the sponsoring ministry, even though the Secretary of State was the co-chair of the AGP, every piece of spending that went through the Aerospace Technology Institute had to be signed off by the Treasury. This is not what we want for ARIA.
On the other hand, the points raised by the noble Baroness, Lady Noakes, about ARIA’s ability to overborrow, to load up the PSBR as opposed to free will, would become an issue. Frankly, it would cause the Treasury to take a greater interest in the activities of ARIA than if its resources were clearly ring-fenced. In other words, if I was sitting in the Treasury and I knew that ARIA could borrow money, I would make sure that I got into a position to stop it. That would be stopping other things, a bit like the Treasury did with the ATI and the Aerospace Growth Partnership. We do not want that. It is in ARIA’s interests for it not to have this borrowing power because it will otherwise attract the unwarranted attention of Her Majesty’s Treasury.
My Lords, these amendments relate to ARIA’s supplementary funding powers—its ability to borrow and form and participate in partnerships and joint ventures. I will begin by clarifying some of the controls and rules that would govern ARIA exercising these powers and I hope I can find enough reassurance for my noble friend Lady Noakes here. She always starts a debate with a great deal of knowledge, so we always pay attention.
ARIA could only ever make use of a financial mechanism, such as borrowing, for the purpose of exercising its functions—to conduct scientific research and exploit and advance scientific knowledge. Any such activity would also be subject to conditions attached to grant funding provided by the Secretary of State under Clause 4. Any borrowing would also meet the stringent requirements and controls of HMT’s Managing Public Money, which sets conditions to ensure value for money. It would be agreed with Her Majesty’s Treasury in advance. This is part of a suite of non-legislative controls that exist on borrowing.
I also highlight that UKRI has the power to borrow. Mirroring that approach, it is reasonable for ARIA to have this full financial toolkit, as it may be appropriate for it to use in certain future circumstances. For example, one possible scenario in which borrowing may be useful would be if ARIA were to own a controlling stake in a subsidiary, which while partially government owned, aims to act with autonomy. Such an entity may want to borrow if purchasing a large capital asset, in order to resolve cash flow issues if an upfront payment were required.
On ARIA’s power to participate in partnerships and joint ventures, using this power ARIA could take an equity stake in a company forming around a new technology. This could provide a clear benefit in cases where the company is creating assets of strategic importance to the UK. On this point, I reassure the noble Lord, Lord Fox, that the National Security and Investment Act does indeed apply to all ARIA’s activities.
In another scenario, ARIA’s taking an equity stake in a company may help to crowd-in private sector interest, bringing in greater funding totals, lowering financial exposure and creating a clear pathway for the commercialisation of a technology. It is fundamental to the design of ARIA that it is able to innovate with different methods of funding high-risk research.
As I have made clear, appropriate checks are in place to ensure the Government can agree the details of any future borrowing activity, and the ability to engage in joint ventures will be an integral feature of ARIA’s full financial toolkit. I therefore see no reason the mechanisms available to ARIA should be limited through the Bill and I ask the noble Baroness to withdraw her amendment.
My Lords, I thank all noble Lords who have taken part in the debate. I particularly thank the noble Baroness, Lady Chapman, not only for her kind words but for pointing out the reputational risk in addition to the financial risk. As an accountant, I tend to think of financial risk before anything else.
I should say to the noble Lord, Lord Fox, that I did not say that I was against joint ventures and partnerships; I said that they were fine and that it was just a question of the degree to which, through those mechanisms, additional liabilities could be taken on that would then end up on the public sector balance sheet. Often joint ventures and partnerships are structured in such a way that, through those vehicles, access to additional borrowing of various kinds, or quasi-borrowing, can then end up coming back. Those are the reasons why I was probing in relation to joint ventures and partnerships. I accept that in many types of arrangement they are a natural way to do business in this area.
I thank my noble friend the Minister for what she said. I think she said that conditions could be attached to grant funding—indeed, there is a sentence on that in the Explanatory Notes for whatever clause relates to grant funding, which I cannot remember at the moment—but no other details were provided on how that works. Is that prospective? Is it done every time that money is paid over? I do not understand how it will work. Once ARIA has got hold of the money and does not need any more grant funding at that point in time, what powers do the Government have over its further borrowing after that?
