Draft Public Bodies (Abolition of the National Endowment for Science, Technology and the Arts) Order 2012
The Committee consisted of the following Members:
† Blackwood, Nicola (Oxford West and Abingdon) (Con)
† Blenkinsop, Tom (Middlesbrough South and East Cleveland) (Lab)
† Burt, Lorely (Solihull) (LD)
Farrelly, Paul (Newcastle-under-Lyme) (Lab)
† Harris, Rebecca (Castle Point) (Con)
† Michael, Alun (Cardiff South and Penarth) (Lab/Co-op)
† Morgan, Nicky (Loughborough) (Con)
† Nuttall, Mr David (Bury North) (Con)
† Onwurah, Chi (Newcastle upon Tyne Central) (Lab)
† Opperman, Guy (Hexham) (Con)
† Rogerson, Dan (North Cornwall) (LD)
† Shepherd, Mr Richard (Aldridge-Brownhills) (Con)
Simpson, David (Upper Bann) (DUP)
† Whitehead, Dr Alan (Southampton, Test) (Lab)
† Willetts, Mr David (Minister for Universities and Science)
† Wright, Jeremy (Lord Commissioner of Her Majesty's Treasury)
Mark Oxborough, Committee Clerk
† attended the Committee
First Delegated Legislation Committee
Monday 19 March 2012
[Mr James Gray in the Chair]
Draft
Public Bodies (Abolition of the National Endowment for Science,
Technology and the Arts) Order
2012
4.30 pm
The Minister for Universities and Science (Mr David Willetts): I beg to move,
That the Committee has considered Draft Public Bodies (Abolition of the National Endowment for Science, Technology and the Arts) Order 2012.
To be clear, although the National Endowment for Science, Technology and the Arts will be abolished as a non-departmental body by the order, its future is secure. It is being reconstituted as an independent charity, with the national lottery endowment transferred to a separate charitable trust. No negative impact on NESTA’s work is anticipated as a result of the changes.
NESTA was established by the National Lottery Act 1998 with an endowment from the national lottery currently valued at £321 million. Over the past 14 years NESTA has promoted innovation through a combination of activities, in particular delivering practical programmes such as the Big Green Challenge, providing early-stage capital to innovative companies and carrying out research into innovation. NESTA also produces insightful reports, such as “Vital Growth” published in March 2011, on how the UK can best exploit innovation for economic benefit. Furthermore, NESTA contributed to the development of our innovation and research strategy for growth, which we published in December. One commitment of the strategy is for NESTA to develop a new UK prize centre and prize fund to run inducement prizes in challenge areas where innovation is most needed.
NESTA’s future was considered as part of the Government’s public bodies reform programme, given our commitment to reduce the number and cost of quangos. As I have set out, NESTA performs a valuable function: it delivers highly regarded research programmes. Although we want its activities to continue, it does not need to remain a public body for that. We therefore propose to abolish NESTA as a statutory body, using the Public Bodies Act 2011. The Department for Business, Innovation and Skills launched a consultation in October last year on the proposal to change NESTA’s status, and 85% of responses agreed with the preferred policy option as the most suitable choice. Furthermore, in excess of 90% of responses agreed that NESTA would benefit from increased independence from the Government. BIS carried out a full impact assessment of the transition and estimated a net benefit over 10 years of £1.84 million.
To give the Committee more detail of the changes, once NESTA is abolished as a public body it will be reconstituted as an independent charity, with the national lottery endowment held in a charitable trust. Both the charity and the charitable trust have been registered
with the Charity Commission, and the objects of the charity are sufficiently broad to allow NESTA to continue with current activities. All property and rights relating to the national lottery endowment will be transferred to the charitable trust; all NESTA’s other property and rights, and its staff, will be transferred to the independent charity. The new NESTA charity is the sole trustee of the charitable trust and will apply returns from the endowment to advance the charitable objects of the trust. The NESTA charity also plans to obtain income from other sources, which it can use for its wider objects. A final transfer scheme will be laid before the House once the draft order is made, and the transfer will take place at the same time as NESTA is abolished. Subject to parliamentary clearance, the changes will come into effect on 1 April.To maintain assurance of the propriety of how the national lottery endowment is used, the Government are appointing a protector—a suitably Cromwellian title in keeping with the traditions of the House—who will have a fiduciary duty to ensure the integrity of the administration of the trust and the propriety of its procedures. He or she may report any matters of serious concern to do with how the endowment is being used to the Charity Commission or to Ministers—a model already in use for the Millennium Awards Trust.
Following the change of status, NESTA will remain a UK-wide organisation, and I understand that it is keen to increase its levels of activity in Scotland, Wales and Northern Ireland. As required by the Public Bodies Act, we have obtained the consent of the Northern Ireland Assembly, and the Scottish Parliament will be considering our draft order on Wednesday. We have also consulted the Welsh Government and will continue to keep them informed of progress.
The Government are clear that NESTA, to whose work I have referred, will continue to play a useful role in support of our innovation and growth agenda. I commend the order to the Committee.
4.35 pm
Chi Onwurah (Newcastle upon Tyne Central) (Lab): It is a pleasure to serve under your chairmanship, Mr Gray.
