|
UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 84 House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE DEFENCE COMMITTEE
The work of the Defence Science and Technology Laboratory
Tuesday 28 November 2006 MS FRANCES SAUNDERS, MR PETER STARKEY and MR MARK HONE PROFESSOR SIR ROY ANDERSON, MR TREVOR WOOLLEY, MR MARK PRESTON and DR PAUL HOLLINSHEAD Evidence heard in Public Questions 1 - 187
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Defence Committee on Tuesday 28 November 2006 Members present Mr James Arbuthnot, in the Chair Mr David S Borrow Linda Gilroy Mr David Hamilton Mr Mike Hancock Mr Adam Holloway Mr Bernard Jenkin Mr Brian Jenkins Willie Rennie ________________ Memorandum submitted by the Defence Science and Technology Laboratory
Examination of Witnesses
Witnesses: Ms Frances Saunders, Acting Chief Executive, Mr Peter Starkey, Future Business Director, and Mr Mark Hone, Finance Director, Defence Science and Technology Laboratory, gave evidence. Q1 Chairman: Welcome. This is an evidence session with Dstl, and so I should be grateful if you would just introduce your team. Tell us who you are and what role you take in Dstl. Ms Saunders: I am Frances Saunders, I am the Acting Chief Executive in Dstl. I took over in May of this year when Martin Earwicker left the position of Chief Executive. On my right is Peter Starkey, who is our Future Business Director and is looking after the development of the kinds of products and services that we will provide to our customers into the future, and Mark Hone, who is the Finance Director of Dstl. Q2 Chairman: You are the Acting Chief Executive? Ms Saunders: That is correct. Q3 Chairman: Why is that exactly? Ms Saunders: When Martin Earwicker left they appointed me on an interim position whilst the MoD ran a competition to find a new Chief Executive. Q4 Chairman: Is that competition still running? Ms Saunders: I believe it is. I think you should probably ask my colleagues in MoD where they have got to in that competition. Q5 Chairman: Your report and accounts tell us a bit about your work, but how is your work different from what QinetiQ does and what universities do? Ms Saunders: That is a very good question. You have to go back to look at the reason why Dstl was created at the split up of DERA into the QinetiQ organisation, which was destined to be working in the private sector and to be privatised, and the Dstl organisation which was retained in government to do those things that are best done in government, and to do those things, particularly, of a sensitive nature or where we need to work very closely with industry and need to deal with proprietary information in areas such as support to operations or counter-terrorism, where you can understand the sensitivities. It would not be appropriate for some of that work to be done in the private sector. As regards the universities, we tend to do rather more applied research than seeking out new knowledge for its own sake. We do not tend to do academic research but we do work very closely with the universities so that they have a better understanding of what MoD requirements from science and technology might be in the future. Then we can work with them to pull through their ideas into our more applied research and then into the equipments and the thinking that goes on within the rest of the department. Q6 Chairman: Your report says that you employ about 3,400 people. Is that right? Ms Saunders: That is about right, yes. Q7 Chairman: Could you say how those people are broken down into each of the broad areas of the work that Dstl does? Roughly. Ms Saunders: Roughly. If you think about the three sorts of work we tend to do, some is associated with supporting systems work - the higher level concept of development, support to policy development and support to the early stages of procurement - and probably about a third of our people are involved in that kind of work. The second third are looking more at the technology, so actually developing technology solutions that will be deployed in future equipments, particularly supporting things like urgent operational requirements (?) in areas such as support to operations in Iraq and Afghanistan. The final third is doing rather longer-term research of a strategic nature which cuts to the deep end of Dstl's research base into areas such as biomedical counter measures, detection of chemical agents on the field, biological agents and explosives, and some of that longer-term research increasingly about some of the social science issues that need to be dealt with and brought into out thinking, as the nature of warfare is changing. Q8 Mr Holloway: To what extent are you involved in the Litvinenko investigation? Are you involved in trying to trace the source of this material? Ms Saunders: That is something that has obviously happened very recently. We have been asked by the Health Protection Agency to support them in providing some of our radiological detection capability to support them in looking for sites that they are dealing with in London at the moment. That is the extent of our engagement. They 'phoned us on Sunday and said could we deploy our team. We have a team that we would normally use if there was an accident in a military establishment, and we can use that to support the Health Protection Agency. Q9 Chairman: Thank you. Do you fund any research that is done by third parties? Ms Saunders: Yes, we do. We have what we call an extramural research programme budget, which is a relatively small amount of money and has been going down since Dstl was formed. This year about £9 million of that extramural budget goes into the universities, so we fund work in universities, both in our own regard and also as an agent of MoD, in something called the joint grant scheme, which is a joint Research Council/MoD scheme for funding work in universities. We also fund work in industry in areas where we want to combine capability to integrate into some of the programmes we are asked to do by MoD, and that includes some of the support to operational requirements where we bring in small companies to develop prototypes of equipment, and so on. Q10 Chairman: Why do you do that? Why is it necessary to have you as a barrier between the MoD and the industry that does the work? Ms Saunders: It is interesting you use the word "barrier"; we actually only do that when we add value. So it is particularly where we need to explain the detail of the technical work to suppliers so that we can integrate it into some of the more sensitive areas of our programme. We need to have that technical expertise in order to be able to specify what is required and we understand the depth of that information. When it comes to the university linkages, again, it is this issue of integration; as more and more of the work in the research programme is competed and different suppliers provided, there is a need to make sure that the MoD has a good understanding of the overall picture of work that has been done in a particular field in the UK. One of the reasons Dstl was kept in government was to provide that integration role. So we tend, really, only to put work out ourselves rather than it going directly from MoD in areas where we really believe, and MoD agree, that we can add value through that exercise. Q11 Chairman: We have just received Dstl's framework document. Are there any major changes in that over the previous one? If so, how will they affect you? Ms Saunders: There are two main things I would point to. One is, I think, a rather clearer statement of the top level objectives for Dstl, and I was particularly pleased to see in there an objective about maintaining and sustaining capability to support MoD in the future. Yes, we are there to do the things that need to be done right now, that need to be done in government, but there is also a recognition that you can only do that if you have got a very strong research base or S&T base and good people who have been active for a period of time. So this idea of sustaining capabilities and making it a specific objective will, I think, be very helpful to us. The other change, of course, is the governance arrangement. This recognises that over the last year or so there has been a new non-executive-dominated board put in place overseeing Dstl to discharge the ownership function on behalf of MoD as owner. So that looks at what is the role of that board vis-à-vis the role of the executive team and what are the levels of delegation and corporate governance arrangements that flow with that. Q12 Willie Rennie: The Defence Technology Strategy. How is that going to impact on your work? Ms Saunders: I think it is going to impact in quite a great way. If you go through the DTS document you will find Dstl's name liberally sprinkled in there - I think we counted 77 times. So the message from this is our aim has always been to be indispensable for MoD and to be part of them managing the science and technology base in the UK and helping them do that. I think the Defence Technology Strategy and the kind of roles it puts out and the challenges it puts out to Dstl to do that is extremely good news, and it is a recognition that we are part of the family. In terms of the detail of how it is going to change things, you will see an emphasis in there about our relationship with universities. They see Dstl very much as a node in the network of the academic research in the UK and being able to bring into defence some of those advances in technology that are more widely applicable, and so on. So a very clear remit to work more closely with the universities and support MoD. Obviously, there is also mention in there of the need to look at the balance between the work the Dstl does; how much research we do vis-à-vis how much advice work - the balance we talked about right at the start, about the third third: is that right? Should it be different? Should it be different in different areas? Of course, when you start to then go into (section B) the different technology areas, the different market segments, then I think you will see a change over time of where Dstl has expertise as the implications of that strategy work their way through. We will be working with our colleagues in MoD over the next few months to articulate what does this mean in specifics for Dstl - i.e. are there areas of technology that actually we need to strengthen because they are going to be even more important to have an in-government capability? Are there areas of technology where actually we are going to allow the market to drive the technology forward and, therefore, perhaps we should disinvest? So there will be quite a lot of debate, I expect, over the next few months with our colleagues in MoD about what the actual implementation plan for this strategy means. Q13 Willie Rennie: What do you think is going to be the biggest challenge within the strategy for yourselves? Ms Saunders: The biggest challenge will always be this issue of evolving and adapting in areas where we need to strengthen our capability, to make sure we are able to do that and that we have the programmes to do that, because you do not develop technical and scientific capability just by sort of sitting in a lab in isolation; you have got to have the right programmes of work. So making sure that the programmes follow where the requirements are going to be. Q14 Willie Rennie: So there is no one specific area that you think is the biggest? Ms Saunders: No, there is no one specific area that I think is the biggest challenge. If you look in terms of what work we are funding, one of the areas where we do need to, I think, strengthen our capability is in the whole area of information management, which is an area where, when we were set up as Dstl, we had a relatively low proportion of the capability that had originally been in DERA, and we have gradually been strengthening that over the last five years. I think that whole area of the use of information technology and i-star on the battlefield is an area where the MoD does need some good quality in-house support, and that is what we intend to be providing. Q15 Mr Hancock: In the Defence Technology Strategy the Government suggested that their national target of R&D investment would be 2.5 per cent of GDP by 2014. Do you confirm that that figure refers to all R&D, not just to defence, and what is your interpretation of where the Government's share of that spend is going to be - what the Government themselves are going to take on? Has it been indicated to you what you can expect as a share of that? Ms Saunders: From a policy point of view I really do not think I can add anything, but my colleagues may be better placed to talk about what the overall policy means. In terms of what is the intention for Dstl, our forward projections of our income are relatively flat, so we are seeing possibly a rise to cover inflation but no more than that. So at the moment we are not expecting to see any big increase in investment in Dstl. Q16 Mr Hancock: Do you know what the Government's target is for Research & Development specifically for defence? Ms Saunders: I do not know that. Q17 Mr Hancock: So you are not party ---- Ms Saunders: I am not party to those policy discussions. Q18 Mr Hancock: That is a decision that has now been made. It is not how the policy was made; it is now out to be implemented. You have not been given any indication over the next seven years what you would expect to have? Ms Saunders: Not specifically. We currently receive around 37 per cent of the defence research budget and we are expecting to continue to receive roughly about the same proportion into the future. That is the best information that we have. Q19 Chairman: Mr Starkey, do you want to join in? Mr Starkey: All I would add is to reinforce that we only do those things which need to be done in government, and that in itself determines the volume of our work. At the moment, there is an arrangement whereby, yes, we receive a particular proportion of most of the research programme - 37 per cent of that - but that defines our role. We do not go up and down with the general volume; we look just at our role. Q20 Mr Hancock: How does that compare with our European neighbours or other countries? Where are we in the hierarchy of having a government agency specifically remaining in government because of the sensitive nature of the type of work you are doing? How does your share compare with your counterparts elsewhere? Mr Starkey: We cannot give you an authoritative answer to that, we can follow that up. Q21 Mr Hancock: But you talk to them? Ms Saunders: We do talk to them, yes. Q22 Mr Hancock: Do they say: "You're doing a lot for a little and a lot of our government share of the action is coming our way"? Ms Saunders: No, I think we would have to give you some actual figures in order to be able to eliminate (?) that, but we will look at doing that. Q23 Chairman: Would it be more appropriate to ask Mr Woolley to do that, for example? Ms Saunders: It may well be that between us we probably have that information because we, obviously, do talk on a laboratory-to-laboratory basis and he would have the figures on the overall spend. Q24 Mr Hancock: We were told earlier this year by the Chairman of QinetiQ that he believed that it would be necessary for a 25 per cent increase in research on defence expenditure, and that he believed that QinetiQ ought to be getting the lion's share of that. What is your view on that? Ms Saunders: I do not think I can really comment on what the Chairman of QinetiQ's views are. Q25 Mr Hancock: You are the Chief Executive of your organisation. I am asking you to tell us what you think you ought to be getting out of that. Ms Saunders: I would go back to what Peter was saying, in that we are here to do the things that need to be done in government. So it is not about a share, it is about being very clear with our customers in government what it is they expect of us, at a detailed level. When do they need to use us and when could they use others? We do not have any targets that say we need to grow by a certain amount, or whatever. That is not the kind of business we are; that is what makes us a bit different, I would suggest, from QinetiQ. Mr Hancock: When this Committee did the DERA break up it was very controversial for this Committee, and Chisholm and his colleagues had a hard time from the Committee. We were very concerned about the split and the constraints that were going to be placed on you by QinetiQ wanting to not just corner but to occupy the overwhelming majority of the research and development ground; that you would be, eventually, squeezed and your remit so tight that you did not have any scope for both securing your own future and holding on to the very people you were talking about keeping at that level of expertise and competence. What are you doing to ensure that you can --- Chairman: Keeping the people is something we want to come on to later. Q26 Mr Hancock: Not that; I am more concerned about the squeeze. Ms Saunders: Actually, I think we have done pretty well over the last five years. If you look at it we have not been squeezed. The reason that has been the case is because we have focused on doing things that are really important to our customers and MoD. So we are not doing things in the margins; we are doing things at the heart of the defence agenda, and we have been doing work in support of some of the major equipment programmes where we are doing something distinctively different from the QinetiQs and the others. We have carved out a niche for ourselves which I think is a very valuable part of the contribution that science and technology can make to defence. We are very happy with that niche, actually. It is clarified for us; we do not straddle a boundary between private sector and the government; we are now very clearly on the Government's side and doing those things that really make a difference. The kind of accolades and feedback I get from senior people in the Ministry of Defence now are much more heartfelt in terms of the thanks they say for the things we do than perhaps we had when we were DERA. So I think we have carved out a very clear niche for ourselves. Q27 Mr Holloway: Can you help us to visualise the sort of things you are doing? What are these things that need to be done in government? Ms Saunders: To give you some examples, in terms of some of the work we did in support of operations - I am sure Peter will join in with that - we deploy scientists out into theatre on a rolling basis; every three months we put a scientist out into Iraq ---- Q28 Mr Holloway: How can we visualise the sort of things you are doing that industry is not? Ms Saunders: Industry does not do that. Q29 Mr Holloway: Sure, but the basis of my question is what sort of projects are they, and in what sort of areas? Can you take us through some? Ms Saunders: Do you want to take us through what we are doing on FRES? Q30 Mr Holloway: So FRES is one. What other stuff? Ms Saunders: FRES is one. Joint combat aircraft ---- Mr Starkey: Essentially, we have a role in all acquisition decision making, in that we are providing an in-house, evidence-based ---- Q31 Mr Holloway: We have heard that, but what sort of things? FRES, future combat aircraft. Mr Starkey: Future combat aircraft, carrier strike, NEC, right through to things which are, perhaps, less obviously tangible, like the future defence supply chain initiative, which is about how we better organise the logistic supply chain in the UK and in Germany. That is being provided by industry but actually the work that we did was to look at what is it that is there at the moment, to model the way that logistics flowed through the system and, actually, to come up with both confidence that there were improvements that could be made and then metrics ---- Q32 Mr Holloway: But none of the things you have said so far, certainly in the way you have explained them, suggest that they need to be done in government. Commercial organisations do that. What is it particularly about what you are doing? Ms Saunders: To give you another example that is clearly within government, the work we do in support of detecting and defeating improvised explosive devices. Clearly, there are a lot of sensitive security issues and intelligence issues that we do not want to widely communicate out into industry. So you need to blend that with the technical expertise we have to be able to design countermeasures that actually work. Similarly, support we have been doing on helicopter survivability where we have been able to work with the warfare centres to develop tactics. So we are not just talking about developing pieces of equipment and science, we are talking about how those things are deployed and the tactics that they use. We are helping the warfare centres train the pilots of helicopters to make them more survivable when they go out and fly in Iraq. Those are very different sorts of thing, not things I would suggest industry would be doing. Q33 Chairman: How, in respect of improvised explosive devices, for example, do you divide up what you as Dstl do and what is done in Abbey Wood? We visited some of the things they do there. Ms Saunders: Abbey Wood are, primarily, the procurers and we work very closely with the IPTs that are procuring the equipment to be used in theatre for operational requirements. We actually do some of the design work and we come up with the ideas for what we are going to do next. So we are actually coming up with the solutions ourselves. Q34 Mr Borrow: Moving on to competition for this research spending by the Ministry, to what extent is that likely to affect your organisation? Ms Saunders: As we have said, our framework document says we do not compete, so the proportion of the research budget that is being opened up to competition is actually not open to us anyway. So, that does not affect us in that regard. We have clearly been working in support of our colleagues in the Research Acquisition Organisation to help them run some of those competitions and to do some of the peer review alongside academics as to the proposals that are coming in under competition. Q35 Mr Borrow: Does all your work have to be done within government for national security reasons? Ms Saunders: It is not all for national security reasons; some of it is for national security reasons. Some of the other reasons we do things in government - and this is really what Peter was saying about some of our support to major procurements - are where we have access to sensitive commercial information from a number of the different suppliers and we have to act with integrity and make sure that information does not pass from one area to another. So it is sometimes handling sensitive commercial information. Q36 Mr Borrow: On this competition issue, if as an organisation you cannot compete and the Government increases the proportion of research spending that is open to competition, that, presumably, will have a knock-on effect in terms of the proportion that you are likely to be getting. Ms Saunders: At the moment, as we have said previously, we currently get 37 per cent of the budget and the rest of it is what is being opened up to competition. There has been no indication that anybody is going to change that percentage at the moment. Obviously, if there was a change in the volume of research then maybe there would be a re-look at that policy, but that is one of the targets at the moment the research budget has to meet with, which is to give us this 37 per cent. Q37 Chairman: Do you accept the premise of what David Borrow was just asking: as an organisation you cannot compete? Ms Saunders: Yes. Q38 Chairman: Why are you a trading fund exactly? Ms Saunders: There are two reasons why we are a trading fund. As you will know, we have been reviewed in 2004 and 2005 just to check whether or not the trading fund is still the right business model for Dstl. That concluded that there were a couple of quite big advantages of being a trading fund. For me the most important one is the customer/supplier relationship and the real focus on the customers. So I think it helps customers to understand the cost of what they are buying, and then they can make decisions about whether they want to purchase that from us and whether they are getting good value for money. So this whole customer/supplier relationship; having the discipline of customers saying what they want and then us proposing a solution to that and having a debate about does that seem like a fair price for what you are going to be getting. I think it is quite a healthy debate and it stops Dstl being any kind of self-licking lollipop, because we clearly have to be focused on doing the things that our customers are looking for. The other benefit is just in terms of being in charge of one's financial future. Part of being a trading fund has allowed us to retain profits in order to be able to afford to do our rationalisation programme, and if we were not a trading fund we would not have been able to do that. I think, therefore, it makes, if you like, the chief executive of the organisation more accountable for making sure that they maintain the infrastructure and maintain the skills than if this was just an on-vote organisation. Chairman: You are giving us very helpful, crisp answers which are directly addressing the questions that we are asking. Would that everybody did that. So thank you very much indeed. Q39 Mr Jenkins: There are rapid changes you are making at the moment, particularly this laboratory you are building. How much did that cost and where is the money coming from? Ms Saunders: I have got the figures here. It is £94.7 million, which is the maximum price. We have gone for a project that is a mixture of building a new build at Porton Down and refurbishing our site at Portsdown West. We have gone for a maximum price of £94.7 million and a target price of £92 million. Q40 Mr Jenkins: Where is the money coming from? Ms Saunders: The money is coming from our retained profits from the time we started. So we have been able to hang on to the cash we have generated as an organisation, and that is sitting on our balance sheet at the moment and we are able to spend