Examination of Witnesses (Questions 60
- 79)
MR G LOUGHRAN
and MR G MCCONNELL;
MR S QUINN
WEDNESDAY 10 DECEMBER 1997
60. All I can say is that I hope we shall
not be revisiting you in a year's time and finding that you still
have not managed to improve your evaluations.
(Mr McConnell) I hope not.
Mr Williams
61. One appreciates that violence is not
exactly the background to stimulate investment and where there
is investment it leads to people wanting a rapid payback period.
One does get the impression, do correct me if I am wrong, that
you have found a way of operating a certain degree of what I might
call administrative regional policy as opposed to official regional
policy, as demonstrated in the answer just given in relation to
intellectual property. This is a form of additional non-cost inducement
which you can make available to firms if they will invest in Northern
Ireland outside the normal regional schemes which are more closely
circumscribed.
(Mr McConnell) We are not out of
line with any other part of the United Kingdom in terms of intellectual
property rights, that where assistance is provided for research
and development it is not policy that I am aware of anywhere to
take an interest in intellectual property. I do not see it as
a special Northern Ireland policy.
62. That is interesting. That is something
I should like to follow up. It is not even a Northern Ireland
remit really but if it is a general situation then it becomes
more a matter of interest to this Committee. The real point I
was interested in probing was an answer you gave to the Chairman
right at the start in relation to COMPETE[5].
He was asking you about giving the minimum necessary for a project
to go ahead. In a background note we have here, we are told that
you are required-not "expected", not "it is hoped
that"-to ensure that the assistance provided in each individual
case is the minimum necessary for the project to go ahead. In
what sense are you required? Is that a statutory requirement under
which the scheme is authorised? Is it an administrative guideline?
Where does the requirement come from?
(Mr Dowdall) We think that comes
from the IRTU guidelines. If I have misinterpreted them there
you can tell us, but we think it is a requirement in your guidelines
that you look at each individual case on additionality.
(Mr McConnell) I would also see it as flowing
from my Agency Accounting Officer responsibilities for economy,
efficiency and effectiveness. That can be translated into saying
that each and every project must be done on the minimum level
of assistance. As I explained to the Chairman-
63. I understand the explanation, that is
what led to my question. We are told that in each case you are
required to do this. That is what attracted my interest. Your
answer to the Chairman immediately jumped across to the generality
of situations and how you are trying to squeeze down one year
on another on the level of grant you give. None of which answers
the question of whether you are or you are not required to seek
the minimum grant level in each instance. Are you required to
or not?
(Mr Loughran) I think as an Accounting
Officer he is required to minimise the amount of money which is
spent under the general heading of the specific scheme. The NIAO
accept that it would be inappropriate to negotiate every single
small grant and it is fair to say that is the conclusion. The
argument the NIAO have been advancing is that in the larger grants,
where quite a lot of money is involved, perhaps there should be
negotiation in those particular circumstances.
64. It is not "perhaps there should
be". It comes back to the question of whether it is a requirement
or is not a requirement. This is the trouble. Once you have a
requirement that you then decide you set aside because the sums
are too small, you then have to make a second decision: when are
the sums large enough? What is your guideline? If you have chosen
yourselves to set aside the rule by which you should operate,
when do you decide that now is the time that the rule should be
applied?
(Mr McConnell) In our case the cutoff
is very clear. Within the COMPETE scheme, which has an upper grant
limit of £0.25 million, we operate on the basis I have described.
Within the START scheme, which tends to be supporting larger projects,
we are negotiating on an individual project basis.
Mr Love
65. May I go back to the comment you made
earlier about not looking for a return or an equity stake in any?
Presumably it is a purely grant regime which you operate. Is there
any protection or safeguard for continuing investment in Northern
Ireland? I postulate that if this project we investigate in the
report in detail had been successful and they then wish to export
that to mainland Britain or somewhere else in Europe or America,
do you have any protection that they will maintain that process
or any of the research and development issues within Northern
Ireland?
(Mr McConnell) Within the letter
of offer there is a requirement that exploitation of the products
of research and development projects assisted by us must be exploited
within the European Union. Legally we are not allowed to restrict
it geographically to any smaller unit.
66. That is presumably because you received
European funds.
(Mr McConnell) No, it is European
law, irrespective of where the funds come from.
67. Do you have any examples of where that
might have happened, that they have come to Northern Ireland and
exploited the opportunities? That is not something which has happened.
(Mr McConnell) Absolutely not. Although
we have no legal sanctions on people moving the results of their
R&D outside Northern Ireland elsewhere within the EU, we apply
as much moral pressure as we can in terms of when we are negotiating
grants and subsequently in our dealings with companies.
(Mr Loughran) The research ought to be as directly
related to a production process which is in Northern Ireland or
any other part of the United Kingdom for that matter. That is
the best safeguard there is. If the research is freestanding,
and not related to production activity, then you are very vulnerable
to this sort of problem you mentioned.