My noble friend also talked about managing public money. I do not have an encyclopaedic knowledge of that, but from memory I could not see how that related to the issue I was really raising—whether you can borrow money without Treasury consent, which is what is implied by the statute, with it ending up on the public balance sheet.
Perhaps I could come back on that point. Any borrowing will be agreed with HMT in advance and will comply with the terms of managing public money, which requires that public sector organisations may borrow from the private sector only if the transaction delivers better value for money for the Exchequer as a whole.
I think I understand what my noble friend is saying. It is then about seeing how managing public money bites on ARIA, which has an unconstrained power to borrow. I would like to think about that further, and perhaps my noble friend could explain alongside that how conditions attaching to grant funding work in practice. Who says what to whom, and when? Perhaps then I can understand the mechanics of that. I am sure that, if the Government have thought this through, she will be able to give me a comprehensive answer on how we are not letting ARIA go out into the world and bust the public sector borrowing requirement—even more than it is already bust. I beg leave to withdraw the amendment.
Amendment 17 withdrawn.
18: Schedule 1, page 10, line 24, at end insert “and other property”
This group consists entirely of amendments in my name. Very helpfully, they have been grouped together so you do not have to hear from me too often. Helpfully, it also groups together amendments which, from my point of view, are about the way in which ARIA acquires, creates, disposes of, retains and shares intellectual property. That is what we are really on about in this group.
Amendment 18 is the simplest and least interesting of them. It bears on this same area of the Bill and the question of the supplementary powers. In Paragraph 17(2)(b), where the power is given to
“acquire and dispose of land”,
the amendment would add the words “and other property”. I may be told that it is unnecessary, but I am not quite sure that I understand why, and why land is referred to while other property is not. Very often in legislation, “land and other property” is referred to.
Amendment 19 is in the same part of the Bill. It adds a further provision, concerning the powers that ARIA would have in connection with the exercise of its functions, for it to be able to
“acquire and license intellectual property”.
Maybe it has the power to do that, but I am not quite sure why other things are referred to as being supplementary powers and why the acquisition and licensing of intellectual property should not be referenced here. The purpose of my amendments generally is to try to give ARIA as much flexibility as possible in the way in which it acquires and uses its intellectual property. This amendment would say that it has the power to acquire and license, so licensing would be a specific power that it was able to exercise.
Amendment 22 gets us back out of the schedule and on to page 2. This is the point at which, under Clause 2, ARIA may attach conditions to the financial support that it gives—so imagine the relationship between ARIA and researchers, institutes, bodies, companies or whoever. Some conditions are referenced in Clause 2(4) about financial support being repaid, property being restored or information being provided. In Amendment 22 I propose that we want to make it clear that intellectual property forms part of those conditions and that it may be held by ARIA itself under those conditions or shared with the beneficiaries of support, obviously in ways that it chooses. From my point of view, ARIA wants to be able to hold on to intellectual property in some circumstances; it definitely wants to be able to share it with the beneficiaries of support in others.
In this context, the beneficiaries of support could include researchers who themselves become part of ARIA for a time. As I mentioned at Second Reading, one of the most notable characteristics of the Laboratory of Molecular Biology, which used to be in my constituency, was that its researchers were able to generate, from very basic research, some applications that had substantial intellectual property value. For example, Greg Winter was at the Laboratory of Molecular Biology and made discoveries that led to monoclonal antibodies. If I remember correctly, he left LMB to form companies and exploit that, and then subsequently came back to LMB to do more research.
This is the kind of interchange that I suspect we want ARIA to be able to undertake. We want it to be able to bring people in and say, “We are going to share intellectual property with you. You will be able to exploit it and we will be able to exploit it. We can set up whatever arrangements are necessary in order to do this.” Amendment 22 would explicitly allow ARIA to enter into those sorts of arrangements with those who are the beneficiaries of its financial support and indeed those who are working directly for it as short-term researchers. The nature of the programme managers and researchers will generally be fixed term and quite short term.
