WEDNESDAY 16 DECEMBER 1998

MR ROBERT FOSTER, MR PETER BUNN and DR ALISTAIR KEDDIE

  880.  Will these institutes be largely or exclusively academic institutions or could they be research institutions or private companies?
  (Mr Foster) I personally have assumed that the bidders will be universities.

  Chairman: Thank you. Dr Kumar is going to go on to the Faraday Centres. You have touched on that already to some extent.

  881.  Do you think the Faraday Centres are adequately funded at the moment?
  (Mr Foster) As I said, the first four are at a fairly early stage. It had been hoped that the DTI would have gone in jointly with the Engineering and Physical Sciences Research Council but it was not possible to do that. We think in terms of the funding that is now being proposed this is at the right sort of level. You cannot just pump money into this field because you are dependent on the skills there and our judgment is the amount of money we have put in for these four, which have been announced today, would be appropriate. We have considered larger sums but we thought that was not sensible.

  882.  You have considered larger sums?
  (Mr Foster) Inevitably in any new scheme, we analyse a whole range. If you put in too little, it is de minimis, but you can put in too much because there simply is not the people skill there.

  883.  Do you think that the Faraday Centres should be part of DTI rather than part of the research councils' responsibility?
  (Mr Foster) We would always want to work with the research councils; earlier it was shortage of finance in many ways so it was not feasible. We think it is highly desirable they should be jointly funded between the research councils and DTI (a) because of the need for commitment of the universities (b) because we think the DTI has the skills in defining the objectives, particularly objectives which are going to be beneficial to commerce, and we believe we have some very strong skills in terms of evaluation, which I was just referring to, and (c) because we want to share ideas with the research councils.

  884.  What is the difference between an Institute of Enterprise and a Faraday Centre?
  (Mr Foster) The Institute of Enterprise is very much like the MIT concept. One can imagine that it may not be just the most well-known British universities, but a very small number of exemplars. In the case of the Faraday Centres, many of these will be industrially sectorally based. I mentioned instrumentation and there is currently a Faraday between the National Physical Laboratory and the Scientific Instrument Research Association which is geared to instrumentation, so the people who will benefit from that all come from one sector, and that is true in other areas. There is also one, for example, with the Production Engineering Research Association between Loughborough and Pera, and everyone who is involved in the manufacturing sector can benefit from that, whereas the idea of an exemplar MIT style might cover the whole of engineering in a sense.

  885.  How do they differ from incubators?
  (Mr Foster) The incubator idea is a very specific idea whereby it is possible to take brand new concepts which come out of universities, or a company itself wanting to network with the university would set up there through an incubator, to take embryo ideas through to the point where a venture capital firm might be interested. So it is at the very early stage of product development.

  886.  Some questions on the Teaching Company Scheme. I think you said earlier that in today's White Paper the commitment there is to be doubled?
  (Mr Foster) Yes.

  887.  Can you just give us a brief outline as to why you think this scheme is proving to be a good success and from what level to what level is it travelling?
  (Mr Foster) The increase in funding which has been announced is that it has been at the level of about £10 million per annum and it will be in the future at about £20 million per annum. In terms of the number of programmes, that will grow from the 650 which there are currently to about 1,000 in three to four years' time. In terms of its effectiveness, I am quoting from memory, as I said earlier, it has been very heavily evaluated and for every pound that has been put in it has generated about 3.5 pounds, I believe, in terms of return. Those who have evaluated them, Sir Robin Nicholson for example, who was Chief Scientific Advisor in the past and more recently has been with Pilkingtons, has said that this has given very good value for the economy. Two things it has done is that people have gone from the university base having recently graduated or in their early post-graduate phase, into smaller companies, it is not just the larger companies, and they are going into companies that have not employed such people before. I think something like 80 per cent of them have then been offered employment in those companies so they have tended not to return to the university but to stay in the company.

  888.  Can I follow up with one observation on the amounts involved here from £10 million to £20 million. In your brief to us there were excellent statistics about the success of this scheme and it is something like £17,000 per job created and 58 jobs for every £ million invested in the scheme and in the LG project in Newport, Gwent, in Wales, £200 million of public money has gone in for (it is hoped) 6,000 long-term jobs, that is £30,000 per job created. So there is this public expenditure of £200 million there and yet for this more successful scheme for the whole of the United Kingdom we could only afford £20 million. The DTI's budget is a very low budget generally compared to other departments and you have to cover the whole of manufacturing industry with just a few million.
  (Mr Foster) I think this is a very interesting question. Obviously if there is a lot more money round that would be very nice, but one is limited by the number of people who can move and one is limited by the number of companies who take such people. These have been very successful placements. There is a lot of work that goes into making the placement. It is not something you can multiply by a factor and say: "Let's have it ten times the size next year." This takes time to build up and therefore a programme that is actually doubling is quite a significant increase. If people after that say this is so successful then perhaps that is something that has to be addressed at this stage.

