Select Committee on Agriculture Fourth Report


The Agriculture Committee has agreed to the following Report:-



1. On 11 September 2000, Horticulture Research International (HRI) announced "a major restructuring programme to restore HRI's financial viability".[2] The programme involved:

  • The closure of HRI's Stockbridge House site, and operational changes at its Kirton and Efford bases with some key scientific staff redeployed to strengthen the teams at the science centres at Wellesbourne and East Malling.

  • The loss of some 150 posts across all sites from HRI's staff of just under 700.

  • The strengthening of HRI's senior management team.[3]

More details of the programme were provided in the Government response to our Report of last Session on the financial position, status and long-term future of HRI,[4] prompting us to take further evidence on this subject from both HRI and its sponsoring department, the Ministry of Agriculture, Fisheries and Food (MAFF). We therefore held a single evidence session on 13 December 2000, with Professor Michael Wilson (Chief Executive), Mr Peter Siddall (Chairman) and Mr David Temperley (Director of Finance), HRI; and the Rt Hon Baroness Hayman, Minister of State and Dr David Shannon, Chief Scientist, MAFF. We received almost 40 written submissions, mostly from individual growers, in response to our call for evidence. We are grateful to all who contributed to this inquiry, particularly the growers who put into practice the results of much of HRI's research.

2. In this brief Report we comment on HRI's restructuring programme. We then go on to make some more wide-ranging observations about HRI's relationship with the horticultural industry and with the Government, and about the role of Government in horticultural research.

HRI's restructuring programme

3. It was clear to us in May 2000 that HRI was in need of serious restructuring. We were therefore not surprised by the scale of the programme announced in September which we have since learned had been in contemplation for some nine months, receiving final approval from MAFF once the impact of the Spending Review 2000 became known.[5] The package is to cost some £4.5 million of public money over five years (£4.3 million in the first year), a fact which in itself provides justification for close parliamentary scrutiny as to whether the scheme will provide a long-term solution to HRI's problems. Given that, since its formation in 1990, HRI has received £60 million from the Government for various restructuring programmes, the track record is not reassuring.

4. We raised two separate but linked concerns about the restructuring: whether it will result in the necessary improvements in HRI's finances and management, and conversely, whether it will undermine HRI's ability to deliver services to its customers. On the first point, we discussed in our previous Report the difficult financial situation faced by HRI, as it attempted to find new commercial sources to compensate for the decline in MAFF funding. Its business unit, HortiTech, which was launched in 1998 to generate commercial income, has had disappointing results to date, leading us to question HRI's prediction that it can keep its income steady over the next three years by increasing annual commercial income from just over £2 million at present to £4 million in 2003/4.[6] That represents an almost 100% increase in three years compared with the historic figure of 60% over the decade since HRI's formation,[7] and indicates a need for far stronger business management skills than have been available to HRI in the past. HRI is appointing a new Head of Business Development and we accept that the right candidate might be able to meet this challenge. However, we note that this is not an additional management post but an existing one which has been vacant for some time.[8] The same is true of the post in operations which has also been presented as a key factor in strengthening HRI's management and ensuring the success of the restructuring programme. In evidence, HRI's Chairman admitted that HRI "are still quite weak" at management level and needed "to strengthen the management team in particular areas".[9] We welcome this recognition that the management weaknesses of HRI must be addressed but believe that this must go further than the two posts now under discussion. If this is not done as a matter of urgency, there is a real danger that the measures currently being implemented will do little to arrest HRI's financial problems.

5. HRI's financial predictions could equally be thrown if the cuts are not managed so as to preserve the organisation's core functions. Last year, we cautioned that any cost reductions should "be carefully managed to ensure that HRI's science and staff base [was] not damaged irreparably".[10] The angry reaction of many of our witnesses to HRI's plans arose from just this fear, particularly as regards the loss of Stockbridge House and its Specific Off-Label Approvals (SOLA) programme for pesticides. HRI management was adamant that, unlike all its other sites, Stockbridge "has no unique facilities" and that "half of the SOLA trials have actually been done at Kirton [HRI's site in Lincolnshire] over the last three years".[11] The Chief Executive admitted to being "deeply upset" that eight of the ten key staff at Stockbridge House had opted for redundancy, but he was sanguine that "HRI has many other staff who are equally capable of filling those gaps".[12] Furthermore, his Chairman stated boldly that "in general terms on the staffing and the capability of HRI to do its job properly and to support its future business development, there is no question that we have preserved the full capability and that the reorganisation and, essentially, the simplification of a multi-site organisation will make it possible for us to be much more productive and efficient".[13] He also stated that any business lost from the closure of Stockbridge House was only marginal to HRI and that any continuing operation there in other hands offering the same service posed little risk.[14] HRI's Corporate Plan, to be presented to Government before the end of March,[15] should help us to judge whether this confidence is well-placed, both in terms of the financial position and the research capability. We look forward to receiving the Corporate Plan and expect it to demonstrate clear plans for moving forward and targets against which the realisation of the plans may be judged.

