APPENDIX 5
Memorandum submitted by the Ministry of
Agriculture, Fisheries and Food (D6)
1. This memorandum is submitted on behalf
of the Government by the Ministry of Agriculture, Fisheries and
Food.
2. In accordance with its status as a Non-Departmental
Public Body (NDPB), Horticulture Research International (HRI)
operates at arm's length from Government. The Minister of Agriculture,
Fisheries and Food is answerable to Parliament for public money
spent by HRI and for its overall efficiency and effectiveness.
HRI submits its Corporate Plans to the Minister who approves their
overall thrust and direction.
3. HRI's Non-Executive Board and Chief Executive
are responsible for the organisation's day-to-day management in
accordance with an agreed Management Statement, plus the guidance
provided by the Cabinet Office and the Treasury on the operation
of NDPBs. HRI is funded to carry out horticultural R&D for
MAFF by a combination of work directly placed on commission, work
which it wins competitively; and work won through the MAFF LINK
programme (a 50:50 funded Government/industry scheme).
4. The R&D contracts which MAFF place
at HRI are intended to bridge the gap between the basic research
funded by the Biotechnology and Biological Sciences Research Council
(BBSRC) and the near-market research which is funded by the industry
itself, primarily through levy-funded bodies such as the Horticultural
Development Council and the Apple and Pear Research Council. MAFF's
R&D is of a strategic or applied strategic nature. HRI also
carries out work in support of MAFF policies on the rural environment
and the conservation of plant genetic resources for food and agriculture.
5. The farm gate value of horticultural
produce and potatoes is of the order of £2.5 billion, making
up more than 15 per cent of total agricultural output of the UK.
A recent analysis by MAFF economists indicates that horticulture
is the most important agricultural sector (of the 11 studied)
in terms of gross value added by the sector itself (net of input
costs and subsidies), and second only to milk and poultry when
the gross value added by upstream (inputs) and downstream (processing,
etc) industries are considered along with value added in the sector
itself. The United Kingdom is 70 per cent self-sufficient in vegetables
but only 10 per cent self-sufficient in fruit. The horticulture
sector is not a major beneficiary of the Common Agricultural Policy
and there is no CAP regime for potatoes.
6. MAFF does not directly support HRI through
grant in aid or other underpinning funding. However, as is clear,
MAFF is a major customer of HRI and has placed R&D contracts
there amounting to some £125 million since 1990. Over the
same period, MAFF has invested some £60 million in restructuring
and for other purposes, notably a major capital programme at the
Wellesbourne site to create state-of-the-art laboratories and
experimental glasshouse facilities.
7. The Committee has asked a number of specific
questions:
What are MAFF's objectives for Horticulture Research
and how are they communicated to Research Institutes?
8. The Ministry commissions research in
horticulture to support its main policy objectives which are:
— to optimise inputs in order to maintain
product quality and enhance the environment;
— to provide safe, attractive and competitively
priced fruit and vegetables which will encourage consumption and
improve the national diet;
— to provide the technology necessary
to develop an efficient market for UK horticulture produce;
— to encourage the development of an
efficient and competitive sector which creates wealth and employment
in the countryside.
9. Across all its programmes, the Ministry
communicates its research needs in a number of ways. These include
the publication of Research Strategies and Research Requirements
Documents, the holding of open competitions, and direct contact
with major research contractors about future research needs. The
development of future needs is informed by consultation with policy
makers, other funders, industry and the research base; the Foresight
process; as well as by the regular process of reviewing current
research programmes with the help of external national and international
experts; the monitoring of the progress of research projects;
and the evaluation of research and its impact on policy formulation,
technology transfer to the industry, etc.
10. In the case of horticulture, and given
the importance of HRI to our research programme, we have frequent
discussions with its senior management and research leaders.
How does MAFF decide the level of funding HRI
receives on an annual basis? Will the rolling spending review
provide HRI with more certainty?
11. HRI is one of 28 contractors for MAFF's
programme of horticultural R&D. In placing contracts, MAFF
takes into account a range of factors including the quality of
the proposals submitted, contractors' ability to address policy
problems; the extent to which results can be transferred effectively
to the UK horticulture industry; and value for money. Twenty-five
per cent of the horticultural R&D budget is placed competitively.
In 2000-01 some 80 per cent of planned spend on horticultural
R&D is expected to go to HRI.
