Select Committee on Innovation, Universities, Science and Skills Minutes of Evidence

Examination of Witnesses (Questions 80 - 99)



  Q80  Chairman: To stop you there, two years ago you had a £10 million overrun on Diamond; last year it was a £20 million overrun on it; you have suddenly been presented with a £10.5 million bill for VAT on it. Are you saying that all those were planned deficits?

  Professor Mason: Forgive me for not having these numbers immediately to mind, but in terms of the capital phase of Diamond it was essentially on budget and on time with a minor variance.

  Q81  Chairman: Are you saying £10 million and £20 million is a minor variance?

  Professor Mason: Ten million on a budget of approaching £300 million is not a bad outcome for such a major project of that sort of complexity. The running costs were correctly estimated in 2003; the £20 million number I think—if I am remembering the right number—is the variance compared to the very early estimates made in 1997-98 before anyone had really done any work on understanding what Diamond was. This was highlighted in the PAC hearing and the NAO report but it is not surprising that at such an early stage in the project you do not get the numbers quite right. The VAT is one of those items which was unexpected and does cause us problems to the tune of £4 million a year.

  Q82  Chairman: Ten and a half it says in your submission.

  Professor Mason: The VAT on the running costs is £4 million a year. You may recall the reason for that is that the Treasury determined that we were liable for VAT whereas originally we had presumed we were not.

  Q83  Chairman: The final bit on Diamond is that on your Delivery Plan submission on light sources there was this final sentence which says: "Our ability to fully exploit the facility will depend on the success in making the savings elsewhere in this plan" so there is a clear statement there that in order to now run Diamond you really have to slash and burn elsewhere.

  Professor Mason: It is true to say that the base line budget allocation to the ex-CCLRC (the predecessor organisation) was not fully raised to compensate for the running costs of Diamond and ISIS Target Station II. Of course there are savings which come in from closing the SRS and that was factored into the calculation. It is true that we are in a situation with flat cash settlements, the buying power of the budget is eroded and yet we are doing more things. Diamond is a great thing, ISIS Target Station is a great thing but they do require more running costs which means that we have to restructure the programme in order to pay for them.

  Q84  Chairman: I came to the launch of the Science Budget Allocation as many other members of the Committee did. Sir Keith O'Nions and the secretary of state seemed to be a little taken aback by the sense of outrage there was from the physics particle, physics and astronomy community at that meeting. When were they briefed as to these changes which were going to hit their political wallets?

  Professor Mason: I cannot really answer that in detail because I was not in the room when they were briefed. All I can say is that in our draft delivery plan—there were several drafts over several months—we made it clear what the consequences of a various funding scenarios were.

  Q85  Chairman: So they raised no critique at all; they said it was perfectly fine to decimate the physics community.

  Professor Mason: I am in a position with STFC—we will come onto this later—where I have fixed budget and I have to make hard choices as to what we fund. I think DIUS are in exactly the same situation. They had a fixed allocation which was only constant volume, they had to make hard choices and we know the choices they made—I cannot argue with those choices—to fund FEC and to put more into medical research—but the consequence of that is that other areas have to contract and I accept that.

  Q86  Chairman: This is not the fault of the Government; this is entirely a consequence of your decision making within STFC.

  Professor Mason: There are two levels, obviously. The overall allocation of STFC is a consequence of the decision making at the DIUS level; the remaining consequences are a result of the consequences of the decision making in STFC.

  Q87  Chairman: So you are planning to cut £80 million—you have said it is a cut, it is not a re-allocation of resources—why are you actually upping that to £120 million given the fact that £80 million is going to be difficult enough?

  Professor Diamond: The answer is again remarkably simple, rather than avoiding consultation and not using peer review we have quite the opposite stance, which is that we want to get peer review involved in making decisions about which programmes we cut and which programmes we continue with. The extra £40 million is basically the by-back space, as we put it, to allow decision making to be made about which programmes are continued and which are cut. That decision making is a process going on now, a process that has been undertaken by our PPAN panel with the review by our science boards, so the community are fully involved in that decision making.

  Q88  Chairman: When Peter Main says that the physics community need roughly £20 million in order to actually plan sensibly for the future, you have already got £40 million in your back pocket of which you could actually pull some in. Is that right?

  Professor Mason: The £40 million is not free money.

  Q89  Chairman: What is the point in consulting on that extra £40 million if you have already made the decision to do the cuts?

  Professor Mason: I think you are misunderstanding. We have a menu of possible programme elements that adds up to more £40 million. We have created headroom in our programme on £40 million and we are consulting with our science advisory system as to which of that menu we will put within the £40 million. These are programmes which, in some cases, are already started but we are getting the priority information from the peer review system as to which of the possible menu things that we could do that we should do in the next few years.

  Q90  Chairman: So out of £120 million of cuts £40 million could be reinstated following peer review.

  Professor Mason: Yes, that is correct.

  Q91  Chairman: I think it is important to have that on record.

  Professor Mason: Absolutely, I agree.

  Q92  Dr Iddon: Could I just ask you whether you are running the current year's budget with an estimated surplus at the end of it? Do you have any money in reserves anywhere?

  Professor Mason: We are required to plan on a flat cash budget and we have a flat cash settlement. We have to reduce the running costs of the Council by £30 million a year. The Council has actually worked very, very hard to come up with a plan which delivers the maximum value for money from the allocation that we have received. In order to do that we are going to have to do some restructuring of internal assets and essentially we have forced an effort to reduce costs in this year so we can take those costs forward in order to pay for that restructuring. This is a device which is essential in order for us to be able to balance our books. It does assume that we can actually carry those monies forward and that is not a given, as I presume you are aware.

  Q93  Dr Iddon: What sort of figure are you talking about? £20 million? £30 million?

  Professor Mason: Twenty million; £17 million actually.

  Q94  Dr Iddon: What about reserves? You have not mentioned reserves.

  Professor Mason: We do not have reserves; we have to come out with a zero balance sheet at the end of every financial year.

  Q95  Dr Iddon: When the collision between CCLRC and PPARC took place I was under the impression that the physics budget was likely to be protected, at least that is what the physics community were led to believe. Now we can see that that has all crashed.

  Professor Mason: The budget I received to run STFC was the sum of the budgets that were previously in PPARC and CCLRC. I think again there is a lot of misunderstanding perhaps about that statement but I interpreted that statement to be that the Government were not motivated to bring the councils together in order to save money and nor did they, we got the full budget for the combined.

  Q96  Chairman: You had to include, within your overall budget, part of EPSRC's budget.

  Professor Mason: That is correct.

  Q97  Chairman: Was that included?

  Professor Mason: That was in addition. We had a transfer from EPSRC as well. Essentially the merger was cost neutral.

  Q98  Chairman: Is flat cash the same as near cash plus non-cash?

  Professor Mason: No.

  Q99  Chairman: Can you give us a little note on that because I am terribly confused between flat cash and near cash.

  Professor Mason: Yes.

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