Examination of Witnesses (Questions 180-199)|
MONDAY 19 MAY 2003
Lord Howie of Troon
180. On the question of setting the objectives,
this is done largely with negotiation between yourselves and the
Treasury. Perhaps there are others involved too. In these discussions,
do you find that you and the Treasury have the same objectives?
(Mr Rees) The objective to improve productivity is
a common one between the two departments. At a general level,
I would say the objectives are pretty uniform. Sometimes there
can be differences in the analysis in terms of how to achieve
that but overall the objectives are pretty common.
181. Is the ultimate determinant your budget,
in which case the Treasury might have something to say?
(Mr Rees) Yes. Also, the evaluation is part of the
deterrent as well. The reason why there has been quite a strong
history of evaluation of programmes in the Department is that
there was an agreement in the mid-1980s with the Treasury that
gave the DTI authority for delegated spend on business/industrial
support in exchange for evaluations based on the rationale of
correcting market failure in the economy. Evaluations had quite
a strong role to play in that.
182. Has anything been built into these 20 schemes
that ensures an agreed information database and information system
to produce the information under which to ensure that evaluators
do have the necessary data to conduct an evaluation?
(Mr Rees) From my perspective of being a coordinator
of evaluation, that is an extremely important point. Where we
have cupboards full of evaluation studies over the last 20 years,
often they have been using different methodologies and have been
done in different ways. Whilst the evaluations have been used
to improve the cost effectiveness of individual programmes, it
is less easy, standing back from a point of new strategy, to compare
the activities using the evaluations. One of the key thrusts coming
through the new business support system is to harmonise the monitoring
and evaluation of the information so that it becomes easier to
183. What lessons do you draw from the experience
of rationalising down and looking at this whole process of objectives,
evaluations and public service agreements with the Treasury? What
lessons do you feel would be useful for other EU countries and
the European Commission to draw upon when they are reflecting
on their Green Paper?
(Mr Rees) There are some lessons on particular types
of activity or particular programmes that work well and some things
that work less well that maybe other countries might be interested
in. You have to bear in mind the context of the situation but
one lesson that emerges quite clearly is that programmes that
have very clear objectives and very clear understanding of the
mechanisms through which the programme will improve on productivity
and competitiveness tend to perform much better than ones that
are vaguer in their objectives. I think there is an issue there
about people being really clear about the objectives and the criteria
on which they judge success; what will be different as a result
of the individual activities. I would see that as quite an important,
generic lesson in addition to some of the lessons that emerge
on particular programmes that work better than others.
184. When we come back, I would like you to
tell us about one scheme which you regard as having clear objectives
and a clear way for it to impact on productivity.
(The Committee suspended from 6.12pm to
6.18pm for a division in the House)
(Mr Rees) When we looked at reviewing
the evaluations on the 20 largest business support programmes,
there were several that came out as particularly effective based
on the evaluation evidence. One of those was Link, which is a
programme to promote collaborative R&D. Another was the Smart
programme. Ray has worked on the Link programme.
(Mr Lambert) Subsequent to the work at
the beginning of the business support review, there has also been
an independently organised and supervised strategic review of
Link. Link again is a programme that draws funding from across
Whitehall and the research councils.
185. Could you explain what the EU Link programme
(Mr Lambert) It is not an EU programme; it is a UK
programme. The EU has a similar programme called Framework which
is to support collaborative research between universities and
businesses across boundaries; whereas Link is a longer running,
UK-based scheme that is financed by the DTI, DEFRA, by the government
departments and by the research councils.
186. Is there a difference between that Link
one and the Faraday one?
(Mr Lambert) Faraday is an activity that hosts mutually
beneficial exchanges of information between universities and businesses.
It is usually hosted at a specialised research organisation. It
provides a meeting place. It does not provide a lot of research
funding but one of its effects might be that people meet together
under its auspices and might generate ideas for a Link programme.
Faradays do not give a lot of support. There is some research
council funding of PhD studentships done in conjunction with industrialists
or industrial research organisations, so rather closer and direct
in its applications than the majority of PhDs but it is not a
large scale funding programme. It is a brokerage activity.
187. Is there co-ordination between those like
Faraday and the Link and knowledge exchange, which is DfES?
(Mr Lambert) I am not an expert on DfES schemes. There
is a flow of information and awareness between the people in the
department and research councils who manage the Faraday partnerships
and the people who manage the Link programme. They are effectively
coordinated, even if they are not formally run under the same
head. Link is organised under a number of particular technology
area programmes, where the funding comes from usually match funding
or from a government department and a research council, going
to one or more university departments and one or more businesses,
to work together at the research end. The strategic review that
was overseen by an independent committee had an economic impact
assessment, an economic evaluation, done by a consultancy firm
as part of the work programme. That is complete and is intended
to be published quite soon, as I understand it. Lord Sainsbury,
the Science Minister, has now agreed that the report should be
published. That has a number of proposals. This is an example
where we hope that the results of an evaluation will feed into
improving the effectiveness of the scheme. The government response
to those proposals probably will not be published for a while
because, as you know, there are a number of other reviews in train
in that area at the moment, an innovation review and a review
of academic and industry links, chaired by Richard Lambert which
will be reporting later this year. Ministers will want to take
all those streams of thought into account before reaching final
conclusions on Link. Link will be published soon. It is a concept
whereby the scheme has managed, overall, quite a good bill of
health. Also, the scientific research maintains a high quality
so it is on a par with traditional research funding. We are getting
quite good science and exploitation results.