Amendment 28 is in a slightly different part of the Bill—the part that the noble Lord, Lord Browne, was talking about earlier, concerning grants made by the Secretary of State to ARIA itself and the conditions that may be applied. I am suggesting that there should be conditions, but conditions that in this case allow the Secretary of State, having made grants to ARIA, to allow the agency, having acquired intellectual property and value out of that research, to retain and reinvest it. That is a potentially not insignificant provision. On some occasions, for example, the LMB was generating more by way of revenue back to the Medical Research Council than the Medical Research Council was giving it in grants. DARPA in America, if I understand correctly, was investing in messenger RNA for vaccine production from 2013 and that has led to Moderna, which has valuations in the tens of billions of dollars.
In America, there is an issue about the extent to which some of the public funding which has led to research has led to private as opposed to public gain. We want ARIA to have powers and flexibility in the conditions that the Secretary of State gives to the grants provided to it to help it not only generate substantial benefit for the economy, society, the environment and so on but also potentially extremely valuable intellectual property, which it can then retain and reinvest for its own purposes—which, obviously, are public purposes. That would be far better than having these activities simply lead to gain which is wholly transferred out into the private sector, which is a real possibility.
The public sector is perfectly capable of having such arrangements. For an organisation such as ARIA, if we are clear at the beginning that it has the flexibility to use intellectual property in these various ways, it will create exactly the right atmosphere of enterprise. What DARPA tells us in its document on its sources of success is that an entrepreneurial approach is central to some of this. We are all looking for the best scientists, researchers, programme managers and the like, but in Germany, for example, the Federal Agency for Disruptive Innovation is led by a tech entrepreneur, which sounds perfectly reasonable. Sometimes we need the entrepreneurial instinct at the heart of this.
For example, Mariana Mazzucato—I will not bore your Lordships, but I declare my wife’s interest here—was the Schumpeter lecturer three or four years ago and spoke on enterprise and innovation. Of course, the relationship between innovation and enterprise was the Schumpeterian thesis. We should not exclude this. These amendments are about trying to inculcate the entrepreneurial instinct in ARIA as well as the innovation instinct. I beg to move.
My Lords, I compliment the noble Lord, Lord Lansley, on a lot of penetrating understanding of how ARIA will work. It will all be a matter of working with others and IP from others. Far more will come into ARIA than it will generate itself. It is all a matter of doing these deals. When DARPA was working on GPS, it needed technologies from everywhere; its genius was in pulling them all in, doing the deals and getting the whole thing co-ordinated and working. It was exactly the same with the internet and the vaccine. It is all to do with interacting with intellectual property. In the generation of intellectual property, leaving the benefits of it with the creators is what drives and motivates them to do it. I agree on the need to really think through the intellectual property relationships that ARIA will have with others.
My Lords, may I ask the noble Lord a question, to be absolutely clear about his Amendment 22? Let us say that ARIA comes up with a fantastic invention. Would his amendment enable ARIA to vest the intellectual property of that invention, which might be worth millions, both in itself and in the researcher or researchers who were personally involved in discovering it?
The purpose of Amendment 22 —this is in the part of the Bill about what conditions ARIA might attach to its financial support—is to give ARIA the flexibility to attach whatever conditions it wishes. In some cases, it might give financial support and not seek to retain intellectual property, or it may enter into an arrangement which says that it retains all the intellectual property, or somewhere in between. However, that is for the circumstances of the individual project rather than something mandated in legislation.
My Lords, the more I look at this and listen to the wisdom of the noble Lord, Lord Lansley, and, previously, the noble Baroness, Lady Noakes, the more curious paragraph 17(2) of Schedule 1 becomes, because of both what is in it and what is not. I am prepared to accept the thesis of the noble Lord, Lord Lansley, that “and other property” would add some copper plating to it.
I hark back to the end of the response of the noble Lord, Lord Callanan, at Second Reading, where I popped up and asked a question about property. The Minister was clear that this would include ARIA purchasing pieces of research equipment. Research equipment can run to many tens, if not hundreds, of thousands of pounds—at least as much as property—yet, somehow, that does not appear to be on this list either. There is perhaps work to be done to understand the objective of this list. I am sure that the Minister will say that it is to afford ARIA the amount of freedom that it needs, but it seems to be quite a selective list, and I wonder what it was based on in the first place.
