Select Committee on Defence Tenth Report


2  Ownership of the Met Office

5. The organisation now known as the Met Office was founded as part of the Board of Trade in 1854 to provide information on the weather and marine currents to the maritime community. Separate meteorological branches for each of the Armed Forces were created in 1914. The Met Office became part of the Air Ministry in 1920 and then part of the Ministry of Defence in 1964.[4]

6. The Met Office supplies services to many central Government Departments. For example, the Office works with the Department for Transport to provide early warning of weather likely to have an impact on transport infrastructure. It works with DEFRA, providing forecasts specifically for farmers, modelling the transmission of airbourne disease, and flood warnings. The Met Office also provides information to the Department for Health on the likely impact of the weather on the NHS workload.[5] The Hadley Centre for Climate Prediction and Research, which is part of the Met Office, provides a focus in the United Kingdom for the scientific issues associated with climate change. The Centre receives most of its funding from contracts with DEFRA, as well as from other UK Government departments and the European Commission. Mr Ewins told us that the Centre:

    …is the authority on climate change internationally. If you do a study of all the references to climate change which are published, the Met Office is cited on more than 50% of the occasions. That is not by accident; that is because it is being led and managed by people who are dedicated, they are supported by the Government and their customers.[6]

7. The Met Office Annual Report and Accounts 2004-05 shows that the Met Office's turnover from defence, through the MoD, was about £33.5 million. The turnover from civil departments, mainly DEFRA, was almost £10 million.[7] We explored with witnesses the rationale for the MoD retaining ownership of the Met Office. Mr Hutchinson, Chief Executive, said that:

    Defence does remain our largest single customer and a lot of our requirements, in particular the whole global capability, are very much a defence requirement. It is quite a comfortable fit in terms of what we do and who we are owned by. […] It is hard to find any one single Department that would be a better fit than the MoD. Certainly it is a relationship which we are quite comfortable with.[8]

8. Mr Tom Watson MP, the new Under-Parliamentary Secretary of State at the MoD told us that the Met Office's work was particularly important to the MoD since "they really do give us a battle-winning edge in theatre".[9] He added:

    I think they need a large department like the MoD to be able to provide the support and investment that their future size needs, […] with their current structure, they fit very nicely with the MoD and I see no need for us to move away from that…[10]

9. Ian Andrews, Second Permanent Under Secretary at the MoD, the senior civil servant in the MoD responsible for the Met Office, emphasised the financial security afforded to the Met Office from being owned by a large Whitehall department. He added "If it [the Met Office] is to be owned in Government there is, in our judgment, no more appropriate department than the MoD to own it".[11]

10. According to Peter Ewins, Chief Executive of the Met Office between 1997 and 2004, the "MoD has always been a responsible owner of the Met Office", and the "relationship has been generally good".[12] He added that on operations, such as in Iraq, the Met Office was the forecaster of choice for all countries, including the USA. He considered that the MoD's ownership of the Met Office probably added to the credibility of its work among the United Kingdom's military allies.[13]

11. Mr Ewins noted, however, that sometimes "…there is confusion between the MoD's role as owner of the Met Office and its role as a principal customer…".[14] He also questioned whether "the MoD understands fully the role of the Met Office internationally", and therefore "perhaps the international dimension is neglected by MoD, or at least misunderstood".[15] He explained that:

    "…weather forecasting is a global business […] the UK standing could not be higher—it is of the highest—but I was never sure that the MoD fully understood that role and, therefore, gave it quite the prominence and the support that it probably deserved".[16]

12. The MoD appears to have been a supportive owner of the Met Office. While we note the close connection between the Met Office and DEFRA in particular, we see no grounds for recommending any changes of responsibility. However, we note the former Chief Executive's concerns about the level of support from the MoD for the Met Office's international role and look to the MoD to address this.

Agency status

13. The Met Office became an executive agency of the MoD in 1990, and started operating as a trading fund in 1996. Agency status is intended to create a more customer-focused approach to delivering functions within Government.[17] Trading funds are agencies that are required to operate as a commercial business and generate sufficient income to meet their costs.[18]

14. The MoD has reduced the number of defence agencies recently, and that trend is likely to continue.[19] In our report on the MoD's Annual Report and Accounts 2004-05, we supported the MoD's rationalisation policy, but cautioned that each agency should be reviewed on a "case by case basis".[20] The Government's response to that report states:

    There is no specific policy to remove agency status across the board and each case is examined on its merits, with the burden of proof resting on demonstrating that the benefits which will result from the removal of agency status are greater than those of retaining it.[21]

15. The Met Office's status is currently being examined as part of the preparatory work for the Comprehensive Spending Review.[22] In evidence, Mr Andrews said this examination was intended to inform Ministers whether a formal review of trading fund status was appropriate.[23] A subsequent MoD memorandum explained that the examination would assess whether, for each trading fund, a "change in structure, boundaries, status or ownership" would improve performance.[24] The memorandum described the possible alternative business models which a potential future review of a trading fund might consider.[25] The work will determine whether a review is necessary, and if so what terms of reference and "what outputs should be sought".[26] The MoD's aim is to reach a final view by Summer 2006.[27]

16. Privatisation is one of the possible alternative business models being considered for each trading fund. Mr Huchinson told us that:

    …I do not see overwhelming evidence that points conclusively to say that the best way forward for the Met Office is via a privatised and commercial route. Equally, I have not seen evidence that says that the best way forward for the Met Office would be to return to Government on anon-vote agency basis. I think where we currently are as a trading organisation feels about right for the time being.[28]

