UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 1625-iii

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Public Administration Committee

Strategic Thinking in Government

Wednesday 8 February 2012

LORD BURNS and LORD CARTER OF COLES

LORD REES OF LUDLOW OM FRS and SIR DAVID KING FRS

Evidence heard in Public Questions 180 - 258

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Oral Evidence

Taken before the Public Administration Committee

on Wednesday 8 February 2012

Members present

Mr Bernard Jenkin (Chair)

Charlie Elphicke

Paul Flynn

Robert Halfon

David Heyes

Kelvin Hopkins

Greg Mulholland

Priti Patel

Lindsay Roy

________________

Examination of Witnesses

Witnesses: Lord Burns, Chairman, Santander UK PLC, and Lord Carter of Coles, Chair, NHS Co-operation and Competition Panel, gave evidence.

Q180 Chair: Welcome to our inquiry into strategic thinking in Whitehall. We are particularly concerned to be very clear in our distinctions: we are not talking about how policies are formed or how departments are managed, but about how Whitehall thinks strategically, and how policy emerges from strategic thinking. In particular, in this inquiry we are wondering whether in fact strategy emerges from a policy-making process. That is particularly relevant to the role of the Treasury. The first question on my brief asks to what extent economic and financial considerations should shape the development of long-term strategy, but I wonder if I should be asking the question the other way around: to what extent should national strategy be shaping economic policy, and to what extent do you think it actually does so? I ought to ask you to introduce yourselves for the record.

Lord Burns: I am Lord Burns.

Lord Carter of Coles: Lord Carter.

Chair: Thank you very much.

Lord Burns: If I can begin with the first question on your brief, I find it very difficult to imagine that one can really think about making strategy without taking into account financial considerations. Almost every situation I have been in where one was thinking about strategy, one was looking at a situation of competing outcomes, competing use of resources or of seeking to costs things and see what alternative ways there were of using resources. To me, the issue of strategy and the issue of finance are in most cases-although not all-completely interdependent.

It also follows, in terms of Government running their finances, that of course they have to give great weight to the strategic outcomes they are seeking, and what they regard as the priority, where the real constraints are and where the real challenges lie. In times of war, for example, by and large finance becomes subservient to the strategic ambition. When I was in the Treasury, it was always said to me that in times of war the Treasury did very little other than sign the cheques. That is one extreme situation. Are we in that kind of extreme situation? What we are looking at is competing uses of money and what things require emphasis. Strategy has to drive finance, and finance has to be, it seems to me, a very important aspect in any strategic thinking.

Lord Carter of Coles: I would agree with that. Strategy is about analysis and choices. As you come to make those choices, the finances are a very strong factor in how you make them. Most strategy requires some form of implementation, which mostly requires money. Therefore, the Treasury must be central to that. How much strategic thinking the Treasury does and how much it reacts is an interesting question.

Q181 Chair: Well, I am asking the question.

Lord Carter of Coles: The thing for me with strategy is the timeframe. Do we think of strategy in a three-year, five-year or 10-year term? Most businesses probably think in three-year terms, and have three-year rolling strategies with a further out view. I suspect that the Treasury has a three-year view on these things, which it relates to, and has things forecast forward. It would be roughly in that timeframe.

Q182 Chair: So would you think it fair for me to assert that, generally, but particularly in times of economic crisis, the Treasury has had a very leading role in the formation of Government strategy?

Lord Burns: The Treasury has a critical role in two respects. One is that it is the Department that deals with economic strategy, and most of the time, as far as Governments are concerned, economic strategy is a very important part of what they do-unless you get your economic strategy right it is very unlikely that the other aspects of your strategy will go well. Economic strategy is the Treasury’s business, and it spends a lot of time on it. That is inevitably the case.

The second feature is that, given the way that the Government works, with 22 Secretaries of State and a large number of Departments, which all have their own statutory responsibilities, it is a very cumbersome process to try to bring it together and work out who should have the resources, over what time scale, how this should be monitored, and how it should be checked that people are delivering in what they are doing. The Treasury has a critical part to play in making sure that the strategies of individual Departments are being brought together in a way that is affordable and fits in with the economic strategy. That is a slightly different role. It is predominantly to do with public expenditure, and a slightly different role from the one of running economic strategy. But both are very important. It is no surprise that the Treasury in this country has always been very close to the centre of all policy and Government strategy.

Q183 Chair: The Treasury has become a very powerful Department of State in the Government-probably the most powerful.

Lord Burns: It always has been. When I was in the Treasury, one of the things I liked to do from time to time was to go and look back at its role in periods in the past. It has always had great power. Back in the 1930s, the finance departments of Departments were more or less Treasury outposts. They were manned by Treasury people, and basically the Treasury ran them that way.

Q184 Chair: So, the way the country is today very much reflects the influence of the Treasury down the decades and centuries?

Lord Burns: The Treasury clearly does not run the health service, transport or education. They are not the people who are driving those things.

Q185 Chair: Is the Treasury a very influential Department or not?

Lord Burns: Of course it is influential.

Q186 Chair: The Treasury has made our country what it is today.

Lord Burns: It has played its part, certainly.

Q187 Chair: Do you think the public are broadly happy with the way the country is today? Has the Treasury done a good job or a bad job?

Lord Burns: The Treasury has its ups and downs. We as a country have our ups and downs. There are periods when economic policy has gone well and periods when it has not gone so well. As to the fundamental allocation of resources within Government, and the issues arising if you look at policies across a whole range of things-whether you think the health service is working well, for example, or whether we have the right education system-I would not put those at the door of the Treasury.

Q188 Chair: Everything that has gone wrong is therefore not the Treasury’s fault.

Lord Burns: I am not saying either of those has gone wrong. That is the last thing that I would wish to argue. I am just saying that what the Treasury has to do is seek to make sure that the monies being spent across Government are being spent in a sensible way, that we have the right allocation of resources, that people spend what it is that they have been allocated to spend and that they are getting value for money from it-more the role of a finance function.

Q189 Chair: One of our previous witnesses, Julian McCrae from the Institute for Government, said the Treasury’s approach to strategic thinking reflected the fact that, "The Treasury’s usual answer would be, ‘It’s for Departments to figure out the strategy’"-once you have imposed the envelope on them-and sorting out the consequences of the financial restraints is their problem. That is pretty true, isn’t it?

Lord Burns: No. It is a long time since I was in the Treasury, but this is a two-way street. Departments come forward with plans and proposals. They know they have a business-as-usual agenda and they have an agenda for change that they wish to bring about. When you add together all of the demands of Departments, it invariably comes to a great deal more than that which is available, and there then has to be a process of negotiation to determine how the money will be allocated.

Q190 Chair: As an example, the Foreign Office is a very important department from a UK strategic point of view, but the expenditure on the Foreign Office is within the margin of error of some benefits, for example-the under-expenditure on a particular benefit. How does the Treasury evaluate between, say, cutting a few tens of millions from the World Service and agreeing to a decision that has a consequence of billions and billions of pounds in social security? Surely these are different order problems and have vastly different strategic consequences.

Lord Burns: They do. But, first of all, you say that the Treasury makes that decision. It does not. Certainly, what happened at the time when I was there is that it went first of all through a committee system, which looked at the competing demands for resources and the demands that were made by individual departments, and then went through a process of debating and evaluating which of them should cut back and how it was possible to meet the total envelope. Where there were then outstanding disputes, where Secretaries of State would not accept the conclusions of that committee, it would go to Cabinet. Cabinet would then decide whether to do A or B.

Lord Carter of Coles: Just going back to the point, I think the process between the Treasury and the Departments is quite iterative. I don’t think the idea that there is an envelope, and then that’s it, is quite correct. In my experience, the various spending lines within that-for example, how it is allocated within the Home Office, or the Ministry of Justice, as it is now, in terms of how the money is spent on prisons or probation, the splits between those and the efficiencies that might be sought-are the subject of constant debate.

Q191 Chair: My impression is that, if a Department wants to transfer money from one programme to another programme, the Treasury takes an interest in that.

Lord Carter of Coles: Absolutely.

Q192 Chair: So the Treasury is involved in micro-managing Departments. Micro-managing is perhaps a little emotive.

Lord Carter of Coles: Given the size of the Treasury spending teams, their capacity to micro-manage is relatively limited. If you look at the health budget, I am always struck by the fact it is £100 billion and there are 19 people in the Treasury who deal with that.

Lord Burns: When I was Permanent Secretary at the Treasury, we spent a huge amount of time trying to test what was the best relationship between the Treasury and Departments. There is a long history of the Treasury interfering less in the day-to-day running of Departments and trying to take what you might describe as a more strategic approach, which is to look at the big issues and the allocation of spending to see whether that spending was going on the things that were regarded as priorities.