HRI and the horticultural industry

6. HRI maintains contact with the horticulture industry in a number of ways. Its customers include the levy-funded Horticultural Development Council (HDC) and the Apple and Pear Research Council,[16] while horticulturalists serve on HRI's Station Advisory Committees[17] and the East Malling Research Association and the HRI Association provide fora for contact with individual growers.[18] It is clear from the evidence we received that the industry values the work of HRI. However, it is equally clear that the restructuring announcement has exposed tensions in the relationship between HRI and the industry, with regard to HRI's overall strategy and to its attitude towards consultation. Concerns were expressed that HRI was moving away from its remit and that it lacked the ability to meet industry's needs,[19] specifically in development.[20] Growers were also anxious that, as a result of the restructuring, they would lose access to "grass roots information"[21] and "face-to-face" contact with scientists[22] and were angered that HRI had not consulted the industry about its proposals.[23]

7. Mr Siddall acknowledged to the Committee that "we are conscious, as a result of the extremely strong outcry that has arisen, that the industry is not very happy with us" and that "the perception this year has grown very rapidly that ... we are not interested in the industry and in development any more".[24] His Chief Executive accepted that there had been little consultation over the restructuring plans. He told us that he had informed interested parties as much as he could during the discussions with MAFF but that it was very difficult "to go public".[25] To address these communication failings, HRI has "made some clear commitments to HDC ... about closer liaison" and has accepted "a clear obligation" to communicate to growers in areas where the organisation no longer had a physical presence.[26] It is a matter of great regret that such uncertainty and feeling of betrayal on the part of growers has resulted from the handling of HRI's restructuring announcement and we welcome the commitment of HRI to mending the breach caused by the inadequate communication with its customers.

8. An essential element in rebuilding industry confidence will be the clear communication of HRI's future strategy. HRI's stated remit is to "carry out horticultural research and development and to transfer the results to the UK horticulture industry",[27] and the concern that HRI was moving away from this perhaps followed Professor Wilson's remark that "we have changed the emphasis of the Institute".[28] We agree with HRI's unions that "the core task of HRI is to provide innovative and relevant research for the horticulture industry and that this should be the focus of [its] activities".[29] We therefore welcome Professor Wilson's confirmation that "HRI remains committed to the development and the transfer of technology and knowledge to the industry".[30] However, Mr Siddall made it clear that further changes to the type of business that HRI undertakes are likely.[31] In these circumstances, it is crucial that customers know what they can expect from HRI and how it will be delivered. Taking its remit as the starting point, HRI must produce a clear mission statement, as well as a commercial and research strategy for its customers, which explains HRI's business. In evidence, Mr Siddall accepted a similar suggestion[32] and we expect to see it implemented as part of the forthcoming Corporate Plan.

HRI and Government

9. HRI is an executive non-departmental public body (NDPB) under MAFF. As such it "operates at arm's length from Government" but the Minister of Agriculture, Fisheries and Food "is answerable to Parliament for public money spent by HRI and for its overall efficiency and effectiveness". HRI's non-executive Board and Chief Executive are responsible for its "day-to-day management in accordance with an agreed Management Statement".[33] Against this background, we raised questions with Baroness Hayman on MAFF's relationship with HRI in the light of the restructuring programme and also on certain longer-standing issues as outlined in our previous Report.

