Select Committee on European Union Minutes of Evidence

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 compare products.

  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 is?
  (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.

Lord Fearn

  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.

Lord Chadlington

  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 answer—I do not want to misrepresent what you said—I 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 be done?
  (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 together?
  (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 in Britain?
  (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.

Lord Fearn

  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.

Lord Fearn

  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.

Lord Fearn

  199. If you are stuck on it we will await your written reply.
  (Mr Rees) I think we will need to get back to you on that.

  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.

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