that cash. Q41 Mr Jenkins: Retained profits. Do you not pay a dividend to the MoD? Ms Saunders: We do pay a dividend to the MoD. Q42 Mr Jenkins: Who decides how much is retained profit and how much is the dividend then? Ms Saunders: That is something that we agree with MoD's Finance Director. Q43 Mr Jenkins: So you decide it amongst yourselves? Ms Saunders: Yes. Q44 Mr Jenkins: Then you have this pot of money and you decide what to do with it. Ms Saunders: No, we have to get agreement from the Minister to spend that money on our rationalisation programme. We have generated this pot of money but we still have to go and ask. Q45 Mr Jenkins: So the Minister was in agreement to reduce from 15 sites to three sites, and he knew where the three sites were going to be? Ms Saunders: Absolutely, yes. Q46 Mr Jenkins: All in the south of England. Ms Saunders: Yes. Mr Hancock: I wonder if I ought to declare an interest here, Chairman, because my house is right opposite the site at ---- Mr Jenkins: No, not unless it is on it. Chairman: We will take that interest as duly declared, just in case. Q47 Mr Jenkins: Who exactly owns the 15 sites? Ms Saunders: I can provide a detailed breakdown of who owns each site. Q48 Mr Jenkins: Can you tell me how many sites you own and how many sites QinetiQ own? Ms Saunders: QinetiQ own the Malvern site, QinetiQ own the Farnborough site. QinetiQ actually own Fort Halstead but we have a long-term lease on Fort Halstead. Q49 Mr Jenkins: So who owns the three sites you are going to establish on? Ms Saunders: We own Portsdown West, we own Porton Down and, as I said, we have a 97-year lease on Fort Halstead. Q50 Mr Jenkins: So the majority of the ones that are being released are owned by QinetiQ? Ms Saunders: Yes. Q51 Mr Jenkins: So they can sell the sites and realise a lot of money on it. Ms Saunders: They actually have more of the people on those sites. If you take the Malvern site, we are a minor lodger on that site; they have far more people on that site than we do. So what they will choose to do with that site will be part of their strategy. Again, we only have two small buildings on the Farnborough site. That is dominated by QinetiQ. Q52 Mr Jenkins: If they can de-scale that or de-people those sites they can sell those sites and the money goes back to QinetiQ. Ms Saunders: That would be the case, yes. I believe that is true. Q53 Mr Jenkins: Was that part of the rationale why you chose these sites to locate on? Ms Saunders: No. We did want to split ourselves off from QinetiQ in some ways so there was not any confusion about what they were doing and what we were doing. So we wanted to have distinctive sites that were definitely our sites, and I think there was certainly something of that in it. We chose the sites on the basis of what made most sense from the point of view of the type of work we are going to be doing in the future and the numbers of people that it made sense to put into those buildings and that sort of site. We did quite a lot of analysis of different options - a three-site option, a two-site option and a four-site option - to look at what would be the best cost-benefit analysis for our move, and this three-site option came out as the best balance. That is what we briefed to the Minister to get the decision. Q54 Mr Jenkins: In your cost benefit analysis did you put into the equation the impact on the community for moving to any one of the sites? Ms Saunders: We did consider the cost in terms of what we might have to do to make sure that we work well with the community, like road improvements, thinking about green transport, and so on. So we did think about those sorts of things but we did not specifically model, say, the impact on the community. Q55 Mr Jenkins: So there is 550 staff moving to Porton Down but you have not worked out the effect that would have on the local schools ---- Ms Saunders: Yes, we have done that. As part of planning we did that. That was not a part of the original cost benefit but in going up to Salisbury Council over the planning application that we have made, yes, we have looked at that. Q56 Mr Jenkins: And it works out to be okay? Ms Saunders: The discussions we have had with the local authorities have actually been very positive and they believe that this is going to work quite well. Q57 Mr Jenkins: Have you been asked to make any contribution towards the cost? Ms Saunders: Yes, we have been asked to make contributions to the costs of roads, and we have agreed to do all of that - so upgrading one of the roads at Porton and maybe putting in some traffic lights; building a roundabout, those sorts of things. So £3 million or so of investment will be put into that to make those improvements. Q58 Willie Rennie: Can we look at the joint ventures, Ploughshare and DDA? Can you paint a picture of how they all fit together? Ms Saunders: Ploughshare Innovations Limited was set up as a wholly owned subsidiary of Dstl to act as our agents for exploiting the intellectual property that we generate as part of our research. They can exploit that in a number of different ways, but the two main ways are: to license that technology to companies that might already have products and would need a licence or could develop their product further to enhance it and would take a licence on our technology to make that happen. The other thing they can do, if there is no existing industry out there and no existing companies, is to look at developing a start-up company using the IP and taking it to a point where they, maybe, have a product to market or they have developed a prototype, at which point that start-up company could be sold or it could develop into a fully fledged company downstream. So we currently have a number of so-called joint ventures but they are actually start-up companies where Dstl, and now through Ploughshare, has put the intellectual property into the joint venture and a couple of venture capitalists have put in the money to take the IP from a proven concept to a prototype and help develop the business. Q59 Willie Rennie: How does that compare with the DDA? Ms Saunders: The DDA's remit is rather different; it is not there to license Dstl technology to companies, nor is it to manage joint ventures or start-ups. Its main remit has been to work with SMEs and, particularly more recently, to look at spinning in technology into MoD. Q60 Willie Rennie: So the activity of Ploughshare is completely different. Ms Saunders: It is completely different. The Director of DDA, Damien McDonnell, has conversations with Andy Tulloch, the Chief Executive, and they have looked at how complementary their activities are. Indeed, before we got approval to set up Ploughshare there was an investigation at the previous Minister's request to look at any overlap between the DDA and Ploughshare, and that concluded that they were doing very separate tasks. Q61 Willie Rennie: So why the proposal to get rid of the DDA? Ms Saunders: I think you really do need to ask my colleagues. Q62 Willie Rennie: If it is of benefit to you ---- Ms Saunders: We have never had anything particular from the DDA that has benefited our business, because, as I said, they have tended to work with SMEs. We have had examples where they have come to us with an SME who would, perhaps, like to have access to Dstl technology, but they have not had any money in order to pay us to help them do that technology transfer. Q63 Willie Rennie: There has been a connection with the DDA. Ms Saunders: There has been a connection over the years, and indeed some of our staff have been working in the DDA. We currently have three staff on secondment to the DDA, so there has been a relationship. Q64 Willie Rennie: How would you fill that gap if the DDA was no longer there? Ms Saunders: As I said, we have not been reliant on the DDA to bring in any particular technologies that we were looking for, nor to exploit any of our IP. So we do not see that there is actually a gap for us. Q65 Willie Rennie: Some people say that they should not be making any money from the technology that they spin out on licence, or whatever, from the Dstl. Do you agree with that? It should actually be for the benefit of the wider economy rather than for the financial interests of the Dstl and the Government. Ms Saunders: It is one of those interesting things, is it not? All public sector research establishments have a charge, really, from the Treasury to make sure that we maximise the value to the country of the IP and the research that we do. One way of doing that is actually to make sure that technology gets out there and is used. A lot of the things that we are exploiting will have benefits to society: they are things like rapid MRSA testing; they are new coatings that will, perhaps, help people in the drug industry. We see those kinds of benefits. In some ways the money is nice to have but it is kind of incidental; what we will then use that money to do is to help make that become a real virtuous circle. So with some of the money that we make out of Ploughshare (we will have to negotiate this with the Finance Director, of course) the intention will be to re-invest that in making technology transfer work even better by putting it into innovative work alongside our IP to help get that pull-through. Q66 Willie Rennie: So you do not think there has been technology that has been lost to the public good because you have been trying to get too much money? Ms Saunders: No, we are actually really rather sensitive to that, to the extent that when we look at Ploughshare's objectives they have some objectives that are not purely financial; it is about trying to maximise some of the benefit to the public, including thinking about: how many jobs are we creating? How many relationships are we creating? So it gives them more than just a financial imperative. Obviously, they have to cover their costs but beyond that there is a richer set of indicators. Q67 Willie Rennie: Where do you see the balance of your future income from this area coming? Is it going to be from Ploughshare or is it going to be venture companies? Ms Saunders: Ploughshare will, effectively, manage all of this for us. One of the reasons for setting this up was to allow the Dstl executive to focus on doing this with the MoD and other government departments, and bring in some expertise that can act as our agents to look at the exploitation. In each area of IP they come up with a strategy and an approach, depending on what that technology is likely to be. I would expect that there is always going to be quite a strong balance between licence revenue and income from joint ventures, because although the potential rewards from a spin-out company could be very high, rather few of them will actually deliver as much as you might hope, and licensing and getting that technology out through existing companies is also a very good way of making sure the technology gets out there. Q68 Willie Rennie: The Lambert Review tried to give a big steer towards more licensing rather than spin-outs. Are you following that route? Ms Saunders: Absolutely. In the early days of Dstl there was quite an emphasis on getting some spin-outs going because we wanted to get some experience of doing that and it made sense for the types of technology. However, now there has been a very clear redressing of the balance and this year the emphasis for Ploughshare has meant their target is to increase their licence revenue, and they have been quite successful in doing that. Q69 Mr Jenkins: Before we leave Ploughshare and the DDA, I have still got some confusion in my mind. As far as I am aware, the DDA still owns intellectual property rights. You say they were looking at SMEs. What is the difference between your operation exactly and the DDA? Ms Saunders: The DDA has no IP rights over Dstl IP. Q70 Mr Jenkins: And it has no rights from anywhere else? Ms Saunders: I do not know if it has got rights from anywhere else; I can only comment that it has no rights over our intellectual property. Q71 Mr Jenkins: I believed their role was to roll out intellectual property rights through industry anyway; that is the "diversification" tag. Diversification meant that defence stuff would have been rolled out to industry, and you are claiming they only dealt with SMEs. What do you deal with (insofar as Ploughshare is going to be dealing with SMEs), why are you different, and why can we not be given a guarantee that Ploughshare is not going to run round the same circuit as the DDA? Ms Saunders: Because Ploughshare actually have a licence from us to license on our technology or to develop our technology, which I do not think the DDA had, but you would probably need to ask our colleagues in the MoD what they had. So they have, if you like, a clear route to market for our IP and their main remit is to find people who want to license that technology or to find alternative routes to get it exploited. My experience with the DDA (and this is only my experience) is that they were working much more as a brokerage organisation brokering a relationship between SMEs and organisations that had research