APPENDIX 4
Memorandum submitted by the Department for Culture, Media and Sport
INTRODUCTION
The Government's response to the Science and Technology Committee's inquiry into NESTA in 1999 welcomed the Committee's interest at what was then the very early stages of development of this organisation. The Government was encouraged by the Committee's endorsement of this new approach to supporting creativity and innovation in the UK, and concurred with the view that NESTA should be a dynamic organisation which was strategic in its approach and able to take risks. We recognised that NESTA's relatively modest income compared with other public bodies, and its broad remit meant that it should target funding where it was likely to have the greatest impact and add most value. We also agreed that NESTA should be judged on outcomes likely to be delivered in the longer term.
Since NESTA's first major awards were announced in May 2000, over 200 awards worth over £15m have been made under its three main programmes—Invention and Innovation; Fellowships; and Education. Given that most awards are for 2-3 years, it is too soon to judge the long term impact of NESTA's funding. However, we believe that NESTA has made significant progress over the last three years and has clearly demonstrated success on a number of fronts, as well as clear potential to do more. The Committee's follow-up inquiry is, therefore, welcome and provides a timely opportunity to take stock of progress.
We understand that colleagues from NESTA will be submitting detailed evidence of its achievements and will be appearing before the Committee. Therefore, this memorandum focusses on the Government's role, particularly that of DCMS as the sponsoring Department; our view of NESTA's achievements; and on NESTA's future.
DCMS' SPONSORSHIP ROLE
It was recognised when NESTA was established that, in order to achieve it objectives, it would require a degree of freedom beyond that of other Lottery and public bodies. Accordingly, the Financial Directions and Accounts Directions issued by the Secretary of State for Culture, Media and Sport in 1998 and a Management Statement aimed to give NESTA as much freedom as possible, while ensuring that it was still publicly accountable and subject to proper scrutiny. Inevitably, there are some tensions resulting from the need for NESTA to be free to take risks and operate in the commercial world, and the need to demonstrate good use of public funds. There is also a balance to be struck between the desire to maximise income from the endowment and the need to safeguard public money. Close and constructive working between DCMS and NESTA, with support from HM Treasury and the NAO, has ensured that these issues are regularly discussed and resolved wherever possible. For example, during 2000-01 DCMS and NESTA agreed revisions to the Financial Directions which removed some unnecessary accounting burdens, particularly those that impacted adversely on NESTA awardees. In addition, NESTA was given freedom to manage the investment of the income from the endowment (Fund B) and this year we clarified Directions to ensure that NESTA is able to take advantage of a wider range of defined endowment investments.
NESTA's Directions require it to establish adequate procedures for appraising, monitoring and evaluating its programmes. As part of the sign-off procedures for the financial management structures of each of NESTA's three programmes, DCMS and the NAO were particularly careful to check that suitable systems were in place to evaluate individual projects as well as the overall effectiveness of each programme. DCMS maintains a close interest in the outcome of NESTA's internal evaluation work and this is a standing item for discussion at regular liaison meetings DCMS officials hold with the Chief Executive and his senior management team. It is particularly encouraging that NESTA constantly seeks improvement to its programmes and is open about any failings.
DCMS has also played a role in promoting NESTA's work with other Government Departments, its NDPBs and organisations and individuals it has dealings with (particularly on the arts and creative industries). For example, DCMS strongly supported NESTA's successful bid to DfES to run Science Year and has been strong advocate of the NESTA FutureLab project. DCMS also encouraged NESTA to develop proposals for new areas of work which featured in the Department's Green Paper, Culture and Creativity: The Next Ten Years, published in 2001.
NESTA'S ACHIEVEMENTS
NESTA has been in active operation for just over two years and, while it is too soon to judge the long term outcomes, it has, in our view, been relatively successful: applications to its Education and Invention and Innovation programmes remain high (2000 applications resulting in 82 awards under the Invention and Innovation Programme by April 2002); it has received positive publicity and is making a good name for itself; it has developed an award-winning website and is seen as a model for electronic handling of applications; and it has forged wide and innovative partnerships across the private, voluntary and public sectors.
NESTA has been successful in supporting and developing partnerships with Government departments, in particular DfES; it secured the contract to deliver Science Year and Ministers are considering proposals to extend the contract until July 2003; it secured around £3 million funding for its FutureLab project; and it is working with the Gifted and Talented team at DfES and with DCMS to produce a core framework for the development of school children with talent in the creative arts. The Small Business Service, an agency of DTI, has also welcomed NESTA's support of small businesses through the Invention and Innovation Programme. This is seen as a valuable complementary measure to the SBS Smart scheme.
We expect NESTA to take risks and invest in ideas that may come to naught. However, it is encouraging that a few projects have already begun to provide a return on NESTA's investment. We are also pleased to see that a good balance has been achieved across NESTA's three areas of responsibility, and that it is supporting projects and actively promoting ways of working that are helping to break down the traditional barriers between the arts and sciences.
In 1999, the Committee felt that NESTA would have to be alive to the risk of partiality in the selection of Fellows and projects. We strongly endorsed this view at the time, and have since been satisfied that, on the whole, the selection processes are open and fair. The one area where we have expressed some concern has been the selection process for the Fellowship programme, which is closed and relies on individuals being put forward by selected nominators. We are, therefore, pleased that NESTA has taken steps to increase the number and diversity of its nominators; has sought to boost geographical distribution of Fellows by employing "talent scouts"; and in June this year announced the piloting of Dream Time which has an open application process. This new element of the programme offers high achievers a concentrated period of "time out" to develop their potential for the benefit of their profession.
THE FUTURE
The Lottery Act 1998 makes provision for NESTA to receive an increase in its original endowment. NESTA did not receive additional funds under the New Opportunities Fund (NOF) Round 3 in 2000 because it was felt that, as a new organisation operating under a unique funding arrangement, it needed first to demonstrate a successful track record over a reasonable period of time. However, the prospect of an additional endowment under a future NOF round was clearly signalled in the Culture and Creativity Green Paper.
NESTA put forward some broad proposals for new projects which subsequently featured in the Green Paper, and NESTA and DCMS officials held a number of meetings in 2001 to discuss ways of taking these proposals forward. This resulted in NESTA submitting a bid to the Secretary of State for Culture, Media and Sport in July 2001 for a £300 million increase in its endowment comprising of two main elements: a bid to help counter the effects of falling interest rates on its income and thereby maintain the current level of activity; and a bid to deliver a package of new work, including the two proposals in the Green Paper. The Secretary of State (DCMS) supports, in principle, some elements of this bid and is considering carefully the funding options.
DCMS is scheduled to conduct a quinquennial review of NESTA in 2004-05. This may be subject to revision in light of the Cabinet Office's proposals for the future of such reviews.
June 2002
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