2 The Department for Business, Innovation
and Skills
The role and responsibilities
of the new Department
5. The Department for Business, Innovation and Skills
is responsible for a broad range of policy areas. The 'what
we do' section[6] on
the Department's new website illustrates the breadth of its remit,
listing the main activities as:
- Better Regulation:
- BIS International;
- Business Law;
- Business Sectors;
- Consumer Issues;
- Employment Matters;
- Enterprise and Business Support;
- Europe;
- Trade & Export Control;
- Further Education;
- Higher Education;
- Innovation;
- Regional Economic Development;
- Science;
- Shareholder Executive; and
- Skills.
Responsibility for Further and
Higher Education
6. The most significant change in the new departmental
structure was the inclusion of the further and higher education
sectors. They find themselves incorporated into a much larger
department which also happens to be responsible for other urgent
and compelling priorities, namely helping businesses survive the
recession.
7. Mr Fraser noted that the Department needed to
action short-term priorities: "It is of course essential
that we maintain the focus on business" at the same time
as "aligning a longer-term set of policies which are essential
for the longer-term economic success of the country".[7]
Some representatives of the higher education sector were concerned
that the new Department's need to focus on businesses would lead
to their own sector being sidelined. Responding to the announcement
of the creation of the new Department, the General Secretary of
the University and College Union (UCU)[8]
stated:
UCU is very concerned that this merger seems
to signal that further and higher education are no longer considered
important enough to have a department of their own. The fact they
have been lumped in with business appears to be a clear signal
of how the Government views colleges and universities and their
main roles in this country.[9]
8. However, Universities UK[10]
said that it had been reassured by Lord Mandelson that universities
would be "central to the business" of the new Department,
though UUK added that it would not be "complacent" about
continuing to exert pressure on the Department to ensure that
higher education was not neglected. [11]
Furthermore, Baroness Warwick of Undercliffe, Chief Executive
of Universities UK, thought that the higher education sector had
the potential to benefit from being part of a "powerful"
department rather than being side-lined, as UCU feared:
It [DBIS] will have a strong place at the Cabinet
table and will therefore be very influential. We hope that is
something of which it will be possible for higher education to
take advantage.[12]
This view was recognised by Mr Simon Fraser:
there is a widespread view in university circles
that there is advantage in being attached to or being associated
with this economic department with the influence it carries in
Whitehall.[13]
9. Lord Mandelson had already highlighted the vital
contribution universities make to the UK and intimated that the
Department has a role to play in ensuring that their work is integrated
into the economy as a whole:
it is a department which is built around knowledge:
knowledge for its own sake; knowledge as the foundation for our
competitiveness, our character, our confidence as a nation. I
have found not one single vice-chancellor or principal who has
said to me, "We want in our university work to have nothing
to do with the economy" or "nothing to do with business".
[14]
10. This point was taken up by Mr Fraser. He emphasised
the capacity of the new Department to foster more productive links
between businesses and universities. In addition to the "financial
advantages" to universities of coming under BIS, there were
also "advantages in terms of the dialogue between universities
and businesses and economic policymakers which will be beneficial
to the country".[15]
In particular, he specified that there would be "synergies"
from "bringing business closer to the provision of skills".[16]
This view was endorsed by Universities UK, which stated that
"One of the strengths of this Department is that it brings
the business relationship to the fore which is really important
for us".[17] The
TUC, when it came before the Committee on 7 July 2009, argued
that there was "great potential for the new Department …
to bring skills and learning more generally into that kind of
business focus which is very important for the economy."[18]
11. Mr Fraser also argued that the structure of the
Department could enable businesses to more successfully exploit
scientific innovation. The new Department, he commented, would
create "synergies" not only by aligning skills with
business needs but also by "creating greater opportunities
for the commercialisation of science through the Innovation Programme".[19]
Mr Lambert, Director-General of the CBI, highlighted the benefits
of linking science, innovation and business needs:
The big potential gain is having a powerful economics
ministry with a big science budget, a responsibility for innovation
and the capacity to manage the university system in a way that
represents both its public good responsibilities and engagement
with the economy. Linking all of that together with a business
focus is potentially a big gain and we must all hope that that
happens.[20]
These benefits are not without risks. Mr Lambert
warned that if "the glue does not hold … maybe the priorities
would be skewed by current economic pressures and people would
regard it as a temporary arrangement".[21]
That said, Mr Fraser was confident that the Department would
be a "better delivery vehicle" than its predecessor
departments. "By bringing the two together, there is more
traction, if you like, behind the agenda." Looking ahead,
he argued that the Department should remain in its new form not
just for the sake of "stability" but more importantly
because "it has logic in its structure".[22]
12. We agree with the Permanent Secretary that
the Department has 'logic in its structure', with significant
potential benefits to the further and higher education sector.