capability that could be applied to the products the SMEs were trying to develop. That is more like brokering for a contract research arrangement than an IP exploitation for research that has already been done. Q72 Mr Jenkins: You have got seven joint ventures at the present time? Ms Saunders: Yes. Q73 Mr Jenkins: If you have got seven joint ventures and Ploughshare going on, how much effort have you been directing into that activity rather than your main "we only work for the Government" activity? What guarantee do I have that in future information will not be slipped out by these joint ventures that are funded by the British Government only to be found later on being utilised by some other organisation? Ms Saunders: I will try and explain a little bit about how this whole governance arrangement works. Firstly, having established Ploughshare, then the oversight of these start-up companies, these joint ventures, is being done by Ploughshare. So we, as Dstl, have stood back from that now and we have employed Ploughshare to do that on our behalf. So we are not being diverted into those sorts of areas. In order for technology to be released from Dstl to Ploughshare and then on to these joint ventures we have to get agreement from the intellectual property group in the Defence Procurement Agency. So anything we release has been approved by them; anything that might be potentially controversial or sensitive we also have a technology transfer oversight group that includes people from CSA's organisation, who can look at whether or not they think there are some sensitivities in the technology that we have not picked up. Obviously, our security people also vet this before it goes out. So we have a very tight regime to make sure that any IP that we release is ready to be released and is fit to be released without it coming back and potentially causing a threat to us in the later stages. So we have a very strong governance regime for this. Mr Jenkins: I am beginning to understand the relationship between the DDA now and why the DDA has not gone down this route. You cannot answer that but the MoD can. Chairman: We can ask that later. Q74 Mr Hancock: Where is your part in this negotiation for the transfer and selling on of intellectual property rights? Where do you come in on the pricing of it? Ms Saunders: Actually we now do not do anything on pricing. We expect Ploughshare to do that. Ploughshare has its own board, which includes non-executive directors who have worked in the licensing and entrepreneurial areas to provide them with guidance as to the kind of prices that might be sensible to enter into a negotiation. For example, recently they, effectively, ran a competition for a licence for one of our areas of technology to see what the market would be prepared to pay for this, so they are using those kinds of mechanisms to set the price - a combination of having expertise on what this might mean plus some experience of doing these kinds of deals in the past. Andy Tulloch, the Chief Executive, has been very experienced at licensing deals in his previous career. Mr Hancock: If it is anything like getting rid of our property that we own then God help you! You will be giving it away. Q75 Chairman: Does Ploughshare's board include any directors who work at Dstl? Ms Saunders: Yes, it does. At the moment, it includes myself and Mark. However, it is dominated by non-executives and it is chaired by a non-executive. Q76 Chairman: Have you considered the experience of the Met Office? Ms Saunders: Yes, we have. Q77 Chairman: How are you guarding against conflict of interest? Ms Saunders: The important thing here is that Ploughshare is 100 per cent-owned by MoD and Dstl on behalf of MoD. So it has not got any other investment coming in from outside organisations into Ploughshare itself. Q78 Chairman: And you would not expect that to happen. Ms Saunders: And we would not expect that to happen, indeed. When we talked about the ways of funding Ploughshare we came to the conclusion it would not have been a wise move to bring investment into Ploughshare itself. We used to have Dstl directors on some of the joint ventures but we have gradually been removing them from that role and requiring Ploughshare to provide directors in their own right rather than us to provide the directors. That, I think, helps put these things more at arm's length and get rid of any chance of conflict of interest. Q79 Linda Gilroy: The Defence Technology Strategy puts a lot of emphasis on the need for Dstl to recruit, retain and develop staff. How do you go about that and how challenging is it? In particular, perhaps you could cover any particular challenges arising from what we believe is an ageing profile, and, also, of recruiting the best of young British scientists? Ms Saunders: We do a lot of graduate recruitment and we have got some very good relationships with the universities; we have people from our younger cadre who actually go out and build relationships with the universities. We aim to recruit about 100 graduates a year and since we have been set up that is the kind of level of recruitment that we have been going for. We are in The Times top 100 of graduate employers (I think we were 76th in the last round), and so we have got a reasonably good profile as a recruiter of graduate scientists and engineers. I think the standard of people we are getting in looks very healthy. In addition to that we also do quite a bit of work with pre-university students. We are very active sponsors of the year-in (?) industry scheme, we provide a prize every year but, more than that, we actually employ of lot of year-in industry students, and to some of those we will offer the equivalent of scholarships to go off to university and then come back and work with us during their vacations. I think at the bottom end of the scale it is actually a very healthy picture; we are getting some very good graduates. Q80 Linda Gilroy: Are you getting enough graduates? Ms Saunders: Yes, I think we are. Q81 Linda Gilroy: Are there any pinch points that are difficult? Ms Saunders: Not at the moment. Where we have a pinch point is people in the late-20s, early-30s. That is when people have done their first few years with us - perhaps they have got chartership of their institute - and they are thinking about what do they do next? The challenge for us is to hang on to enough of them at that point to work up to replace the grey beards in the organisation. Q82 Linda Gilroy: So how do you go about retention? Ms Saunders: We are looking at a number of different ways of doing that. Clearly you want to target the ones you want to retain rather than just saying we want to retain everybody, because we do not want to retain everybody; we want to have some turnover (?) because that is healthy. We have introduced what we call an associate fellowship scheme which is for people at that kind of stage in their career who want to really follow the scientific and technological careers, to have some time and some money to, perhaps, work with a university or work with the systems engineering innovation centre at Loughborough to establish their scientific and technical credentials and give them a step-jump on their scientific careers. We think that would be quite an attractive proposition to help people stay with us during that period. Q83 Linda Gilroy: Is that because otherwise they are watching, largely, what other people are doing rather than being at the cutting edge of doing ---- Ms Saunders: No. We have a very strong technical career path now that allows people to get on up to the top of the organisation by staying in technology. We have a fellowship scheme and senior fellows, and those guys now get paid the same as the management team; so they are getting right up to the top of the organisation. We want to encourage more people to go that route because it is the quality of our scientists and engineers who are absolutely key to us being able to do the kind of work we do. Q84 Linda Gilroy: And the ageing profile? Ms Saunders: As I said, if you look at it it is not too bad. The profile is not ageing; the gap is in this 28-34 area. I have a concern about that because, of course, if you do not get people into that gap then you will not have people for the future, but we do not have a big problem of an ageing profile at the moment. We have very robust succession planning for those people who are planning to leave the organisation. Of course, under the latest changes in the retirement law quite a number of our more senior people, our technical people, are choosing to stay on beyond 60, either full-time or on a part-time basis. You are not hitting a brick wall at 60 any more. Q85 Linda Gilroy: How do you go about developing the close and effective relationship you need with universities? Ms Saunders: We have had some initiatives going since Dstl was set up, particularly in areas where we have not got a lot of in-house research. We have something called co-operative research centres. Those are paid for by our MoD customer as part of the capability development activity, and they pay for us to work for the university. Some of the work is done in the university but it also allows some of our staff to act as visiting professors or visiting lecturers within the university, properly engaged in that research programme, providing advice, mentoring and so on, to postgraduates doing the work. So we have got a few examples with Southampton University, with Cranfield and with Imperial College of that kind of model working. You will see in the defence technology that MoD is keen to expand that kind of model to create communities of interest and create those kinds of strong relationships with the universities. So we have some experience of doing that. Q86 Linda Gilroy: How do you handle the security issues that can arise from that, with foreign students? I am a member of the Quadripartite Committee on strategic export controls and we were told at an evidence session earlier this year that very often universities do not understand when they have to apply for ordinary or special licences. Ms Saunders: We are working with universities that are quite used to working with us, so we have had some long-term relationships with these universities. We are also quite careful; the kind of work we would do in a university would tend to be some of the underpinning work that would not be so sensitive and so much of an issue. Q87 Linda Gilroy: So you are fairly confident? Ms Saunders: We are fairly confident that in the relationships we have with the universities we work with those kinds of issues are well understood. Q88 Linda Gilroy: Have you had any cause for alarm about any work at all in that respect? Ms Saunders: No, we have not had any cause for alarm. Q89 Chairman: Last week, witnesses in front of us on the Strategic Nuclear Deterrent inquiry were expressing concern about things like the closure of the physics department at Reading University. You have expressed no such concern. Do you feel it? Ms Saunders: It is one of those things we do keep an eye on because, clearly, if there are reductions in the number of physics departments then it could well have a knock-on effect on the pool of graduates that will be available to us, but we actually take students from a very wide variety of backgrounds, not just physics - obviously, quite a lot of engineers and chemists and biologists and social scientists. So we are not just dependent on one kind of area of science. Q90 Chairman: So you do not find the pool is shrinking? Ms Saunders: We have not had too much of a problem so far, but I think that is partly because the kind of work we are offering graduates they see as being rather attractive. There is quite a strong public sector ethos amongst our intake of graduates. They are quite driven by that; quite passionate about it. It is really good. Q91 Mr Jenkin: I presume international collaboration is a major part of your activity. What is the objective of international collaboration? Ms Saunders: In terms of the overall government objectives and MoD objectives for international research collaboration, again, the policy for that is set from the Chief Scientific Adviser's area. We are there to support them in developing technology agreements or joint work with laboratories in other countries. So we are there very much to help the MoD get gearing from the international research collaboration so they can get access to more knowledge through information exchange, and so on, than they would be able to get if all they did was fund the work in the UK. So a lot of this is about getting gearing; it is also about making sure that there is an element of government-to-government peer review, so we test out our ideas against other scientists in government laboratories that perhaps have a different perspective. So there is some benefit in that. Q92 Mr Jenkin: What is the objective? Is it to gain more ownership over IP? Is it more directed towards the outcome capability? Ms Saunders: As I say, I think you should ask the CSA for what he thinks are the top level objectives. From my perspective