  889.  When you talk about doubling, does it mean the scheme doubles on the same budget or the budget doubles?
  (Mr Foster) The budget doubles but the numbers do not go up. The number of programmes is 650 and this will go to 1,000, but the actual cost per scheme can vary, it depends on the sector and all sorts or reasons.

  890.  It is the budget?
  (Mr Foster) It is the DTI's contribution to the budget.

  891.  It is the input that is doubling and we hope that the output doubles but you measure it not necessarily in terms of numbers in the scheme.
  (Mr Foster) Correct.

  892.  We have heard a lot about the effectiveness or the ineffectiveness of Business Links and certainly some of the witnesses have referred to the role of the Innovation and Technology Counsellors as being patchy throughout the United Kingdom. What proportion of Business Links have access to an Innovation and Technology Counsellor? Moreover, what work has the DTI done to ascertain how effective they have been in executing their role?
  (Mr Foster) I think it is inevitable when talking to people about Business Links that one will get the feedback that they have been patchy. When they started off that was the case. Much of the more recent feedback has shown considerable improvement although this does depend enormously on the individuals it has been possible to recruit. I know areas like Bristol have been first rate with some outstanding people. We have had a study done by Public and Corporate Economic Consultants, a value for money study, which concluded that the business adviser services in general have been well received although it does not tally with what you have just said. In terms of the ITCs, our figures show that they visit on average about 1,500 small companies a quarter and that is quite a significant number.

  893.  1,500 per quarter?
  (Mr Foster) 1,500 small companies.

  894.  Throughout the United Kingdom?
  (Mr Foster) Throughout the United Kingdom.

  895.  How many small companies are there in the United Kingdom?
  (Mr Foster) Millions.

  896.  As a percentage of all companies how many have received a visit from their Business Link ITC co-ordinater?
  (Dr Keddie) I think some of the detail of numbers, Chairman, we may have to provide you with separately. I think we need to be careful when we are talking about something like three million businesses because more than 90 per cent of those are one or two people businesses or less. Most of the effort of Business Links is actually directed at businesses of between five employees and 200 employees. They do not exclude the very small businesses but a lot of the targeting is on the somewhat larger businesses so the proportions are not as bad as they look at first sight. If you want the precise numbers—

  Mrs Curtis-Thomas: I do not need the precise number, I need an approximation about how many of the target companies, the five plus companies, actually receive the services.

  897.  0.3 per cent on my calculation.
  (Dr Keddie) It is low, but I am not sure it is as low as that, Chairman. I think the other thing is that increasingly Business Links are there and are marketing themselves to provide what businesses are looking for which is business advice more generally of which the more specialist Innovation and Technology Counsellors are a part. Business Links are serving a very much wider community than just those 1,500 businesses. In other cases businesses are getting access to Design Counsellors. In other cases they are also getting access to Export Counsellors. I realise this Committee's primary interest is in Innovation and Technology Counsellors but, as always with these things, we need to be careful that we do not isolate one part of business activity and focus on that and that it fits into the overall business activity and need.

  898.  Would you be kind enough to let me have the cost of the services. I do not know if you have the average for the UK but certainly the top and bottom figures. How can the ITC role be made to be more effective?
  (Dr Keddie) There is already built into the system a mandatory requirement on Innovation and Technology Counsellors for continuous professional development throughout the year. It is 60 hours. That is in one sense not a lot but this is a mandatory requirement now so that, in fact, they must spend an amount of time on their own personal development. We have also introduced a system of national standards of competency as well which are all intended to drive the standard of advice up of course.

  899.  Is there any sharing of best practice between Business Links and similar organisations and what would those organisations be called?
  (Dr Keddie) I am not sure between other individuals. I know there is a sharing of experiences amongst Business Links themselves. That will also involve the Training and Enterprise Councils to some extent and I would guess some of the universities and colleges of further education but I am guessing to some extent here. I do know there is a system in place to encourage Innovation and Technology Counsellors to get together to share experiences and best practice and a lot of that is facilitated by external people not by Business Link people themselves.

  Chairman: You have had a very long afternoon, gentlemen. We are coming to the end. There is one final section with two questions in it. I hope you will bear with us. We are going to move on to promoting academic/industrial contacts. Mrs Curtis-Thomas will start and Dr Gibson will be our star performer and bring up the end.

  Mrs Curtis-Thomas: I declare an interest here as an engineer and I rather hope the response you can give us very much impacts upon my professional discipline. You have chosen to support the Royal Society of Chemistry Technology Car Boot Sales which have been reported to be a success in bringing together companies and academic researchers from different disciplines with common interests and a common purpose. What are your plans to extend this activity into other areas of engineering?

  Dr Gibson: It just slipped out, didn't it!