10. Our discussion with the Minister highlighted a general issue concerning NDPBs: the sponsoring Department needs to know "where the line is drawn between meddling in the proper responsibilities of the Board and the senior management and having a proper strategic overview of an organisation".[34] Baroness Hayman explained that management statements offered a framework but the involvement of senior staff varied between departments and individual NDPBs.[35] At its most simple, there are two aspects to monitoring the work of NDPBs: quinquennial reviews and ongoing monitoring. In the specific case of HRI, we have concerns about both aspects. First, we believe that a thorough review of all of HRI's activities and its relationship to Government and its customers should have been conducted before the money for the restructuring programme was granted. It appears that broad questions as to the future of the organisation were ruled out because of the fixed quinquennial review cycle[36] whereby HRI's next review is scheduled for 2002/03 (its last ran from 1995 to 1997). In order to deal appropriately with substantial problems within or new opportunities for NDPBs, we believe that the terms of the cycle should not prevent Government from carrying out the type of review we have suggested. The alternative, which we have seen in this case, is ad hoc decision-making and drip-feed cash injections without a strategic context.

11. Second, we were assured by Dr Shannon that MAFF "monitor[ed] the performance of HRI carefully".[37] However, despite that monitoring, HRI posted an operational deficit of £1.64 million in 1999/2000 and is forecasting a deficit of £2.17 million in this financial year.[38] This indicates a need for a more robust approach to monitoring by MAFF, including the recognition, from which Baroness Hayman did not demur, that when an organisation "has a track record of getting into difficulties", it is important that it is monitored closely.[39] In the case of HRI, we recommend that a formal monitoring procedure, agreed by both MAFF and HRI, be put in place. On the broader question of Departmental involvement we accept that this is likely to vary but MAFF must satisfy itself that it has adequate involvement with its NDPBs to ensure that it can undertake its duty to be answerable to Parliament for their efficiency and effectiveness. This is an issue to which we shall pay particular attention in our inquiries into all such bodies.

12. The history of MAFF's relationship with HRI has left operational and staffing problems which can be resolved only by changing HRI's status through primary legislation. In our last Report, we recommended that a bill to this effect be laid before Parliament in Session 2000-01.[40] MAFF responded by reference to the need to consider whether this would prejudge the forthcoming quinquennial review. Meanwhile, it was investigating whether alternatives to primary legislation could be used to resolve operational difficulties.[41] We followed this up with the Minister, who suggested that the 1999 Employment Act would allow some of the Transfer of Undertakings (Protection of Employment) issues to be resolved and that HRI's permanent staff could all be brought within the Research Council's pension scheme.[42] This would leave the overall governance issues "still left to be resolved", a matter that would be difficult to address as the quinquennial review approached.[43] We believe that MAFF has missed an opportunity to tie the current restructuring of HRI in with a resolution of the issues affected by its present status. The need for primary legislation to resolve the governance issues remains. Despite the looming threat of the quinquennial review, we would prefer these issues to be resolved sooner rather than later and once again urge the Government to bring forward the necessary bill without further delay.

MAFF and horticulture research

13. HRI is only one element within MAFF's wider responsibilities for horticulture research. This year, through its research budget, it spent over £11 million on horticulture research in the UK[44] and further sums are made available through the Horticulture Link Programme which is "50/50 funded with the industry".[45] The strategy behind and mechanics of funding MAFF's horticultural research programme are therefore a matter of interest to both the taxpayer and the industry, as well as to the research institutes who stand to benefit from this expenditure. At the moment, MAFF is in the process of considering the results of a consultation exercise on its whole research strategy for 2001-2005.[46] This, however, is limited in its scope and would not allow the "fundamental review of the roles" of the organisations engaged in horticulture research, suggested to us by the HDC, for example.[47] We perceive a clear need for such an in-depth review. HRI's difficulties have highlighted the extent to which that institution has played a dominating role in MAFF's horticultural research strategy thus far, through its receipt of the lion's share of the available funding. We believe that MAFF must now step back from this position and institute a review of what it is trying to achieve through its funding for horticulture research in the UK, leading to the development of an articulate strategy for the achievement of those ends. It may be that other institutes are better placed than HRI to deliver in the identified areas of expertise or that HRI is able to justify its privileged position. Either way, the Government would have established a firmer basis for its policy and expenditure on research in this sector. We recommend that MAFF conduct a fundamental review of the research needs of the horticulture industry, consultations on which should involve all sections of the industry, including growers and their customers, as well as industry, research bodies and universities. The Government should also initiate a report on the way in which the HDC sets its research priorities and its relationship to HRI.