Given the economic climate, the main challenge for the Department
will be to strike the right balance between the short-term immediate
priorities of helping businesses through the recession and the
longer term priorities of ensuring that the higher and further
education sectors are able both to flourish and to equip the future
workforce with the skills that businesses need.
The Merger Process
13. There has been a significant level of concern
that the Department's remit and structure had already been the
subject of too much restructuring. The further education and university
sectors had, in the space of two years, moved from being managed
within the former Department for Education and Skills—where
they were primarily linked into school education—to a new,
much smaller, focused Department, DIUS, where they were associated
with innovation.
14. The Innovation, Universities and Skills Committee
heard that the creation of DIUS in June 2007 had already had a
negative impact on policy momentum. Richard Lambert, Director-General
of the CBI told the Committee that "not much happened"
in DIUS's first year.[23]
In December 2008, the Capability Review undertaken by the Cabinet
Office on DIUS highlighted inadequacies in its management processes:
[DIUS] needs to do more to prioritise its resources
and to manage performance and risk across its new agenda. DIUS
needs to assess whether its inherited delivery relationships are
the right ones.[24]
15. The National Audit Office argued that one of
the new Department's main challenges was to ensure that the changes
initiated by DIUS in the further education and university sectors
remained on track:
[DIUS] has been managing continuing changes within
itself, its bodies and the sectors in which it operates [...]
Since BIS [Business, Innovation and Skills] has taken over the
former responsibilities of DIUS, it is important the benefits
of the change programme continue to be realised where this is
appropriate and feasible.[25]
16. When asked to comment on the impact of departmental
change on the smooth running of government, the Department assured
us that the merger had not caused any major or lasting disruption
to policy implementation. Ms Hilary Douglas, Director General
for Operations and Change for BIS, commented:
Issues that were raised for DIUS in their capability
review were around the setting of strategy, strengthening the
leadership of change, especially at the level just below the board,
and making sure that the board was visible in driving policy and
engaging with their delivery partners. Those were all issues that
were very important to BERR and remain very important to BIS,
so bringing together the change programme for BIS has not created
huge dissonances and differences of opinion. We really have been
able to bring together the experiences of both.[26]
17. Mr Fraser also noted that "DIUS was doing
some extremely good work on confident policymaking, new ways of
making policy, evidence based policy" and that the Department
had "sought to take the best of both" its predecessor
departments' experiences.[27]
18. Commenting on the merger process, Mr Fraser told
the Committee that the Department had moved "as fast as it
could" not only to ensure that disruption was kept to a minimum,
but also because of the pressing need for the Department's agenda
to be delivered:
We established a new management system; we have
established a new governance system. We are still in the process
of working through some aspects of that; for example, our risk
management procedures and so forth, which we are just refining
now. We have appointed our non-executive board members as well.
We have been able to move pretty rapidly over the summer to keep
the show on the road.[28]
19. Ms Douglas gave us an insight into the costs
incurred to create the merged department: the upfront-costs of
the merger logged so far were £160,000. This amount, she
continued, would be absorbed in the Department's current budget
and would later be offset by recurrent savings from the merger
arising from the removal of duplication.[29]
Mr Fraser explained that while signage was an immediate cost,
other costs were not so high, and that the Department would be
able to realise some economies of scale. In terms of specific
savings in staff costs he highlighted the fact that the new Department
had made reductions of "one permanent secretary, one director
general, with two further director general slots to come, plus
some director level jobs, so at the top we have achieved quite
a lot of integration and we have to work that through the system."[30]
20. Ms Douglas described how staff were being briefed
about departmental changes:
The Secretary of State had an all-staff meeting
with video conferencing to all the different sites; we have had
a conference of all the senior leadership; and we are now having
events with all the middle managers across the sites.[31]
At the time the Department gave evidence to the Committee
in October it was in the process of conducting its main staff
survey. The Department had already conducted a mini staff survey
of about 100 staff "just to get a feel on how they were reacting"
and the responses had been "pretty positive".[32]
Ms Douglas added that the "great majority of the staff were
recognising what the objectives and the mission of the department
were and were saying that they thought change was being managed
well."[33] Despite
the Department's confidence in its management of the change process,
Mr Fraser was fully aware that "stability" remained
one of the main risks facing the Department.
21. We note the Permanent Secretary's assurances
that the new Department has been created with a minimum of disruption.
