Select Committee on Agriculture Sixth Special Report


The Agriculture Committee has agreed to the following Special Report:—

The Committee has received the following memorandum from the Ministry of Agriculture, Fisheries and Food, constituting the Government's Reply to the Fourth Report from the Committee of the 2000-01 Session, Horticulture Research International, made to the House on 24 January 2001.

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1.  This reply to the Committee's report is submitted on behalf of the Government by the Ministry of Agriculture, Fisheries and Food.

We welcome this recognition that the management weaknesses of HRI must be addressed but believe that this must go further than the two posts under discussion. If this is not done as a matter of urgency, there is a real danger that the measures currently being implemented will do little to arrest HRI's financial problems (paragraph 4).

2.  HRI acknowledges that its senior management team has been significantly under strength recently. Action has already been taken to strengthen it. A new Head of Business Development is being head-hunted as a matter of urgency. The new post of Operations Manager has been filled and the successful candidate will take up his duties on 30 April. The vacant post of Site Manager at the Efford site has also been filled. An additional management accountant has been appointed in the Director of Finance's department. HRI believes that all these measures will considerably strengthen its capability to deal with the very significant challenges facing the organisation. It will be keeping its senior management capacity under review.

3.  HRI is also addressing the management of the organisation as a whole. A re­organisation - which began in November 1999 and accelerated through the restructuring exercise - will shortly be completed. The aim is to improve the integration and efficiency of research and development activities across the organisation; to streamline and centralise management systems; and to improve internal communication between individual scientists and research teams. HRI's research and development activities are now delivered through 15 multi-disciplinary teams within three overarching thematic areas. HRI recently identified and announced 12 key Commodity Sector Specialists and is promoting their role to the horticulture industry and other customers.

We look forward to receiving the Corporate Plan and expect it to demonstrate clear plans for moving forward and targets against which the realisation of the plans may be judged (paragraph 5).

Taking its remit as the starting point, HRI must produce a clear mission statement, as well as a commercial and research strategy for its customers, which explains HRI's business. In evidence, Mr Siddall accepted a similar suggestion and we expect to see it implemented as part of the forthcoming Corporate Plan (paragraph 8).

4.  Work to prepare HRI's new Corporate Plan is at an advanced stage. HRI intends to consult key industry stakeholders on a draft Plan prior to submitting it to MAFF Ministers for approval. The Plan will include targets and performance measures to enable HRI's success to be measured. The aim is to publish the new Plan in summer 2001.

5.  HRI has already completed a review of its research strategy and is seeking the views of its customers through a public consultation exercise.

6.  HRI's commercial strategy is also being reviewed as part of the preparation of its new Corporate Plan. Over the last five years HRI has raised the level of its competitively won, non­MAFF income by approximately 65%. Both HRI and MAFF accept that it will be very challenging to maintain this trend and the appointment of a new Head of Business Development is designed to aid the process.

7.  HRI and MAFF believe that HRI should aim to become a more robust and competitive "mixed economy", serving not only its traditional customer base through sponsorship from conventional public sector sources but also to seek high added­value projects and competitive funding from private sector partners. HRI will also be looking to enhance its links with universities, Regional Development Agencies and other research institutes. For example, there are plans to create Kent's first Enterprise Hub based at HRI's East Malling site. Similar discussions are at an early stage at HRI's Efford site with links to an Enterprise Hub based near Southampton. Both these initiatives are being supported by the South East England Development Agency.

It is a matter of great regret that such uncertainty and feeling of betrayal on the part of growers has resulted from the handling of HRI's restructuring announcement and we welcome the commitment of HRI to mending the breach caused by the inadequate communication with its customers (paragraph 7).

8.  Both HRI and MAFF accept that there are lessons to be learnt from the handling of the recent restructuring announcement, notwithstanding the need for some degree of confidentiality because of commercial and staff considerations. HRI has initiated an active and ongoing dialogue with the industry about the future direction of the organisation, including how it can better meet the needs of its many industry customers.

We believe that a thorough review of all of HRI's activities and its relationship to Government and its customers should have been conducted before the money for the restructuring programme was granted (paragraph 10).

