Examination of Witnesses (Questions 40-59)
LORD PUTTNAM OF QUEENSGATE, MR JEREMY NEWTON AND MR MIKE TOMLINSON
MONDAY 8 JULY 2002
40. It sounds like something you might have said, David!
(Lord Puttnam) I think I did actually, Chairman.
41. Lord Puttnam, you mentioned patents and in terms of intermediate outcomes patents and companies formed are good news, but I wonder how many of those patents have been granted and how many of them have been exploited.
(Mr Newton) Certainly all of the thirty are granted. There are a number still outstanding, obviously, that will take another six months or a year before they are finalised. We said in our submission that we have begun to receive income, a royalty stream, from one of our projects, and there are at least five or six others where substantial orders have been made for the product and we stand to gain income either through equity participation or through royalty participation, in the two different kinds of contract we use, during the course of the next year. Most of the successful invention and innovation projects, interestingly, are in the transport area. They are either very small-scale improvements to engine design, like the one that is already delivering income, or they are very, very large-scale ambitious projects like the amphibious vehicle, which is one of our first projects. That has now received its first million pound order for four large-scale vehicles from British Waterways, who are keen to buy more; and Mitsubishi are planning to order many more. There is a substantial amount of income that we are likely to derive from that project. Cardiff have just committed over £25 million to the Ultra Urban Light Transport Scheme that Martin Lowson developedagain, one of our early projects. Our equity participation in that will mean that we will start to derive income, and probably quite a substantial capital gain from that over the next few years. I could go on, but there are a number of projects that at the outset did look extremely risky and highly unlikely to succeed, which are beginning to come off. There are four or five more I could list that have already failed. Obviously, we are not going to make all of them winners, but I am certain that we will be deriving a significant income from those projects.
42. I am interested in your board membership. It is a very eclectic board and I was wondering how many people at an average board of trustees meeting actually attended.
(Mr Newton) Attendance has been 70 per cent on average throughout the last three years. Similarly, trustee attendance at committee meetings and decision-making meetings has been at 71 per cent. So at any one meeting, roughly two-thirds to three-quarters of the members are there.
43. Can you take me through the decision-making process? Is a bright idea tossed into the arena, for example, and chewed over by the trustee board members? How is it done?
(Mr Newton) We have three committees, one for each programmeeducation, invention and innovation, and fellowship. They are made up of three or four trustees and three or four non-trustee members, experts from the particular field or the particular area that they are looking at. Those committees meet in the inventions and innovations case every month, and in the other two cases every other month. They receive quite a substantial amount of background information about all of the substantial proposals we have had in the previous couple of months, and they are discussed and decided on in detail at that stage. They have a reasonable degree of delegated authority to take smaller scale financial decisions. In larger scale cases they are remitted to the next full trustee meeting for final ratification. Most of the detailed discussions and assessments and decision-making is done at committee level.
44. You said that you would like to see the amount of money that you have in your endowment increased substantially. Clearly, the DCMS will be looking at results for the money you have had already. I have to say that in a parliamentary question on this subject, Mr Caborn was less than forthcoming because his rather stark reply in response to my question, which was to ask him what plans existed for the future funding of the National Endowment for Science, Technology and the Arts, was: "Plans for funding NESTA will be considered alongside other options for the future use of Lottery funds, and although government responses these days do tend to be fairly brief, that really is extremely brief." I am just wondering how confident you feel about extending the amount of money in your endowment. You will need to reflect, perhaps, on your outcomes and what you have produced for the money, and possibly on things like your projected increase in staff. I understand that at the moment that is 35 staff, but you want to go up to 48. Is that correct?
(Mr Newton) No, the gap between the two figures is largely made up of stand-alone teams. We have set up the Science Year team to run the Science Year project, and they are based at a separate location; and now we are setting up a Futurelab team in Bristol to run that project. There are some NESTA employees who are not part of the core administrative teams that are running the programmes, but who are managing off-line arms' length projects.
(Lord Puttnam) But resources are coming from elsewhere. Mike's budget for Science Year is funded directly from the Department for Education and Skills.
(Mr Tomlinson) The small team running Science Yearits funding comes primarily from the contract that NESTA successfully bid for from the DfES, which was £3.35 million. But we have also secured additional funding from external sources, from different companies and organisations, to support the work as well.