However, any departmental restructuring has an impact, in the
short term, on policy implementation, as resources are diverted
to manage that change. The Permanent Secretary acknowledged that
"stability" was one of the main risks facing the Department.
Given the degree of departmental change experienced in the Department
and its predecessor Departments in recent years, we believe that
a sustained period of stability in the Department's structure
would be in the interests of all policy areas in its remit.
22. Furthermore, we are encouraged by the fact
that the initial costs of the merger will be met by existing budgets.
Delivery Agencies
23. The merger of BERR and DIUS resulted in the new
Department being responsible for 74 delivery partners. BERR had
40 delivery partners—which included two Executive Agencies,
eight Regional Development Agencies and nine Executive Non-departmental
Public Bodies with bodies as diverse as Consumer Focus and Capital
for Enterprise Ltd.[34]
DIUS had 34 delivery partners including one Executive Agency (the
National Measurement Office) and 22 Executive NDPBs which included
the Higher Education Funding Council for England (HEFCE), the
Learning and Skills Council (LSC) and the seven Research Councils.[35]
24. Mr Fraser described the nature of the delivery
agencies to the Committee :
They are not all delivery partners; some of them
are policymakers as well. It is important to say that they are
rather heterogeneous and different, so we have to look at them
individually and make sure that we are establishing the right
relationship with each organisation. They all have clear tasks
and mandates and they have agreements with the Department which
delineate their responsibilities. I do not think it is impossible
to have this set of organisations operating effectively, but clearly
there is a challenge, as you pointed out, in terms of coordination
and financial control and management control which we have to
address.[36]
25. Mr Fraser acknowledged that the number of delivery
agencies was one of the risks which kept him awake at night.[37]
That said, he argued that it was "too early" for him
to make a judgement on whether rationalisation of delivery partners
ought to be considered, and concluded that "I
am focusing on making what we have work as effectively as we can".[38]
Mr Fraser indicated that the delivery partners were kept informed
of overall departmental strategy with regard to them. In addition
to this, the Department planned to convene a second meeting of
all the heads of the agencies, which would be attended by the
Secretary of State. He also explained that the Department had
undertaken a review which examined its relationships with all
its delivery partners. The review had generated a number of recommendations
which were about to be presented to the Management Board of the
Department.[39]
26. Managing the Department's large number of
delivery partners represents a significant risk. We welcome the
Department's review of its relationships with its delivery partners.
We look forward to receiving early sight of the recommendations
arising out of that review and details of the Department's plans
for their implementation.
PSAs and DSOs
27. BERR's Annual Report and Accounts 2008-09 showed
the latest assessment against its three PSA targets[40]:
PSA 1
Raise the productivity of the UK economy (not yet assessed)
PSA 6 Deliver the conditions
for business success in the UK (some progress)
PSA 7 Improve the economic
performance of all English regions and reduce the gap in economic
growth rates between regions (some progress)
The Department also had five Departmental Strategic
Objectives covering the Department's key policy areas. They were
to:
- Promote the creation and growth
of businesses and a strong enterprise economy across all regions
(strong progress);
- Ensure that all Government departments and agencies
deliver better regulation for the private, public and third sectors
(strong progress);
- Deliver free and fair markets, with greater competition
for businesses, consumers and employees (strong progress);
- Ensure the reliable supply and efficient use
of clean, safe and competitively priced energy (strong progress)
and
- Provide the professional support, capability
and infrastructure to enable BERR's objectives and programmes
to be successfully delivered (strong progress).[41]
28. DIUS's Departmental Report 2009 showed its progress
against the two PSAs it led on:[42]
PSA 2
Improve the skills of the population on the way to ensuring a
world-class skills base by 2020 (not yet assessed).
PSA 4 Promote world-class
science and innovation in the UK (some progress).
That Department also had six DSOs (five of which
were not assessed), which were:
- To improve the skills of the
population throughout their working lives to create a workforce
capable of sustaining economic competitiveness, and enable individuals
to thrive in the knowledge economy (not yet assessed);
- To build social and community cohesion through
improved social justice, participation and economic opportunity
by raising aspirations and broadening participation, progression
and achievement in learning and skills (not yet assessed);
- To pursue global excellence, research and knowledge,
promote the benefits of science and society, and deliver science,
technology, engineering and mathematics skills in line with employer
demand (not yet assessed);
- To accelerate the commercial exploitation of
creativity and knowledge, through innovation and research, to
create wealth, grow the economy, guild successful businesses and
improve quality of life (strong progress);
- To strengthen the capacity, quality and reputation
of the further and higher education systems and institutions to
support national economic and social needs (not yet assessed);
- To encourage better use of science in government,
foster public service innovation, and support other government
objectives which depend on DIUS expertise and remit (not yet assessed).[43]
29. Incorporating both Departments' PSAs and DSOs
has resulted in the Department for Business, Innovation and Skills
leading on five PSAs alongside having eleven DSOs. Mr Fraser told
us the Department was not in a position to adjust the PSAs because
they were cross-governmental, but he agreed that eleven DSOs were
too many for a Department to manage. He explained that his Department
was looking to streamline the process and intended to include
new DSOs in its Autumn Performance Report.[44]
30. We look forward to considering the Department's
new DSOs and indicators when they are published in the Department's
Autumn Performance Report.
