Examination of Witnesses (Questions 120-139)
PROFESSOR SIR
ROY ANDERSON,
MR TREVOR
WOOLLEY, MR
MARK PRESTON
AND DR
PAUL HOLLINSHEAD
28 NOVEMBER 2006
Q120 Chairman: Before moving off
that, in a sense, that decision has already been taken, has it
not, because, although it is called the Defence Diversification
Agency, it is not listed in the accounts of the Ministry of Defence
as being one of your agencies. Has it been declared a non-person?
Mr Woolley: It was never a formal
agency in the sense of the "next steps" agency construct.
It does not match the constitutional requirements of a formal
defence agency. It is, if you like, an agency with a small "a"
rather than a capital "A".
Q121 Chairman: Are there any other
organisations in that category?
Mr Woolley: I think it is unique
in that regard.
Q122 Chairman: Does it actually exist?
Mr Woolley: It does exist.
Q123 Chairman: Does it have a legal
personality?
Mr Woolley: It is not legally
independent of the Ministry of Defence. It is part of the Ministry
of Defence. It comprises some 55 people, it has a headquarters,
it has its own budget, it has its own Director, but it is not
a formal agency in the sense that the Defence Procurement Agency
is formally an agency.
Q124 Willie Rennie: In the higher
education sector, the NHS, they have all set up bodies like the
DDA, which is responsible for that brokerage. What makes the nature
of defence any different from the NHS and from the higher education
sector?
Professor Sir Roy Anderson: May
I just interject one thing? In all these activities, surely the
prime criterion should be success: is it doing well?
Q125 Willie Rennie: You think it
is not doing well?
Professor Sir Roy Anderson: I
think it is sensible every now and again to examine the success
and track record of such organisations, particularly when a government
department is under a lot of stress financially.
Q126 Willie Rennie: You think it
is not performing well?
Professor Sir Roy Anderson: I
am not going to comment on that in the sense that it is prior
to this review and consultation that is going on at the moment
but the general point I want to make is that you should always
look at whether these organisations are serving the function they
were set up to do.
Q127 Willie Rennie: Is it systemic
or is it the personnel involved? You do not just scrap something
if it is failing; you try to reform it.
Professor Sir Roy Anderson: Of
course, but we are very encouraged by the success of Dstl in looking
at interesting spin-outs and I make the point again that I think
those who are very close to the technology are often the best
judges of what is likely to be successful.
Q128 Willie Rennie: How is that different
from the higher education sector and the NHS?
Professor Sir Roy Anderson: The
higher education sector is a very interesting one because, of
course, there—and there has been great success in recent
years at spinning out companies from universities—it is
the deep involvement of those who are actually involved in the
research and the management of it. I see that more as the Dstl
model.
Mr Hancock: Surely, the writing
was on the wall the minute the decision was made to pack up DERA.
With QinetiQ going, there was no role for the DDA. I am surprised
it is still there today. Everyone on the Defence Committee at
the time thought its days were numbered at that time and, for
the life of me, I cannot understand why none of you have just
said that, because their main business went when QinetiQ went.
Q129 Chairman: Is there something
in this?
Mr Woolley: I do not disagree
with that. That is the point I was trying to make when I said
that the landscape has changed since it was set up. As for why
it has taken so long, I think that the DDA has evolved into something
slightly different from what was originally intended and there
has been a view that the value of what it has evolved into is
something that we should assess before taking decisions.
Q130 Mr Hancock: Nobody can tell
us what we got out of it. Nobody can tell us what that value was
to the MoD or, for that matter, to the state.
Mr Woolley: I think it is precisely
because we do not judge that we have got value from it that is
commensurate with the cost that Ministers have been minded to
close it.
Q131 Willie Rennie: Defence Technology
Strategy. Professor Anderson, what has your involvement in that
strategy been and what is the feedback on the strategy from the
stakeholders?