The Treasury does take an interest. The main reason that it does so is that it is testing all the time whether or not: a) there is value for money, and b) Departments are going to stay within their spending limits. As you have just described in terms of the relationship between them, there is inevitably a certain amount of gaming that goes on between the Treasury and the Departments. Departments bid for much more than they know they are ever going to get. They have all kinds of tricks that they use-for example, putting forward and highlighting the particularly sensitive projects as the ones that they wish to have at the margin rather than others. The Treasury has its own ways of dealing with these things as well in response to that gaming. It is not always a pretty process, but it does involve the Treasury team having to take an interest in how Departments are shuffling money.

Q193 Chair: Who do you think takes a strategic view of what the Treasury does? Are we just reliant on the Chancellor and the Prime Minister? Is there a machinery in Government that puts what the Treasury does into a strategic context?

Lord Burns: At different times there have been different arrangements. For public expenditure, which is the most sensitive part of all this, there are well-defined arrangements, which do shift over time. During the financial crisis, if I remember, although I was not there, there was some new machinery set up in the Cabinet Office to deal with those issues. Otherwise, the major Treasury issues do go to Cabinet, but as everyone knows, there are some things that Chancellors have held very closely to themselves, particularly taxation changes. A lot of things to do with international economic relations, though, would go to Cabinet or to Cabinet Sub-Committees. It varies.

Q194 Priti Patel: In light of the remarks you have made thus far about the Treasury and its influence, how would you ultimately define the Treasury’s strategic influence, first on Government Departments and, secondly, on the way that the country is ultimately run?

Lord Burns: I feel that I have tried to answer that question already, in a sense. The Treasury has two main functions. One is to run economic strategy. The other is that it has a particular role to do with the allocation of public expenditure, and trying to ensure that the public expenditure made by a Department aggregates to a number that is capable of being balanced by taxation. Those are, to a degree, separate roles, and indeed in some countries these jobs are undertaken by different Departments. In this country the two are together. The Treasury is central, and plays a central and important part in the allocation of resources, in dealing with Departments, and on its own account it is obviously the place where economic strategy thinking takes place.

Q195 Lindsay Roy: Just to pursue the line of argument that we have been discussing so far, can Government be truly strategic when spending is compartmentalised by Department? We have heard strong evidence of a continuing silo mentality and an intense competition between Departments for resources.

Lord Burns: There is always going to be intense competition between Departments for resources, because whatever is being spent by Departments has to be raised in taxation. Raising money through taxation has its own problems. By and large, it interacts with the whole process of the economy. Most of the Governments that I have watched have had an ambition to keep taxation as low as they possibly could, and so there is always going to be constraint on public expenditure. The bids that are made by Departments are always going to be greater than the economy can support in the eyes of Government.

There has to be a process of competing for those resources. I have never been in an organisation where there was not competition for resources, whether between different parts of the organisation or between departments. That is what the economy, in a sense, is about: the competition for resources. I regard the competition for resources as a good thing, because it makes people put forward the case that they have as to why they should have the resources rather than someone else.

Lord Carter of Coles: On the point about silos and competition, this is a great debate everywhere, whether it is in business or in Government. It seems to me that nobody has found a better way than silos. We talk about it, but if you want accountability and roles and responsibilities that are actually well defined, then, sadly, silos seem to have been the best way to achieve that so far.

As to the previous question about the Treasury, I think it is central, but if you look at the Departments, there is strong competition. In my time of observing this, I have seen very strong Secretaries of State change that balance by coming forward with very powerful arguments that meet a particular political imperative or something like that, which actually justified changing settlements. Clearly, the Treasury is there in that central role, trying to determine it, but as I said before, it is a very iterative and part of a powerful process when something of great import is out there.

Lord Burns: The thing to remember here is you can change things only at the margin. Huge amounts of public expenditure cannot be changed very quickly at all, because they involve fairly large bodies of people in different aspects of public service-in defence, teaching, the health service, the payment of benefits, which themselves account for a very large bill. The competition for resources tends to take place at the margin. In every spending round that I ever saw, there was an envelope, different Departments put in bids and there was a competition between them. It was not all silos. Large chunks of spending were determined, because it was business as usual, but at the margin were the things that came through the process of settling the public expenditure.

Q196 Charlie Elphicke: In your view, how far exactly should Treasury processes, such as the whole Budget thing and setting spending settlements, promote strategic behaviour across departmental silos, and how would you change things to improve that?

Lord Carter of Coles: I think it is extremely difficult. If there was a cross-departmental agenda, there is the question whether you can top slice it and actually pull that money off and spend it in a different way. The whole question of accountability and the accountability of the spending of Departments to Parliament seems to me to underlie how the money is handed out and how it is held in those silos. I find it quite difficult: a number of times central functions in Government have sought to influence Departments or tell Departments what to do, but it has never been sustainably successful, in my view, apart from in the Treasury. There has not been another mechanism that has actually effectively joined up across Departments in any enduring manner. You might get things from time to time, an initiative or something else, that do so, but ultimately it seems to me to default back to those silos.

Q197 Charlie Elphicke: Couldn’t you have a stronger Cabinet Office instead, so that cross-cutting is done more effectively by the Prime Minister of the day, rather than the Treasury meddling with the money?

Lord Burns: I have been round this circle a number of times. My instinct is that we do need a stronger centre. The problem is getting a stronger centre that works. In a sense, your question puts forward a particular paradox, which is that in most organisations if you are going to have a strong centre, it is a centre which revolves around the chief executive. However, the Cabinet Office is not the Prime Minister’s Department. The Cabinet Office is the Cabinet’s. It is there to serve the Cabinet as a whole. Our system of government is not organised around a Prime Minister’s Department, where there is a strategy unit and a strategic choice process that centres around the Prime Minister. Instead it centres around the Cabinet. It is a very large body. That is very difficult to handle.

As Lord Carter says, from time to time different solutions have been tried here. There was a think-tank-what was it called?-the CPRS, back in the 1970s, and at different times there have been different units. My observation is that over time the Government and the system are becoming better at dealing with some of these cross-departmental issues than they were. In the last 20 years, my observation has been that there is less silo-thinking than there was: quite a lot of initiatives that run across Departments have been pulled out, where project groups have been put together to try to see whether progress could be made. The old departmental boundaries do not always deal with some of the big issues, particularly social issues, problems of poverty, etc.

Chair: Lord Burns, your answers are fascinating, but we have to have shorter answers. I am most grateful to you.

Q198 Charlie Elphicke: Wouldn’t it therefore make sense to rename the Cabinet Office "the Prime Minister’s Office", rather than trying to create a new thing, like delivery units and all the sort of rubbish that we have had over the last 13 years? Shouldn’t we just grab the bull by the horns, and say, "Henceforth, the Cabinet Office is the Prime Minister’s creature, the Cabinet Office Minister is a kind of creature of the Prime Minister, and we can have executive power throughout Whitehall to counterbalance the Treasury and make it more cross-cutting"?

Lord Carter of Coles: A chief operating officer of the Government? That is certainly something that people have discussed over time. It certainly could be considered and you could see the benefits that could come from that. Whether that would counterbalance the Treasury, I am not sure. Thinking of the number of times we have tried to do these big strategic plans, I was thinking of the national plan of 1964, or something like that, where people tried to go outside and do something bigger and different. But I certainly think that it is worth looking at. In many ways the Government do policy quite well, but do they do operations well enough? Do they have the strategic operating plan that they need to do these things? That might fill the gap.

Lord Burns: Personally I have some sympathy with that. It does not fit in with our traditions of Government and it does not fit in with the extent to which a lot of the statutory responsibilities here exist within Departments. It would be a major change, which would require being looked at in some depth. I fear that the time would never seem to be right to put this into practice. But I have a lot of sympathy with it. If I compare it with the world I now live in, the centres of companies have much more strategic power than I feel is the case with Government.

Charlie Elphicke: And the Presidents of the United States.

Q199 Chair: A more strategic capability for delivery would in fact encourage the Government to think more strategically about their aims, would it not? That is what we are really about in this inquiry-how the Government choose their strategic aims.

Lord Burns: My question to you is: can you do this with an organisation the size of the Cabinet? If you wanted to have a smaller group to engage in this, who is going to form that smaller group? Individual Secretaries of State are very jealous of their responsibilities.

Q200 Chair: That suggests the process of strategic assessment and analysis needs to be done by a smaller group, even if it is supporting that large group of people. That seems to be what is lacking at the heart of Whitehall.

Lord Burns: I would push you one step further than that: if that smaller group is to have an impact, it has to have real clout, in the way that Governments tend to organise themselves during wartime, which I referred to earlier.