the objective is certainly not about getting IP or control over IP; it is more about exchanging information and about making sure that we have a good understanding of what the art of the possible is in terms of the sorts of defence capabilities the UK might need. Q93 Mr Jenkin: What about access to non-UK technology? Does it differ in Europe, say, from the United States? Ms Saunders: Do you have something to say on that, Peter? Mr Starkey: It varies across all countries but, in a sense, there is a strong dependence on the particular technical areas - what we have to offer and what the other partner has to offer - and that varies even within our relationship with one country across those technical areas. So one cannot easily categorise it by nation, as such, I am afraid. Q94 Mr Jenkin: Which is the most important international partner? Ms Saunders: If you actually look at the amount of activity then it is going to be with the US and the other nations in the TTCP activity, which includes Canada, Australia, New Zealand, and so on. That grouping is a very influential grouping of countries. Q95 Mr Jenkin: What constraints are there on that relationship? Ms Saunders: It is constrained under the details of the memorandum of understanding that binds it together. So it is all set out exactly what we will do under those different arrangements: what we will exchange and the terms and conditions under which information is exchanged. Q96 Mr Jenkin: Are we looking to break down obstacles that exist between us and other countries, and what are those obstacles? Mr Starkey: The obstacles are quite often to do with the point you have raised earlier about intellectual property. We are in the business of getting value out of the exchanges, getting gearing out it; we are not in the business of giving away UK intellectual property without there being a quid pro quo, and we do not decide those things ourselves in Dstl; they are part of an MoD policy. Q97 Mr Jenkin: What about access to what the Americans call their "black programmes"? Is that one of the obstacles? Mr Starkey: All nations have programmes which for one reason or another they wish to protect. Sometimes it is because of sensitive applications, sometimes because of sensitive technology, sometimes because of commercial sensitivity. All of those can provide a barrier. My experience is that when the UK has something which other nations are interested in, whether it is a piece of technology, a bright idea or simply experience in an area so we can offer constructive criticism, then quite often, as long as value of that sort is seen by another nation, we can have a productive dialogue and exchange. Q98 Mr Holloway: On dialogue, exchange and gearing, according to the Americans you were extremely helpful with sensitive stuff originally in Northern Ireland - DCM stuff. What would you have got out of that pretty much one-way street? Mr Starkey: It is very difficult for me outside of a confidential arrangement to be specific there, but indeed that was not a one-way street. The United States has huge capability there, on which we have been able to have a very good engagement with them. I am not trying to avoid the question; it is not a one-way street; there has been definite benefit to the UK in that field through the United States investment and through the technology they have over an enormous field because we are no longer dealing with a very narrow technical issue in this area. Q99 Chairman: On the Joint Strike Fighter, do you think you are getting enough of the information you need to give the Ministry of Defence proper advice? Mr Starkey: That is a very good example of where research which is being carried out in the UK has taken the UK to a high enough level of understanding to be able to persuade the Americans that we are credible people to talk to, and that is one of the areas where we have indeed been able to provide very good advice to the Ministry of Defence on the level of technical risk, likely performance and so on and so forth to do with that programme. Q100 Chairman: I am not sure that fully answers whether you are getting enough information from the United States. Do you think that you are? Mr Starkey: I think we are getting a great deal of information. There are always areas where there is further discussion, and indeed, on that programme there are further areas that are currently subject of discussion that are quite important for the programme. Chairman: That sounds like a "no". You are allowed to say "no". Q101 Mr Hancock: What about what we wanted to get out of this aircraft? Will the capability of that aircraft as was first foreseen be available to us as a nation or will it be a downgraded specification because of the Americans' insistence on not allowing us to have the complete package? Mr Starkey: I am not in the right position to answer that question. Chairman: I think that is probably right. Q102 Mr Jenkin: Can I just ask a more general question? There is a sense that over the years we have less and less to put on the table relative to particularly the United States. Mr Starkey: There is a danger of that if one does not invest in the appropriate research programmes that generate that. Q103 Mr Hancock: You have to know which ones to go for. Mr Starkey: Certainly. Q104 Mr Jenkins: I am sorry to labour this point, but this Ploughshare Innovations Limited is a limited company. Who actually owns it? Do you own it or does the MoD own it? Ms Saunders: We are part of the MoD so it is owned by the Secretary of State for Defence. Q105 Mr Jenkins: There are very subtle differences here. If it were at any time in the future to be packaged up and sold in the market place to raise capital, who would the money go to? Would you get a share or would it all go to the MoD? Ms Saunders: That would be something we would have to discuss with the Finance Director at the time. Q106 Mr Jenkins: But it is not clear. Ms Saunders: There are no guarantees. Q107 Mr Jenkins: I am not clear who owns this company. Ms Saunders: The Secretary of State for Defence owns the company and we manage it on behalf of the Secretary of State for Defence because we are part of MoD. Chairman: The Finance Director is listening very carefully. Q108 Mr Hancock: One last question on an issue locally, and it is about Portsdown West, and it is not about my home. It is about the plans you have and the investment that you are going to make there. You are going to be bringing an extra 500 people on to that site. Is the investment absolutely assured, that that will take place in the time frame that is outlined in the papers to us? Ms Saunders: Yes. Q109 Mr Hancock: That is a guarantee? Ms Saunders: Yes it is. We have the ministerial agreement, the £97 million maximum price that I have talked about. That includes the refurbishment of Portsdown West and that is due for completion in 2009. We have signed the contract, so Serco press the "go" button and yes, that will be happening. Chairman: There are a number of other questions that we may wish to ask you about but I think, in view of the time, and we have a number of other people to see, we need to ask them in writing rather than anything else. I apologise to those members of the Committee who have burning issues that they wish to ask. May I repeat what I said before, that your answers have been crisp, and answers to the questions we have been asking, and that has been a most refreshing and enjoyable experience. Thank you very much indeed. Memorandum submitted by Dstl Examination of Witnesses
Witnesses: Professor Sir Roy Anderson, Chief Scientific Adviser; Mr Trevor Woolley, Finance Director; Mr Mark Preston, Director of Business Delivery; and Dr Paul Hollinshead, Director Science & Technology Policy, Defence Science and Technology Laboratory, gave evidence. Q110 Chairman: May I welcome you to the second part of the morning. I wonder if you could perhaps introduce yourselves for the record and tell us what your role is. Professor Anderson, would you like to start. Professor Sir Roy Anderson: I am Roy Anderson, Chief Scientific Adviser to the Ministry of Defence. Sitting to my right is Trevor Woolley, who is the Finance Director, and beyond Trevor is Mark Preston, who is the Director in the Business Development Group within the Ministry of Defence, reporting to Trevor, and to my left is Paul Hollinshead, who is the Policy and Planning Director within the Science Innovation and Technology part of the MoD. Q111 Chairman: Could you describe to us, please, your role as the Chief Scientific Adviser in the Ministry of Defence in terms of research, particularly in relation to Dstl. Professor Sir Roy Anderson: Within the Ministry of Defence, the Chief Scientific Adviser's position is the oldest one within all government departments, established during the Second World War. Responsibility is as a top-level budget holder for the science and technology budget. That is the first responsibility, and that is to ensure that the Ministry of Defence gets sound technical and scientific advice on both capability today and also looking into the future about the strategic capabilities required. The second area is to do with the deterrent, other more strategic technologies in that area, and the third responsibility is as Chairman of the Investments Approval Board for the category A projects and, as a consequence of those two, I sit on the Defence Management Board of the Defence Council. Q112 Chairman: The category A projects are which projects? Professor Sir Roy Anderson: They are the big ones, as it were, which are over a certain value. Q113 Chairman: What is the value? Professor Sir Roy Anderson: About £300 million. Q114 Chairman: How many scientists do you have in the MoD, not including Dstl? Professor Sir Roy Anderson: Within the Science and Innovation top-level budget, that is, within the main building at Whitehall, then we have a subsidiary site at Shrivenham, which is the Research Acquisition Organisation, the current total is roughly 240. It varies between 240 and 270. Half are based at Shrivenham and half in the main building in Whitehall. Q115 Chairman: How do you decide which work goes to Dstl on which work those scientists do? Professor Sir Roy Anderson: We have a Board, a Science and Technology Board, which is populated by the customers, equipment capability and so forth, and the Services themselves, and we have discussions at the Board about the policy of directing research towards Dstl. The management of that is largely undertaken by the Research Acquisition Organisation in Shrivenham. If you think of a research council in the civil sector, research councils like the Medical Research Council and so forth have a body of staff who procure, monitor, and peer-review the quality of research and that is the function of the Research Acquisition Organisation. Q116 Willie Rennie: We received a note from the MoD recently about the DDA, and it said the DDA was established in 1999 to facilitate defence technology transfer into the civil sector and to broker civil technology back into defence. As you will have heard, in the previous session we heard that the Dstl had a light relationship with the DDA and there would be no gap to fill if the DDA were to go. Why is that the case, when they were supposed to take technology transfer out and in, and the Dstl is one of the main holders of technology? Professor Sir Roy Anderson: I am going to ask Trevor, as Finance Director, largely to answer this but I want to stress the point that Frances is made. A deep understanding of the research that is going on in an organisation is absolutely crucial to deciding what bits might be exploited, and I think it is more appropriate that Dstl, being best placed to make those judgements, has this intimate relationship with spinning out small parts of the organisation. That is the point I want to stress which Frances made. Mr Woolley: I think the key facts are that events have moved on since the Defence Diversification Agency was originally created. It was originally created as part of the Defence Evaluation and Research Agency, DERA, which of course has now subsequently evolved into Dstl and into QinetiQ. As Professor Anderson says, in terms of the spin-out of technology, as far as MoD-owned and funded technology is concerned in Dstl, the Ploughshares arrangement is the one that we think is most effective, and that is the route through which the spin-out is going. QinetiQ are heavily engaged in the civil and commercial sector anyway and are well placed to spin out technology there. As far as the spin in side is concerned, MoD procurement policies now encourage the pull-through of civil technology directly into the defence supply chain through the prime contractors, and it is therefore less clear what role there is in technology brokerage for the Defence Diversification Agency, and that is why its role has been reviewed, that is why it is the subject of a consultation document and a consultation period, in the light of which Ministers will take final decisions on its future. Q117 Willie Rennie: But the relationship has never really been there, from what we heard earlier on, so it is not really that the landscape has changed; the relationship was never there in the first place. Is that not the case? Mr Woolley: I think the landscape has changed. As I say, originally DDA was part of DERA, as part of the Department's in-house research and technology organisation but events have moved on. There is not a clear requirement from customers within the Ministry of Defence for the services that the DDA provides and there is not an evident requirement in the defence industrial community for that service and therefore we had to ask the question whether this is the best way of spending defence money, which of course is, as always, extremely tight. Q118 Willie Rennie: So the DDA were successful in the past, under the old structure, in getting spin-in and spin-out? Mr Woolley: What the DDA has come to be is a technology brokerage service. It is not directly spinning in or spinning out. Q119 Willie Rennie: It is facilitating the process. Mr Woolley: It has facilitated it. It is a sort of dating agency. The question is, though, whether it is essential to that process and whether the value it adds to that process is commensurate with the cost to the Department. 