17. No country in the World Met Organisation has a privatised meteorological organisation.[29] Mr Ewins considered it possible that there could be implications for a privatised Met Office's standing within the international meteorological community, and among military allies.[30] However, he told us that there was a case worth consideration. He noted that the Met Office might benefit in "things like capital investment, joint ventures with other commercial organisations, et cetera," if it were in the private sector.[31] On the other hand, he noted that, were the Met Office privatised, then the Government's responsibility to maintain its research programme would "probably disappear altogether".[32] He concluded that "There are arguments on both sides […] when I was there two years ago, I would say there is no convincing argument to move it outside but it ought to be kept under continuous review".[33]

18. The Minister told us that, unless the MoD's review showed a compelling case for altering the current ownership arrangements, the Met Office should stay within Government and within the MoD.[34] We share this view. We have discovered no compelling reason to remove the Met Office from public ownership at present.

19. Without gainsaying the outcome of the MoD's current examination of defence agencies, or any subsequent reviews, the evidence we received suggested that the Met Office's current status as a trading fund is appropriate. We found no suggestion that the Met Office's obligations to generate income and pursue commercial opportunities had an adverse effect on its public service role, or its service to the MoD and Armed Forces.

MERGER WITH THE HYDROGRAPHIC OFFICE

20. The Met Office Annual Report and Accounts 2004-05 refers to closer ties with the United Kingdom Hydrographic Office. A working group has been established to discuss ways of improving co-operation and to identify business developments that might be mutually beneficial.[35] Only modest levels of financial efficiencies have been identified to date, but both agencies recognised that there is potential for greater savings from initiatives such as combining services on human resources and finance. Mr Andrews emphasised that there were "real opportunities […] for the scope of sharing technical infrastructure, corporate services and looking again at whether there are in some areas business synergies".[36]

21. The former Chief Executive, Peter Ewins told us that the design of the Met Office's new site at Exeter had allowed for the construction of a fifth office block to the four that exist, which would increase the accommodation by 25%—sufficient for the Hydrographic Office to collocate with the Met Office if desired.[37] Mr Ewins was not only in favour of the two agencies sharing support services, but also advocated merging the Hydrographic Office with the Met Office because the work that "the two organisations do scientifically [is] quite close or complementary", although he conceded that "they do not have quite the same perspective of the customer and that might be difficult".[38]

22. Mr Andrews told us that the case for merging the two agencies was looked at from time to time.[39] The Minister told us that although the case for merger might look attractive, there were significant differences between the two organisations. Nevertheless, he said that he would await the findings of the examination of trading funds.[40] We recommend that the MoD consider further whether to co-locate the UK Hydrographic Office and Met Office in Exeter.


4   See http://www.metoffice.com/corporate/history Back

5   See http://www.metoffice.com/products/index Back

6   Q 207 Back

7   The Met Office, Met Office Annual Report and Accounts 2004-05, HC 126, July 2005, p 54 Back

8   Q 2 Back

9   Q 211 [Mr Watson MP] Back

10   Ibid. Back

11   Ibid. [Mr Andrews] Back

12   Q 77 Back

13   Q 82 Back

14   Q 77 Back

15   Ibid. Back

16   Q 78 Back

17   "Executive Agencies were first established following Sir Robin Ibbs' "Next Steps" Report in 1988. The intention was that they would take responsibility for, and bring a new, more customer-focused approach to, individual executive (service delivery) functions within Government. This would leave their parent departments to concentrate on policy development." http://www.civilservice.gov.uk/other/agencies/agencies_and_non_ministerial_depts/index.asp Back

18   "Some Agencies have become Trading Funds. They must generate the cash they need to operate from their commercial business." http://www.civilservice.gov.uk/other/agencies/agencies_and_non_ministerial_depts/index.asp Back

19   Ministry of Defence Annual Report and Accounts 2004-05, p 211; Defence Committee, Sixth Report of Session 2005-06, Ministry of Defence Annual Report and Accounts 2004-05, HC 822, paras 55-56 Back

20   HC (2005-06) 822, para 56 Back

21   Defence Committee, Seventh Special Report of Session 2005-06, Ministry of Defence Annual Report and Accounts 2004-05: Government Response to the Committee's Sixth Report of Session 2005-06, HC 1293, para 32 Back

22   Ev 59-60, Qq 214, 224 Back

23   Qq 212-224 Back

24   Ev 59 Back

25   Ev 60, the options considered are: Return to On-Vote operation; Maintain existing Trading Fund status (either under MoD or another department); Merger with another relevant organisation; Contractorisation; Move to Government-owned company or similar; Full or part-privatisation. Back

26   Ev 59 Back

27   Ev 60 Back

28   Q 3 Back

29   Q 81, Mr Ewins explained that only New Zealand had a quasi privatised meteorological service, which is a wholly owned Government commercial organisation.  Back

30   Qq 81, 83 Back

31   Q 80 Back

32   Ibid. Back

33   Ibid. Back

34   Q 212 Back

35   Met Office Annual Report and Accounts 2004-05, p 12. See Ev 43-44 Back

36   Q 240 [Mr Andrews] Back

37   Q 185 Back

38   Qq 184, 185 Back

39   Q 240 [Mr Andrews] Back

40   Ibid. [Mr Watson MP] Back


 
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