Examination of Witnesses (Questions 1-19)|
INDUSTRY & SCIENCE
WEDNESDAY 9 MAY
Q1 Chairman: Good afternoon. Welcome
to the Committee of Public Accounts where today, we are considering
the Comptroller and Auditor General's Report, Big Science:
Public investment in large scientific facilities, we welcome
back Sir Brian Bender, the Permanent Secretary at the Department
of Trade and Industry, who is appearing before us as the Accounting
Officer, Sir Keith O'Nions who is Director General of Science
and Innovation at the Department and Professor Keith Mason, who
is the Chief Executive of the new Public Accounts Facilities
Council established only in April 2007. Mr Dunne and I had a very
interesting morning this morning when we went to the Diamond Synchrotron
at Harwell, which is certainly a fantastic piece of science and
we all pay tribute to what has been achieved there in terms of
putting us at the cutting edge of science in the world. Having
said that, if you look at figure 8 on page 21 you will see Diamond
Phase I and II, which we were visiting this morning, and the forecast
operating costs and the percentage change, you will see 89%. It
is not very good, is it? I wonder why these forecast operating
costs for these large scientific facilities are so consistently
Sir Brian Bender: It is not satisfactory.
The answer to your question, as you would expect, is for slightly
different reasons in different cases. As may have been explained
to you this morning, in the case of Diamond the early estimates
were based on the running costs of the previous machine at Daresbury
and those doing those estimates had not taken sufficient account
of the greater scale of sophistication of Diamond.
Q2 Chairman: You would have thought
that would have been fairly obvious, would you not?
Sir Brian Bender: They should
have done it. Cutting straight to the chase, we absolutely accept
the NAO findings that we need to improve our understanding of
how the operating costs might grow in proportion to more realistic
estimates of future demand.
Q3 Chairman: You have these big pharmaceutical
companies which will come in and use Diamond, which is really
a giant microscope which shines light at 10 times the brightness
of the sun onto cells and things like that. Mr Dunne understood
it all; I was struggling a bit more. One of the things I asked
them this morning was that if you have pharmaceutical companies
coming in and using these facilities and presumably making huge
profits for the future, how can we divert more of this for the
benefit of the UK taxpayer? After all the taxpayer paid around
80% of the cost of this facility. I just wonder whether there
is sufficient cutting-edge economic expertise at these facilities
to try to ensure that we get back to us, the taxpayer, what we
put into these things.
Sir Brian Bender: First of all
may I just say that it is primarily a science facility and therefore
there is going to be some competition for use of it, as may have
been explained to you. As I understand it, the plan that the operators
haveand Professor Mason as the Chief Executive may want
to say more about itis over its first phase for 5% of its
use to be by the private sector and they pay something close to
the economic cost of that; that would rise at a later stage to
10%. Neither the Government nor the Research Councils would want
that figure to be very much higher because it is there as a research
tool and alsoa benefit to industry rather than an industry tool.
Getting that balance right is quite important.
Q4 Chairman: If this is going to
be of such benefit to the UK economy, and presumably that is why
it is doing that, it rather begs the question. You can say this
is complete nonsense, I do not mind, but if it is so economically
justifiable, why can this money not be raised in the market in
the normal way? Why can we not privatise these decisions?
Sir Brian Bender: You are not
asking about private finance initiatives, are you? So far, none
of these projects has gone down the road of a private finance
Q5 Chairman: I know that was not
very successful at Teddington at the National Physical Laboratory,
but we were told this morning that that was a good reason for
not going down the PFI route.
Sir Brian Bender: None of them
Q6 Chairman: I am not talking about
PFI but private finance.
Sir Brian Bender: Just raising
the money; exactly. The purpose of it is essentially science rather
than wealth creation and therefore there is a public policy objective.
One of the experts on either side of me can elaborate if you want.
Professor Mason: It is important
to realise that what we are doing here with Diamond is primarily
a facility for cutting-edge science. Much of the research that
will be done in it will not deliver economic benefit immediately;
it will downstream, but there is this long lead-time research
aspect to it, which the machine is designed to fulfil. Our anticipation
is that it will be fully subscribed with high quality research
of that type. In order to make its capabilities more widely available,
we will be allowing some fraction of near-term industrial use,
up to 10% after the first five years, and you probably saw this
morning that there is actually space for 45 beam lines around
the Diamond and not all will be occupied for many years to come,
so if industry were to wish to utilise that capability, they could
in principle buy into the machine.
