The science of spending money successfully

One of the most cheering aspects of British universities is their entrepreneurial vigour. At it's best, it is thrilling

Another problem, another conference at the Treasury. A fortnight ago Gordon Brown held a conference aimed at tacking global inequalities. Yesterday he held a breakfast seminar with the more modest intent to do something to help British science - and in particular to make sure that scientific research is linked more closely to commercial applications.

Maybe that is unfair. You can be sceptical about the usefulness of the Treasury's plans for tackling the great problems of the world, but the funding of scientific research is right within its bailiwick. Science research costs money and a large chunk of that money can only come from the taxpayer. Much pure research is too far from the marketplace to be financed by the private sector. The Treasury, of course, holds the purse-strings.

The Government has increased the science research budget over and above inflation, so the Chancellor can argue that taxpayers are doing their bit. His aim is now to try to get bigger bangs for their bucks, so there is to be a review of science and engineering that will focus particularly on that frontier between academia and commerce: how to get ideas from the universities into the marketplace.

Conventional wisdom is that Britain is great at discovering things but poor at applying that knowledge and even worse at making money out of it. You know the sequence. We split the atom but have a catastrophic record of investment in nuclear power, culminating with the AGRs. We build the world's first commercial jet but then invest in Concorde. The result is huge numbers of Nobel prizes but no Bill Gates.

If this were still the problem, then it would be very difficult to fix. The reasons why we failed to make the bridge between academia and commerce were deep-seated: the intellect- ual arrogance and other-worldliness of academics, an unprofessional and under-valued business community, and governments ill-equipped to take large investment decisions.

But while the poor old taxpayer still has to step up to the plate as a result of those past failures (wait for the bills from the Channel Tunnel and the Eurofighter), the problems now are different. We are not making huge high-technology investment failures because, defence apart, we are not making huge publicly-funded high-tech investments any more.

We are also - and this is wonderful - in the early stages of an entrepreneurial revolution in the universities, which are working very hard at seeking ways of making money out of their boffins' ideas. Finally, the quality of management in the UK business community is vastly better than it was a generation ago: it is not just good macro-economic management that has made the UK the fastest-growing large economy in the European time zone.

That is the good news. The bad news is we are not getting the Nobel prizes either. Well, we are, but not as many as we used to. Not only do too many of our best scientists bunk out to the US for better pay and facilities; our universities are being squeezed by having to subsidise every UK undergraduate; and science teaching in the schools, where it all begins, has suffered.

So what is to be done? The history of government intervention in science over the past 50 years should make us suspicious of ten-year reviews now. And the history of government policy on university funding over the past ten years should make us suspicious of any plans that it develops for their science research.

There is a fundamental disconnection between Treasury micro-management and the funding needs of research. This is the most interventionist Chancellor of all time, but the very essence of much scientific research is that you have to waste money: you have to hunt for things for which you can see no commercial return. Can the Treasury resist the temptation to meddle? I think not.

Fortunately there are some pretty obvious things that need to be tackled and let's hope these emerge from the review. There is a saying in the shop trade that retail is detail. I suspect that science is too. The principle of the review should surely be not to have grand schemes about Britain as a "world leader" or other such PR guff.

Rather it should be to look at detail of scientific education, starting with the kids. I would like to know whether the cleverest children do go into science, how well they are taught, what happens to them at university and afterwards. Is there something that puts young people off science? Why - if it is indeed true - do so many scientists move to the United States?

There may be something wrong with the market signals here. For many years British businesses have complained they cannot get good engineers, but then you look at what the firms pay and it is pretty obvious why.

The review ought to try to identify whether the Government is fulfilling is responsibility in funding basic research, the research that can only be funded by taxpayers. All research institutions will make the case for more money; that seems to be in their DNA. But public money should not be directed at areas where there is an alternative: it ought to go to the places where the Government is the only potential source of funds.

Next, the review ought to look at success. As a general principle of planning nowadays you should not over-plan (HM Treasury please note), because by the time your plan is in place things will have moved on and you will need a different one. Instead you should respond to market signals and reinforce success.

One of the most cheering aspects of British universities at the moment is their entrepreneurial vigour. They are setting up incubator businesses, improving their fundraising, getting business people on to campus: it is an utter transformation from even five years ago. At its best it is thrilling. There is surely a case for looking at the most successful universities - not just the ones that come top of the rank in the research ratings but those that have the best teaching record too - and seeing how they deal with funding their scientific development.

Finally there is the principle of medicine that should be applied more often to government: first, do no harm. A generation ago there can be little doubt that government did harm to science. It backed losers. That wasted resources, both financial and human, and also taught the rest of us to be profoundly sceptical of scientists' claims and the ability of government to spend taxpayers' money wisely.

There's a trust problem here. All special interest groups want more public money, and the scientific establishment seems to have be succeeding in this instance. But unless society thinks it is getting value for money, some future Chancellor, under pressure, will give science budgets the chop. Look what has happened to general university funding, notwithstanding the modest help from the new student loan scheme.

Ultimately the safest way to protect - and project - our scientific skills base is for there to be more business applications. The Chancellor's instinct here is quite right. If businesses can make money out of science, scientists will get funding for their research. But it will always be the state's responsibility to see that the next generation gets to the starting gate. That means more money for basic school and university teaching, not just high-end research.