Q201 Lindsay Roy: You have heard one possible option from Mr Elphicke. How can we have an overarching corporate strategy developed and promoted? You have mentioned extracting a small group. Are there any other ways in which we could get this big picture, into which the departmental priorities would chime?

Lord Carter of Coles: An interesting question is whether it should be done within the Government or without-should it be done by think-tanks, for example? If you look at the United States and the period of great strategic choices in the Cold War and wartime, third-party think-tanks played a great role in presenting options for the Government to choose from. It is awfully difficult sometimes: if the Government actually commission strategy, sometimes there is the question whether it has become the Government’s strategy before they have had a chance to consider if that is what they want to adopt. There is balance; maybe this can be done another way, and not necessarily with a tight group. It needs to come into a tight group before it is moved into the Cabinet, but somehow we need to get those ideas from different sources.

Q202 Lindsay Roy: How would that be organised?

Lord Carter of Coles: There is a growth of good think-tanks-of research commissioned outside to look at particular things and then brought in, in some way, to formulate a strategy. That might be one consideration.

Q203 Kelvin Hopkins: A question to Lord Burns: when you were in post did the Treasury undertake scenario planning either for unexpected economic developments or other cross-Government contingencies?

Chair: It is a yes or no, isn’t it?

Lord Burns: It is not. There are two ways of looking at this. I am not sure which one you have in mind. Most policies in my experience were subject to a great amount of stress-testing, which is trying to identify some ways in which the external world may come to impact upon what the policy was doing or where things may turn out differently from expectations, and then trying to see how robust the policy was. I would regard that as a stress-testing exercise. Government have never been very good, in my experience, at what you might describe as looking at plan B, because Government do not like to think that plan A is not going to work. They fear that, by looking at plan B, there will be a loss of confidence in plan A. Of course, when plan Bs have been looked at, they never turn out to be a plan B, because by the time there is a problem with plan A, there are usually a lot of other factors that by then have changed as well. I am not a great believer in what people describe as scenario planning. I am a great believer in stress-testing and in making sure that policies can survive unexpected events.

Q204 Kelvin Hopkins: Professor John Kay, who recently came before us, put it rather more strongly than that. He said that there is a process in which, "The people at the top do not welcome challenge, and there is a single view, as it were, imposed on the organisation, and people feel they will damage their careers by disagreeing with it." I remember your appointment as Chief Economic Adviser to the Treasury and your appointment as Permanent Secretary to the Treasury very well. I was writing about economics at the time, and I got the very strong feeling that, from the beginning, almost, of Mrs Thatcher’s era, the Treasury took a particular direction and anybody who challenged it was marginalised.

Lord Burns: That certainly is not true of the Treasury. It operated a system where a great deal of internal challenge took place. Furthermore, it was not at all a hierarchical Department, where the only people who had a say were the senior people. Issues were challenged all the way up. Meetings with the Chancellor would typically involve people from a whole variety of grades within the area. What is true is that the Treasury is a Department that has always, in my observation, had strong political leadership. Strong political leadership is a very important aspect. We had a great deal of debate up to the point at which policies were decided. Once they were decided, it was a question of a rowing in and trying to make that policy work. By and large, that is the culture that has existed in the Treasury. The challenge takes place up to the point at which the decisions are made. Once they are made, you get on and try to make it work.

Q205 Kelvin Hopkins: One strategic decision that turned out to be catastrophic in your period was the decision to join the Exchange Rate Mechanism, which turned out to be catastrophic both economically and also for the Conservative Government, which lost the 1997 election largely as a result of the failure of that policy, right in the middle of your term. Was anybody challenging that? I know that the Cambridge Economic Policy Group and one or two others, such as myself, were arguing against it at the time, but was anybody seriously challenging that and suggesting it was a mistake inside the Treasury?

Lord Burns: This is a long story, which I am sure you have not got time to get into today, but if you remember, the decision was made by the Labour Government at the end of 1970s, but also by the incoming Conservative Government, to join the Exchange Rate Mechanism once the time was right. This was a kind of sword that hung over the head of the Government throughout that time. There were many attempts made by different groups of Ministers to join the Exchange Rate Mechanism. The Treasury by and large challenged this all the way through, just as it has challenged on the issue of joining the euro.

Q206 Kelvin Hopkins: Denis Healey refused to join the snake-the EMS-early on.

Lord Burns: The policy was not that we would never join; it was that we would join when the time was right. That was a terrible decision, because it meant that this issue remained on the agenda throughout the period. The Treasury as an institution was not the driving force behind joining the Exchange Rate Mechanism. It was something that constantly came up-a political issue that was on the go all of the time. In the end the decision was made, for a whole series of complex reasons, to join at that point, and it then ran into all of the issues such as German reunification, and it was not a very good time.

Q207 Chair: Did it reflect a failure of strategic thinking? To get it that wrong, for goodness sake-it must be a failure of strategic thinking.

Lord Burns: I am not sure it was a failure of strategic thinking. The strategic thinking all the way through was to try to prepare the ground and to be aware of the conditions under which it would work and those under which it would not work. It ended up facing a stress that was greater than had been contemplated, which was the stress that emerged from the result of German reunification.

Q208 Chair: There was a failure of the imagination about how it might develop, and then there was a long period of complete denial, which was very destructive for the economy.

Lord Burns: I do not agree with the second part, because, if you recall, what was put in place in 1992 at the time of the exit from the ERM was a policy to do with inflation control, which has lasted for 20 years.

Chair: I agree with that, but that is after we came out. We must not spend too much time on this, sorry. Thank you.

Q209 Robert Halfon: You have said that you do not like strategic planning.

Lord Burns: I did not say that; I said, "scenario planning".

Q210 Robert Halfon: I meant scenario planning. Surely another way of looking at it is that it is preparing for eventualities. That must be a central role of what the Treasury does. If you look at current events in the eurozone, for example, the Treasury must be doing scenario planning for if the eurozone collapses.

Lord Burns: I am sure that they are looking at that. There are specific issues where obviously you have to look at options. As I say, I regard this as a process of stress-testing: trying to identify where the pressures are likely to arise and trying to identify events that may put the policy that you are pursuing into difficulty, and then deciding how you are going to react. My doubts about scenario planning concern people trying to paint big pictures of all kinds of different things that might happen in the world and to devise a series of policies to suit each of them. In my observation, the options that are looked at under that kind of exercise are rarely the options that eventually emerge or are terribly useful. I believe very strongly in the issue of what I call stress-testing-trying to identify where events may take place that would disrupt the policy that you have, and planning for how you might react to that.

Q211 Priti Patel: This is for Lord Carter. You have a background in carrying out a number of policy reviews across Government, which, ironically, have cut across departmental silos. You said earlier that trying to cut across silos and challenging behaviours is immensely difficult. Other witnesses have also said that. What has been your assessment of how strategically the Government have been able to work together across Government Departments? What are the lessons: where are the strengths and weaknesses for this Government and, dare I say it, future Governments, especially in light of the transformational programme that is also going to take place across the civil service?

Lord Carter of Coles: Where it has worked best is where the Prime Minister of the day has driven it: where the Prime Minister has made it a priority and brought Departments together to meet a particular objective it has worked really well. It seems, though, that that is not a sustainable model; it can deal with issues but it cannot actually change the way that the machinery of Government works to deliver long-term answers to problems. You can deal with one-offs in that way, and it has worked very effectively as I have observed it.

I remain doubtful that we can make effective cross-silo working work. I think that the structure of the way that we run things-the whole concept of Cabinet responsibility and the role of the Secretary of State-makes that a great challenge. You can do one-offs: you can change things and move the direction a little bit, but fundamentally I think we have not cracked that problem. I watch large corporations and other Governments trying to do this as well. It is probably the single greatest challenge. We all hear the speeches about how, if we could all behave in a joined-up way, we would get so much more out of it, but I have not seen anywhere yet where this is actually satisfactorily demonstrated. Apart from in times of war and crisis, where people are prepared to break those silos up, I have not seen it.

Q212 David Heyes: You have both made comparative comments with business in the evidence that you have given so far. For example, Lord Burns, you have said that the centres of companies have much more strategic power than the centre of the Government. Is it more than just a question of degree? Is it that there is fundamentally different meaning to strategy as applied in business from that applied in Government? Do we mean the same thing?

Lord Burns: I think they are fundamentally the same thing. Most organisations have got to think about the challenges that they are going to face, how the world that they work within is likely to change and the way that that will affect them, and to try to identify policies and solutions to be able to deal with these factors effectively.

Governments are extraordinarily complex. The Government are very big. They are a business, of course, that has no revenue stream. The biggest difference between Government and business is that Government Departments do not have a revenue stream. Revenue is collected collectively at the centre. This therefore means that you are dealing with an extra dimension in what is a very large and complex business.