Let me place it on record that the Opposition admire NESTA’s work over the past 14 years, and that we are grateful for its contribution to innovation, policy and ideas and its considerable investment in early-stage companies. As the Minister has said, it was set up in 1998 under the previous Government, to support and promote talent, innovation and creativity in science, technology and the arts.
We support the reconstitution of NESTA as a charitable entity. Indeed, it was my right hon. Friend the Member for Southampton, Itchen (Mr Denham), when he was Secretary of State for Innovation, Universities and Skills, who first worked with NESTA to move it towards charitable status. That was part of an overall approach by the previous Government to support innovation and growth. Indeed, it was part of an active industrial strategy, which this Government have only just started to think about, nearly two years into their tenure.
I have two main concerns and a number of questions. The first concern is quite broad. Has this decision been taken due to a desire to abolish as many quangos as
possible, to which the Minister referred, rather than as part of a coherent strategy for innovation? The well-publicised, recently leaked letter from the Secretary of State for Business, Innovation and Skills to the Prime Minister said that the Government are missing“a compelling vision of where this country is heading beyond sorting out the fiscal mess; a clear and confident message about how we will earn our living in the future.”
I could not agree more with the Secretary of State.
The order will give NESTA the freedom and independence to continue and extend its work to support Science, Technology and the arts, and that is welcome. But will the Minister assure the Committee that the order will not further reduce this Government’s focus on innovation as part of growth and reduce the likelihood of the Government producing a compelling vision for the future of innovation? Is it simply a part of the Government’s deficit reduction strategy?
In short, I am a little suspicious of the Minister’s motives. Was this a financial decision or a governance decision? That has not yet been made clear. Will the Minister comment on the progress in setting out more of an overarching strategy for promoting innovation and growth?
My second broad concern is on what steps the Minister will take to ensure that NESTA’s good work continues under this new governance model. How will he ensure that there will not be any mission creep or a shift in emphasis away from NESTA’s current focus? We all want NESTA’s excellent work to continue for years to come. What assurances can the Minister give that that will happen? Specifically, what assessment has been made of the impact on NESTA’s work of its new status? The Minister mentioned the Cromwellian protector and implied that his or her main duty would be fiduciary. Will the Minister say at this stage whom he will appoint, and how, and whether they will have responsibilities beyond merely accounting and finance? On a procedural point, can the Minister assure us that there will be no lag between NESTA’s abolition and its reconstitution? Will the ongoing performance of NESTA be assessed by the Government and, if so, how?
The Technology Strategy Board has a singular responsibility for technology, and the regional development agencies, which were abolished by the Government, also had a responsibility for technology, so will the Minister ensure that NESTA continues to work outside London with regional organisations, as well as ensuring that it works effectively with the Technology Strategy Board?
4.39 pm
Mr Willetts: I thank the Committee for its consideration of the order. Let me respond briefly to the questions that have been put.
The first question was about whether the changes will further reduce the Government’s focus on innovation. I think I detected a trap there, and I propose to step around that ingeniously formulated question, because in my view there is no reduction in our focus on innovation. Indeed, in December we produced a significant policy statement on innovation, which included discussion on the role of NESTA. As I said, we envisage NESTA
continuing to carry out all its current functions. Insofar as it raises funds for wider charity purposes, it could broaden its remit. That would be separate from the specific purposes that we have identified and want it to carry on with.On whether the purposes of the changes are financial or about governance, I will be frank: one argument—not the only one; not even necessarily the prime one—for the proposals is indeed to save some public money. Staff at the Department for Business, Innovation and Skills are currently involved in monitoring and supervising NESTA as a non-departmental public body, so the changes will release some staff resource in BIS, and I make no apology for that. The Government are committed to reducing overall civil service numbers. This will enable us to deliver our overall objectives for reducing BIS staff, and the people currently working on NESTA will be able to turn to other things. There will be some saving in relation to the administrative burden of monitoring NESTA, but NESTA itself will enjoy greater freedoms. It is accountable for continuing to comply with its charitable purposes, but NESTA will gain a bit more freedom and BIS will have some reduction in oversight responsibility—everybody gains.
On timing, we hope that all changes will be able to take place on 1 April—subject, of course, to discussion here today. On the Technology Strategy Board and the RDAs, we are great admirers of the TSB, which does a useful job. Putting the TSB’s core funding together with the additional funding we have allocated for our new catapult centres modelled on German Fraunhofer institutes, its funding is going up. We feared that the RDAs were not achieving a big enough economic benefit for their high costs, so the TSB has taken over, at national level, some of the valuable programmes that were previously being run by different RDAs. A very good example is the smart award scheme, which I personally think should never have been delegated to regions and lost its distinctive identity. It is once more, as it was originally created to be by David Young and the previous Conservative Government, a single, nationwide scheme.
On the protector, the role is defined in the trust deed, which established the new charitable trust. The powers include: to receive notice and papers for all meetings of the charity, committees of the directors of the charity and members of the charity, attend and speak at such meetings and table items for discussion, but not vote; to call for information and seek professional advice wherever his or her consent is required; to remove the charity as trustee of the trust and appoint a new trustee if the protector considers that the charity has acted in material breach of its duties as trustee. The short answer, therefore, is that the protector is there essentially to protect propriety and the proper use of charitable funds, not to pursue a wider policy objective.
In the light of the assurances that I have given to the hon. Lady and the Committee as a whole, I hope that the Committee will support the order.