SIXTH SPECIAL REPORT
The Agriculture Committee has agreed to the following
The Committee has received the following memorandum
from the Ministry of Agriculture, Fisheries and Food, constituting
the Government's Reply to the Fourth Report from the Committee
of the 2000-01 Session, Horticulture Research International,
made to the House on 24 January 2001.
* * * * *
1. This reply to the Committee's report is submitted
on behalf of the Government by the Ministry of Agriculture, Fisheries
We welcome this recognition that the management
weaknesses of HRI must be addressed but believe that this must
go further than the two posts 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 (paragraph 4).
2. HRI acknowledges that its senior management
team has been significantly under strength recently. Action has
already been taken to strengthen it. A new Head of Business Development
is being head-hunted as a matter of urgency. The new post of Operations
Manager has been filled and the successful candidate will take
up his duties on 30 April. The vacant post of Site Manager at
the Efford site has also been filled. An additional management
accountant has been appointed in the Director of Finance's department.
HRI believes that all these measures will considerably strengthen
its capability to deal with the very significant challenges facing
the organisation. It will be keeping its senior management capacity
3. HRI is also addressing the management of the
organisation as a whole. A reorganisation - which began
in November 1999 and accelerated through the restructuring exercise
- will shortly be completed. The aim is to improve the integration
and efficiency of research and development activities across the
organisation; to streamline and centralise management systems;
and to improve internal communication between individual scientists
and research teams. HRI's research and development activities
are now delivered through 15 multi-disciplinary teams within three
overarching thematic areas. HRI recently identified and announced
12 key Commodity Sector Specialists and is promoting their role
to the horticulture industry and other customers.
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 (paragraph 5).
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
and we expect to see it implemented as part of the forthcoming
Corporate Plan (paragraph 8).
4. Work to prepare HRI's new Corporate Plan is
at an advanced stage. HRI intends to consult key industry stakeholders
on a draft Plan prior to submitting it to MAFF Ministers for approval.
The Plan will include targets and performance measures to enable
HRI's success to be measured. The aim is to publish the new Plan
in summer 2001.
5. HRI has already completed a review of its
research strategy and is seeking the views of its customers through
a public consultation exercise.
6. HRI's commercial strategy is also being reviewed
as part of the preparation of its new Corporate Plan. Over the
last five years HRI has raised the level of its competitively
won, nonMAFF income by approximately 65%. Both HRI and MAFF
accept that it will be very challenging to maintain this trend
and the appointment of a new Head of Business Development is designed
to aid the process.
7. HRI and MAFF believe that HRI should aim to
become a more robust and competitive "mixed economy",
serving not only its traditional customer base through sponsorship
from conventional public sector sources but also to seek high
addedvalue projects and competitive funding from private
sector partners. HRI will also be looking to enhance its links
with universities, Regional Development Agencies and other research
institutes. For example, there are plans to create Kent's first
Enterprise Hub based at HRI's East Malling site. Similar discussions
are at an early stage at HRI's Efford site with links to an Enterprise
Hub based near Southampton. Both these initiatives are being supported
by the South East England Development Agency.
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 (paragraph 7).
8. Both HRI and MAFF accept that there are lessons
to be learnt from the handling of the recent restructuring announcement,
notwithstanding the need for some degree of confidentiality because
of commercial and staff considerations. HRI has initiated an active
and ongoing dialogue with the industry about the future direction
of the organisation, including how it can better meet the needs
of its many industry customers.
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 (paragraph 10).
9. MAFF considered the possibility of advancing
the date of the Quinquennial Review planned for 2002/03 before
taking a decision whether to fund HRI restructuring plans. However,
it would have taken up to a year to organise and carry out a thorough
Quinquennial Review. In view of the financial position of HRI
and the inevitability and urgency of restructuring to reduce its
deficit, it was concluded that there would be insufficient time
to carry out such an exercise. Nevertheless, MAFF scrutinised
HRI's restructuring plans very carefully before agreeing to support
them. The funds were provided on the basis that the restructuring
would maintain HRI's ability to meet the industry's needs whilst
allowing HRI to reduce costs, improve efficiency and build up
new sources of revenue.
10. The date of HRI's next Quinquennial Review
was not chosen merely because it would be some five years since
the last one. It was scheduled carefully so to give both MAFF
and HRI sufficient time to prepare for the Review and to ensure
proper consultation with all its stakeholders. A further consideration
in setting the timetable was the timing of the assessment of HRI's
scientific work to be carried out by the Biotechnology and Biological
Sciences Research Council (BBSRC) in consultation with MAFF in
October 2001. MAFF felt that it would not have been reasonable
to ask HRI's management and staff to deal with a Quinquennial
Review together with the BBSRC's scientific assessment, implementation
of the restructuring programme and preparation of a new Corporate
Plan - all within the space of one year. The Committee itself
commented in its previous report into HRI that the organisation
needed a period of stability in order for the management reorganisation
to take effect.