45. Are you saying that you will be keeping to the 35?
(Lord Puttnam) No, I do not think there is a hope in Hell that we will keep to the 35. Can I give you a better example? When the General Teaching Council was originally mooted, the minister at the time suggested that the General Teaching Council could be run by 30 people (I used this expression the other day to a Select Committee) from a relatively small office in Clerkenwell. The General Teaching Council today has two offices, one in Birmingham and one in London; it has 80 people and is responsible for one of the largest single databases in the whole of the UK. How anyone in Parliament imagines you could do that with 30 people is beyond me. It is, I am afraid, a parliamentary fantasy; that successful organisations delivering in very complex areas can accomplish anything on that sort of daft off-the-cuff notions of a head count.
46. I come back to my original comment about outcomes. I am looking for some green shoots that suggest to me that this huge sum of moneyand despite your earlier comments I do regard £200 million of what is at the end of the day the public's money, as hugewhat exactly we are getting for that. Frankly, the Chancellor, I am sure, could well do with such a sum elsewhere. What we are looking for at the moment are intermediate outcomes, some sign that some of this will actually give the public some payback. I am afraid that it is not coming across. You wrote to me a little while ago and said that one company has been set up and you are expecting a royalty cheque of £1,000 from that company.
(Mr Newton) We have had that cheque, but we are likely to get similar and growing cheques every quarter from now on for the next 15 years.
47. What was the size of that first cheque?
(Mr Newton) It was less than £1,000. I have not got the sum to hand.
48. I note your comments about fellowships and applaud them, but what I am really looking for, I suppose, is some Clockwork Oranges, or at least signs that we are likely to be getting some Clockwork Oranges.
(Mr Tomlinson) I think the signs are positive. First of all, you have to accept that from the point at which an idea is developed to its actual production, the selling of that product and the making of it, is not a short period of time. It can be lengthy and it can be quick, but there is a period of time. I think it takes about two years between an idea going through to actual production, which is not an unreasonable period of time in the engineering world in particular.
49. Since you look at me, that is part of our problem, that our time to market has been too long compared to other nations, particularly in the Far East and America, who have shortened the time to market and beaten us competitively because of that; so I am sorry to hear you accept as part of our culture
(Mr Tomlinson) No, I am not accepting it; I am saying
(Lord Puttnam) Prototyping is our motto as an organisation.
(Mr Tomlinson) I guess that is part of why the other side of our help has been not just financial; it has been to try and get through this. As you have heard, it can take a long time just to get the patent registered, which is not the case in some other countries either. So there is a whole series of steps that can absorb time, unfortunately. As you quite rightly say, it can on occasions knock us back in terms of our competitors.
(Lord Puttnam) To avoid any misunderstanding, let us slice up this discussion accurately. Forty per cent of our invested sums go into invention and innovation. I do not know of your own past record in the private sector, but I spent 35 years of my life working in the private sector. It takes three and a half years to develop, produce and market one movie. I think we have done remarkably well, and I would very much like to map our development over the last three and a half years as a stable, solid organisation against any other. We have delivered successfully Science year. We are awaiting a ministerial decision at the moment for Science Year to be rolled over to a second year because it has been so successful. We have discovered a clear market failure in the area of educational content. We have created and funded Futurelab from external sources. I think we have done magnificently actually. That is 40 per cent for invention and innovation. Thirty per cent is on what we think is a breakthrough programme of educational investment. It has not been done by anybody else at all. We have delivered an organisation that is capable of doing things that no other organisation in government or associated with government can do. I am making a very, very powerful case to DCMS: I think they will be making a shocking mistake not to increase our funding. It does not mean that they will not make a mistake, because there are many, many mistakes made in government, but I think they would l be making a tremendous mistake, and it is, I am afraid, whether you like it or not, a remarkably small sum of money to be tackling the brief we have been given.
50. I should say that I was urging you to produce clockwork radios, not Clockwork Oranges. Can I bring you back to some failures, because I accept you are going to have failures, but we cannot just dismiss them. The chewing gum buster particularly caught my eye a little while ago, as did the comment by Dr Alison Staples, who was involved with this project. She said: "NESTA came along and they seemed to help lost causes." That was not much of an endorsement for her products, and we heard subsequently from your partner in this that this initiative which, on the face of it, had seemed smashing, had failed. I was wondering how many initiatives that you had funded had now been accepted as, to use Richard Morrison's words, "duds".
(Mr Newton) Four of the invention and innovation projects so far, of which Alison Staples's is one, have been written off. In two of those cases, they are fascinating failures, if you like, and we have learned more from them than we have learned from most of our successes. We have been able to turn them to very useful advantage in terms of informing us. A hospital communication project, which was a fantastic project, failed, through no failing of the product, but it simply had the enormity of the health procurement industry stacked against it. What we have learnt from that project is very potent, and we will use it.