9.  MAFF considered the possibility of advancing the date of the Quinquennial Review planned for 2002/03 before taking a decision whether to fund HRI restructuring plans. However, it would have taken up to a year to organise and carry out a thorough Quinquennial Review. In view of the financial position of HRI and the inevitability and urgency of restructuring to reduce its deficit, it was concluded that there would be insufficient time to carry out such an exercise. Nevertheless, MAFF scrutinised HRI's restructuring plans very carefully before agreeing to support them. The funds were provided on the basis that the restructuring would maintain HRI's ability to meet the industry's needs whilst allowing HRI to reduce costs, improve efficiency and build up new sources of revenue.

10.  The date of HRI's next Quinquennial Review was not chosen merely because it would be some five years since the last one. It was scheduled carefully so to give both MAFF and HRI sufficient time to prepare for the Review and to ensure proper consultation with all its stakeholders. A further consideration in setting the timetable was the timing of the assessment of HRI's scientific work to be carried out by the Biotechnology and Biological Sciences Research Council (BBSRC) in consultation with MAFF in October 2001. MAFF felt that it would not have been reasonable to ask HRI's management and staff to deal with a Quinquennial Review together with the BBSRC's scientific assessment, implementation of the restructuring programme and preparation of a new Corporate Plan - all within the space of one year. The Committee itself commented in its previous report into HRI that the organisation needed a period of stability in order for the management reorganisation to take effect.

In the case of HRI, we recommend that a formal monitoring procedure, agreed by both MAFF and HRI, be put in place. On the broader question of Departmental involvement we accept that this is likely to vary but MAFF must satisfy itself that it has adequate involvement with its NDPBs to ensure that it can undertake its duty to be answerable to Parliament for their efficiency and effectiveness (paragraph 11).

11.  Monitoring arrangements are already in place. There is regular contact between MAFF and HRI to discuss how the restructuring plans are being implemented. In particular, HRI reports to MAFF on this and on other strategic issues at new quarterly liaison meetings between HRI management and the MAFF Sponsor Division instituted in October 2000. HRI is also providing MAFF with monthly reports on its expenditure of the restructuring funds.

12.  As the Committee's report recognises, Sponsor Departments need to strike a balance between exercising their duty of oversight of their NDPBs at a strategic level on the one hand; and, on the other hand, unwarranted and inappropriate involvement in the day­to­day management tasks of the business which fall properly to the Chief Executive and other senior staff.

Despite the looming threat of the quinquennial review, we would prefer these issues to be resolved sooner rather than later and once again urge the Government to bring forward the necessary bill without further delay (paragraph 12).

13.  The Government continues to have serious reservations about bringing forward primary legislation at this time in advance of the Quinquennial Review to resolve the range of outstanding issues in relation to HRI's status. An early bill would clearly settle one model for HRI's future without the benefit of a full public consultation or proper involvement of industry interests as the Quinquennial Review would provide. Nor would it be possible to take account of the review of Government funding of horticulture proposed by the Committee. These concerns are also shared by HRI.

14.  In the meantime, MAFF and HRI have made progress on the way ahead for resolving the two most pressing constitutional issues, namely, regularisation of the employment status of staff attached to HRI from MAFF and the BBSRC and the harmonisation of HRI staff pensions.

15.  On employment, it had been hoped to transfer the MAFF and BBSRC staff to HRI's employment by secondary legislation made under section 38 of the Employment Relations Act 1999. However, DTI's legal advice is that HRI's circumstances do not permit the use of the 1999 Act. MAFF and HRI are therefore seeking to resolve this matter by non­statutory means. HRI, with the support of MAFF and BBSRC, would aim to negotiate an arrangement with its unions under which the MAFF and BBSRC staff would be invited to transfer their employment to HRI. The agreement would take as its basis the principle that the staff concerned will not be disadvantaged by such a move and appropriate guarantees would be given to staff.

16.  On pensions, HRI, BBSRC and MAFF are proposing that there should be a single scheme for all HRI staff (i.e. including the attached BBSRC and MAFF staff who transfer to HRI's employment) within the ambit of the Research Councils' Pension Scheme. This proposal has been explained to HRI's unions and it will be examined further in the context of the discussions about the employment status of staff. The detailed arrangements would need to be approved by the Research Councils' Joint Superannuation Service.

