RT HON ALAN JOHNSON MP, SIR BRIAN BENDER, PROFESSOR SIR DAVID KING AND PROFESSOR SIR KEITH O'NIONS

24 APRIL 2006

  Q140  Chairman: A third of £1 billion will go then?

  Alan Johnson: That is not necessarily certain, no.

  Q141  Dr Harris: It is possible, given what has been said, that the total spend at the moment of £1.3 billion cannot be guaranteed to be maintained?

  Alan Johnson: I would be very surprised if there is any reduction on the current £1.3 billion. What we are saying is we will have a fund of at least £1 billion to start off with. As Keith says, the crucial point is that the Department of Health aspect of this will now be ring-fenced.

  Professor Sir David King: I want to underline that because one of my jobs is to see that R&D funds in government departments are well spent. First of all, I very strongly welcome the Budget Statement on this issue for a variety of reasons. One is it means that, as I understand it, what will emerge is not necessarily a merger of the two budgets but that the two budgets will be treated in much the same way as Research Councils. At the moment we have a Medical Research Council within the Office of Science and Innovation in DTI and we will see a similar structure emerging if not under a single head, which it may be, but, nevertheless, it means that money will be operated like a Research Council. That is rather different from the previous mode of operation. I do think this has significant advantages.

  Q142  Dr Harris: I agree with you, but I am still trying to chase the not insubstantial sum of £300 million. If you are ring-fencing £750 million, which is the Department of Health R&D budget, and you are retaining spending plans, which are welcome and increased of £550 million from the MRC, then why does that not enable you to say that there will be at least, or near enough, £1.3 billion? As soon as you say £1 billion it looks like you are ring-fencing out £300 million.

  Alan Johnson: I would guess the problem here is we need to look very carefully at the Department of Health and how they spend that money. I do not think it is so much a DTI issue as a Department of Health issue.

  Q143  Dr Harris: I agree with you.

  Alan Johnson: If we are going to ring-fence it, what does that mean? Ring-fencing is not a small measure to take, once it is ring-fenced it is ring-fenced. Probably the reason why we have said at least £1 billion and not said at least £1.3 billion is the need to make absolutely sure that some of that money which is classified as research spend in health at the moment is right to go in the ring-fenced bit.

  Q144  Dr Harris: If we were honest we would say what many people recognise that a significant amount of NHS R&D is used to prop up service and is not being well-used for R&D, and that is part of the basis, but you do not want to destabilise the NHS by sucking it all out into proper R&D spending. That would be an honest way of putting it and you might have a bit of heat from that in the first instance.

  Q145  Chairman: Secretary of State, do you agree with that?

  Alan Johnson: We are honest. The only point I am making here is I would be very surprised if it was less than £1.3 billion, but I think you have to keep some contingency plans there for when you look very closely at turning what is now a budget which has some discretion over it into a ring-fenced budget. I would not go into the areas that you are going into at all, Dr Harris, but I think that is a proper way to frame this, it is to say that there will be a least £1 billion. We are not saying there will be £1 billion, we are saying at least £1 billion. At least £1 billion could be £1.3 billion or it could be more.

  Q146  Dr Harris: You have to go into the areas I am going into, with respect, because there is an expectation of £1 billion. Everyone in the NHS recognises that NHS R&D has not been ring-fenced functionally for R&D, that is what Sir David has just said. I do not think it has been clear that that is a problem which this is part of a solution to. I think it would be made clear if it was stated. Perhaps we are not going to make much more progress there. There is a plan to identify what the governance should be of this overall budget, if I can call it that. What do you think are the advantages of the MRC type model of governance for this fund?

  Professor Sir Keith O'Nions: It very clearly says in the Budget Statement, after identifying these two ring-fenced budgets, that Haldane principles will be upheld in the deployment of that budget. The Haldane principle is quite hard to find, it goes back to 1917 when Lord Haldane, something of a machinery of government anorak in modern speak, devised that. The key thing is that this is arm's length from government and would, in effect, be enshrined under the Science and Technology Act which defines the Haldane principle. That Haldane principle is enshrined in the last Budget document. It says there has got to be a Research Council structure or something that is identical to it under the Science and Technology Act to deliver that. It is not a matter of do I think it is a good model, it is the only model we have got within legislation as it is.

  Q147  Dr Harris: That is very helpful. Why do you need this review of what the governance arrangement should be if you have got the Research Council type arrangement which you like so much, and which has Haldane and a whole series of other things, unless you can identify for me some benefits of the way the NHS or the Department of Health handles the R&D budget? Can you give me any?

  Professor Sir Keith O'Nions: At this stage it probably depends on where the boundary of R&D in the Department of Health lies. It may well be that some of their spend is not ideally suited to Haldane principles. Quite a lot of DTI's spend in business and so on is not under Haldane principles. I do not think it is sensible at this stage, until this has all been reviewed over the summer and into the autumn, to say automatically, "Every penny that is spent across that whole piece all comes under the Haldane principle" because I do not know the R&D budget well enough. It would almost be like saying, "Every penny you spend on innovation in DTI has to be a Haldane principle", which would not be the case.