I would say that strategy within individual Departments works reasonably well. People do a lot of strategic thinking. The challenge, as Lord Carter says, is where the Departments intersect and interact, and the choices that have to be made. That is much more difficult.

Lord Carter of Coles: To support Lord Burns’ point, the first thing is that business is relatively simple compared with Government. The objectives are straightforward: the directive is to satisfy the needs of the stakeholder groups, which are pretty clearly defined. That is harder in Government. Also, you always have the political imperative coming along and changing those priorities. One of the hardest things in Government is the balance between having a strategic plan and sticking to it. Whether it is Ministers or senior civil servants, there is an issue of consistency-of actually sticking with a thing as it goes along as opposed to constantly changing it. In business you get a much more stable environment, in my experience, to do those things.

Q213 David Heyes: Therefore, is it sensible to look to business to learn lessons that you can apply in Government?

Lord Carter of Coles: No. My experience of Whitehall is that everybody I hear referring to business usually does not last more than about a year. It is hardly an apt comparison because it is much more sophisticated and much bigger.

Q214 Chair: To press Lord Burns on this point: do not businesses work in relatively banded systems of thinking, where their aims are very limited, whereas with the world of politics and statecraft, you are into the laws of unintended consequences and the unpredictable, and you have to have a completely different set of strategic skills in order to operate in that climate?

Lord Burns: I am not sure that they need to be completely different, but I agree entirely with what Lord Carter says about the differences and the greater problems that there are in dealing with Government, as you say. I think there are some things that business does better. Businesses that I have observed typically deal better with the distinction between business-as-usual activities and change activities and innovations, whether those are takeovers, restructuring the business or whatever. That is because they are more contained businesses. What they have to do is much clearer. The distinction between investment and running costs tends to be clearer. There is a different accounting system. It is a very different world.

Q215 Robert Halfon: Can I just ask, do you think the current Government have a long-term strategic plan?

Lord Carter of Coles: Well, perhaps we should separate domestic and international.

Q216 Chair: Why?

Lord Carter of Coles: Because of the history of it. If you look at what we have in terms of defence and foreign policy, one can discern more clearly some strategic commitments to that. But as to whether they have an overall strategic plan for the domestic situation, then, no, I do not think so.

Q217 Robert Halfon: Why?

Lord Carter of Coles: Because I think that a succession of Governments have never felt the need for it.

Lord Burns: My interpretation is that there are a series of strategies for individual departments: there is a strategy for health, for education, for economic policy.

Q218 Chair: They are plans. That is not strategy in the strictest sense, is it?

Lord Burns: I am not sure about that. I am far removed from this now, but I would hope that they go beyond policies. I would hope they go much further, looking at the challenges that could emerge, how the world is changing, how people’s demands for different kinds of services are changing, what is happening to technology.

Q219 Robert Halfon: Do they have a long-term strategy? That is my question: do you believe that the current Government have a long-term strategy?

Lord Burns: Probably not. I share Lord Carter’s view: I am not sure that, in that sense, Government can have a long-term strategy.

Q220 Chair: The Government must have an implied strategy. All their policies must add up to an implied strategy-what we call an emergent strategy in our inquiry. The question is, are we consciously monitoring this emergent strategy or is it just an accident?

Lord Burns: No. I am going to repeat myself here. You have strategies for different Departments. At some point there is either an issue of where you need interaction between some of those Departments because there are policies that cross the Departments, or you end up against the problem of competition for resources, where decisions have to be made as to whether we are going to support activity A to a greater extent and reduce our support for activity B. Those decisions do take place at the centre of Government. They have to be based upon priorities and upon what you think the biggest problems are that society, the economy and the country face. That process does take place. I would hesitate to describe it as a strategy.

Q221 Robert Halfon: In terms of devising strategy, in your own experience how do you use public opinion to shape the strategy of the organisation? If Government were to have a proper strategy and decision-making procedure, how would they use public opinion, bearing in mind 24-hour news cycles, the tabloid press and so on and so forth?

Lord Burns: Most businesses that I know spend a great deal of time looking at the views of their customers and the people that they engage with, whether it is by simply monitoring carefully the actions that people take in respect of their products or whether it is by looking at complaints, asking good questions and sampling opinion. I do not see why Government should be any different. If the Government are going to make choices between different areas, they need to know something about the extent to which the people of a country have greater happiness or unhappiness with some aspects of the services that they receive than others.

Lord Carter of Coles: However, Governments do have to lead sometimes. There is always a balance in taking decisions that are sometimes difficult and do not necessarily have the most popular support at that moment but possibly in the longer term may be the right answers.

Chair: I am going to have to draw a line under this fascinating evidence session. We have really enjoyed it. My Lords, thank you very, very much indeed.

Examination of Witnesses

Witnesses: Lord Rees of Ludlow OM FRS, Astronomer Royal, and Sir David King FRS, Director, Smith School of Enterprise and the Environment, University of Oxford, gave evidence.

Chair: I hate to put you under pressure, but we are going to have to try to wrap this by 11.30 at the very latest. We are looking forward very much to what you have to say. Can I start by asking about science as a philosophy and the way science feeds into strategic thinking: what role do you think science has in feeding strategic thinking in Government? Perhaps you could also both introduce yourselves for the record.

Lord Rees of Ludlow: I am Martin Rees, a space scientist at Cambridge University. I have been involved in science strategy as President of the Royal Society, and I am on the House of Lords Science and Technology Select Committee.

Sir David King: David King, previous Chief Scientific Adviser to the Governments of Blair and Brown and currently Director of the Smith School of Enterprise and the Environment at Oxford University.

Lord Rees of Ludlow: It is clear that a larger proportion of the long-term issues confronting us as a nation have a scientific dimension, and therefore it is crucially important that scientific input is made, at the appropriate level, into these decisions. Most of the issues that concern scientists are intrinsically long term. Whether you call them strategy or not, I do not know, but clearly they involve some sort of planning on a horizon of 10 or 20 years. That is where science comes in, but, of course, it is important to bear in mind that scientific input is only one element of the decisions that politicians have to make. Any important policy question, be it on energy, environment or industrial policy, has to take into account the science and engineering, but also has to take into account the other social, ethical and economic aspects as well.

Sir David King: My introductory comment to this would be that I am a physical chemist-i.e. there is a specific area of science that I am trained in-but I always read widely in economics, politics and philosophy, and when I came into Government I was very keen to interpret the word "science" in the old way, that is to incorporate all of knowledge. So when I was advising Government, I would bring in the appropriate physicists or engineers but also appropriate economists and social scientists to tackle the problem with me before giving advice. I think the way in which I can answer that question best is in the old Latin meaning of the word "science", from scientia-in other words, use the knowledge base as a means of advising Government. That formed the basis of my position in Government.

I can also give an answer in terms of very practical situations I was faced with. The first disaster that I had to handle was the foot and mouth disease epidemic of early 2001. What I discovered in terms of Government strategy was that the Department, which was then the Ministry of Agriculture, Food and Fisheries, tackled the problem by-and in characterising in this way, I may be criticised-taking out the lessons learnt from the 1967 foot and mouth disease outbreak and applying them. That is not sensible in a changing world. We were, therefore, surprised by the intensity of this outbreak, which had really come about from the fact that animals are now moved across the country at various times during their lives considerably more than before. Also, we did not take account of modern science and technology and what could have been done to manage that outbreak much more quickly.

Q222 Chair: In terms of vaccination, for example?

Sir David King: Vaccination at that point was not on the cards: if we had vaccinated animals, we would not have been able to distinguish animals that had foot and mouth disease from animals that had been vaccinated, because there was no means of distinguishing. Nevertheless, there were procedures that we introduced-can I use the phrase, "on the hoof", Chair? I was working 24/7 for 6 weeks, determining new processes to bring this under control. We did bring it under control, but I never wanted to be in that position again.

I had inherited the Government’s Foresight programme and I completely revamped that programme. The way I did that was to use the way that Foresight had been developed in the United States-Herman Kahn was a great figure, and also the Shell foresight programme. We investigated how that had been done, and I introduced an in-depth Foresight process, and in my time initiated a dozen Foresight programmes. Each of these was a detailed analysis involving in a minimum case 100 experts-in a maximum case, 350-over two to three years, to study strategically issues of importance to the Government that take a timescale of beyond 10 years. For example, nuclear new-build is on the agenda now. Building a new nuclear power station is going to be with us in 100 years’ time.

Q223 Chair: I understand all that. My question was really at a philosophical level above this.

Sir David King: Right. The meta-level.

Q224 Chair: Science, necessarily, is about discovering what we can know; yet in politics and statecraft we have to make decisions in the absence of knowing everything, and indeed in a climate where we actually do not know what we do not know. What has science got to offer, when so much of political decision making has to be done in this climate? What has science got to offer in this respect? Is science just one of the elements that we feed into this process, and not the answer?

