Select Committee on Agriculture Minutes of Evidence



Examination of witnesses (Questions 140 - 162)

WEDNESDAY 13 DECEMBER 2000

RT HON BARONESS HAYMAN and DR DAVID SHANNON

  140. There are two precedents, the previous Government got the Bail Amendment Bill using the ten minute rule procedure and there is always the handout bill. Have you considered either of those two options?
  (Baroness Hayman) Both of those were considered and the advice was that a Private Member's Bill was not an appropriate way forward. We did look at the handout bill but within departmental priorities there were other bills that came further up. If you do not have a large legislative programme it does not make it easier to get small Bills through. It is something that I would prefer that we had been able to achieve, and I have to say that we did not achieve it.

  141. You are going to have this meeting with the Treasury, when can people expect to know if the alternative routes which you have outlined, particularly in reference to the employee problems, are going to be resolved? It sounds like an endless manana argument, if we keep this going there will be a Quinquennial Review and then there will be something else and we will never know what the answer is.
  (Baroness Hayman) I do not think I was talking about the Quinquennial Review in terms of resolving the employment issues, I hope we can make faster progress on that. Although we do need to sort them out I have been assured that people are not being disadvantaged, certainly in terms of their pensions, by the current untidy and unsatisfactory state of employment.

  142. Tell me how the legislative circumstances of HRI are currently affecting its ability to borrow and to finance its operation? For example, is its wish to borrow money currently a problem as far as that is concerned, because under the current status it would count against your departmental budget?
  (Baroness Hayman) I think it is hard to bottom this one up because I think some of the difficulties about borrowing are more in people's minds than in the actuality of the legislation. There are opportunities for HRI to borrow. There are, indeed, issues about our departmental spending limits, but because the £4.5 million that we are putting in is being met out of MAFF's budget then the borrowing issue does not arise there.

  143. If, for example, HRI saw—we heard about the excellence of their science—an opportunity to develop a facility to invest in some new process, are you saying that there is not a problem?
  (Baroness Hayman) I am saying that I do not believe that there are insurmountable problems posed by the legislative framework for borrowing in the sort of circumstances that you have described.

Mr Borrow

  144. Earlier on we had some discussion about the funding link between MAFF and HRI, and the fact that HRI is overwhelmingly dependent for its funding on MAFF.
  (Baroness Hayman) 50 per cent.

  145. Over the last ten years there has been something in the region of a 25 per cent reduction in real terms in the funding by MAFF to the HRI.
  (Dr Shannon) To keep the record straight it is probably more like one-third, rather than 25 per cent.

  146. Do you feel that MAFF has given HRI sufficient notice of those reductions in funding for them to be able to incorporate those changes in their business plan? Given the pattern of restructuring of HRI do you feel that there is any connection between the reduction in funding from MAFF and the failure of those restructuring plans to actually achieve their original objectives?
  (Baroness Hayman) We have always tried to give HRI as much notice as possible of funding reductions, or at least to warn it of the risk of reductions. I think we have kept them in the loop in terms of MAFF's overall science budget and the likely difficulties and repercussions for HRI. It has actually sustained its funding against a background of reduction in our total spend, and increased use of competitive tendering. We still, as you point out, account for some 50 per cent of the R&D income. There has also been a great deal of investment, as we discussed, in the infrastructure. There has been a firm commitment and there has been appropriate information given. Indeed the business plan that HRI are now looking at is looking towards MAFF funding over the next three years and recognising the possibility of decline in that now. If you like, we have two factors that have squeezed and impinged, one has been the overall reduction in the MAFF science-based spending and the other has been the enormous pressure, particularly in areas of animal health and BSE and TSE research.

