Examination of Witnesses (Questions 80
MONDAY 21 JANUARY 2008
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.
Are you saying £10 million and £20 million is a minor
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 thinkif I am remembering the right numberis 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.
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.
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.
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 planthere
were several drafts over several monthswe made it clear
what the consequences of a various funding scenarios were.
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 STFCwe will come onto this laterwhere 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 madeI cannot argue
with those choicesto fund FEC and to put more into medical
researchbut the consequence of that is that other areas
have to contract and I accept that.
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.
So you are planning to cut £80 millionyou have said
it is a cut, it is not a re-allocation of resourceswhy
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.
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.
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.
So out of £120 million of cuts £40 million could be
reinstated following peer review.
Professor Mason: Yes, that is
I think it is important to have that on record.
Professor Mason: Absolutely, I
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
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.
You had to include, within your overall budget, part of EPSRC's
Professor Mason: That is correct.
Was that included?
Professor Mason: That was in addition.
We had a transfer from EPSRC as well. Essentially the merger was
Is flat cash the same as near cash plus non-cash?
Professor Mason: No.
Can you give us a little note on that because I am terribly confused
between flat cash and near cash.
Professor Mason: Yes.