14. The review could also usefully be extended to funding issues, discussion of which at the moment seems to be umbilically tied to HRI's quinquennial review, in the minds of MAFF Ministers.[48] We raised two specific points with the Minister and Chief Scientist which should be included as options in the review: first, the suggestion that MAFF should match HDC levy income £1 for £1 and give the HDC control of the whole amount, allowing "HDC to really drive technology transfer" for growers;[49] and second, the allocation of core funding to institutes reliant on Government funding (such as HRI) which would enable them to compete on price as well as scientific excellence and relevance.[50] Baroness Hayman was reluctant to commit herself to changes in funding arrangements, but argued that the funding relationship between MAFF and HRI or similar institutes raised "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".[51] We agree. We recommend that funding arrangements be part of the fundamental review of MAFF sponsorship for horticulture research.


15. The process of change at HRI is set to continue for the foreseeable future. Its restructuring programme means that it should be a very different organisation in twelve months time. As it changes, it is imperative that HRI focus on its remit and the requirements of its customers and that it become more responsive to change in the availability of public sector funding. We believe that MAFF should do all it can to assist HRI through resolving the difficulties caused by its current status and through continual monitoring of the restructuring process. We wish HRI well in this transition. However, we recognise that there is and should be a distinction between the Government's support for HRI and the Government's support for horticulture research in the UK. It is regrettable that a clear framework for horticulture research was not established before HRI's restructuring programme was developed. It is vital that the Government now set in train a review of its objectives for horticulture research in the UK, which should be completed before HRI's next quinquennial review in order to establish the wider framework within which HRI, as the main recipient of MAFF's horticulture research and development programme,[52] is to operate. Research funding is one of the few ways in which public money is given to assist the horticulture sector. There are clearly improvements which should be made to ensure that the strategy behind this expenditure meets the agreed needs of the industry.

2  HRI press release, 11 September 2000. Back
3  Ibid. Back
4  Seventh Report from the Agriculture Committee, Session 1999-2000, HC 484; and the Government Response thereto contained in the Seventh Special Report from the Agriculture Committee, Session 1999-2000, HC 926. Back
5  Q 92. Back
6  Q 15. Back
7  HC 484, Session 1999-2000, Q 32. Back
8  Ev. p. 1, para 7 Back
9  Q 27. Back
10  HC 484, Session 1999-2000, para 5. Back
11  Q 31. Back
12  Q 27; Ev. p. 1. Back
13  Q 27. Back
14  Qq 48-50. Back
15  Q 84. Back
16  HC 484, Session 1999-2000, Q 51. Back
17  e.g. Ev. p. 23. Back
18  HC 484, Session 1999-2000, Q 51. Back
19  e.g. Ev. pp. 23-4; Ev. p. 32. Back
20  Ev. p. 33, para 2.2. Back
21  Unprinted evidence from D Westwood & Son. Back
22  Unprinted evidence from J Cook & Son. Back
23  Ev. pp. 23-4. Back
24  Q 28. Back
25  Q 18. Back
26  Q 28. Back
27  HC 484, Session 1999-2000, Ev. p. 1, para 2. Back
28  HC 484, Session 1999-2000, Q 4. Back
29  Ev. p. 38. Back
30  Q 6. Back
31  Q 48. Back
32  Q 55. Back
33  HC 484, Session 1999-2000, Ev. p. 32, paras 2-3. Back
34  Q 95. Back
35  Q 112. Back
36  Qq 120-121. Back
37  Q 110. Back
38  Ev. p. 1, para 3. Back
39  Q 112. Back
40  HC 484, Session 1999-2000, para 6. Back
41  HC 927, Session 1999-2000, paras 9-10. Back
42  Q 138. Back
43  Q 138. Back
44  MAFF Research Strategy 2001-2005, Consultation Document, page 92. Back
45  Q 156. Back
46  MAFF Research Strategy 2001-2005, Consultation Document. Back
47  Ev. p. 34, para 2.6. Back
48  Q 147. Back
49  Ev. p. 25. Back
50  Ev. p. 40. Back
51  Q 147. Back
52  HC 484, Session 1999-2000, Ev. p. 33, para 11. Back

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