Examination of witnesses (Questions 1
WEDNESDAY 28 FEBRUARY 2001
CLIFFORD and MR
1. Baroness Symons, Sir John Chisholm, Mr Clifford
and Mr Jagger, thank you very much for coming. Baroness Symons,
I understand that you would like to make an opening statement.
(Baroness Symons of Vernham Dean) If I may, yes.
2. First, I shall make an opening statement.
Two of our colleagues are taking part in the debate on Sierra
Leone so they will join us later. Throughout the current Parliament,
the Defence Committee has been closely monitoring the progress
of the proposed public-private partnership for DERA. We have produced
three reports. Our Defence Research report highlighted
our concerns about the MoD's plans, concerns shared by many important
stakeholders: industry, the trade unions and the US authorities.
The MoD abandoned its plans for a "Reliance" model for
the PPP, to which we had very strongly objected. It launched a
consultation on an alternative "Core Competence" approach
in April 2000, which involved a much bigger proportion of DERA
staying within the MoD . "Retained-DERA", as it was
then called, would keep about a quarter of DERA within the department,
leaving most of it in a plc called "New DERA". Our latest
report on The Future of DERA, published last June, welcome
these improvements but warned that the fundamental weaknesses
of the proposed PPP had not all been removed, and that there were
still significant areas of uncertainty which the MoD had yet to
resolve. We promised that we would return to this subject. The
MoD announced its intention of proceeding with the PPP on 24 July
last year, and it has since been dividing DERA into its two new
entities: New DERA and Retained-DERA (now re-titled the "Defence
Science and Technology Laboratory"). The immediate occasion
for our session this morning was the laying of a draft Order to
establish the DSTL as a trading fund from 1 July, paving the way
for the incorporation of the rest of DERA as a plc. So the focus
of our session this morning is on the current state of play on
the privatisation, in particular, the move to Vesting Day for
the new organisations and what that involves; the MoD's progress
in resolving the outstanding issues that we flagged up in our
earlier reports; the way New DERA and DSTL have been divided up;
and how the Defence Diversification Agency fits into the new scheme
of things. I anticipate that our session will be largely public,
but should we ask questions on the United States and the degree
of support or acquiescence that they have given, perhaps it may
be more prudent to go into private session, but I would prefer
not to do that. It will depend on how much you are prepared to
say. On a previous occasion I was accused by one distinguished
journalist of being "incandescent with rage". I promise
you that it will require extreme provocation for me to degenerate
into incandescence, but it cannot be ruled out totally. I thank
you for coming and I hope you have brought your sandwiches with
(Baroness Symons of Vernham Dean) Thank you. I shall
try to do my best not to provoke you. I thank you and the Committee
for providing me and my colleagues with the opportunity to discuss
the amended DERA trading fund order laid before Parliament on
17 January. As you can see, I have with me a team of officials
who I hope will be able to talk in some detail about some of the
issues that you have raised. You know Sir John Chisholm, the Chief
Executive of DERA, Mr Bill Clifford, who is Managing Director
of the Security Division which consists of those activities that
will be retained within the MoD and I believe that you have also
met Mr Terence Jagger before, who leads the MoD's DERA Partnering
Team. I would like to say a word about my two colleagues on my
right, Sir John and Bill Clifford. They and the staff of DERA
have carried out an immense amount of hard work over the past
few months in undertaking the work that we believe is necessary
to ensure that we stay on track over a successful public-private
partnership. As you know, the announcement that we made in Parliament
last July followed an extensive consultation exercise. We believe
that substantially ended some of the uncertainty and the degree
of frustration apparent in DERA staff. Sir John has had a difficult
task in ensuring that he kept his organisation on the tracks,
and he has delivered the programmes that MoD customers have wanted
to see delivered during that period. It is always difficult in
a period of change to sustain that but it has been carried out
successfully. It has given us the confidence that the new organisations
will be capable of being as professional and as successful in
the changing environment in which we hope that they will operate.
Mr Chairman, you have read out some of the background in relation
to the decision over Core Competence, which was taken having had
the consultation that we had over the earlier proposals. We now
turn to the proposed amendments to the trading fund. The purpose
of the changes are twofold. Firstly, it is to remove from existing
DERA trading fund a number of activities that will form the basis
for New DERA, which will be vested as a plc on 1 July 2001. Initially
the plc will be wholly government-owned, but work will continue
to prepare the company for a transaction. The precise nature and
timing of the transaction is dependent on value-for-money considerations
and, to a certain extent, upon the market prevailing at the time.
Secondly, the order allows for the creation of the Defence Science
and Technology Laboratory, which we now refer to as DSTL, in time-honoured
MoD fashion. That will continue as an MoD trading fund and will
be responsible for carrying out functions that our consultation
showed could not be easily transferred to the private sector.