188. Why is Smart such a good scheme? Why are
more firms taking to it than before? You talk about Link but Smart
is another one, is it not?
(Mr Lambert) Yes. Smart is direct grants to R&D
projects in small companies. Link supports collaborative research,
further back from the market, between universities and quite often
major, very technologically intensive small firms. Smart gives
individual grants on quite a small scale to individual small companies
to carry forward their R&D based technology projects, usually
a little nearer the market end. They would not be able to do without
it, basically. It is addressing a rather different part of the
market place and it is addressing the constraints that small firms
tend to face: cash, essentially.
189. Could you send us a good, substantial example
in terms of the EU, where you said some of our schemes in this
country have clear objectives and where it is clear that they
have a key input into raising productivity? Could you take one
of those schemes and send us a note on it and any documentation
you have about objectives, what its assessed impact is on productivity
and how that would be evaluated? Once we are into the objective
of raising productivity, it does appear a very specific objective
to programmes and it is very interesting, given that £750
million is spent, to see how that impacts on productivity. If
you could send one example that would be extremely helpful.
(Mr Rees) I would be happy to do that.
190. I would like to talk about these new schemes
and understand a little how they are being made complementary
to the existing and proposed EU programmes in entrepreneurship.
Could you explain how those link together?
(Mr Rees) That is quite a complicated area because
there are a lot of UK and EU schemes and different routes through
which funding can come. If local authorities are bidding for funds,
it is quite difficult to handle that at the centre but in terms
of schemes that are centrally managed any new business case that
is put to the investment committee must have an environmental
scan, where you will be looking to see that it is not reinventing
the wheel as far as the EU is concerned. The Department is also
being more proactive in seeking to draw down EU structural funds.
I was talking to some of the guys running TCS, for example, and
they are looking at ways they can get match funding for that.
Lastly, there are some natural complementarities between the UK
and EU schemes. I mentioned Link, for example, where companies
participate with higher education in the UK. A natural progression
from that for some might be to collaborate at an EU level but
the landscape is complicated.
191. When I listened to your answerI
do not want to misrepresent what you saidI do not leave
that answer feeling confident that there is a lot of work going
on about what happens in the EU and what happens here, matching
up resources one to the other. Is that reasonable? Could more
(Mr Rees) Certainly more could be done. There is a
lot that goes on and maybe because of my specialist knowledge
I am not best placed to answer that question but a lot goes on
at ministerial level. For example, the Competitiveness Council,
set up last year, looks to coordinate activity and entrepreneurship
across the EU. There is a lot that goes on at middle management
level. One of the Department's objectives is to do more in this
area and to improve co-ordination.
192. If there is more information in support
of that proposition that you are able to provide in writing, it
would be very valuable because one of the things that seems to
be coming through is that there is an overlapping and, if not
an overlapping, sometimes both EU and the DTI are doing the same
thing. That is an area which, with the Chairman's agreement, we
particularly want to explore in order to make sure that the funding
is not being replicated. The second issue is to do with how policy
design and provision is coordinated across the UK and EU schemes.
Where you have schemes which work quite well such as the regional
venture capital funds, the proposed early growth schemes and so
on, how do they match up with EU schemes such as ETF Start up
and the Seed Capital Action Plan. How do these things get put
(Mr Rees) There was a formal consultation that took
place with the EU to ensure that the way the scheme was designed
was appropriate. Some of the funding for the regional venture
capital fund came through the European Innovation Fund and the
European route, for example. There was a fair amount of co-ordination
that took place.
193. I do not know if you were in the room when
the previous evidence was being given but we talked a bit about
culture and the importance of culture. In America, failure and
going bankrupt is not quite such a stigma as it is here. I know
this is outside the area in which you specialise but do you think
there is more we could do to create a culture for the entrepreneur
(Mr Rees) If you look at the evidence, the start up
rate for new businesses is quite high in the UK. It is not a generic
problem but the problem applies in particular areas. For example,
the business start up rate which can be used as a proxy for entrepreneurship
is pretty low amongst women and ethnic minorities in particular
regions and areas. There are specific issues that need to be addressed
there. I do not know whether it would be fair to say that the
culture as a whole is lagging behind but there are some specific
examples where the UK could do better.
194. You are saying you have entrepreneurship
amongst women and ethnic minorities?
(Mr Rees) The evidence is that the start up rates
there are particularly low so that may be indicating that there
is a problem with the culture in that respect.
195. I do have another question. Why are there
no existing UK policies to support "intrapreneurship"?
Does that mean that the EU should not attempt to do this?
(Mr Rees) I am sorry, I did not hear the question.
Lord Fearn: Why are there no existing UK policies
at the moment to support "intrapreneurship"? I am talking
about "intra" not "entre".
Chairman: The last paragraph of the Minister's
evidence says effectively it is quite interesting but we do not
do anything about it.
196. Does it mean that the EU should not attempt
to do this either?
(Mr Lambert) I think we are slightly at a loss as
to what the term of art actually means.
197. The Minister's paper has given a paragraph
to it actually.
(Mr Lambert) I am sorry about that.
198. I am trying to help the people with us.
You are rather stuck on this, are you not?
(Mr Lambert) Yes.
199. If you are stuck on it we will await your
(Mr Rees) I think we will need to get back to you
Chairman: In that spirit, Lord Fearn, let us
run through what we would like further clarification on.
Lord Fearn: Clarification that when I said "intrapreneurship"
it means smaller, bringing it down to another level altogether.
From the evidence it would seem that the Minister attached quite
a bit of importance to that, so perhaps if you read the evidence
and then come back with a reply.