Professor Sir Roy Anderson: That
is an interesting question. The Science Innovation and Technology
top-level budget produced the document, so my staff were very
much involved with it over the past six months. It was a first
pass. I do not know whether you have seen previous technology
strategies published by the Ministry of Defence, have you?
Q132 Willie Rennie: No.
Professor Sir Roy Anderson: It
was a first pass trying to be much more open about what our research
needs are. Myself and the Minister, Lord Drayson, were very keen
that the document was in the public domain. In other words, we
were trying to provide some research roadmaps for industry of
the things at the top of our priority list. There is a second,
classified document, which also deals with other roadmaps in more
sensitive areas but it was the public document that was most important.
The objective here was—and this is not an easy task and
if you do not get it right first time, there will be iterations
here and there are fuzzy edges—to try and think of what
areas of science and technology we should sustain in the UK because
they were so important to us for defence and security. In other
words, we had to remain world class in those fields. The US has
a stated policy that it will remain world class in all areas of
science and technology and engineering that are relevant to defence
and security. We are a small country and we cannot afford to do
that so we have to be smarter and more incisive about the selection
of those fields. That was the objective of it. Turning to the
second part of your question, what has the response been from
industry and academia: very positive from academia. Both Lord
Drayson and myself have had many letters on that side and also
from the small and medium enterprises in the industrial sector.
I think some of the larger industries, quite understandably, have
been a little frightened by the suggestion that they might invest
more in R&D, which was a heavy component of that report. We
felt if government plays its part in raising R&D spend, or
sustaining it at a good level, then industry should play its part
too.
Q133 Mr Borrow: I have a number of
questions around the whole issue of research spending. They are
fairly straightforward, just to get information. How much is currently
spent on defence research in the UK and how much of that is government
spend?
Professor Sir Roy Anderson: The
total spent by government is £2.6 billion. In relation to
a question from the Chairman earlier, if you take £2.6 billion
R&D spend as a fraction of MoD's total spend, you are of the
order of 10%. So we are well above other government departments,
etc. If you take the total R&D spend of the defence sector
industries, there are fuzzy edges here, because there is communication
and so on. My understanding from the DTI figures which publish
the R&D investment is that we are talking about a very significant
spend. The figures are not precise because of the fuzzy edges
but I would guess it may be 20 to 30% of total R&D spend,
so it is a very heavy commitment. If you look at the export market
and the status of the defence sector in the UK and as an employer
of science and engineering graduates, then again you are talking
about a third, position three, so it is a very important industry.
Q134 Mr Borrow: Of the MoD's research
spend, how much of that goes to Dstl and how much to QinetiQ?
Professor Sir Roy Anderson: It
is about half and half of the fraction that we spend, so it is
about £160 million this current financial year to Dstl. It
is a little less than that to QinetiQ at the moment but that is
probably just a temporal issue in billing rather than intention.
The intention is to spend roughly equal proportions there. That
is not the total R&T, which is the more basic end of the spend,
which, of the £2.6 billion, is about £500 million. We
spend in other areas there too, not just in Dstl and QinetiQ.
Q135 Mr Borrow: The Defence Technology
Strategy refers to the national targets being set for R&D
investment of 2.5% of GDP by 2014. I understand that that
figure refers to all R&D, not just defence, and includes both
government and private sector funding. Does the Government have
a target for defence research?
Professor Sir Roy Anderson: Not
that I am aware of. The DTI publishes very good figures on R&D
spend company by company. You can break it down by sector. The
pharmaceutical sector strikes you as very high, up the top end.
The defence sector is variable. Some companies are very good,
some are less good. Rolls-Royce obviously is a company with a
civil and a defence arm and has a high R&D expenditure, but
there is no stated Government target, to answer your question.
Q136 Mr Borrow: The Defence Technology
Strategy also states that the defence industry investment—that
is, the private sector investment—in R&D is low and
that the industry should increase the amount of investment. You
have just mentioned that yourself. How does the MoD intend to
contribute towards defence research and how does the MoD decide
what is the appropriate level of MoD research spending?