Perhaps I may remind you of those. That is, first, research into
certain very sensitive areas; secondly, the provision of a high
level of overview of defence science and technologythat
provides the overall core competencethirdly, acting as
an in-house source for impartial advice, free of all commercial
considerations; and fourthly, the management of international
research and collaboration. You yourself referred to the interest
that our international partners have had in that. The order represents
a further step in a successful transition towards the PPP. A substantial
volume of the work is already complete. Although until the order
is approved the DSTL and New DERA are still part of the single
trading fund, they are progressively being managed and operated
as separate entities already. The allocation of staff between
DSTL and New DERA was agreed in November last year and the internal
transfers took place on 2 January this year. So by April we envisage
that the physical separation of the organisations will be completed
to a level that will satisfy the MoD's normal accreditation authorities.
An initial split in the current year's work programme was completed
in December and from 1 April 2001 MoD customers will place work
on the two organisations as though they were separate entities
at that date. Our experience so far indicates that separation
has progressed well and that the two organisations are already
operating with a high degree of independence, hence both my colleagues
on my right being here today. As we announced in July, we shall
conduct a rigorous process of shadow operation and testing aimed
at demonstrating the robustness of the organisations and the supporting
infrastructures. I understand that that began about two months
ago, but it will continue until the end of June. We are determined
to test as fully as possible. I believe that we have listened
carefully to what you and other interested organisations have
said to us about this. We have taken an extensive period of consultation
and I believe that, having made the announcement that we have
made, we are making good progress and are able to set up a route-map
of where we see matters progressing over the next year or so.
3. If you had listened to us, Baroness Symons,
you would have heard us say that you are separating two parts
of a viable organisation. I am delighted that everyone is really
happy with what is happening. I understand that there was a MORI
survey. Did you bring it with you?
(Baroness Symons of Vernham Dean) No, Mr Chairman.
4. We could see how happy everyone is.
(Baroness Symons of Vernham Dean) I am aware that
there have been a number of different surveys. I believe you will
also be aware that during the course of our consultation we received
125 individual lettersa substantial number of individual
lettersbut taken as representational of the 12,000 or so
staff that represents about 1%. I agree that 1% is a substantial
number of people when they write as individuals. The trades unions
have left us in little doubt that they had apprehensions and misgivings.
I am sure that you know, Mr Chairman, as I do that the trades
unions are prepared to get behind the new proposals and that they
acknowledge that we have listened. You said that if only we had
listened to you. We did listen to you, but in the end we did not
agree with everything that you said. That does not mean to say
that we did not listen to you. We have listened very carefully
and the trades unions in a letter to me dated 23 February this
year have said that they now want to see us progressing these
proposals and that they believe that they will behind the proposals,
as will the overwhelming majority of staff in DERA.
5. You should have no objection to showing us
the MORI survey.
(Baroness Symons of Vernham Dean) I do not know the
status of the MORI survey at the moment. I have no objections
myself, but I look to Sir John.
6. Everybody is blissfully happy so there is
(Baroness Symons of Vernham Dean) Are there problems
with this, Sir John? Is it MORI's property or is there a legal
doubt about this?
(Sir John Chisholm) I am not sure to what you are
referring when you talk of a MORI survey. We had a Gallup survey
7. The Gallup survey then.
(Sir John Chisholm) We published the results of a
Gallup survey of our staff in our newspaper.
8. When was that?
(Sir John Chisholm) That was in the autumn.
9. We do not receive your staff newspaper, but
if there is raw data we would love to receive that, to see whether
it confirms that everybody is idyllically happy.
(Baroness Symons of Vernham Dean) Mr Chairman, that
is a little unfair. I made a particular point of not saying that
they were idyllically happy. I have been very clear that there
are still misgivings and worries, but the trades unions have said
that, recognising the way they are going, they wish to progress
matters as quickly as possible.
10. I understand their motives. I have spoken
with them too. They are not idyllically happy; they are acquiescent.
They recognise that further disruption would be damaging to the
operation. That does not mean support for what is happening, but
they are looking to the future and trying to salvage something
from what they regard, as we do, as being anti-structural. Acquiescence
does not indicate enthusiasm. In your summary of the consultations,
you hardly give a flavour of what the views were. People are apparently
reasonably satisfied, or whatever the phraseology was. You would
not even send us copies of the report and said that to get their
views would entail a disproportionate cost. I could not see why
a first-class letter or one sent by internal mail to the people
who gave evidence to you saying, "Would you be prepared for
this document to be released to the House of Commons Defence Committee?"
would be more than 0.0001% of the money spent on splitting the
two organisations. Why could we not have access to the organisations
that you have apparently managed to get on board over this consultation?