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 (paragraph 11).
11. Monitoring arrangements are already in place.
There is regular contact between MAFF and HRI to discuss how the
restructuring plans are being implemented. In particular, HRI
reports to MAFF on this and on other strategic issues at new quarterly
liaison meetings between HRI management and the MAFF Sponsor Division
instituted in October 2000. HRI is also providing MAFF with monthly
reports on its expenditure of the restructuring funds.
12. As the Committee's report recognises, Sponsor
Departments need to strike a balance between exercising their
duty of oversight of their NDPBs at a strategic level on the one
hand; and, on the other hand, unwarranted and inappropriate involvement
in the daytoday management tasks of the business which
fall properly to the Chief Executive and other senior staff.
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 (paragraph 12).
13. The Government continues to have serious
reservations about bringing forward primary legislation at this
time in advance of the Quinquennial Review to resolve the range
of outstanding issues in relation to HRI's status. An early bill
would clearly settle one model for HRI's future without the benefit
of a full public consultation or proper involvement of industry
interests as the Quinquennial Review would provide. Nor would
it be possible to take account of the review of Government funding
of horticulture proposed by the Committee. These concerns are
also shared by HRI.
14. In the meantime, MAFF and HRI have made progress
on the way ahead for resolving the two most pressing constitutional
issues, namely, regularisation of the employment status of staff
attached to HRI from MAFF and the BBSRC and the harmonisation
of HRI staff pensions.
15. On employment, it had been hoped to transfer
the MAFF and BBSRC staff to HRI's employment by secondary legislation
made under section 38 of the Employment Relations Act 1999. However,
DTI's legal advice is that HRI's circumstances do not permit the
use of the 1999 Act. MAFF and HRI are therefore seeking to resolve
this matter by nonstatutory means. HRI, with the support
of MAFF and BBSRC, would aim to negotiate an arrangement with
its unions under which the MAFF and BBSRC staff would be invited
to transfer their employment to HRI. The agreement would take
as its basis the principle that the staff concerned will not be
disadvantaged by such a move and appropriate guarantees would
be given to staff.
16. On pensions, HRI, BBSRC and MAFF are proposing
that there should be a single scheme for all HRI staff (i.e. including
the attached BBSRC and MAFF staff who transfer to HRI's employment)
within the ambit of the Research Councils' Pension Scheme. This
proposal has been explained to HRI's unions and it will be examined
further in the context of the discussions about the employment
status of staff. The detailed arrangements would need to be approved
by the Research Councils' Joint Superannuation Service.
17. HRI and MAFF have had informal discussions
about these options with the unions at HRI. These will now be
followed up. If they can be agreed by all, the plan would be to
introduce these arrangements with effect from 1 April 2002.
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 (paragraph 14).
We recommend that funding arrangements be part
of the fundamental review of MAFF sponsorship for horticultural
research (paragraph 13).
18. MAFF has developed and published R&D
strategies for all key sectors, including horticulture, for many
years. As the Committee will separately know, MAFF has consulted
widely and publicly on its research programmes (again including
horticulture) and is devising a new Science and Innovation Strategy.
That document will be published in spring 2001. MAFF's new Science
Committee - which benefits from external advice - is considering
the developing strategy and will also be advising Ministers on
the prioritisation of MAFF's R&D budget.
19. The Quinquennial Review of HRI will tackle
fundamental issues of HRI's relationships with MAFF, the industry
and its other stakeholders; the funding arrangements; HRI's efficiency
and effectiveness; and its future status. HRI's stakeholders will
be invited to give their views about HRI's performance and status
as a part of a public consultation exercise. The detailed arrangements
for the Review are still being developed; MAFF will be explaining
these to the industry and HRI's unions in due course.
20. The Government believes that there is nonetheless
a case for a separate exercise to seek a consensus about the overall
needs of the horticulture industry and to help both the industry
and Government set priorities for R&D spending. MAFF is now
considering how such a review might be organised and will be consulting
key industry organisations before final decisions are taken. The
Committee will be kept informed of progress.
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, 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 (paragraph 15).
21. HRI's Board and management are committed
to its future success. In particular, they will be seeking to
ensure that the organisation focuses on serving its key customers
and sponsors and capitalises on its own unique strengths. HRI
welcomes the interest which the Committee is taking in its development.
22. MAFF will continue to provide HRI with support,
advice and encouragement. The coming few years will be a challenging
time for HRI but the Government believes that there is a robust
plan of action to manage the process of changing HRI. MAFF looks
forward to receiving HRI's Corporate Plan, including the reactions
of the key stakeholders to it; to a strengthened dialogue between
HRI and the horticulture industry; and to a productive review
of the rationale and wider framework for Government and industry
programmes for horticultural R&D.
Ministry of Agriculture, Fisheries and Food