Sir David King: Again, I should like to answer this question. It is philosophical, because while we were running the Foresight programme, I had the comment from Government: "We have to make strategic decisions on issues that you are not considering, and we need quick answers." We set up a horizon-scanning process. To do that we established what we called a Sigma scan, which looked at what technology was on the horizon that may be of use to Governments in the future, and a Delta scan, which looked at what problems were likely to arise in the future. Using this as a basis, we set up a computer programme that enabled us to respond very quickly to Government horizon-scanning queries.

Q225 Chair: So we can do strategy on a computer?

Sir David King: We used the computer to our best ability to meet these rapid-fire demands coming in from the Government. We did give advice. I think the advice was useful to every single Government Department. I worked closely over that period with at least 35 Ministers in developing strategies.

Q226 Chair: Lord Rees, do you think there is a danger in regarding science as salvation-that we can become over-reliant on science? Science is very attractive, because it provides concrete data and concrete answers, when in fact we have to learn to work without those.

Lord Rees of Ludlow: We get on better with it than without it; we have to accept its limitations. Clearly, some things are well understood, some things are not well understood, and no doubt there are Rumsfeld’s unknown unknowns as well. Those have to be fed in, and in any long-term policy one has to bear in mind what you said earlier, Chairman, about the laws of unintended consequences: you cannot be confident of what is going to happen in future decades.

Despite that, it is fair to say that in something such as foot and mouth disease, as Sir David mentioned, one had to use the best science that was available, ditto for BSE and other issues. When we come to long-term questions like energy, then clearly science and engineering have to be used and we need the best expertise. One has to plan 30 years ahead. We may not get everything right; we may fail to foresee some technical breakthrough that might change things, but we do the best we can.

Perhaps I should say that, when we talk about science, as Sir David said, we should include engineering. One of the problems in many Government decisions is that there has not been enough engineering input. Offshore wind, for instance, is an example of that. I like to flatter engineers by reminding them of a rather nice cartoon, which shows two beavers looking up at a hydroelectric dam, with one saying to the other, "I didn’t actually build it, but it’s based on my idea." That shows the balance between the science and the engineering in many contexts.

Q227 Chair: Finally on this strand, do you feel that, when you feed scientific knowledge into the strategic process, you are actually feeding a strategic process, or do you feel that science is being grabbed as an answer too readily? What sort of assessment or analysis happens to your scientific input?

Lord Rees of Ludlow: I would have thought that the most obvious example is the Government’s energy policy, which is clearly something that looks 30 or 40 years ahead. It has to be based on the best science and engineering, and also on the goals to gradually decarbonise the economy. That is an example of where we clearly need the best science and engineering in order to guide policies.

Q228 Chair: Sir David, do you feel that the best use was made of your advice?

Sir David King: In my time we published the results of eight Foresight programmes. The programme that had the greatest publicity was on obesity. We raised the problem in a different way from how it had been raised before, and it is still very much more in the public eye than it was before. It is an extraordinarily complex situation, as it does not just belong to the Health Service, the Department for Culture, Media and Sport or to the Department for Education: it cut right across every Government Department.

In each of these Foresight programmes, we engaged strongly with Ministers who could see the power of the techniques we were developing. By the way, these techniques were based on scenarios; we were not predicting the future but building various scenarios into the future, and then looking at what Government decisions were required to optimise opportunity and manage risks on each of these scenarios.

The outcome, I would have to say, was never terribly satisfactory. If I give you an example, one of the first programmes we started was on flood and coastal defences for the UK. The initial response from the ministry was, "We are doing this." We were saying, "No, we are taking a longer look at this." If you take the Thames Barrier as an example of forward-looking science and engineering, it took many decades to get it up and running. We were saying that we needed to take an 80 to 100-year look at flood and coastal defences for the UK.

The outcome of this was an additional £500 million being spent, largely through the Environment Agency, to protect housing, the built environment and people from flooding, at the level it was at in 2000, as we move forward in time. We had co-operation from all of the appropriate industries, particularly, for example, the insurance industries, which were fully involved in that process. Typically, we engaged stakeholders who would be concerned with the roll-out of the programme. That was absolutely key. I think, however, that in time this gets lost. I believe that we should revisit flood and coastal defences, taking another long-term view, because the dust has settled.

Q229 Chair: The strategic surveys tend to be one-off, rather than continuing-is that what you saying?

Sir David King: Actually, the biggest outcome from that programme was that I received an invitation from Premier Wen Jiabao to go to advise the Chinese Government on flood and coastal defences. We sent our team out there, and the net result was that their understanding of flood risk around Shanghai is now considerably better than it was before, and they are putting in place a very extensive strategic plan for the defence of Shanghai from flooding down the Yangtze. I am not saying that we have done badly on this. I simply feel that all sorts of problems tended to arise because our projects necessarily were inter-departmental or trans-departmental in their nature.

Q230 Chair: I have two other, very brief, questions, and then I will move on. Do you feel that we husband our science base sufficiently in the UK as one of our key strategic assets?

Sir David King: I produced a paper in the journal Nature in 2004 examining the position of British science in relation to every other country in the world. The paper’s conclusion was that, in terms of the science output per pound invested in the science base, we were easily the most productive in the world.

Q231 Chair: But do the Government take a strategic approach to this?

Sir David King: It therefore required a strategic approach. Lord Sainsbury, as Minister of Science, and I worked closely with the Treasury on this. We produced a 10-year plan, for 2004 to 2014. Again, by the way, Premier Wen Jiabao asked to see me, and wanted us to help with the Chinese development of a strategic plan. You may be interested to know that the outcome was that, where we had said that we should increase the science budget at twice the rate of our GDP growth, Premier Wen Jiabao decided to do exactly the same. The only difference is that a 10% per annum growth in their GDP meant that they were investing in the science base at an increased rate of 20% a year.

Lord Rees of Ludlow: We are fortunate in our science, but if we ask what our strategic aims for this country are, one of them, declared by both Governments in recent years, has been to make the UK a preferred location for R and D, a centre for high-value-added manufacturing and a preferred destination for mobile talent. Clearly it is crucial that we succeed in that, because if we do not get smarter, we will certainly get poorer. We do, indeed, have a lot going for us. One of my concerns as an academic, and indeed as someone involved in this, is to make sure that we do not jeopardise this long-term strategy, which is essential for our health, by short-term hiccups, and own goals. That is the thing that worries us as people in these fields.

Sir David King: Could I quickly follow up? The point about our strategy was science innovation for wealth creation. This was looking strategically at the outcome for the manufacturing base in the UK, based on this enormous strength in our science. I still believe that the connectivity has not been properly made. We have become a magnet for top scientists across Europe. If we look at the number of appointments of top scientists in our universities, you can see that. We have some very good examples of spin-out companies. The density of spin-out companies in the so-called golden triangle between Cambridge, Oxford and London is the highest in the world. But we do not seem to make the big transition between the small high-tech companies and the large companies that will lead the way forward and help our economic recovery.

Q232 Chair: Which is not a science problem.

Sir David King: It is more a problem of strategic direction. For example, South Korea is a very good example of strategic direction. The South Korean Government decided to back the development of broadband in Korea before the rest of the world. They had scientists who were right at the helm of the development of broadband. They invested an enormous amount of public money in creating a platform.

Q233 Chair: So, Governments should be prepared to pick winners?

Sir David King: I believe that this phrase "picking winners" is the biggest blockage from the Treasury. I think that the groupthink in the Treasury is always, "Good heavens, David. You are not suggesting we should back…"

Chair: Lord Rees?

Lord Rees of Ludlow: We do not pick particular companies, but we surely pick broad areas where we see that we have a competitive advantage. The life science strategy of the Government is an example of doing just that. There are areas in the physics-based sciences where we should do the same. The problem has really been that the Government measures that have been taken to stimulate innovation have not been on the required scale. Just as one example, there has been talk for many years about the need for some institutions to bridge the gap between what it is appropriate for universities to do in research and what is profit-making. The German Fraunhofer institutes is the model that has been cited, and there has been lots of talk about them. We do now have these: we talked about Newton institutes and then they were Faraday institutes; now they are called Catapult centres for some reason. These are now being set up, but probably not on a big enough scale. So this is one of many areas where we are doing something and the rhetoric and policies are right, but the implementation is on too large a scale or too slow.

Sir David King: I will just throw in a simple fact: there would have been no Silicon Valley in the United States without DARPA funding. Public funding from the Defense Agency is what pulled through all of that technology in Silicon Valley.