Professor Sir Roy Anderson: There
are multiple facets to that question. The first one is we published
in the Defence Industrial Strategy quite a detailed statistical
analysis of the relationship between R&D spend and our equipment
and technology capability. There is a very close correlation between
the two. There is about a 15-year time lag between the two so
what you spent 15 years ago determines what you have today. We
know that relationship is there. We have stabilised our R&D
spend at the moment for the near term, adjusted for inflation.
I am a research scientist by background and instinct and research
scientists, if asked if they want more R&D money, always say
"yes" but the most important thing to recognise is that
the MoD has some very important priorities in terms of the two
current operational theatres, and these take priority. You always
have to bear that in mind when you are thinking about how much
we should spend on R&D. Unusual times at the moment, and unusual
pressures. It is my role to argue within the Defence Management
Board with the Finance Director and so on the logic of the case
for increased R&D spend. That is my responsibility. If you
take the industrial sector and you take the big players, I think
their R&D investment is probably a little less than we might
like, and the objective of the Defence Technology Strategy was
to give a road map so that they could invest in R&D with greater
security that there was a procurement at the end of it. I have
often heard from senior executives in the defence industry who
have quite fairly made the point "We are spending on R&D
and we have been greatly encouraged by you, then you decide not
to procure anything so I have got to write off all that R&D
expenditure." One of the prime objectives here is to try
and provide a more detailed road map.
Q137 Mr Borrow: Do you accept the
argument that there are certain areas of research where it is
unrealistic to expect industry to fund all or a large proportion
of that, and if UK plc wants that research to take place, even
if that takes place within private sector companies, the Government
is going to have to put a hand in the taxpayer's pocket to make
sure that that research takes place?
Professor Sir Roy Anderson: Absolutely
correct. I would agree with that. If you are thinking about a
unique capability for UK defence or the Services, which has no
commercial or other civil spin-off, then clearly we have to bear
the brunt of that R&D expenditure. In developing these road
maps for our technology needs, in part published in the Defence
Technology Strategy but in part these are developing in consultation
with industry, through a very helpful committee at the National
Defence Industrial Council, which has a sub-committee which is
an R&D committee. There is very good work happening there
and they contributed enormously to the Defence Technology Strategy
document. We are working out areas where in essence we will have
to put initial funding in but there are some other areas. If you
take UAVs, for example, unmanned air vehicles, what is apparent
is that you have very heavy military use at the moment, but the
civil opportunities are enormous. So there we might be arguing
that to start with perhaps we should bear the brunt of the R&D,
but you should also think about the civil market that could emerge.
Q138 Willie Rennie: It may be your
style but your language is very gentle on industrial R&D for
what is quite a dire situation, that we are way below the OECD
average and industrial competitors, and, if Britain is going to
compete in an increasingly competitive world, we are going to
have to up our R&D level to at least the OECD average. Your
language is very gentle.
Professor Sir Roy Anderson: Perhaps
I am being very polite in this particular environment. You should
hear me when I am talking to industry.
Q139 Mr Borrow: You mentioned how
difficult the financial situation is for the MoD at the moment
because of the two major operations we have going on but obviously,
in your discussions with the Treasury, making bids for funding
for research, I am sure you would make the case that these projects
are important and therefore a certain amount of investment needs
to take place but would you also recognise that to make short-term
reductions in research on the defence side because of the priority
being given to operations may actually risk undermining the long-term
research in defence and actually have a long-term negative effect
on the defence of the UK?
Professor Sir Roy Anderson: That
is a very fair point but it is a common problem in life. The immediate
grabs your attention and, with all R&D investment, whether
it is in this industrial sector or others, boards of directors
or whatever, if you are saying "I'm investing now for something
15 years hence", it is a difficult argument if the immediate
priorities are very urgent and so apparent publicly. It is my
task to make those arguments, and one of the reasons we commissioned
that analysis of the relationship between R&D expenditure
and capability to pick up this very strong correlation between
the two and the 15-year time lag, was to illustrate exactly that
point. I am in favour of quantitative evidence to support your
arguments.
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