Q7 Chairman: The reason I asked was
that if you look at paragraph 1.17, you will see it says there
"Neither the large facilities road map as a whole, nor the
prioritisation of projects within it, is the subject of direct
consultation with bodies representing industrial interest in government
science policy". What I am worried about is whether this
is just one scientific elite choosing another scientific elite.
Professor Sir Keith O'Nions: There
is certainly more scope for consultation with industry. In this
particular case, there was experience from Daresbury, interest
from the pharmaceutical companies, and indeed aerospace companies.
The 5% was arrived at as a realistic level of use that business
might want. With other facilities, we are in a regime where we
are looking much harder in all sorts of aspects of spend, in science
and innovation for industrial use and business benefit and I have
no doubt in the future we will be looking much closer in those
places where it is appropriate to do so.
Q8 Chairman: Sir Keith, if you look
at paragraph 2.16, I have asked about this increase in operating
costs, but what happens in the future if a research council cannot
afford to run its facility at planned capacity? What do you do
then if you run out of money?
Professor Sir Keith O'Nions: Let
me first say that it has not happened so far and we have not been
in a situation where facilities have been built where research
councils cannot afford to run them and, of course, they have to
justify to us that they can afford to run them at the time of
gateways. However, the question is fair inasmuch that given the
inadequacy of estimating costs of ownership or through-life costs
of these large projects, you could envisage a time when there
was a shortfall in funds and research councils had to make very
serious choices about utilisation of them. We propose to follow
very closely the recommendations in the NAO Report which are very
helpful and we will put much more effort into more rigorous estimates
of through-life costs and hopefully move away from the position
Q9 Chairman: Why do you not always
have Gateway reviews? It says here in paragraph 2.4 on page 16
"The Energy Recovery Linac Prototype business case had not
been subject to gateway review in its own right". Why was
Sir Brian Bender: There was a
particular reason. May I again cut to the chase at the end? About
a year ago Sir Keith reached the view that gateway reviews were
not being used sufficiently rigorously and consistently and wrote
a letter then to all the Chief Executives making clear how they
should be applied and making clear they were mandatory. In that
particular case, as I understand it, it was seen by the Research
Council as an exception because it was a development of another
project that had already passed gateway 0 and gateway 1. That
is arguable and we have closed that stable door.
Q10 Chairman: Lastly, I was very
surprised to read in paragraph 2.6: "The RRS James Cook project,
for example, following an abortive attempt at direct recruitment
due to the lack of suitably qualified candidates, procured a project
manager from a consultancy company at a cost of approximately
£1 million for the design and delivery phase". Do you
have nobody in your Department or any of these research facilities
who could do this work? Why did you pay £1 million for a
Professor Sir Keith O'Nions: This
particular research ship is not just a ship but it is a very complex
ship. I do not want to go into the technicalities but it can sit
very stably in the ocean and make all sorts of observations; it
is a very unconventional type of ship. Individuals that actually
have project management skills, design skills for ships of that
sort are actually in quite short supply. It is not obvious that
you would have people even in the MoD with those sorts of skills.
There was really no option and the right decision was made to
get somebody in from outside. It is an arguable question as to
whether the costs versus the benefits are appropriate. However,
this is rather a good example of where this particular project,
which is quite a complex project, came in on cost and on time.
I would say it has probably been the right investment. We may
not build another ship of this complexity for another 10 or 15
Q11 Chairman: So there is no point
asking you whether this expertise will now be passed on within
the research councils or the Department.
Sir Brian Bender: That expertise
will not, but what the new Research Council that Professor Mason
is Chief Executive of is looking at and is doing is making sure
that there is much better spreading of best practice on project
management and on procurement.
Q12 Chairman: I should have said
in welcoming you Sir Brian that you are in fact a graduate of
Imperial College and a PhD, are you not?
Sir Brian Bender: I was.
Q13 Chairman: So you know about science.
Sir Brian Bender: I did.
Q14 Chairman: What did you do your
Sir Brian Bender: Physics, optics,
Q15 Mr Dunne: Despite the Chairman's
generous remarks, I am not a scientist and was very impressed
by what we saw this morning at Diamond, mostly because I did not
really understand what was happening inside the machinery. However,
I do have an interest and a concern about the state of scientific
knowledge within our youngsters coming out of education. For that
reason the work that you are doing is very valuable, but I would
like you to tell me how you assess how valuable it is when you
look at the impact on the wider scientific community in this country
from these projects?
