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Session 2002 - 03
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Delegated Legislation Committee Debates

Draft National Endowment for Science, Technology and the Arts (Increase of Endowment) Order 2003

First Standing Committee on Delegated Legislation

Thursday 9 January 2003

[Miss Ann Widdecombe in the Chair]

Draft National Endowment for Science, Technology and the Arts (Increase of Endowment) Order 2003

2.30 pm

The Minister for Sport (Mr. Richard Caborn): I beg to move,

    That the Committee has considered the draft National Endowment for Science, Technology and the Arts (Increase of Endowment) Order 2003.

We are here to debate an increase in the endowment of the National Endowment for Science, Technology and the Arts under powers conferred on the Secretary of State for Culture, Media and Sport by the National Lottery etc. Act 1993 and the National Lottery Act 1998. We propose to increase the endowment by £95 million from money held in the national lottery distribution fund for expenditure on health, education and the environment. The increase will serve two purposes: an addition of £50 million to the existing £200 million endowment in order to enhance NESTA's income, which has fallen considerably since its inception; and a further £45 million, which will be used over the next three years to launch a range of new initiatives.

Many hon. Members know that NESTA was established under the 1998 Act in recognition of the need to enhance the United Kingdom's capacity to develop and commercialise ideas. Its overarching objective is to support and promote talent, innovation and creativity in science, technology and the arts. Under that Act, NESTA is charged with achieving that objective by helping talented individuals or groups to realise their potential; by helping to turn inventions or ideas into products and services that can be effectively exploited and the rights to which can be effectively protected; and by contributing to public knowledge and appreciation of science, technology and the arts.

The initial endowment of £200 million from the lottery was granted in 1998 and expected to generate an income of about £12 million. With that income, NESTA runs three core programmes to meet its remit: invention and innovation, fellowships and education. Funding is concentrated directly on people, groups and projects, rather than revenue or capital funding of organisations. There is a strong emphasis on providing intensive support, such as mentoring, guidance and business advice, during the lifetime of each award.

What has NESTA achieved so far? It is still relatively young, and many of the outcomes will be seen more clearly in the medium to long term. However, the initial signs are quite encouraging. Under the strong and determined leadership of NESTA's chairman, my noble Friend Lord Puttnam

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of Queensgate, significant progress has been made and success demonstrated on a number of fronts.

Since the awards in 2000, NESTA has awarded more than £34 million to more than 270 people across its core programmes. More than 30 new patents have been filed, 25 new companies have been registered and the first royalty cheque has been received from an awardee, who developed—as an engineer, I am pleased to say this—a diagnostic tool for fuel injection engines. Some of NESTA's fellows have already produced significant bodies of work, and investment in more than 75 education projects has led to the development of national models of excellence.

NESTA has attracted significant support from Departments. It won the contract to deliver the Government's science year in 2001–02, which involved a drive to raise the profile of science among 10 to 19-year-olds. Due to its success, that has been extended to the current academic year—renamed ''Planet Science'' and with NESTA again at the helm. The NESTA Futurelab has also been established. That research and development facility brings together the academic community and cutting-edge creative industries to develop educational interactive digital software. The Department for Education and Skills supports both those programmes, and Futurelab has also attracted substantial support from the Department of Trade and Industry. NESTA has received praise for the way in which it has conducted its business. It has gained awards recognising its vision and its pioneering electronic business methods. It has received increasing and widespread positive support from business, the investment community and the media.

However, as some hon. Members will know, NESTA is not perfect. It was set up to take risks, which means that there will, inevitably, be some failures. It is important that NESTA learns from experience as it evolves. It is doing that, and is also sharing that experience.

NESTA has carried out initial evaluations of its three programmes. It has streamlined its application process and, in particular, has taken steps to increase the diversity of its fellows. It has improved communications with applicants and has just redesigned and relaunched its website. It has taken positive steps to raise its profile and to increase applications from Scotland, Wales, Northern Ireland, and the English regions such as the north-west and the east midlands.

That is encouraging but, as the recent report of the Select Committee on Science and Technology on NESTA's achievements pointed out, there are a number of areas in which NESTA could and should improve. The Government's response to that report was sent to the Chairman of this Committee on 18 December, and I do not propose to go into the details of the response today. The report states that NESTA must ensure that it presents financial information in the clearest possible manner, identify and demonstrate outcomes more clearly and limit its running costs.

Mr. Malcolm Moss (North-East Cambridgeshire): The Minister says that NESTA must report its

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financial dealings in a clearer way in future. However, NESTA says that it is following the guidelines given to it by the Department for Culture, Media and Sport. Is it not, therefore, the Minister's and his Department's responsibility if the accounts are not as clear as they should be?