Q234 Priti Patel: Sir David, you said that in your time you were working across Government with around 35 Ministers. It sounds like in your capacity as Chief Scientific Adviser you were quite embedded, basically, across Government. Do you think that the Government as a whole have a strong enough understanding of science, scientific data, technology, the interconnectedness that modern technology brings, and the value that the Chief Scientific Adviser can bring to policy and decision making? Bear in mind, of course, the caveat that decision making always has this feel of political imperatives and politicians have a particular mindset of quick wins-what is going to make the Government look good and generate an element of feel-good factor with the public as opposed to the long-term approach that science and technology can offer.

Sir David King: The first part to my answer is that what I did manage to achieve after the foot and mouth disease epidemic was the placement of chief scientific advisers in different Government Departments. Up to that point we only had a Chief Scientific Adviser to the Prime Minister and the Cabinet and to the Ministry of Defence. We now have chief scientific advisers in all Government Departments. That is now embedded in the process.

I would question whether advice is taken from these advisers where it is appropriate. Let me give you an example, which you may find surprising. In the current economic crisis in the world, there is an enormous elephant in the room that the economists do not want to hear about, which is global oil production capacity. The price of oil increased gradually up to 2005: it gradually doubled from $20 to $40 between 1997 and 2005. Production increased from 64 million barrels a day to 74 million. Since 2005, production has hit a wall. We are still at no more than 75 million barrels a day-I am talking about crude oil production-and the price has gone shooting up to $140 and down again. It only comes down when the global economy is brought down. It shoots up again as the economy begins to recover. At $100 a barrel, as we had last year for the first time as the average through the year, Europe spends $1 billion a day on imported oil. It used to be a fraction of that. If I look at the Greek and Italian economies, a big part of their deficit is the increased cost of imported oil. I do not see economists taking this into account.

So my biggest point, Chairman, is that we need to integrate forward thinking, not just put science in a box here and economics there. The economic thinking is a groupthink that led to the inability to predict the downfall of the global economy. Oil prices went up to $140 a barrel just before the downfall. It was not a fluke. Ten out of the last 11 financial crises have been preceded by sharp rises in oil prices. We have a debt crisis, which of course made it a dramatically poor financial downturn, but until we actually cope with the fact that the oil price will continue to rise until it turns the economy down and grasp that in our strategy, we are not going to manage to regrow our economies.

Q235 Priti Patel: On that point, there is a role for technology to play here. Lord Rees touched on energy policy and strategies as well. Nuclear is almost like the elephant in the room, where we seem years away from actually developing anything. How strategic, in your view, is the whole technology piece versus the economic arguments and benefits, versus political ambition?

Lord Rees of Ludlow: Can I answer both questions? On chief scientific advisers, thanks to what Sir David and his successor as Government Chief Scientific Adviser have done, there are now chief scientific advisers in most Government Departments. In fact the House of Lords Science and Technology Select Committee has just completed a study of how effective they are being. Clearly the outcome is rather mixed, and the importance of these people is greater in Departments like the MOD and DEFRA than, for instance, in DCMS. We do not expect one size to fit all, but I think it is very important to have independent people of high standing.

The other point you mentioned was about R and D and energy. Here again, the scale of our R and D effort is not as large as the problem demands. It would be wonderful, not least for attracting young people into engineering, if we were to declare the aim of taking a lead in some versions of clean energy and provide this for the export market and the world. We are not doing it on a big enough scale. In terms of nuclear, the scale of our effort is really very meagre indeed. About £15 million has been spent on nuclear R and D. We are not even able to provide a watching brief on future developments, still less to participate in them. Indeed, there is a worry about whether we will have enough people with training in nuclear engineering for safety roles when the present generation, who are now in their fifties, retire. That is an example of where under-investment is going to lead to long-term losses.

Q236 Paul Flynn: What dangers do you foresee if that money is not invested?

Lord Rees of Ludlow: First of all, if we cannot provide expertise on a safety level, that is clearly bad news. If one feels that nuclear is going to be part of our energy mix, and moreover if one thinks that Generation III and IV nuclear reactors are going to be more efficient and safer than the rather old designs that are being used and commissioned now, then it would seem a pity if the Brits not merely did not have any people who could take a lead in developing them but did not even have people who were well informed in order to calibrate and assess them.

Q237 Priti Patel: On that point, is that a failure of political ambition from the Government or is this about a complete failure of strategic thinking from both politicians and people at the heart of Whitehall with regard to the role of Foresight, working with technology and the insights that scientific advisers are bringing when we look around the world?

Lord Rees of Ludlow: The nuclear story is a depressing one, from our leadership role 50 years ago to the present situation. Chris Huhne, until recently the Minister, made a rather frank speech saying that the UK had made almost every possible mistake in the past, and so now it should try to do the right thing at last. We have had a rather poor record in the past of delays and poor choices, and trying to ride too many horses at the same time.. This is just part of the story of our energy policy not being well enough co-ordinated and not being followed through quickly enough.

Q238 Chair: Is this relying too much on scientists or not enough?

Lord Rees of Ludlow: No, I think scientists can only offer advice and do the designs. It is, as you know, a matter of whether the public will invest or whether it is accessible for the private sector to invest. The science is only the first element if you want to have a successful nuclear policy.

Sir David King: I would just come in quickly on that question.

Chair: I thought you might be stung by that.

Sir David King: I just want first of all to say that I think economics is far too important to leave to economists alone, and yet, if we look at the advice given to Government, you will find that it is the economists, who I believe are guilty of groupthink most of the time, who give advice without taking into account what science can deliver for them.

Q239 Chair: The economists can be the worst at pretending that they are operating within closed data systems when in fact they are dealing with very unpredictable events.

Sir David King: In terms of the failure of strategic thinking in the energy area, there is a massive opportunity for wealth creation out of the new challenge arising from oil resource limitations and pricing going up, which is to find alternatives to fossil fuels to provide energy for our economic situation. Britain is in a very strong position to lead the way because of the strength in the science, engineering and technology base.

The question is whether we are going to get smart enough in a strategic direction to develop that. When I was in Government I did manage to set up the Energy Technologies Institute as a public-private enterprise, so half of the money came from Government and the other half from eight major energy companies. The idea behind this was not that £1 billion investment over 10 years was enough to change the whole situation, but that it should stimulate investment from the private sector in what was going to be a growing opportunity.

Lord Rees of Ludlow: I would just say that, obviously, the private sector needs security and long-term planning. We have seen a recent example of what should not happen in the very sudden change in the rules for subsidising solar panels. I am not saying that the earlier rules were right or wrong, but to change the rules suddenly is not going to encourage people to make long-term investments. That is an example of a sort of own goal, where one might have a good long-term aim, but if the rules are tinkered with in an unpredictable way then that is going to make it harder to follow though.

Q240 Paul Flynn: When you last came before this committee, Sir David, you were lukewarm on marine power and other renewables. In hindsight, how does that foresight look?

Sir David King: I was lukewarm on wave energy.

Q241 Paul Flynn: Well, tidal power I think was the one that came up.

Sir David King: I am going to continue to say that I was lukewarm on wave energy, but I happen to be in favour of tidal power in the Severn. That is in my view a very positive way of producing a large amount of energy in a renewable way. I am very much in favour of renewables and microgeneration of electricity, but I am not in favour, specifically here, of picking winners. I think we need to create a higher price for carbon so that we produce these alternatives.

Q242 Paul Flynn: Tidal power is immense, eternal, British, clean and untapped. Do you not regret that you have not been an advocate of increasing the work, and not just at tidal barriers, as there are other, probably more efficient ways of doing it?

Sir David King: I do not regret what I was doing, because I have a feeling that I was pushing this agenda harder than anybody else.

Q243 Paul Flynn: If you take your horizon scanning, did Fukushima appear on this? A year ago there were 54 reactors generating power in Japan. There are now three. Isn’t nuclear appearing to be the most fragile of energy-generating sources?

Sir David King: Here we are going to disagree. I believe it would be fair to say, post-Fukushima, that nuclear energy per kilowatt hour is still the safest form of energy that we have yet devised, just in terms of the number of fatalities. We do need to keep track of the facts: despite the enormity of the Fukushima disaster, there has not been one fatality arising from it.

Q244 Paul Flynn: I do not particularly want to get into an argument on this, but there were 53 fatalities named.

Sir David King: I beg your pardon.

Paul Flynn: It is plainly held. I will send you the details, if you like. The situation is that, post-Fukushima, the argument in Germany, Holland, France and a whole range of other countries has concentrated not only on the public’s perception, which has been well reported, but on cost. In this country, we have had no examination of the additional costs, as a result of Fukushima, for protecting against terrorism or from the natural events that are likely to turn up. Are you happy that the Government have persistently refused to look at additional costs?