Professor Sir Keith O'Nions: You
have put your finger on an extremely important point here: the
way in which we use our investment in science to engage the next
generation and actually how we manage those benefits. In looking
at Diamondand I will certainly not explain how it works
to you, I will go straight to the chaseit is a very good
example where you can excite young people and the research councils
have very good programmes of getting engagement of local people
and so on, as they are in the astronomy area. Engagement with
the community and developing the next generation of scientists
is a high priority in what we do. The bigger challenge is to know
how effective we are in doing that. We have had quite a lot of
work going on over the last two years. We have had the Tavistock
Group trying to look at methodologies to measure the success of
particular types of public engagement outcomes that you and everybody
else are looking for. It is actually quite difficult to unpick
what was the benefit of opening the doors on Diamond and getting
lots of people in, vis-a"-vis a television programme,
vis-a"-vis science ambassadors and so on. I do not
have the quick smart answer to it, but it is an extremely important
area and it is one that is quite high on our agenda and one on
which our ministers are quite focused.
Sir Brian Bender: One of the best
things we do is a Public Accounts ambassadors' programme
for schools which currently has about 13,000 young business people
from companies like Rolls-Royce and others going around and trying
to inspire kids at school.
Q16 Mr Dunne: I am pleased to hear
it because the current evidence suggests that there is a looming
crisis in the development of chemistry and physics graduates.
My understanding is that in the last two years five chemistry
departments have closed in universities and over the past 10 years
university chemistry enrolment is down by 18% and physics down
Professor Sir Keith O'Nions: May
I offer you a little bit of good news? We are obviously enormously
concerned about this and the sustainability of physics, chemistry,
mathematics and training of youngsters. I very much hope it is
not a blip, but applications to universities for October 2007
are significantly up in maths, physics and chemistry. One very
much hopes that it is a sign of turning the corner, but there
is quite a substantial increase for October 2007 applications.
Q17 Mr Dunne: I am pleased to hear
that. We touched briefly this morning on how the Diamond project
won out in terms of the bidding for these large funding projects.
We were directed to you to explain to us how this process works.
The NAO Report provides a chart of the gateway process, but could
you just briefly outline where you are going to take this because
it looks as though you have effectively used up your funding for
these projects for at least the next four years? What is happening
in bidding through the comprehensive spending review to maintain
some access for capital projects to money going forward?
Professor Sir Keith O'Nions: I
will try to be brief. The road map process that we have set in
place seems to be quite a pioneering approach which others are
adopting, so we believe this is a good process. Prioritisation
within that road map is key and there are some NAO recommendations
that we need to improve upon. It is a fact that we are committed
to the maximum allocation at the moment and there is no headroom
in that road map. In terms of the Comprehensive Spending Review,
we looked quite carefully at what level of capital we felt we
needed over the 2008-09 to 2010-11 period, building into that
an understanding that we would probably be prioritising more rigorously
than we have in the past now this is at a steady state. I do not
have the numbers in my head but I believe the notional number
that has come as part of the settlement letter to the DTI has
an adequate amount of money in that roadmap to meet future aspirations
as long as we rigorously prioritise and re-prioritise as recommended
by the NAO. I hope I am in the right area in responding to you.
Q18 Mr Dunne: Am I right in thinking
that only last month the Government cut £98 million from
the ring-fenced science budget to pay for overspends elsewhere?
Sir Brian Bender: Yes Mr Dunne,
you are correct, but let me just explain. What we did was to take
£98 million of accumulated end-year flexibility from the
science budget. These were decisions by ministers to deal with
pressures on the DTI budget that had not been foreseen at the
time of the 2004 Spending Review. That was less than 1.5% of the
2004 Spending Review allocation for science over the three years.
It still left a cumulative underspend in the Budget and then,
straight after that at the time of the Budget, the Chancellor
announced, you may recall, a settlement for science, both DfES
science and DTI science, over the next three years which together
comes to a 2.5% real-terms growth over the three-year period.
The money is going to continue to grow, but there was this one-off
taking from the accumulated underspend, as you say.
Q19 Mr Dunne: That reduction you
have just described will not affect any of these projects which
are currently under construction in terms of either capital or
ongoing support for operating costs.
Professor Sir Keith O'Nions: There
are no capital implications.