Mr. Caborn: Not necessarily. As the Government's response states, my Department is trying to work with NESTA to take up some of the points that were made by the Science and Technology Committee. If there are problems with the instructions that are given by the Department for Culture, Media and Sport, we will examine that. As the Minister, I want to ensure that the accounts are accurate and transparent, so that they will give full knowledge to the House and to members of the public. Public money is being used, and we must ensure that it is used for the purpose for which it was given. If there are difficulties in that area, we will address them.

We have given an assurance that we will work with NESTA to address those key issues over the next few months. We have already taken steps to improve the way in which NESTA's programme expenditure is presented in the annual accounts.

I will now discuss the reasons for the proposed increase in NESTA's endowment. When NESTA was established, provision was made in the relevant National Lottery Act for the endowment to be increased by order of the Secretary of State. That provision recognised that the initial endowment alone might not be sufficient, in the long term, for NESTA to achieve all of its ambitions and challenging objectives.

In March 2001, my Department published a Green Paper, ''Culture and Creativity: The Next Ten Years'', which included some new ideas that we thought NESTA would be best placed to develop. Those ideas included new schemes to provide business support to art and design graduates and the establishment of what has subsequently become known as the NESTA Futurelab.

Bob Russell (Colchester): Will the Minister explain how, if the national lottery money was not there to support NESTA, those projects to which he has just referred would be funded?

Mr. Caborn: That is a hypothetical question, because the lottery money is there.

In the summer of 2001, NESTA submitted a proposal for an increase in the endowment of around £300 million. That increase would have provided income to extend its three core programmes significantly, to launch several new initiatives, and to counter the effects of prolonged low interest rates.

We have considered the proposal carefully over the past 18 months, and believe that it is too soon to approve such a significant increase in the endowment. NESTA must clearly show that it can walk before it can run and that it can do things in its own time. Radical change would be premature. However, NESTA's annual income has fallen significantly from £12 million to £8 million because of low interest rates, and its reserves are being used to sustain current levels

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of programme expenditure. This is unsustainable; it is vital that NESTA is able to maintain its core programme. A reduction in awards would send out a negative message about our support for developing the nation's talent. We therefore propose to increase the endowment by £50 million to provide a return that restores annual income to the £10 million to £12 million that was first envisaged. It will also provide a cushion against fluctuations in interest rates.

We would also like NESTA to be able to make modest growth in the short to medium term. There are several new initiatives that we are keen for NESTA to develop over the next three years, particularly those that support our objectives for children and young people, education and social inclusion, sustainable development and the economy. We therefore propose to increase the endowment by a further £45 million and to allow NESTA to draw down up to £15 million over the next three years to fund new projects.

Those new projects include a graduate support scheme that will give business support and training to the best talent emerging from our art and design colleges; a fellowship scheme for young people with an emphasis on mentoring; promoting entrepreneurship in schools; the development of more imaginative interactive exhibitions in museums, galleries and science centres; and broadening programmes by, for example, funding some projects over a longer period.

These projects are a relatively modest package that will allow NESTA to grow and to consolidate. Longer-term decisions on NESTA's funding will be made in the light of the full evaluation of the programmes that NESTA is undertaking and in the light of further independent reviews that are scheduled to take place over the next few years.

As a one-off measure, we propose to fund the £95 million increase by transferring uncommitted funds from the New Opportunities Fund. The transfer will not affect NOF programmes and is not intended to alter the balance of funding between lottery distributors. The Government have given a commitment to maintaining the percentage shares that go to the original good causes, and this commitment will not be affected by the proposals. It is also important to note that the transfer in no way challenges the effective and invaluable contribution of the New Opportunities Fund to thousands of health, education and environment schemes. The Government remain committed to ensuring that these important matters continue to benefit from lottery funding.

Neither do we propose to present NESTA with a blank cheque. The transfer and subsequent draw-down of funds will depend on several conditions. These include a commitment from NESTA to deal with cost-effectiveness and to demonstrate how it might contribute further to our social inclusion and sustainable development agendas; to take steps to ensure a balanced distribution of funds across the United Kingdom in science, technology and the arts; and to ensure that all the issues that were raised in the Science and Technology Committee report have been properly dealt with.

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As required by the National Lottery Act 1998, my rt. hon. Friend the Secretary for Culture, Media and Sport has consulted her Cabinet colleagues and the devolved Administrations on the proposal. They are broadly content, but the devolved Administrations have asked us to ensure that there is a more even distribution of funding across the United Kingdom. We will make this a condition of extra funding. As required by the National Lottery Act 1998, we have consulted the New Opportunities Fund and the other lottery distributors, and they have approved the proposed transfer of funds.

There is a sound case for providing NESTA with an increase in its endowment to help it to restore its income and to help it to develop the new initiatives. This is the best and most effective way of transferring the £95 million from the unallocated funds of the national lottery distribution fund. I therefore commend the order to hon. Members.

2.44 pm


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