Sir David King: At Oxford University I have established a school that does futures work. We produced a report last year, which was published just two weeks after Fukushima, on nuclear waste and material in the UK, looking at the situation in Cumbria in particular. We are currently preparing a report on the future role of nuclear energy in the UK, which will be published in March this year.

I believe that the Government are keen to see that we continue to produce these reports at arm’s length from Government, where we are not influenced directly by Government. I do not believe that the Weightman report was a poor outcome of Fukushima. I think that the Government immediately set up Weightman to look into the outcomes of Fukushima, and his report is a very good analysis of the situation.

Q245 Paul Flynn: I am sorry, I have to interrupt you. In that report there is no mention of cost. Weightman has said that he was not even qualified to consider costs. That report was set up by Government to shore up collapsing public and investor opinion. It was a part of spin. Weightman would admit that.

Kelvin Hopkins (in the Chair): The Chairman is absent momentarily, so may I say that although this is an interesting debate, it is probably more appropriate for the Energy and Climate Change Select Committee.

Sir David King: I would just say that Weightman is an independent nuclear adviser.

Q246 Priti Patel: We have touched on energy security and also climate change to a certain extent. These issues are global in nature and require a strategic and co-ordinated response-there is no doubt about that. I would be interested in both of your views as to what the appropriate strategic approach should be from the UK Government to respond from a long-term point of view, or a vision of how long that strategic response should be, heading into it. Also, it seems that we are in a period right now where multilateral government seems to be declining. How can this Government, future Governments and the thinkers and decision makers within Government, so Whitehall as well, use the type of strategic models and risk management tools-scientific data as well as technology-to really think ahead to prepare this country and, dare I say it, other countries as well against some of these threats and global challenges?

Sir David King: Can I add to your list of global challenges one that concerns me greatly, which is biological weapons? I believe we ought to be banning biological weapons. I think that the international community needs to take that on board in the way that chemical weapons have been abolished. We need to work strongly with the United States to try to push that through. The reason I say this is that we attempted to work strongly with the United States when I was in Government, but the United States did not wish to go down that route.

Chair: This is a question of policy. We are interested in how the Government make strategic judgments.

Sir David King: I was just explaining why I think-

Chair: I understand that, but the subject is in danger of becoming a Christmas tree on which we all hang our opinions. That is not the purpose of the session. Mr Flynn, did you finish your line of questioning?

Q247 Paul Flynn: Lord Rees, you have said that "it is depressing that long-term global issues of energy, food, health and climate get trumped on the political agenda by the short term and parochial". I wonder what you had in mind. But isn’t it true that Government decisions are taken on the basis of pressure or prejudice and not on the basis of evidence, let alone scientific evidence?

Lord Rees of Ludlow: I think that was in my Reith lectures or somewhere similar. I am sure that it is true. I do not need to tell parliamentarians that the urgent tends to trump the important.

Q248 Paul Flynn: How do you get across to scientifically illiterate Prime Ministers and Ministers that their policies are wrong?

Lord Rees of Ludlow: Obviously, we have to have the best scientific advice. We have to try to have some bipartisan consensus on these long-term questions like the environment or energy. Regarding what you said about public ignorance, I tend to think that scientists grumble too much about public ignorance of their subjects. I find it gratifying how interested people are in aspects of science, whether it is dinosaurs or space or anything like that. It seems to me just as deplorable if the public cannot find Afghanistan or Korea on a map, and many people cannot. In both cases, ignorance prevents people from participating in debates.

The important point is that it is not just the scientists who should decide these issues. They should be decided after wide democratic discussions. For those discussions to get above tabloid slogans, the public have to have a feel for what the issues are and, even more importantly, a realistic assessment of risk. One of the problems, related to what Sir David just said, is that the public has a disproportionate view of risk. We fret too much about carcinogens in food, etc, but do not worry enough about bio-error, bio-terror, cybercrime and things of that kind, which are far more serious-these low-probability, high-consequence events.

Q249 Paul Flynn: How does a scientific adviser to the Government turning up with his slideshow about what is going to happen in 100 years’ time compete with people who do not want to see wind turbines out of their windows?

Lord Rees of Ludlow: With great difficulty, obviously. It is fairly clear that any investment in energy, whether made by the public or private sector, is going to be looking 40 years ahead.

Q250 Chair: The real question is, what is lacking in the machinery of Whitehall that makes this more difficult? What should there be in the machinery of Whitehall that would support Ministers and enable them to make better strategic decisions about these things?

Lord Rees of Ludlow: There are instances where it is clear that decisions were made on the basis of inadequate thought. I would classify offshore wind as being an example of that. Also one needs to have consistency. In many of these areas, like environment and energy, there is a long-term plan, but the trouble is it is being scuppered or rendered suboptimal by small changes.

If I may, I will turn to another area close to my own interests, which is our policy on universities. We have a good university system. There have been very major changes. A huge experiment has been done on the system and it may turn out well, and not only are these big changes being made, but small tinkering is being done, month by month. This makes it very hard to organise things in the long term. I would say that in many areas of Government what would be crucial would be to leave the long-term plan freer from short-term tinkering.

Q251 Paul Flynn: One final question. Other countries, such as Finland and Israel, have committees for the future, which take decisions based on their reactions in 15, 25 or 100 years’ time. In this Parliament we have POST, the Parliamentary Office of Science and Technology, which does a splendid job of explaining complex scientific issues in terms that are digestible for the majority of MPs. We also have Foresight. But what else should we be doing, especially here in Parliament, if we are going to improve the role of scientific advice in decision making?

Lord Rees of Ludlow: It would be good if a higher proportion of those getting elected to Parliament had a scientific background. At the moment it is a rather low proportion. We should be grateful to organisations like POST for doing what they can and to science journalists for what they do to digest difficult science. Within the civil service, one needs perhaps not just a Government Chief Scientist or a chief scientist in each Department, but perhaps a rather stronger support group for each of these people. Some Departments have a good cadre of scientists, others do not. Scientific participation at all levels of Government is probably rather too low.

Sir David King: The question is a very good one. There are several countries that do take the issue of futures seriously. I see myself now as an expert in futures. Although the Foresight programme in Government continues, it is still marginalised in terms of general decision making within Government. The strategy group within Number 10 that was set up during my time in Government was looking at much shorter term issues than what I would describe as futures scenario gaming. Futures work is looking 10 to 100 years into the future, as I said before.

I believe this has to be done by bringing together scientists, economists, social scientist, technologists-in other words, you need the expert community to sit with the political community and advise on future trends, opportunities and risks. The contribution that this could make to the direction on strategy for the Government would be enormous. I realise there are political differences of opinion, and some of this has surfaced here. I happen to think that climate change is a critically important issue. I also think that our oil supply is a critically important issue. I am prepared to go to nuclear energy as part of the parcel of solutions.

Chair: That is a policy matter. Thank you for that.

Lord Rees of Ludlow: I think we need a strong cadre of experts who are independent of Government. If you contrast our situation with the US, we find a big difference, especially in the area of defence. In the US, because of the revolving-door system of Government, there is always a group of well-informed experts who are out of Government and can criticise Government policy and have a high-level debate. That is harder in this country because Government service is more of a long-term career and secrecy is more pervasive. So it is harder in this country, especially in defence-related areas, to have an informed debate where you have expert outsiders speaking on an equal level with those in the Government. That routinely happens in the US.

Q252 Chair: Maybe we are more sensitive about conflicts of interest.

Lord Rees of Ludlow: Maybe.

Q253 Kelvin Hopkins: Setting aside particular policy issues, I take the view that we should have many more scientists in and around Government and politics, and rather fewer economists. Having come from a scientific background but being an economist myself, I have seen both sides of the fence.

Lord Rees of Ludlow: You said that; we did not.

Kelvin Hopkins: I did. Many economists are no better than, at best, mediaeval alchemists and possibly even witch doctors in some of the things they do and say. I also knew that the average intelligence level of the students I taught economics to was much lower than that in applied science and mathematics. On the other hand, is it not the case that, just as politicians choose economists to say the things that they want them to say, to an extent they do that with scientists as well? We talked about scenario-planning in an earlier part of our meeting. We want a range of views and a debate, if one likes, rather than picking out a scientist you particularly like. The extreme case was Stalin and Lysenko-a complete charlatan, but because it was an authoritarian regime, he was promoted as a serious person.

Sir David King: During my time in Government it was absolutely clear-I made it clear-that I was an independent science adviser. I think that is a role for the science adviser: to be parachuted in from outside Government, not to be a civil servant trained through and through, and to have the ability to keep the trust of the public and the trust of Government. That particular high-wire act is necessary for a chief scientific adviser.