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 fro 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 that 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 spent, you are of the order of 10 per cent. 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 per cent 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 per cent 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. Q140 Mr Borrow: The Executive Chairman of QinetiQ made a comment that research spending needs to be increased by 25 per cent. Professor Sir Roy Anderson: And it should all go to QinetiQ - is that right? Q141 Mr Borrow: From what you have said so far, I assume you are not necessarily going to agree with him, although I assume you would not be unhappy if there were a significant increase. Professor Sir Roy Anderson: I think my prime task is to open up defence R&D to a broader community. In fast-moving areas of technology industry is often not at the front; it is other people who are at the front, and there are some very fast-moving areas of defence technology, as we are seeing, sadly, with improvised explosive devices. The Web, in the notion of the flat Earth, as it were, has made technology move very quickly so we have to be exceedingly agile and we need to bring in some of the best and brightest minds from university. If QinetiQ wants to collaborate with some of those and come in and compete for moneys, fine, but to believe that we should favour QinetiQ over others - we choose the best people. Q142 Chairman: If I may interject, I think you are being a little tough on QinetiQ there because I think the context in which that answer was given by John Chisholm was the long-term decline of research in defence, and I do not think he was suggesting that it should all go to QinetiQ, although obviously he would like that. But do you accept that there has been a long-term decline in defence research? Professor Sir Roy Anderson: The statistics are in the Defence Industrial Strategy document. There is a graph in there which shows the percentage spend over time. I stress the point I started with, that I am a research scientist and it is my case to argue the point that we should look at this and analyse the trend very carefully. Mr Woolley: I think it is the case that there was, from the late 1980s, a policy decision by government to spend less on defence R&D. So there has, since the late 1980s until around 2002-2003, been a decline in real terms in spending on research. That has now flattened out and over the last few years the defence research spend has been broadly level, or slight real growth in the last few years actually. Development spend is much more related to the phasing of projects in the equipment programme and, depending on the particular phase a project may be in, there will be years when development expenditure is a high and then subsequent years when it is a bit lower and then subsequent years when it is higher again. So it tends not to be as constant; it tends to be slightly more volatile for that reason. Q143 Chairman: But heavily prioritised towards the current theatres? Mr Woolley: Development spend is related to our procurement process. In terms of research spend, it is for the internal MoD customers of the research budget to prioritise research expenditure and, yes, obviously, some of the spend in recent years has been focused on research in support of operations. Q144 Mr Borrow: One final question. The Defence Technology Strategy talks about a wider debate on R&D investment in defence and the need for that. When is that likely to happen and what would your role be? Professor Sir Roy Anderson: That is very much going on at the moment. We have done two things. First of all, you will have seen that we did the capability alignment study of our £500 million more R&T spend and I was very keen that we set an example for other government departments in having external peer review of that research for its quality and alignment, despite the fact that there are some sensitive areas in it, and that we successfully managed to do. We have a Defence Science Advisory Council of about 240 individuals who are national authorities in various areas of science and engineering, and we are the first government department to subject our research to that degree of scrutiny, the same that the research councils do, and that will be an integral part of our practice now. By the way, one of your sister committees, the Science and Technology Committee, failed to pick up that we have been doing these things for some time. The second point is that for the broader £2.6 billion R&D, we are very much looking at the detail of how better to manage that at the moment and there is quite a broad debate on the management and direction of that going on right at this moment within the Ministry of Defence. We also need to bring in our industrial partners to that very intimately in relation to my earlier comment about providing joint investment R&D road maps. Chairman, someone asked about a comparative figure in the previous session about what Britain spends versus other countries. Chairman: We are just coming on to that actually. Q145 Mr Jenkin: What do we spend in comparison to other countries? How does it compare in quality and objectives? You mentioned the United States but, obviously, we are in a completely different category from them but a more accurate comparator might be France, for example. Professor Sir Roy Anderson: First of all, David King has made this point many times. Britain hits hugely above its weight and is second only to the United States in terms of science citation and international prizes and so on, so we start from a privileged position. This is in my view a jewel in the crown and Dstl, in my view, is a jewel in the crown in terms of its capability. This capability alignment study assessed something like 90 per cent of the projects to be world class or high national class, and I think most universities, including Oxford and Cambridge, would have been delighted if the external peer reviewers had said that, so I want to stress that point; there is real quality in Dstl, so it is a jewel. In relation to France, as far as we are currently aware, France can be a little more coy about some areas of its defence R&D, particularly on the deterrent side, but we are approximately equivalent to them. The United States we are behind. China is very difficult to obtain figures from but we are certainly well ahead of them at the moment. Russia, again, the figures are somewhat hidden but we suspect we are ahead of Russia at the moment. We are second equal, somewhere in that domain. Q146 Mr Jenkin: The impression one gets is that we seem to lose technology, intellectual property, faster than we are generating it, that we are going sub-critical in terms of what we contribute to our own procurement programmes. Professor Sir Roy Anderson: I think that is an older mantra. If you look at the university sector and you look at some of Dstl's current activities, I think we are in the process of regenerating. Frances talked about the encouraging recruitment at the graduate and PhD levels. I go down there quite a lot, I go to their conferences, and I am always impressed by the young people who come in there. There is this capture business, which is, as Frances mentioned, aged 25 to 30 or perhaps a little beyond, that may have bigger opportunities in industry but that is not an area of my worry at the moment. The area of my worry is that we have to keep Dstl as an open organisation which has very intimate collaborations with the university sector and the small and medium-sized companies to capture these fast moving areas of technology. Q147 Mr Jenkin: You paint a very positive and rosy picture. Are we spending enough to maintain that position? When you say that we need to spend more, do you think we are at a critical juncture? Are we at risk of losing this position? Professor Sir Roy Anderson: I think not at the moment. It is early days from the split from QinetiQ, it is early days from the settling down of Dstl; it needs very careful monitoring and nurturing. Frances also mentioned that we have this age distribution where you have a set of individuals who are very highly skilled areas of great importance to us who might be in the 50 to 60 year age bracket. Another one of my main tasks, working with Dstl, is to ensure that we are recruiting and growing, keeping the next generation of deep specialists. If I comment on some of the areas, even with our American competitors, there is a set of fields at Dstl that we are regarded as the world authority in. That is not a bad position in some sensitive areas. It is something to carefully watch and something to carefully nurture but at the moment I am moderately comfortable. Q148 Chairman: Professor Anderson, in answer to where we were in competition with other countries, you said we were behind some, level with others and ahead of others, which sounds vaguely unscientific as an answer. I wonder if you can possibly give us your best estimate of the amount of that. It might be best to ask for this in writing. Professor Sir Roy Anderson: I have the figures. Q149 Chairman: What I would like is the amount that several countries spend, both in the public sector and in the private sector, on defence research and those countries I think should include the United States, France, Russia, China and India and if you are able to give us those broken down, if you have them to hand, that would be fine and we would be grateful. Professor Sir Roy Anderson: China and India you may struggle a little bit with because the figures are more difficult to verify. Q150 Chairman: Presumably, you in the Ministry of Defence, with all your clever technology, make assessments of what these figures might be, so please give us your best estimate. Professor Sir Roy Anderson: The top three, for your information here, is 15 per cent spend of essentially defence expenditure in the US. Q151 Chairman: Fifteen per cent of what? Professor Sir Roy Anderson: Fifteen per cent of total defence expenditure. In the UK it is 9 per cent and in France it is 8.2 per cent. So when I said we were roughly equivalent to France... Q152 Chairman: Total defence expenditure in the United States is what? Professor Sir Roy Anderson: I do not know off the top of my head. It is a big number. Q153 Chairman: It is a lot, and 15 per cent of a lot is a very great deal more than 10 per cent of rather a little. Professor Sir Roy Anderson: £2.6 billion R&D spend. Q154 Chairman: I am being unscientific myself now. Do you accept the point that not only are we behind the United States, but we are falling further behind because of the proportion of their much larger budget that they put into research into technology? Professor Sir Roy Anderson: That would be true of every other country. Q155 Chairman: Yes, but it does not make it right. Professor Sir Roy Anderson: No, but I would still make the point that £2.6 billion at 9 per cent is not a bad figure and I also make the point that it is my role to argue for that to be increased. Chairman: All power to you. Q156 Mr Hancock: You talked about the unusual circumstances of this country being engaged in very intensive fighting in two separate areas. No amount of increased expenditure on research and development would essentially help the situation there immediately. It really leads me to believe that some of the solutions that you are seeking on behalf of those men and women are off-the-shelf solutions that are readily available. What does that do to your organisation when that pressure will not decrease but will increase, so the pressure on you is not to research and develop your own but simply to find out what is the best product for the men and women who need it virtually instantaneously? Professor Sir Roy Anderson: You have a series of horizons. The question to