17.  HRI and MAFF have had informal discussions about these options with the unions at HRI. These will now be followed up. If they can be agreed by all, the plan would be to introduce these arrangements with effect from 1 April 2002.

HRI's difficulties have highlighted the extent to which that institution has played a dominating role in MAFF's horticultural research strategy thus far, through its receipt of the lion's share of the available funding. We believe that MAFF must now step back from this position and institute a review of what it is trying to achieve through its funding for horticulture research in the UK, leading to the development of an articulate strategy for the achievement of those ends. It may be that other institutes are better placed than HRI to deliver in the identified areas of expertise or that HRI is able to justify its privileged position. Either way, the Government would have established a firmer basis for its policy and expenditure on research in this sector. We recommend that MAFF conduct a fundamental review of the research needs of the horticulture industry, consultations on which should involve all sections of the industry, including growers and their customers, as well as industry, research bodies and universities. The Government should also initiate a report on the way in which the HDC sets its research priorities and its relationship to HRI (paragraph 14).

We recommend that funding arrangements be part of the fundamental review of MAFF sponsorship for horticultural research (paragraph 13).

18.  MAFF has developed and published R&D strategies for all key sectors, including horticulture, for many years. As the Committee will separately know, MAFF has consulted widely and publicly on its research programmes (again including horticulture) and is devising a new Science and Innovation Strategy. That document will be published in spring 2001. MAFF's new Science Committee - which benefits from external advice - is considering the developing strategy and will also be advising Ministers on the prioritisation of MAFF's R&D budget.

19.  The Quinquennial Review of HRI will tackle fundamental issues of HRI's relationships with MAFF, the industry and its other stakeholders; the funding arrangements; HRI's efficiency and effectiveness; and its future status. HRI's stakeholders will be invited to give their views about HRI's performance and status as a part of a public consultation exercise. The detailed arrangements for the Review are still being developed; MAFF will be explaining these to the industry and HRI's unions in due course.

20.  The Government believes that there is nonetheless a case for a separate exercise to seek a consensus about the overall needs of the horticulture industry and to help both the industry and Government set priorities for R&D spending. MAFF is now considering how such a review might be organised and will be consulting key industry organisations before final decisions are taken. The Committee will be kept informed of progress.

The process of change at HRI is set to continue for the foreseeable future. Its restructuring programme means that it should be a very different organisation in twelve months time. As it changes, it is imperative that HRI focus on its remit and the requirements of its customers and that it become more responsive to change in the availability of public sector funding. We believe that MAFF should do all it can to assist HRI through resolving the difficulties caused by its current status and through continual monitoring of the restructuring process. We wish HRI well in this transition. However, we recognise that there is and should be a distinction between the Government's support for HRI and the Government's support for horticulture research in the UK. It is regrettable that a clear framework for horticulture research was not established before HRI's restructuring programme was developed. It is vital that the Government now set in train a review of its objectives for horticulture research in the UK, which should be completed before HRI's next quinquennial review in order to establish the wider framework within which HRI, as the main recipient of MAFF's horticulture research and development programme, is to operate. Research funding is one of the few ways in which public money is given to assist the horticulture sector. There are clearly improvements which should be made to ensure that the strategy behind this expenditure meets the agreed needs of the industry (paragraph 15).

21.  HRI's Board and management are committed to its future success. In particular, they will be seeking to ensure that the organisation focuses on serving its key customers and sponsors and capitalises on its own unique strengths. HRI welcomes the interest which the Committee is taking in its development.

22.  MAFF will continue to provide HRI with support, advice and encouragement. The coming few years will be a challenging time for HRI but the Government believes that there is a robust plan of action to manage the process of changing HRI. MAFF looks forward to receiving HRI's Corporate Plan, including the reactions of the key stakeholders to it; to a strengthened dialogue between HRI and the horticulture industry; and to a productive review of the rationale and wider framework for Government and industry programmes for horticultural R&D.

Ministry of Agriculture, Fisheries and Food

April 2001

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