Look at the BSE crisis. As soon as a science adviser does the bidding of a politician, there is always going to be the risk that science takes the can. In other words, the public loses trust in science. That is what I inherited when I began. Contrast that-if I may-with the United States, where my opposite number was Jack Marburger, whose views on climate change were the same as mine, but who never spoke those views out in the public domain. The contrast was absolutely stark.

Lord Rees of Ludlow: On many issues, like BSE and climate, the science is clearly uncertain. Scientists have to give politicians a best estimate of what the scientific consensus is and the balance of probabilities. What is even more important is that scientists should realise that, even if the science is certain and fully worked out, there can be a range of policy responses. When it comes to aspects of policy involving ethics, economics or social science, then the natural scientists have no special expertise. What has gone wrong in the climate debate, for instance, is that, it is quite proper to have a debate on how we respond to the possibility of climate change, but those who disagree with Government policy just rubbish the science quite unnecessarily. Even if the science is agreed, it is still perfectly possible to take different views on how we deal with it. It is crucial to keep clear water between the science, whether it is certain or uncertain, and the overall policy recommendations, in which the science is just one element.

Q254 Paul Flynn: One final word: I think we want to thank our two witnesses for their contribution to British life and sympathise with them, as the whole wealth of 2,000 years of scientific achievement can be trumped by a headline in the Daily Mail. That is the sad reality. You mentioned defence and defence thinking. To put it as simply as possible, we went to war in Iraq on the basis of non-existent weapons of mass destruction. We stayed in Afghanistan on the basis of a non-existent terrorist threat from the Taliban. We might now be stumbling into a war on the basis of a non-existent missile and nuclear threat from Iran. What hope is there?

Sir David King: I wonder if I may come back to that, even though I am treading on political ground. Iraq is a country with a very large remaining oil reserve.

Chair: I think we are straying. It was a good rhetorical question.

Sir David King: But I do believe that is a very important issue. The elephant was there again.

Q255 Kelvin Hopkins: I have very much enjoyed listening this morning to your wise words, even though we may debate the policy issues. The points you have made about having different disciplines involved in policy making are absolutely right, but unfortunately we are not in that situation. The short-termism of politics and Governments choosing economists who flatter their prejudices is a serious problem. I would not suggest at all that either of you have anything else but pure objectivity in your advice, but we do have commercial interests. There are people in the pharmaceutical industry advising the Department of Health. We have people playing down the dangers of alcohol and the damage it is doing because of the baleful influence of the drinks industry. How much do you think that the Government are influenced by these industries and private interests, and are pushing to one side scientific arguments that are inconvenient?

Lord Rees of Ludlow: Clearly, they are deeply influenced by all kinds of lobbying. It is not entirely inappropriate that there should be these inputs, but the role of the scientific adviser to a Minister ought to be to try to cut through that and, if there is a scientific consensus, to make sure that that does not get obscured.

Sir David King: It is correct, as Lord Rees says. There is another complication, which is that the interests of the British economy are often aligned with some of those special interests you referred to, particularly as we have such a strong pharmaceutical industry in the UK. There is an inclination for Government to provide support to the pharmaceutical industry precisely for that reason.

Independent advice is absolutely crucial in all of these cases. The Daily Mail headline is what we in Government were always up against; whether it was genetically modified food or whatever-it did not matter-you could be derailed by that process.

Q256 Greg Mulholland: From a slightly different perspective, we had a very interesting session yesterday with Professor Gwyn Prins, who actually suggested that we are putting too much emphasis on scientific thinking instead of accepting the presence of uncertainty. Just to quote from his interesting written evidence to us, he said, "Dazzled by the world-altering powers of Enlightenment science, it assumes that all significant problems are tractable to one type of knowledge and to scientific solution. This fallacy underpins the recent proliferation of scientific advisers across departments. It also makes it appear shameful for civil servants to admit to ignorance or to say that nothing can be done (or should be done) by Government." Do you agree with that?

Sir David King: No.

Lord Rees of Ludlow: I did in fact read his evidence. He is right in saying that we should not underestimate the uncertainties and that, therefore, we should keep many options open in our strategy and not assume that we can be confident about what will happen 20 years hence, either on a scientific front or on the geopolitical front. But I do not think that any scientist would claim that their input is anything other than a part of mix. But it is surely a crucial part of the mix when we are talking about energy, health or the environment.

Sir David King: I know of no professional scientist who has a high standing who does not understand uncertainty and errors in measurements and predictions. It is part of the job of training a scientist to make sure that they understand the uncertainties in what they are dealing with. The difficulty is, as Lord Rees says, that when scientists discuss uncertainties, it can be picked up by the Daily Mail and others as indicating that the scientists do not know what they are talking about.

Let me give an example, Chairman. If you fly in a jet aircraft, you are stepping into the most complex piece of technology that we have generated. It is carrying large numbers of passengers into the air. We have the safest means of travel in potentially the most dangerous form of travel. It is the safest because the precautionary measures taken by the scientists and technologists involved are in the extreme. Every possibility of an event that can go wrong in those aircraft is checked through and checked through again. Why? Because it would be the end of the aircraft industry if we had a few of these aircraft crashing.

What I am saying is that the level of uncertainty depends on the nature of the problem that you are looking at. I did have to say to a Prime Minister once that the chances of the temperature rise because of global warming exceeding 2 degrees centigrade, even if we manage to defossilise the global economy, were still more than 50%, and the chances of a 3.5 degree centigrade rise were still more than 20%. If I took off in an aircraft and the pilot said, "I only have an 80% chance of landing safely," I would get off that aircraft. Scientists do know about uncertainties.

Q257 Chair: You have just made a very interesting comparison in your example. The predictability of what an aircraft will do is in what I would describe as a much more bounded system of probabilities than, for example, predicting climate and the outcome of the next 30 years of politics on the climate. That is a completely different order of problem. In defence of Professor Prins, he is talking about different forms of knowledge. You are talking about technical knowledge, when it comes to aeroplanes, which does not really apply itself to the art of statecraft or how you run a Government. That is surely the limitation of science. The other question I would ask is this: is a sprinkling of scientific advisers a substitute for having a scientific branch of the civil service, which is what we used to have, in which there were people who understood science, and whose job it was to understand science, impregnated throughout the civil service instead of being planted on the top? Which is more satisfactory?

Sir David King: You are quite right. The ending of the scientific civil service took an area of special training out of the civil service. We ended up going right down the route of the general training that civil servants have. The attempts to appoint highly qualified scientists in the civil service began again in about 2005, when it was realised that we were taking on very few scientifically trained people. That did follow through. We still have scientists. DEFRA will have scientists in laboratories producing work that is relevant to the department. But the general run of the civil service has very few experts within it.

Lord Rees of Ludlow: The other important thing was the privatisations of 20 years ago, which depleted the stock of experts in Government service generally. That clearly altered the nature of the scientific civil service.

Chair: This has been an absolutely fascinating session for us. It has ranged very widely. Could I ask each of you perhaps to reflect further on what mechanisms in Government are lacking and, if you felt able, to offer us some more thoughts in writing on that, in order to make sure that there is a framework in which better decision making and better strategic thinking is made? I think that is what would help us most in our inquiry. If you want to add anything at that point, please do.

Lord Rees of Ludlow: Is the university system within your remit?

Q258 Chair: The way that Government interacts with universities certainly is. Maybe you want to make something of that point.

Sir David King: In my view there is a serious lack of strategic thinking within and across Government Departments. There is very little strategic thinking of the long-term nature that I believe is necessary within the Cabinet Office and Number 10 as well. I think this is a serious issue that applies in Governments throughout the world.

Ms Patel asked a question before she left about international negotiations. There is an absence of long-term thinking at that level as well, today. People are caught up with the current financial crisis. I have heard many people-not just our Ministers-say, "Let us first deal with this financial crisis." This financial crisis is tied to many of these other issues. We have to be able to grasp them all together. Until we see leadership from the top saying, "We need strategies and this is how we do it," this will continue.

I will give you one example, Chairman. If I may, I will come back to the issue of nuclear energy and its future in this country. We have a nuclear decommissioning commission, because that was set up at a time when the Government of the day, back in the 1990s, had decided we were going to decommission nuclear power stations and not go for new nuclear. There is no authority dealing with new nuclear power build, whether it is price or whatever. There is no authority. We are in a very strange situation. Inertia is often the big driver; we just stay with the institutional structures we inherited.

Lord Rees of Ludlow: Also, there is the unjoined-up nature of Government. To give one example, clearly the visa restrictions are causing problems both for the high-tech commercial sector and for universities-faculty and students. I am sure that it was not thought through, and there is not enough contact to ensure it is dealt with optimally. That is just one example of a lack of joined-up Government.

Chair: Lord Rees and Sir David, thank you very much indeed for a fascinating session.

Prepared 13th February 2012