the Services with R&D is "What would you like very instantaneously, in other words, six months?" There is research very much related to solving problems on that timescale. Q157 Mr Hancock: Can industry react to that? Professor Sir Roy Anderson: Yes, we can, very much so. Q158 Mr Hancock: You might, but can the defence industries then fulfil what you come up with? Professor Sir Roy Anderson: Very much so. If it is an urgent operational requirement, when we get through the research into the capability provision, there are a number of specific examples where that has been achieved. Q159 Mr Hancock: Could you give us one that has come about in six months? Professor Sir Roy Anderson: Yes: improvised explosive devices counter-measures, and I am not going publicly into details but there is a continuing evolution of the technical capability there on a very fast time scale. Q160 Chairman: Professor Anderson, could you give us the figures that I asked for, please, in writing? Professor Sir Roy Anderson: Yes. Q161 Chairman: Would you regard us as people who are likely to try to help you in your battle with the person on your right. If you can give us some idea of the extent to which other defence research has suffered because of our concentration, as David Borrow was asking, on the immediate theatres of war and therefore our investment in the longer term has suffered, then it might be a good thing not only for you but for the country. Could we move on, please, to the management of defence research and technology. The NAO made several recommendations in its 2004 report. I wonder whether those recommendations have been implemented, or to what extent they have been. Professor Sir Roy Anderson: Providing clearer technology and strategy, we have already talked quite a bit about the defence technology strategy and that is a clear objective there. The management side of research I think has, as I understand it, given that I have been in his post two and a half years, has improved greatly and the intimacy of the relationship strategically between Whitehall and Dstl and the customers about deciding what your priorities are for research, both in relation to your question, what you would like soon, what you would like in three to five years, what the capability need is in 15 years. I think that planning is improving although there is more to do. If we take the metrics for R&D, one of my other, almost an obsession, is that we should have accurate databases on precisely what our R&D expenditure is at any one time, and these databases should not only include the bare facts, but they should have things about the detail of what the result of that research was, whether there is IPR associated with it, who is responsible for following that IPR, etc, etc, and what publications, what reports have arisen out of it. We have just constructed a database called STRIMS, which is a Science and Technology Research Management database, and this I think is going to pay great the benefits into the future although it will not pay benefits instantly. That provides metrics for R&D and what you got for it, basically. If we take the expertise and the role of the TLP and Dstl, I suppose, in the spirit of your previous comment, Chairman, I always am concerned about the scientific expertise within government, largely because we recruit very bright and able people, and I have been hugely impressed by the intake, and then we have lost the old science and technology streams in the civil service, where somebody could end up at a high level within the civil service being a deep specialist. The Ministry of Defence is very actively discussing this at the moment in the context of or in relation to the establishment of a new agency, the merger of the DPA and the DLO, and how we sustain specialist expertise lines for engineers and scientists. We have appointed head of professionals in both. There is a lot to do but it fits in with the broader government of objective with the Cabinet Secretary about specialist skills in government. If I am blunt, I think it was a mistake getting rid of the specialist science and technology careers stream. I think you had technology demonstrator programmes and technology exploitation. The demonstrator programmes is something we are very much thinking about how best to fund this with industry. We have a very high emphasis on technical demonstrators and sometimes, in relation to your comment about timescale, I could quote one which from concept to the demonstrators about a year, which is very pertinent to an operational theatre. Q162 Mr Hancock: Lord Drayson told us it was his intention back in February to have greater competition in research and development. It has taken some time to get that moving. What is your feeling on that and are there targets have been set for what will be sent for competition and what will not and how will the decisions be made? Professor Sir Roy Anderson: We have a stated target, and it is published in the Defence Technology Strategy, of competing about 60 per cent of our total R&T funds, that is the £500 million. Q163 Mr Hancock: By when? Professor Sir Roy Anderson: By 2009, and we are ramping that up at the moment. If you are thinking about that sum of money and you want to do this properly, where you have adequate peer review, you have to create an infrastructure to do this carefully. I am very keen on the open competition side because, as I mentioned earlier, I think in fast-moving areas of technology a lot of the innovation comes out of the universities and small companies. I also, with Lord Drayson's approval, commissioned a study, which will be published quite soon: where does innovation come from in the technology defence industry? At the top you have the big primes, then you have the medium-size companies, many of the small ones at the bottom and perhaps the university spin-out groups at the very bottom of this pyramid or food web. In that study we have looked at 36 technology trees in a great deal of depth and, unsurprisingly, a lot of the really innovative bits come out at the bottom. The top is still crucial, because they have the skills of system integration and defining the capability requirement. So the top is absolutely essential but we need to think about how we target some of this money, or the competition side, to make sure that we do not exclude small companies, who are often less agile and less informed. Q164 Mr Hancock: How would they be able to afford to take part in the competition that you are devising? Will this inevitably mean that there will be prime players in the research and development who in turn will systematically downstream the resources? Professor Sir Roy Anderson: There are two strategies to this. This is a slightly different approach so I will answer this in two parts. In the past, we have always felt we knew what we needed in technology and therefore we put out calls for people to bid for X, Y and Z. I am very keen that we actually also ask the community "Do you have interesting areas of technology that might have important defence and secure at security implications, not necessarily immediately but some time in the future?" All a small company has to do there is get on to the website, write half a page and say, "I have got this. It is terribly exciting" and then somebody from the Research Acquisition Organisation will go down and see them. Q165 Mr Hancock: So why did they tell us when they gave evidence that there was a problem in knowing what you wanted and how to go about getting part of the action? Professor Sir Roy Anderson: Fair comment. I think in the past we have been less transparent than ideal, and our relationships with the big primes are the strongest, so they are always very well informed but, if you look at the real powerhouse of innovation in the UK at the moment, it is often in those small companies. In October we launched the Defence Technology Strategy website up and running with the competition of ideas. I spoke to 600 people last week from the small and medium-sized company end to tell them, with the Director of the Research Acquisition Organisation, Andrew Beard, how to do it and we will be as synergistic or encouraging as we possibly can be. The universities are another bit of this. Q166 Mr Hancock: I think it is vitally important, and it is great news that we have got that far. Maybe that will go some way to address the criticism they brought to us when they gave evidence on it. What do you see as any potential downsides and how do you play a part in protecting us from a decline of that interest from the small players? Professor Sir Roy Anderson: As I said, we have not been as good as we should have been perhaps in nurturing them. We have not recognised that a lot of the innovation comes from that end. Now that we have finished a study of technology trees, innovation trees, we now have hard numerical data on the different types of capability or technologies, where the really innovative bits come from. Now we have that in front of us, which is very recent, that gives me a firm basis from which to say we have to spend a lot of attention on these companies and the spin-out groups in the universities. Sometimes they will do it with partnership because a company such as QinetiQ or BAe Systems could quite correctly argue that they know us as the beast much better and therefore if a small company collaborates with them, they are more likely to be successful in the research bid, and some of that will go on, I am sure, but as this community sees us as a more friendly, interested customer, I am hopeful. Q167 Mr Hancock: The French now have a pot of money which people can bid for for carrying out specific research that they themselves have generated, which they have persuaded the French Ministry to support in one way or another, with possibly no chance of it ever coming to success, but hopefully it will. Are we going down a similar route? Professor Sir Roy Anderson: We are doing two things. I said there was a competition of ideas: as one of them, going out to them. Also, again via the website, and the Research Acquisition Organisation, we are going to compete 60 per cent of the £500 million. This competition will be rather like writing a proposal. It can be detailed or it can be a short inquiry, and the Research Acquisition Organisation's responsibility is to sift these and to look for the interesting ideas and the well-written proposals. I may be biased because this has been a big hobbyhorse of mine, but I think we have been doing more at the moment than we have ever done before and we are going to do more and more. Mr Hancock: That is good news. Q168 Mr Jenkin: We have heard quite a lot about Dstl's role from Frances Saunders already. Is there anything you want to add from a strategic point of view, from your oversight point of view, to what Dstl's role is? Professor Sir Roy Anderson: One thing that is not commonly realised - and Frances hinted at it to fire a question concerning polonium 210 - is that Dstl is vital to this country, not just in defence but in many security areas. It provides deep technical expertise. It is not ever in the public eye. It might be the Home Office and others who take the lead, correctly, but the technical backup for this lies often, very often, in Dstl. So it is something we need to nurture and sustain and look after, in my view. Q169 Mr Jenkin: You do not feel the work that DERA used to do is compromised in any way by losing quite a lot of the intellectual property to the private sector? Professor Sir Roy Anderson: In the areas that are particularly important in the security and counter-terrorism and counter-insurgent areas, I think we have kept the areas of expertise that we need because these are very sensitive. We have already mentioned the IED areas, we have mentioned biological and chemical weapons, detection, counter-measures, protective suits, explosive forensics, etc, a whole pile of areas at a AWE in radiological detection and clean-up - those have been sustained within government control through Dstl. Q170 Mr Borrow: The jewel in the Crown, as you described Dstl, you are obviously very pleased with its performance, but do you have no concerns at all? Professor Sir Roy Anderson: One of you asked a question to Frances about physicists. I have concerns about university entrants and graduation in physics, engineering, mathematics, computer science, etc. These are all highly competitive fields in the civil sector. We rely on very good people here, so we will feel the effects in the future in recruitment in what used to be called the hard sciences - it is a bit of an insult actually to other areas. They are mathematics-based sciences often. We will feel the effects. I could recruit from Ukraine and China bucketfuls of mathematicians and engineers at the drop of a hat but, of course, as you hinted earlier, we cannot do that in security sensitive fields I think we are part of a larger effort through the Academy of Engineers and the Royal Society, which we have very intimate and good relationships with, and we have all got to strive to raise the excitement