Alan Ryan: British managers, not Oxbridge, fail the test

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The decayed state of political, intellectual, and journalistic life in Britain was on full display when Richard Lambert, the former editor of the Financial Times, published his interim thoughts on the failure of British industry to exploit the bright ideas of university researchers. All anyone noticed was six paragraphs on Oxford and Cambridge. The Times managed a headline about "dithering dons", for which there was no justification, and a reference to Oxbridge colleges - which play no role at all in this issue. Lambert says he has detected "a general sense of unease about the direction of both universities." The implied threat is that if they don't shape up, Gordon Brown and the Treasury will do the job for them.

Forget that Oxford and Cambridge are in vastly better shape than their London competitors. Forget that Gordon Brown and the Treasury have presided over declining productivity in the health service, and have made a complete mess of higher education funding. Do not compare the dithering of the dons with the government's frantic tinkering. Do not notice that the "general sense of unease" results from the government blaming everyone but itself for its failures. Ask yourself why the Treasury picked the ex-editor of the FT to solve a problem that baffled Keynes and Alfred Marshall. Richard Lambert once employed Ed Balls, and Ed Balls returned the favour by putting him on the Monetary Policy Committee. For outsiders, it's transparency and evidence-based policy, for the Treasury, old friends who will reinforce Gordon Brown's prejudices do nicely.

In fact, aside from those six silly paragraphs, the interim report is perfectly rational. The depressing thought is that most of it could have been written when Mr Lambert was a history undergraduate at Balliol in the Sixties. The problem he raises agitated my economics teachers at much the same time, and the Treasury 60 years earlier: British industry spends too little on research and development and too little of British industry is science driven. The UK is fifth out of the seven countries in the G7 in R&D expenditure, and that accounts for a good deal of the productivity gap with Germany, the US and France.

Why is a puzzle. Britain was for ages a low-wage, low-productivity economy, and the effect lingers; the City creams off the cleverest people - a young engineering student gets starvation wages for academic research, a modest salary in industry, decent pay on the Financial Times, and much more in law or banking. The worst problem is that small and medium enterprises - "SMEs" - are where growth should happen, and they are particularly backward. ICI tried to improve the quality of the SMEs who supplied it, but found they paid too little to attract well-trained graduates, wouldn't spend money upgrading the skills of their workers because they might leave to work elsewhere, and were managerially overstretched. Little appears to have changed.

Many of the evidence given to is sensible: it is hard to know who does what in every university; it is impossible to predict demand for labour in five or10 years' time, so aligning university courses and industrial need is a non-starter. Some of the evidence isn't, especially the suggestion that universities may be over-optimistic about the viability of the spin-off companies they launch. If they aren't, we should give up.

Enough carping. What should Richard Lambert's final report say? Three things. First, universities can't rescue British industry; British universities already have a better record than American ones in cooperating with industry. The trouble lies with British management, as evidenced by the fact that UK firms with American managers are more productive than those managed by the natives. Second, if universities are to pay attention to the business world, they must have the mental space to do it - which means an end to acronymic intrusions, penny-packet funding initiatives, and debilitating interference. They can't be entrepreneurial by fiat, nor if they are treated like Fifties nationalised industries. A schizophrenic government will produce schizophrenic universities. Third, there is much room for detailed improvements - in charity law, the research funding mechanism, "off the peg" contracts to make life easier for SMEs, and so on. Miracles, on the other hand, not.

The writer is warden of New College, Oxford