I turn to the other amendments before us and suggest that perhaps the most important is Amendment 28. It is a great shame that, because of a prior appointment, my noble friend Lord Clement-Jones was not able to be here for this section at least because, when it comes to intellectual property, most of us know that he has a strong expertise. I know that he will read very closely the Hansard report of this and, far from marking the homework of the noble Lord, Lord Lansley, I am sure that it will be the Minister’s homework that he will be marking. I hope that we can return to it.
Looking at Amendment 28, it seems eminently sensible to legislate for success, because we want this to succeed. If this succeeds, there should be a flow of revenue coming back into ARIA. We need to understand that this will not then become a cash cow for other parts of BEIS or indeed the Treasury. What this amendment therefore seeks to do—and, I think, would achieve—is to put that ring-fence in place; for that, the noble Lord, Lord Lansley, should be congratulated.
My Lords, for the second time today I am grateful to the noble Lord, Lord Lansley—the first was for saving me before the Minister had to expose my misunderstanding of a part of the Bill. He revealed, as the noble Lord, Lord Fox, pointed out, an even more fruitful argument for later in the consideration of this Bill, which I will look at more carefully.
I am grateful to the noble Lord for drawing my attention to the specific provisions of paragraph 17 of Schedule 1. When I read it, I honestly do not understand the purpose of paragraph 17(2) at all, unless these powers are not included in what is I think the most expansive and limitless description of powers that I have ever seen anywhere. In paragraph 17(1), ARIA is given powers to do
“anything which appears to it to be necessary or expedient for the purpose of, or in connection with, the exercise of its functions.”
There does not seem to be any point in trying to list anything. I tried to see if there was anything in common with these particular powers that required them to be expressly described, and I may find out that that is right when the Minister responds.
I am also grateful to the noble Lord for opening up this issue of intellectual property, because it was my concerns about where the intellectual property may end up that caused me to table Amendment 30. It is against the recent experience of practice that has developed in this country of businesses with intellectual property that has been developed by public funds disappearing off, principally into the United States; this is sometimes because a business is stripped apart and the prize piece is taken out because it is of greater value in another marketplace than it is in ours.
This is an issue on which I hope to have an opportunity to expand when we get to Amendment 30, which is causing great concern to the Bank of England about its effect on the economy of the United Kingdom. I am sure we will get an opportunity to debate that next time we meet in Committee. I have nothing further to add, but I am grateful to the noble Lord, Lord Lansley, including for encouraging the noble Lord, Lord Broers, to explain why the freedom of intellectual property management is crucial to getting the best of ARIA.
I turn to a series of amendments that relate to ARIA’s intellectual property arrangements. I am particularly grateful for the contribution of the noble Lord, Lord Broers. With all his wealth of experience, he has added much to the debate.
Turning first to Amendments 18 and 19 from my noble friend, I point out that in exercising its functions, there is already provision for ARIA to acquire and own physical property and intangible property, such as intellectual property. In compliance with its functions, ARIA can own property as it is a statutory corporation with its own legal personality. Paragraph 17(2) of Schedule 1 is not exhaustive, and therefore covers property and intellectual property as a subcategory of property. I hope that my noble friend will understand that I cannot accept this amendment, as it duplicates what is already provided in Clause 2.
Moving on to Amendment 22, I recognise the sentiment of this amendment, and I reassure my noble friend that ARIA will have the freedom to choose whether to retain or share its intellectual property rights. We recognise that ARIA’s intellectual property arrangements will need to be flexible, as they will vary depending on the research area, the amount of involvement of partnering institutions, such as business and academia, and the stage of technological development. ARIA will also have to agree bespoke intellectual property clauses tailored to the specifics of individual programmes and projects, given that commercial value is also likely to vary across ARIA’s portfolio. An amendment here is not necessary, as Clause 2(2)(c) already makes provision for ARIA to make available rights to, or license, its property, including intellectual property. I hope that I have managed to assuage my noble friend’s interest in the flexibility of ARIA’s intellectual property arrangements.
