Select Committee on Public Accounts Minutes of Evidence


Examination of Witnesses (Questions 1-19)

DEPARTMENT OF TRADE AND INDUSTRY & SCIENCE AND TECHNOLOGY FACILITIES COUNCIL

WEDNESDAY 9 MAY 2007

  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 underestimated.

  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 have—and Professor Mason as the Chief Executive may want to say more about it—is 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 initiative.

  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 so far—

  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 that?

  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 project manager?

  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 years.

  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 PhD in?

  Sir Brian Bender: Physics, optics, colour vision.

  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 Diamond—and I will certainly not explain how it works to you, I will go straight to the chase—it 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 by 7%.

  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.


 
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