12. Maintaining HRI is thus not a direct
policy objective of the R&D budget holders, but MAFF does
have regard to the need to maintain a body capable of doing necessary
and high quality work in the horticultural sector.
13. Of course, the amount of funding available
for horticultural R&D depends on the size of the total R&D
budget and overall priorities for the Department. The setting
of policy requirements and overall priorities is assisted by MAFF's
Research Strategies. Before the end of this year MAFF is aiming
to publish a new Strategy for the period 2001-05. It plans to
consult widely on this document, giving interested parties the
opportunity to comment on and influence future MAFF policy and
prioritisation of R&D. In principle, a three year Spending
Review settlement should imply greater stability depending on
the amount of the settlement available for R&D and taking
account of overall Departmental priorities.
What progress is being made in resolving outstanding
operational and staffing matters?
14. The main operational problem facing
HRI concerns the employment of its staff. When HRI was created,
staff working for the parent bodies—MAFF and the Agriculture
and Food Research Council (now the BBSRC)—were attached
to it. 53 per cent of HRI's staff are still on attachment. This
is an unsatisfactory situation for MAFF, BBSRC and staff alike
as it makes it difficult for HRI to develop its own ethos and
culture and its own terms and conditions of employment, in order
to meet its new more commercial remit.
15. It has been the intention of successive
governments since 1990 to transfer the MAFF and BBSRC staff on
attachment to HRI to its direct employment. It is hoped to achieve
this in due course by primary legislation to apply the Transfer
of Undertakings (Protection of Employment) Regulations, but parliamentary
time has been at a premium.
16. In consultation with HRI, BBSRC and
other government departments, MAFF is exploring whether there
are any alternative means of transferring the staff concerned
without having to resort to primary legislation. Action will also
be needed to harmonise the pensions entitlement of HRI staff.
HRI's staff and unions will of course be consulted about any proposals
to transfer staff or harmonise pensions entitlements.
Are there any mechanisms that would allow HRI
to operate more freely in the commercial sector whilst retaining
its NDPB status? A number of difficulties such as HRI's ability
to borrow, to raise capital, to take equity and to start spin-off
companies were raised.
17. HRI has a certain degree of freedom
to act in a commercial manner, having regard to its status as
a public body and as a registered charity. Under its Management
Statement HRI can borrow, charge assets and securities, lend or
invest money with prior consent of MAFF. However, in reality,
it is acknowledged that HRI can have hurdles to overcome in seeking
to exercise this freedom. For example, any borrowings by HRI would
count against MAFF's Deparmental Expenditure Limit. As a result
of tough public expenditure settlements for MAFF in recent years,
any such proposals by HRI would have to be assessed rigorously
against the Department's other spending priorities.
18. The Baker report "Creating knowledge:
creating wealth" published in August 1999 made recommendations
for improving the exploitation of research by Public Sector Research
Establishments, including greater commercial freedoms for such
bodies. The report has been welcomed by Government and steps are
being taken to implement the recommendations. The Quinquennial
Review of HRI planned for 2002-03 will also consider the scope
for giving HRI more commercial freedoms.
Does HRI's longer-term future lie in the commercial
or public sector? What are the terms of reference for HRI's prior
options review in 2002 likely to be?
19. HRI, like all NDPBs, is subject to a
regular Quinquennial Reivew. We are planning such a Review of
HRI in 2002-03. It will incorporate a Better Quality Services
Review. The purpose of this exercise is to assess HRI's performance
and to consider wider organisational options (the so-called "Prior
Options" questions), including the need for the body and
the work it is carrying out; the scope for rationalisation; the
question of transfer to the private sector; and its continued
status as a NDPB.
20. It would be premature for MAFF to take
a position at this juncture about the future of HRI; the Review
will first need to be completed. A detailed Prior Options Review
of HRI was carried out in 1995-96 which was informed by management
consultancy advice. This concluded that HRI should remain in the
public sector "for the present" and that MAFF would
be working with it over the coming years to resolve outstanding
operational and staffing matters and to develop the body's science
strategy and business plan. Planning for the next Quinquennial
Review, including preparation of the terms of reference will start
later this year. In 2001-02 the BBSRC will be carrying out a scientifc
audit of HRI's work so as to inform their decisions on future
funding levels at HRI.
12 June 2000
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