The noble Lord, Lord Fox, asked about the acquisition of pieces of research equipment. ARIA will have the ability to do its own research if needed, it will have scientists and experts working for it and it might sometimes be simpler for ARIA to conduct research directly if needed.
The noble Lord, Lord Browne, also expressed reservations about what ARIA could do. I should point out that ARIA is a statutory corporation. It will only ever act in compliance with its functions and powers and, as a consequence, the powers must, in general, be available.
Turning finally to Amendment 28, which relates to ARIA’s ability to retain income generated through the exploitation of intellectual property, I can assure my noble friend that I firmly agree on the intention behind this amendment. The ability for ARIA to retain income from its activities is subject to ongoing discussions with HM Treasury, and will be agreed to in compliance with the Government’s consolidated budgeting guidance. The detail of arrangements will be finalised as part of the funding delegation letter between BEIS and ARIA. It is therefore not appropriate for this to be placed in legislation. I hope that I have managed to assuage his concerns on those two important amendments, and ask him not to press them.
On Second Reading, the noble Lord, Lord Callanan, said that “It”—ie ARIA—
“can fund the purchase of a piece of research equipment, which ARIA then owns, and it can loan it out on the condition that it is then returned within a specific timeframe.”—[Official Report, 2/11/21; col.1204.]
So essentially, it becomes an equipment lending library. That is not exactly what the Minister has just said. Are the two things both true, is only one of them true, or what?
I think they are both true.
I am grateful to my noble friend, particularly because, as far as I can tell, we are all agreed that ARIA should have the flexibility to do these things. Where we not quite all in the same place yet is that it seems to me that the legislation can make that clear and it would be helpful if it did. Maybe we will come back to it and my noble friend will enlighten me. She seemed to say that in paragraph 17 of Schedule 1 the reference to property encompasses intangible and intellectual property but the word “property” is not there. That is my point. The word “property” needs to be there in order for intangible and intellectual property to be encompassed within it.
There are circumstances—for example, where the Secretary of State makes grants to ARIA and where ARIA provides financial support—where my noble friend seems to be saying that it will have the flexibility to enter into all these agreements, to share its intellectual property, to secure the benefits and retain them and reinvest them but that does not need to be in the Bill. Yet, we have these places where there are little lists of what the conditions might be like or what the provision might include. They may be non-exhaustive lists but the only things that seem to be listed are things that constrain ARIA, rather than making it clear that intellectual property, which is at the heart of its activity, is something where it should absolutely have this kind of flexibility.
I know the Treasury would hate to have it in the Bill that ARIA can retain intellectual property revenues and reinvest them for its purposes but that is exactly why we should put it in the Bill. I think we will return to this issue. I gladly give way to my noble friend.
I reassure my noble friend that paragraph 17 is not an exhaustive list. ARIA can develop and exploit scientific knowledge and this covers it getting a patent, under Clause 2(1)(b). The supplementary powers in paragraph 17(1) of Schedule 1 allow acquisition and disposal of property including intellectual property—
Paragraph 17(1) allows anything.
Is that not the point?
We will take this point away and clarify it.
I may have misinterpreted something earlier, but I do not think I have misinterpreted this. Paragraph 17(1) allows ARIA to do anything as long as it meets the test. It is judge and jury of its own testing. It allows it to do anything. What I do not understand is why there is a list below it because the list is just confusing. It misleads people into thinking that unless it is on the list ARIA cannot do it. It can do anything, almost, as long as it meets the test.
I think, given the concerns raised, we will take it back and discuss this in the department.
Can I ask my noble friend the Minister to ensure that when she comes back she explains the relationship between paragraph 17 in Schedule 1 and Clause 2, which sets up ARIA’s functions but seems to go beyond functions into things it can do? Paragraph 17 then comes and says again the things it can do. I find that confusing and that confusion may be shared by other noble Lords.
I am grateful to my noble friend. We are going to return to some of these issues and I beg leave to withdraw the amendment.
Amendment 18 withdrawn.
Committee adjourned at 8.05 pm.