51. You put a target of 30 fellowships a year. Did you make it last year?
(Lord Puttnam) I think we made 28 last year.
52. Is that because there are not people around of sufficiently high quality? How many did you turn down2,000 or 20? What is the scale of failures.
(Lord Puttnam) There are a number of stages at which they are rejected. There are those that do not even get past the start point; there are those that are assessed at phase 1 and those who are assessed at phase 2. They go through three processes. I would have to write to you and give you the number of failures for each of those phases.
53. That would be very helpful indeed. How do you pick your talent scouts, the people who decide whether these projects are really good? One can think of a lot of ways of picking talent scouts who would let you down.
(Lord Puttnam) The most important thing is to start with the human-being. In the case of Ruth Turner, she had run a successful organisation. At the time, she was starting a new trust that was specifically designed to look for exactly the type of people we were looking forentrepreneurs in the Manchester/Liverpool area. What she was doing on a day-to-day basis fitted us very well. What she proved to have was incredible energy and incredible contacts, largely as a result of the magazine, and we were able to piggy-back that. What we are now intending to do is to find similar people. We have someone in Wales who we are trialing. We have an agreement in Northern Ireland with the Regional Executive to work with them, and that choice we will make jointly with them. What I am waiting for is the serious green light from the DCMS that agrees that this regional approach is the right one. We are very committed to it.
54. They do not need to be polymaths.
(Lord Puttnam) Nofull of energy and self-starters.
55. What are the other mechanisms for identifying these fellowships? We are not terribly clear how people find out about them and how you process the things through. You talked about the three different stages.
(Lord Puttnam) During our start-up period we looked around the world at the variety of fellowship organisations and arrangements that had been made, and we opted for one modelled on the MacArthur Foundation in the United States, which seemed to us to be the most admired and seemed to echo most what we both wanted to do and, more importantly, could be managed with the resources available to us. It would have been very easy in years one and two to be flooded by an avalanche of inquiries, and then you are just dealing with the consequent situation in which many people are terribly disappointed. We went through the nomination system as used by the MacArthur Foundation. They came over and were incredibly helpful to us. My own conviction is that we made the right decision. Our desire now is to stretch out and experiment with the application base in very specific areas. Indeed, these junior fellowships are very exciting. We have had nothing but enthusiasm for the notion of these graduate incubation grants, helping people as they leave university or college to spend a year or two attempting to be self-employed and attempting to get their own company off the ground, rather than necessarily going immediately into employment and losing what could be productive and interesting entrepreneurial years.
56. Are there not a lot of people out there who would massively benefit from these fellowships who are not in the know and do not know a suitable nominating person?
(Lord Puttnam) It does not quite work that way, Chairman.
(Mr Newton) We are just piloting our first open access application process for fellowships, the Dreamtime Awards, which we are promoting very widely through intermedia agencies and so on. We are constantly opening up the whole process of fellowship proposals, nominations and appointments through different routes. We have developed a network of 25 talent scouts in the East Midlands alone, just to target a particular geographical area at the grass roots in arts, science and technology. We are working with the regional arts councils and so on and asking them to nominate individuals from their fields and disciplines who do not fit into the existing round holes in their field but who want to spread across the boundaries with other disciplines. We have had a particular good response from the research councils and have received some very strong nominations from the Science Research Council. They are individuals who do not quite fit the existing modes of science research funding either because they are not within a university or because they work across two or three disciplines that are covered by different research councils. There are a number of those individuals around and they are beginning to provide us with information about what kinds of research they do.
57. That is potentially very exciting, but if in the end we get the old track nomination process, there are a lot of people around that you are going to miss out on. Ar your talent scouts paid?
(Mr Newton) No, we give them a very small honorarium, a few tens of pounds, for doing the initial research and submission of information, but we do not pay them a daily rate.
58. It is a strange way to do it, is it not?
(Lord Puttnam) You would be amazed how much enthusiasm is out there, to be part of the process. It is one of the most fulfilling things that we have discovered: outside of London there is an incredible energy and belief in the ability to get things moving.
59. How many talent scouts do you have?
(Lord Puttnam) We have Ruth Turner operating in the north-west as the closest thing to a full-time scout. Under the new scheme we have 25, but this is a targeted one-off scheme, working on a much more open application basis. We are putting our toe in the water.
(Mr Newton) We have appointed something like 150 nominators, so that number is going up all the time. The stand-alone nominators are only allowed to give us two names, so we are constantly refreshing the pool of nominators as well as adding to it by these other mechanisms for attracting proposals.