68. The report paints a picture of a fairly
cavalier attitude towards the well established procedures that
we have in this area. You have defended that on the basis that
you think you have in place enough procedure to protect public
funds. Yet in this case obviously the specific case we look at
here, the project was not successful. Has that any lessons for
you in terms of whenever we review that we need to know through
the procedures that everything has been carried out to the letter?
(Mr Loughran) Yes. There are two
areas and perhaps I could say to Ms Eagle that there is no disagreement
between myself and the Chief Executive of IRTU on this. In terms
of there being a formal meeting of the casework committee, that
should have happened and that is a lesson which has been learned.
In terms of an indicative letter of offer, there was not sufficient
qualification in that letter and certainly that lesson has been
learned. We have procedures in place now which will ensure that
does not happen again.
69. Turning to evaluation which is mentioned
in the report but I do not want to go into it now because I suspect
it is wickedly complex, through the DTI the National Audit Office
has carried out evaluations in this area and has a whole methodology
worked out. Is that something you are looking at? Have you incorporated
that in the work you are doing?
(Mr McConnell) Yes, we are looking
at the method developed by NAO and DTI related to a comparison
of the cost effectiveness of DTI schemes. There are about six
schemes and they devised a method which would compare one with
the other. At the end of the day, although an order of cost effectiveness
came out, there appeared to be some doubt over the weightings
used in the various factors, how you weighted the cost of administration
against benefits and a range of indicators. It did produce an
interesting method of comparing schemes. In addition to COMPETE
and START, we are involved in the national Teaching Company Scheme.
We certainly will be looking at the possibility of using this
methodology to compare the methods, to compare our expenditure
in the different areas, to see where we are getting best value
for money.
70. The Chairman mentioned earlier on that
we like yes or no answers. I was not sure whether that was a qualified
yes or a qualified no. Could you qualify it for me, please?
(Mr McConnell) Yes, we are looking
at it. I was merely trying to explain that it is not a panacea:
it is a difficult area to see the cost effectiveness.
71. Do you accept that it would give you
an order of magnitude that perhaps is more defined than current
custom and practice and expertise and knowledge of the area which
appears to be what you go on at the moment? You trust to the staff
you have who have expertise in particular areas. We know that
is an even less precise science than the figures and numbers which
the methodology can put together.
(Mr McConnell) Yes, but as I mentioned,
we are doing a lot of evaluation of our schemes and a lot of targeting
and refocusing of them. Yes, this could provide additional information
and yes, we are looking at it.
72. It says about the main scheme that you
had not carried out your proper evaluation. Has that now happened?
(Mr McConnell) Yes.
73. It has.
(Mr McConnell) Yes.
74. Are you fully satisfied from that evaluation
that the scheme did stack up?
(Mr McConnell) Yes. The evaluation
of that large project covered in section 3 explained why the project
had been unsuccessful. I have to say that the evaluation produced
no lessons for us in terms of the policy of the scheme.
75. On monitoring, I can understand some
difficulties which you may have in regard to monitoring companies.
Do you provide the grant in a lump sum or is it provided in tranches?
(Mr McConnell) It is in tranches
and it is paid against approved expenditure. Reports are now tied
directly to grant claims.
76. What sanctions do you now operate on
companies? I can understand companies with a great many other
things they are having to contend with putting a report or an
evaluation of a scheme to you on the back burner. What sanctions
do you have to ensure that they treat it as seriously as we want
them to treat it?
(Mr McConnell) They do not get grant
paid.
77. It is as simple as that.
(Mr McConnell) It is as simple as
that.
Chairman
78. First, a technical point. Could you
let the Committee have the 1996 GDP figures as soon as they are
available[6]?
We are not going to be considering the draft report until February,
so if you could let us have them in January.
(Mr McConnell) Yes.
(Mr Loughran) Yes.
79. As you can tell, I am a very kindly
figure. I sometimes feel for Permanent Secretaries sitting in
front of us and faced with the prospect of being defensive on
the one hand or accused of being complacent on the other. May
I start by commending you for your openness in dealing with the
Committee? The fact of the matter, however, is that the report
and discussions today have highlighted a number of shortcomings
in relation to project appraisal, monitoring procedures, lack
of performance measurement and so on, a wide range of them. I
am going to ask you for two things. First, your assurance that
you are responsible for a much tighter ship now than has evidently
been the case in the past. Second, is it possible for you to give
us a very brief note, hopefully early in January-not wishing to
ruin your Christmas but hopefully early in January-indicating
what has been done and if it is still to be done what is expected
to be done and what sort of timetable there is to it. Is that
possible[7]?
(Mr Loughran) Yes, to both.
Chairman: Thank you very much indeed.
Thank you for your time and have a good journey back.
5 Note: See Evidence, Appendix 2, page 11 (PAC 235). Back
6 Note:
See Evidence, Appendix 1, page 10 (PAC 108). Back
7 Note:
See Evidence, Appendix 1, page 10 (PAC 108). Back
| 