  147. I am not disputing that at all. Obviously MAFF's commitment to HRI is demonstrated by the amount of funding that is being made available for restructuring. The possibility of HRI not being solely dependent upon MAFF funding, that is, if you like, research programme based, has been raised with the Committee, but it may actually lead to some greater stability within HRI if MAFF recognised its commitment to HRI by making some core funding available because there is no dispute that MAFF is committed because of the £60 million of restructuring money that has already been invested. Do you think that may be a route that could be taken in the future?
  (Baroness Hayman) At the risk of offending Mr Todd I will say that I think the funding relationship equally has to be considered as part of the Quinquennial Review. If there were issues before then where we believed that there were restrictions in the management statement which are genuinely preventing it from exploring its full potential then I think we could look at that. I think the answer to whether or not you want to core fund an institution rather than simply fund it as a competitor for work against other competitors does come back to fundamental issues about whether this capacity is important for Government to have maintained in one place and in one particular way, in which case then core funding may be an appropriate way to do that. I think it does take us back to some fundamental questions about whether the organisation and the capacity itself are important to Government in one place or whether you feel you could meet that capacity across a range of providers. I think that is the fundamental issue. The funding then follows that, the funding structure follows that decision.

  148. I think Mr Todd might wish to come in.
  (Dr Shannon) Could I just add to that. The new MAFF Science Committee is obviously looking at the priorities across the budget and will advise ministers about that, but equally they will look at a whole range of other things, about the question of should there be core facilities, core expertise, that is maintained on a different basis from the generality of the MAFF research programme. I have no doubt the Science Committee will look at that in the not too distant future.

  Chairman: I wonder if Mr Borrow would like to continue on research now and then I will come to Mark and to Michael, just for better organisation.

Mr Borrow

  149. When MAFF commissions research at the moment, to what extent are the resources of that research monitored in terms of value for money and the effectiveness of that research?
  (Dr Shannon) That is probably a rather specific question. The research is funded on a basis that specifies what research we expect and then we have annual reports on projects and, indeed, all of our programme is now on the web so you can see exactly what projects MAFF is funding and you can see what reports are available. There are annual reports on the projects and then at the end of the project is a final report. I should have said it is knowledge of the final report that is on the web. So you can get from MAFF copies of the final reports of all the projects it does. In addition to that we have a formal review of all the projects within a programme which invites the researchers to present their work, it has external academic peers who are looking at the quality of what is done, it has commercial peers or industrialists who are looking at the relevance of what is done. As a result of that projects are either dropped or further work is funded. There is a very fulsome programme of review of the research programme. In addition to that we do carry out a programme of evaluations of specific areas of work: did the research provide the answers and were those answers then effective in changing the policy, in other words did the research really contribute to policy in the way that we hoped it would do?

  150. You touched earlier on in terms of the dilemma that exists between mixing pure science research and research that is directly related to industry. Certainly the feeling in the industry some years ago was that the model where they were brought together within the same institution was the model which should be followed. Certainly we, as a Committee, have heard a number of thoughts that they should be separated. I wonder whether that is being reviewed, or may be reviewed, within MAFF or whether MAFF is happy with the existing model?
  (Baroness Hayman) I think it is one of the fundamental issues that you have to keep under review. Just because ten years ago the belief was that the synergy was best created by having a research facility that could go right to near market research that was commercially funded from very lab based, blue sky, horizon sky research was the right decision, I do not believe that it is the wrong decision now but I think that assumption has to be questioned. You do not not revisit it because it was the right thing to do ten years ago. I have not been persuaded that people feel that they are working in such completely different sectors that their synergies would be better if they were silo-ed into different compartments. I think there is evidence of the fact that making the connections is an important area and that people who work in genomics now are actually going to be doing stuff that is very relevant to commercial markets quite soon. There are still scientific advantages to keeping those things together. It is a legitimate question to be asked and one that I think we should continue to keep asking ourselves.