Future Departmental Reports and
Resource Accounts
31. The DTI initially combined its Departmental Report
with its Resource Accounts in its last year of existence in 2006-07
and BERR continued that practice in 2007-08 and 2008-09. BERR's
Annual Report and Accounts for 2008-09 therefore has two sets
of financial figures, the 'expenditure tables' and the resource
accounts. The Treasury has historically requested Departments
to present data on budgetary expenditure in their Departmental
Reports. This data—the 'expenditure tables'—is presented
in Annex 8 of the Departmental Report. It shows historic financial
information from 2003-04 and also projections for the remaining
years in the Spending Review. The resource accounts, which are
similar to a set of company accounts and present financial information
for 2008-09 are included in Chapter 5. The resource accounts have
been audited by the NAO.
32. BERR's inclusion of Resource Accounts in the
Departmental Report is in line with the Treasury's agenda for
all Departments to publish their Departmental Reports and resource
accounts together by June 2010. In its 2009 Departmental Report,
DIUS presented its Resource Accounts separately from its Departmental
Report. Mr Fraser told us that the Department intended next year's
Departmental Report would also incorporate the Resource Accounts.
That said, he acknowledged that consolidation of both BERR's and
DIUS's financial accounts represented a significant challenge.[45]
33. We commend the (former BERR) Department for
being one of the first to produce its resource accounts together
with its Departmental Report in 2008-09 (BERR's Annual Report
and Accounts 2008-09). We look forward to the new Department producing
a combined Departmental Report with resource accounts for 2009-10.
6 www.berr.gov.uk/whatwedo/index.html Back
7
Q 14 Back
8
UCU is the largest trade union and professional association for
academics, lecturers, trainers, researchers and academic-related
staff working in further and higher education through-out the
UK. Back
9
UCU website, UCU comment on new Department for Business, Innovation
and Skills, 5 June 2009 Back
10
Universities UK is the representative body for the executive heads
of UK universities. Back
11
HC (2008-09) 754-i, QQ 3, 29 Back
12
HC (2008-09) 754-i, Q 9 Back
13
Q 15 Back
14
HC (2008-09) 754-ii, Q 107 Back
15
Q 17 Back
16
Q 14 Back
17
HC (2008-09) 754-i, Q 13 Back
18
HC (2008-09) 754-i, Q 32 Back
19
Q 14 Back
20
HC (2008-09) 754, Q 86 Back
21
HC (2008-09) 754, Q 86 Back
22
Q 6 Back
23
HC (2008-09) 754-i, Q 54 Back
24
DIUS Capability Review: Supporting the Economy, Investing in Future
Prosperity, December 2008, p 11 Back
25
www.nao.org.uk/publications/0910/dius_briefing.aspx, para 2.21,
p22 Back
26
Q 19 Back
27
Q 19 Back
28
Q 10 Back
29
Qq12-13 Back
30
Q11 Back
31
Q 22 Back
32
Q 22 Back
33
Q 22 Back
34
http://www.nao.org.uk/publications/0910/berr_briefing.aspx, p
29-30 Back
35
www.nao.org.uk/publications/0910/dius_briefing.aspx, p 37-38 Back
36
Q 35 Back
37
Q 4 Back
38
Q 37 Back
39
Q 35 Back
40
Department for Business Enterprise and Regulatory Reform, Annual
Report and Accounts 2008-09, HC 447, p 20 Back
41
Department for Business Enterprise and Regulatory Reform, Annual
Report and Accounts 2008-09, HC 447, p 20 Back
42
Department for Innovation Universities and Skills, Departmental
Report 2009, Cm 7596, pp 28 and 38 Back
43
Department for Innovation Universities and Skills, Departmental
Report 2009, Cm 7596, pp 36, 42, 44, 46 Back
44
Qq 136 and 137 Back
45
Alignment (Clear Line of Sight) Project, Cm 7567, p 5 Back
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