and stakes for being a scientist and an engineer. As Frances mentioned, a lot of young people get very motivated by contributing to security and defence. Q171 Mr Jenkin: On the narrower question of Dstl's actual performance, are its targets stretching enough? Are there additional targets which it should be given? Professor Sir Roy Anderson: I am new to Government targets so I might not have a good understanding of this. We are constantly evolving these targets in a learning experience with an agency. I want to come back to one of your earlier questions. The other slight concern I have - in a spirit of honesty here about it --- Q172 Chairman: That is always relieving to hear! Professor Sir Roy Anderson: --- Government departments are often in a cycle of customer knows best-driven research and I will make the point that we have gone through that cycle quite quickly and we have now orientated Dstl's work very much to customer needs. I do place the caveat that saying that the customer knows best in fast moving areas of technology and science is wrong. You must sustain a proportion of your activity, which is young people who have got a fascination with fields of science where, independent of the customer need, they can see very exciting things to do. We are evolving and iterating the balance between that at the moment. I think the Defence Technology Strategy hinted that we are looking to perhaps slightly increase the proportion which is not so customer-driven but is more inquiry enthusiasm-driven. Q173 Mr Jenkin: What proportion of the budget is that? Professor Sir Roy Anderson: At the moment it is probably about - I should give you a more exact figure here - ten per cent or so, something of that nature. Remember, to the very good scientists in Dstl the board there gives them incentives. To keep the very best you might have to say, "Four days a week you work on the customer problems but one day a week you can pursue your inquiry and inquisitiveness", so you can keep a more basic research programme going. In discussion with the Dstl board we need to think about all sorts of incentives for encouraging that. Q174 Chairman: In a spirit of honesty, Professor Anderson, you gave the impression just now, in answering about targets, that you thought in this field anyway essentially they were a load of drivel. Would you be able to confirm that is your view in a spirit of honesty? Professor Sir Roy Anderson: I think that inference would be wrong. I am not an expert here and, Trevor, you are far more experienced in setting targets. Mr Woolley: Clearly some of the targets are harder than others. Some of the more qualitative targets in this area are inevitably going to be difficult. I do think, though, it is important, as part of the governance of trading funds, that the owner of the trading fund does set targets on the agency, and this is what we do. The targets are evolving. We are trying to reduce the number of targets to try and make them a little more relevant and in some respects they have got tougher over the years. Q175 Chairman: I will take that as a financial answer rather than a scientific answer. Mr Woolley: I would like it to be taken as a governance answer rather than a scientific answer. There is a financial dimension. Obviously the interest of the Department as owner is only partly financial, it is also to ensure we get the best quality out of the agency, and the targets are aimed at quality as well as financial return. Professor Sir Roy Anderson: Chairman, can I correct one figure? I said 60 per cent of 500 million were going to compete; it is 60 per cent of 410 million. I apologise and would like to correct the record. Q176 Linda Gilroy: On the role of Dstl, an emerging argument of those who have difficulty in appreciating the merits of a nuclear deterrent is that climate change needs scientists who are in scarce supply. How does that argument look from where you stand as the Chief Scientific Adviser to the MoD? Given that climate change and energy security have got strategic defence relevance, presumably there is cross-departmental discussion amongst scientists on these issues? Professor Sir Roy Anderson: Yes, very much so. David King takes the lead in DTI and the Office of Science and Technology, but I asked DSAC, which is our Defence Science Advisory Council, about a year ago to produce a report about their assessment of what climate change predictions could do, or the implications for the MoD, in particular thinking about certain areas of procurement because we are thinking now about procuring for 15-20 years ahead. If you take issues such as helicopter lifting, high temperatures, cooling systems for land vehicles, protection gear and clothing, there are huge implications for us. It is a very, very active area of thought at the moment. I would not be telling the truth if I said it had entered heavily into our procurement thinking, but from the science and technology end it is a very active area of thought. Q177 Linda Gilroy: In terms of the supply of scientists? Professor Sir Roy Anderson: Of what global warming might imply for us as a defence activity. The supply of scientists is more a Met Office issue. The Met Office attracts very good quality people. If you talk to graduates now, climate change is something they are all aware of and if they can work in that field they get quite excited. Increasingly climate change models now have the environment and biological component. If you are talking about physics and high-end computing, perhaps there are problems. Q178 Linda Gilroy: In the competition between the two areas? Professor Sir Roy Anderson: No, in competition with the civil sector. Business high-end computing people are highly desirable in a whole variety of areas of employment. Q179 Chairman: You talked a bit about the supply chain, what about international collaboration in defence research? Would you care to answer about whether we are getting enough from the United States in relation particularly to Joint Strike Fighter? Professor Sir Roy Anderson: First of all, in relation to the previous comment, if you look at my facts earlier, the United States produces a very high proportion of the total science and technology output today. Scientists are there to try and solve technical or understanding problems, and the best strategy, in my view always, is to go to the best people in the world. Science is an international activity, it does not have borders. The web provides this communication instantaneously, so if you have got a problem to solve, you should do your collaboration first on a strategic judgment, in other words who you have a Memorandum of Understanding on, but you should also weigh into this equation technically who is the best in that field. That total international environment for science is changing very rapidly, as you know. There are some fields where China would not even have been on the horizon five years ago. I am thinking, particularly, of signal processing where suddenly countries like China have a significant activity there. We have got to think very carefully over the coming years about how we form these collective Memoranda of Understanding. At the moment they are dominated by our relationship with the United States for very good science and technology reasons because a lot of the very best people are there. That is an evolving area of thought for us. If you take Western Europe as a whole and you sum science output from Western Europe as a whole, then the gap between Western Europe and the United States is closing. Again, we need to think strategically over a ten to fifteen year horizon whether in some areas where there is deeper expertise in Europe, our research collaboration should broaden. That is important to do. With the Joint Strike Fighter, I am not well placed to comment on the detail of that. My own experience is in areas where there is no commercial sensitivity, your comment about black programmes, we get complete access with the United States and a very privileged position in many fields. Where there are commercial sensitivities and IPR issues, then inevitably - and it is the same this side of the Atlantic as the other - there could be acute sensitivities about sharing information with anybody. My understanding of the Joint Strike Fighter at the moment is that we are seeking the same product as the United States. There are very active and ongoing discussions concerning what technical information we require for sovereignty and security reasons and, by and large, those discussions have been going well. Q180 Mr Jenkin: Can I ask what role you think the European Defence Agency is going to play in all of this? Professor Sir Roy Anderson: Clearly we are being encouraged by our French partners to contribute to the R&D budget of the EDA. My own view, and of many of my colleagues in the MoD, is that we need to take this very slowly. The EDA has no experience of managing R&D and no skilled infrastructure to both commission peer review and manage it and this will evolve over time. At the moment our Ministry of Defence strategy, which I believe is absolutely correct, is to work with partners, particularly France because they have a big R&D investment, equivalent to ours, the others have a very small R&D investment, and choose areas where our joint activity would be more than the sum of the parts. In other words, there would be synergy. I can think of areas of missile guidance technology where France is very, very good. From the French aspect, I can think of areas of CBRN protection detection where we are stronger than France. It is a matter of choosing areas where synergy makes sense to us. Q181 Mr Jenkin: You believe essentially that bilateralism is far more in the national interest than working through a European institution which is inevitably going to be horse-trading on other issues rather than what is in the direct national interest? Professor Sir Roy Anderson: In the SIT and R&D community at the moment that is our attitude. We feel these bilateral relationships are very good, particularly with the French, and we see great benefit from continuing those. Q182 Mr Jenkin: Have we placed ourselves under any obligations by agreeing to the establishment of the European Defence Agency, or is it just a cipher of an institution which need not do anything unless we want it to? Professor Sir Roy Anderson: I cannot judge; I am going to focus on the R&D. My benchmark or metric is how quickly they develop a capability to manage R&D programmes and we will see how that evolves over the coming years. Q183 Chairman: Without any money I doubt it will be very quick, will it? Professor Sir Roy Anderson: We will see. Q184 Chairman: You said just now that the gap between Western Europe and the United States was closing and yet you said a little while ago that the United States was spending 15 per cent of its large defence budget on research and technology, whereas we were spending 10 per cent of our small defence budget and everybody else was spending less. How is the gap closing? Is it because we are cleverer than Americans by a factor of two or three, or is it that we spend the money better or what? Professor Sir Roy Anderson: My comment was related not just to defence, it was related to the science and engineering outputs of the nations across all sectors. If you take Germany, for example, Germany has a low defence R&D expenditure but a very, very high civil R&D expenditure in certain fields, in engineering, the motor industry, et cetera. My comments about the metrics of scientific output - these are published figures compiled by OST - if you sum Western Europe and you look at the United States, then the United States are still well ahead but the derivatives of the slope, there is evidence of Western Europe becoming more influential as a whole. In the defence sector, as you quite rightly point out, the United States is hugely ahead. I am making the argument in that earlier comment that we will close the ground in the defence R&D field. Q185 Chairman: And that is widening, is it not? Professor Sir Roy Anderson: Probably, yes. Q186 Chairman: Certainly, yes. Professor Sir Roy Anderson: In some areas, no. Q187 Mr Hancock: Is there any real reason why we should not want to close the gap? Professor Sir Roy Anderson: Defence and security are getting fuzzier now, so in the American jargon of homeland security, there are many technologies there which have dual use, in both defence and in protecting against terrorist activity in the UK. This is a hugely expanding commercial market and I can see interesting opportunities for UK industry in that field. There could be fields there, like detection, imaging and information processing, which will be of great advantage to the Ministry of Defence, the civil sector and the more homeland security sectors where, in my view, we should sustain a significant investment. Chairman: I think we have covered the ground, and we are going to allow you away for some lunch. Thank you very much indeed for a very interesting session and a very interesting morning altogether. Thank you to all the witnesses. |