  151. And if when you are considering placing a research contract, shall we say a research contract for something that is very much at the lab end, would you take into account in deciding in which institution to place that contract how relevant it is to have that in an institution where there is the industry end working within the same institution? Is that a factor that would affect your judgment on giving that contract?
  (Dr Shannon) If it was placed competitively we would look at whether the bid that comes forward addresses the policy objective that the research is being carried out to underpin. Then we would look at the context in which the research was being carried out and the quality of the science that is contained within it and, at some point, obviously the cost of the project. We would look at whether the people were capable of doing the research, whether we had high confidence that the people were capable of delivering a good research project and that the project was focused on the issue we wanted it to be focused on. Clearly the facilities and the other work around it are quite often a strong element in convincing that the project will be successful.

Mr Jack

  152. Just one question. Why do you think £12.5 million is the right number for your contribution to HRI?
  (Baroness Hayman) £12.5 million as the R&D income?

  153. Yes. Your input to HRI. Why is £12.5 million the right number?
  (Baroness Hayman) I think you have to ask whether the MAFF horticultural and potato R&D programme is the right number, and that has to be asked in the context of overall priorities for department R&D, and then whether what HRI gets out of that is the correct slice of it. Both those figures are around £11 million at the moment.

  154. Tell me why you think the slice is correct? Why are you content with this number?
  (Baroness Hayman) I am content with the number because I know we are undergoing a thorough evaluation of the research programme and we will be questioning the amount that goes into horticultural R&D in the sense of setting the overall science strategy. I am not just relying on what historically has been there in the past, I am also involved in a process that is assessing that. Out of that, 85 per cent of that work goes to HRI and 25 per cent is out to competitive tender. Again, one looks at each of those as to whether it should go there. The figure is not that we have decided to spend £12 million, the figure is organically produced by the contracts that are won by HRI.

  155. So is this a bottom up budget or a top down budget?
  (Baroness Hayman) It is a bottom up budget in the main but there are two sets of research contracts that are put with HRI. Some of it is out of the competitive budget, that goes out to tender, and some of it is out of the horticultural budget.
  (Dr Shannon) HRI is a major contractor for us in relation to horticulture. The £11 million does contain elements of work on nitrates in relation to horticulture. HRI does attract budgets, it does attract funding from other elements within the overall MAFF programme. The question you ask is one that we ask repeatedly. Of course we have to look after public protection, the environment and then look amongst the agricultural sector and the horticulture sector to make some judgment about what the relative spend should be in relation to horticulture versus pigs, poultry, and other sorts of sectors. The one feature, of course, that horticulture has is that it is a large contributor to the GDP of the agriculture and horticulture industry. I think something like £1.8 billion of added value is added by the horticulture industry and the horticulture sector. That is a very large slice of the added value across the whole of the agriculture sector.

  156. My final question is, if it is a bottom-up budget what was the sum total of the elements by how much it was reduced. Take the total horticulture spend, you have to divide up the cake with a number of competing outcomes, but if they are bottom-up budgets you add up all of the bids and then you have to cut something off the top. What was the pile of the bids and what was the cut-off?
  (Dr Shannon) We normally do a PES-type exercise asking policy customers what research requirements they think they have and what research they need. That exercise usually generates about 20 per cent or 25 per cent more than the budget we have to spend. We then have to do a rigorous assessment of what we think the priorities are and then allocate the budget on the basis of that. It has been the R&D Committee within MAFF that has done that and has advised ministers on that in the past. It will be the Science Committee that will advise ministers in future on the balance of expenditure between sectors and on things like environment versus competitiveness.
  (Baroness Hayman) Am I right in saying there are some sources of income for work, whether it is European work or anything else, that are funded by a number of partners? So it is possible that MAFF funding levers-in funding in from other organisations, whether it is the commercial sector or the EU as well. There is that wrinkle to it in addition.
  (Dr Shannon) The obvious one is the LINK programme, there is very large horticulture LINK programme which is 50/50 funded with the industry, I think it is worth £15.9 million over a number of years.

