The Agriculture Committee has agreed to the following
HORTICULTURE RESEARCH INTERNATIONAL
1. On 11 September 2000, Horticulture Research International
(HRI) announced "a major restructuring programme to restore
HRI's financial viability".
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
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,
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
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.
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
That represents an almost 100% increase in three years compared
with the historic figure of 60% over the decade since HRI's formation,
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.
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".
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
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".
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".
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".
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".
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.
HRI's Corporate Plan, to be presented to Government before the
end of March,
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,
while horticulturalists serve on HRI's Station Advisory Committees
and the East Malling Research Association and the HRI Association
provide fora for contact with individual growers.
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,
specifically in development.
Growers were also anxious that, as a result of the restructuring,
they would lose access to "grass roots information"
and "face-to-face" contact with scientists
and were angered that HRI had not consulted the industry about
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
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".
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.
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
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".
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".
We therefore welcome Professor Wilson's confirmation that "HRI
remains committed to the development and the transfer of technology
and knowledge to the industry".
However, Mr Siddall made it clear that further changes to the
type of business that HRI undertakes are likely.
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
and we expect to see it implemented as part of the forthcoming
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
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".
Baroness Hayman explained that management statements offered a
framework but the involvement of senior staff varied between departments
and individual NDPBs.
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
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".
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.
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
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.
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.
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
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.
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
and further sums are made available through the Horticulture Link
Programme which is "50/50 funded with the industry".
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.
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,
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
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;
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.
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".
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
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
2 HRI press release, 11 September 2000. Back
3 Ibid. Back
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
484, Session 1999-2000, Q 32. Back
p. 1, para 7 Back
484, Session 1999-2000, para 5. Back
27; Ev. p. 1. Back
484, Session 1999-2000, Q 51. Back
Ev. p. 23. Back
484, Session 1999-2000, Q 51. Back
Ev. pp. 23-4; Ev. p. 32. Back
p. 33, para 2.2. Back
evidence from D Westwood & Son. Back
evidence from J Cook & Son. Back
pp. 23-4. Back
484, Session 1999-2000, Ev. p. 1, para 2. Back
484, Session 1999-2000, Q 4. Back
p. 38. Back
484, Session 1999-2000, Ev. p. 32, paras 2-3. Back
p. 1, para 3. Back
484, Session 1999-2000, para 6. Back
927, Session 1999-2000, paras 9-10. Back
Research Strategy 2001-2005, Consultation Document, page 92. Back
Research Strategy 2001-2005, Consultation Document. Back
p. 34, para 2.6. Back
p. 25. Back
p. 40. Back
484, Session 1999-2000, Ev. p. 33, para 11. Back