(Baroness Symons of Vernham Dean) As I understand
it, when the consultation was undertaken, we did not make it clear
to people that we wanted to put their views into the public domain.
People gave us their views on the basis that they were giving
them to us and that they were not for publication. I think we
would run into considerable difficulties were we to put into the
public domain the views that people felt that they had given to
us on a confidential basis.
11. If you said, "The Defence Committee
has asked to see the views, so are you prepared for us to send
them to the Committee", that would require one letter to
the people and one letter back. If they had said "No",
we would have respected that. Our safe is not necessarily open
to the general public. We have lots of information stored in our
private secure accommodation that is available for the Committee
to see on a very sensitive basis. I cannot see why those conditions
could not apply.
(Baroness Symons of Vernham Dean) On the second point,
I agree with you. If the Committee were able to undertake to keep
the results confidential, we may have room for some progress.
If I may, I would like to take that away with me to see whether
there is more information that we can give you on that basis.
It would be quite difficult for us now to write to people, sending
them copies of what they said, and asking what they want in the
public domain or do not want in the public domain. That may be
quite a problem. If there is a way forward on this I shall examine
the matter. I did so at the time that the request came to me and
I felt that we were in some difficulty over this matter, given
that individuals had given their views on a private basis. If
you want me to re-examine this issue, without prejudice to the
outcome, I shall certainly do so.
12. Please do.
(Baroness Symons of Vernham Dean) Like you, I believe
that we should have as much as possible in the open and not putting
things in the open actually breeds suspicion and doubt. I do not
believe that we have anything to hide. It is purely a matter of
safeguarding the position of individuals who thought that they
had given information on one basis instead of on another basis.
13. As such a major change in policy is unfolding,
and as we, as a committee, are charged with monitoring what is
happening in the MoD and in the agencies, we have a right to approach
you and to seek information.
(Baroness Symons of Vernham Dean) Absolutely.
14. We would be very relieved if the majority
of the stakeholders are, if not just acquiescent, reasonably enthusiastic.
(Baroness Symons of Vernham Dean) It may be easier
if we were to concentrate on organisations rather than individuals
in trying to obtain release of what they actually said. I do not
know how that strikes you, but that is a way forward.
15. That is fine.
(Baroness Symons of Vernham Dean) If I were to go
to all 125 individuals from DERA that may be rather more difficult,
but if I were to go to the organisation that submitted evidence,
that may be a way of giving you more information. I rather doubt
that anybody from those organisations would have a problem with
that. Presumably they have already consulted extensively within
their organisations before sending it to us.
16. That is fine.
(Baroness Symons of Vernham Dean) Would that be helpful?
17. That would be wonderfuland the Gallup
survey. We would then have our finger on the pulse in a better
(Baroness Symons of Vernham Dean) The Gallup survey
results have been published and we shall certainly send you that
18. You made a fairly intensive opening statement
about the background and how you have arrived at where you are
today. I am interested to know whether there were any significant
issues raised in the consultation which actually put serious doubts
in your mind about whether or not you would get support in reality
and I am interested to know whether writing to stakeholders and
asking them for their comments was a cosmetic exercise. What significant
reservations did they have? You did not mention any of those.
(Baroness Symons of Vernham Dean) We have carried
out two lots of consultation. To which one are you referring?
19. The second one.
(Baroness Symons of Vernham Dean) The second lot of
consultation was on Core Competence. We tried to lay these out
in the document that we sent to you on the outcome of consultation.
We put together the sorts of issues that have been raised. For
example, there was a view taken that there was a lack of detail
in the consultation document itself and, therefore, people were
concerned about whether there was a hidden agenda behind what
was happening. They felt that it was made difficult for respondents
to feel confident about the future trading relationships. If you
have not had a copy of that I can send you one, but as you go
through that document we have tried to be very straightforward
about the sorts of issues that people raise. One point, as I am
sure you know, and it is one that the Committee itself has expressed,
is that the PPP is being pursued solely as a means of dealing
with some of the perceived shortfalls in the defence budget. That
has been a feeling that people have pursued generally. I am sure
you do not want me to go through all the individual points, but
if we had felt that there was, what you may describe as a "show-stopper",
in the same way that we did for the original proposals, I personally
would not have had an insuperable difficulty in thinking again
about this. I genuinely would not, in the same way that I did
not have an insuperable difficulty in thinking about the original
proposals that we have now altered considerably. Yes, there were
doubts and difficulties. I believe that they have been laid out
in the document that you have already, together with the response
that we have given to those doubts and difficulties.