Mr Todd

  157. You will already have the thrust of my agenda on this, I think. I will not go through the way in which I think the Ministry has led this process poorly, to date, incidentally not purely under the watch of this Government. Could I add one other thought to the way in which this should be re-evaluated in future, which is the horticulture industry unusually does not rely on subsidies in its normal activities. Many of the other areas you talked about do, and this is one of the very few ways in which the Government makes any significant contribution to assist the sector. Would it not be better to empower the growing community more to purchase their requirements more effectively? Currently the HDC is a major player in discussing with Government and with the HRI their particular goals, but, to be honest, does not have a particularly strong purchasing relationship of its own. Would it not be better to see Government resources transferred to the HDC so that they can make their own commercial choices of where they should place their proportion of research activity?
  (Baroness Hayman) I am trying to think through some of the implications about that sort of transfer of funds and how it would be viewed in terms of competitiveness.

  158. It is a levy body which has a quasi-governmental relationship already.
  (Baroness Hayman) Exactly and, therefore, one has to think about the model. I am thinking technically about the modelling difficulties, which I think is not the right way to take your approach which I suspect is more about getting a more direct link between the customer and making them a smarter customer.

  159. That is right, a stronger purchaser/provider relationship. There have been criticisms of too cosy a position, perhaps because HDC does not really have enough resources of its own to manage that process as rigorously and as effectively as it might.
  (Baroness Hayman) One of the things that has emerged from my conversations with HRI is the need to strengthen their understanding and communication both with HDC and with growers themselves in different sectors of the industry. One of the things I have learned and want to do within MAFF is I do not have specific responsibilities for horticulture as an industry, I have responsibilities for science and science institutes and, again, that is the possibility of a gap and not being a smart enough customer, whether you do it through transfer of funds or whatever. I think joining up and getting closer to making sure that you do not have too convoluted a relationship, too many Chinese whispers, between the people who want the work done and know what is necessary and the people who are doing it is a lesson. Whether you do that by not having direct MAFF funding and channelling it through HDC, for example, is something I do not want to commit to.

  160. Not even I would suggest that was the total route because there are clearly longer term research objectives which the HDC would be a poor evaluator of because they have nearer to market goals. The impression one has of this sector is of a diffuse sector of procedures, a relatively loose network that drives the HDC and a relatively small institution to make judgments on their behalf. That could be improved substantially by additional Government support to the HDC's own levy based research activity to put a little bit more power into their relationship with not just HRI but the other producers of research which could be available to them.
  (Dr Shannon) Could I make perhaps two comments. One is the Link Scheme is a very direct way in which the industry can leverage, if you like, more money out of Government in relation to the issues that are important to the industry. The other one is that we do have a very close relationship with HDC and my staff constantly provide information of what MAFF is funding and we take note of what the HDC is planning to fund, so that we do try to create some sort of seamless whole out of the overall spend. It has not been Government policy to transfer taxpayers' money to organisations like HDC in the past.

  161. Is it a reason not to do it now?
  (Baroness Hayman) Although I would not like in any way to undermine HDC or what they are doing, or indeed what we are doing, or David's colleagues, I think communications and relationships and cutting out middle men are usually good things to work on in terms of getting the job done properly. So, taking some of those issues on board and considering them without prejudging what the end result will be I certainly undertake to do.
  (Dr Shannon) The terms of the Link Scheme were carefully worked out with the European Union to ensure that we did not end up providing national aids, which is against Community rules.

  Chairman: Thank you very much indeed both of you. Neither of you two, of course, are in the position that we are, we all face our Quinquennial Review quite shortly. In any case, I have a feeling that we will want to follow this one quite closely.

  Mr Todd: A rather less hidebound timetable than the Minister has indicated for this.

Chairman

  162. We may want to keep a close eye on this. I am intrigued by Dr Shannon's remarks that there are quite a lot of organisations that are in the same boat. Any list he wishes to give me would help us to sort it out and we will do our best. Thank you very much indeed for coming. This being the season of the year, Happy Christmas. You may well want to join Horticulture Research International at the Salvation Army carol concert in Westminster Hall; salvation is something we are all in need of.
  (Baroness Hayman) Absolutely. Thank you.


 
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