  Q148  Dr Harris: It is not just Haldane, the Research Council model—which I support and I have been very strongly, by the same token I am not blaming the Government for decisions of Research Councils because they are independent—is well liked and also the MRC has an international profile. There is worry that obviously if there is going to be a governance arrangement half-way between the way the DH works and the way the Research Council works that some of the good things about the MRC's way of doing things may be lost. Can you reassure on things beyond the Haldane principle?

  Professor Sir Keith O'Nions: I am not running the review so I cannot give you any reassurance, but I would be exceedingly surprised if you could come to a conclusion where that sort of structure was inappropriate for a large part of that.

  Q149  Chairman: Sir Keith, are the terms of the review published?

  Professor Sir Keith O'Nions: No, I think they are a couple of weeks away. They are being determined by a team within the Treasury.

  Q150  Chairman: Who is leading that programme, Sir Colin Blakemore?

  Sir Brian Bender: No, David Cooksey is dealing with it.

  Q151  Dr Harris: He has been appointed to lead the review, but his precise terms of reference have not yet been.

  Professor Sir Keith O'Nions: The nature of the consultation will be published in a couple of weeks, as I understand it. There is a team in the Treasury, I will not name the individuals here because I will get some of them wrong. Certainly there is an individual from OSI as part of that team and there is an individual from the Department of Health and a couple of Treasury officials supporting those.

  Q152  Dr Harris: The CCLRC and PPARC are proposed to be merged, well they are not definitely going to be merged, this is a proposal unlike the OSI thing where you decided you were going to do it and you did it, that does not apply to this. Concerns have been raised about the fact that you should not separate the grant givers from the people who know and understand the machinery because the two are heavily linked and that is precisely what the current proposal does. Are you alive to those concerns?

  Professor Sir Keith O'Nions: Very much so. The current proposal is basically saying, "We believe there is a case for some merger of those activities and asks the question as to where should the grant-giving functions go". Then there is a consultation which is on-going. It has not come to a conclusion, it is a consultation. The motivation and driver for that is the nearly £600 million a year that we spend on large facilities in the UK, both indigenous ones and through subscriptions, usually more and more and more is spent with Europe. We are a large player by international standards, in that, we have the good fortune to have a budget regime for science. There is real scope for getting even greater benefit from that investment, particularly when you take account of the establishment of a Harwell science and innovation campus and a Daresbury science and innovation campus, also announced in the Budget. Again, it is part of the agenda of money invested in the science base, getting involved more and more in knowledge transfer and innovation. When you put that together there is really a case for putting this £600 million into a single body. Once you do that, because there are overlapping responsibilities for international subscriptions between PPARC—particularly in particle physics, high energy physics—and CCLRC, you draw out you have got two Research Councils and then you say, "What do you do with the grant giving, for example, in astronomy?" That is part of a consultation. I am absolutely alert to the notion of the dangers of separating the grant-giving from the expert knowledge of how it should be spent—but different people have different suggestions. The consultation will flush this out. I am not going to say here, but I think you would probably guess, how I would vote. It is a legitimate consultation and I am well alert to the important points there.

  Q153  Dr Harris: One issue is the issue of separating the facility from the people who use it and know it best in terms of peer reviewing applications for use of those. Another issue is the fact that EPSRC timescales are three years and PPARC's per force are usually much longer and the cultures are different. Can you give me any reasons that you have heard as to why giving the grant-giving powers of PPARC to EPSRC on the contrary might be a good idea?

  Professor Sir Keith O'Nions: People have different views. Some people simply make the observation, "That is how the National Science Foundation in the US do it, that is where astronomy is supported there. High energy physics and particle physics is in the Department of Energy", therefore it must be a good thing.

  Q154  Dr Harris: It is not very convincing.

  Professor Sir Keith O'Nions: I am not necessarily convinced by those arguments. The important thing established in this Budget is that over a ten-year period there is a tacit acceptance that the fundamental structure of our Research Councils is about right. They are large in number relative to any other country. No other country has as many as this, but they are efficient and effective. The Budget is proposing two changes, one of which I think has a huge prize, potentially, the linkage with health for the medical research, and the other of which has a significant prize in innovation at the large facilities end. Beyond that, that is the way in which the ship is going to sail for most of the Ten Year Framework.

  Q155  Chairman: Why did you not speak to the people involved in the Research Councils before these announcements were made? They came as much of a surprise to them.

  Professor Sir Keith O'Nions: This is part of a Budget and you will understand, at least as well as I do, the purdah that surrounds Budgets. This is not something that says, "This is what it is going to be". This is a consultation. The community has all the opportunity to give a view on the appropriateness or inappropriateness of these structures exactly as it does on the Research Assessment Exercise and so on. If there had been a decision on a new structure with new chief executives, and jobs were changing, and so on without consultation, then that would be a real issue. But this is a consultation. Whether you should consult as to whether you are going to have a consultation I think is a moot point. This is part of a Budget.

  Q156  Chairman: You must have been aware of this when the new Chief Executive of PPARC was appointed, that you were going to perhaps seriously interfere with proposals.

  Professor Sir Keith O'Nions: You say "must" and I will be totally honest with you. It was not in my mind at that point. People within the Research Councils themselves for some years, not unanimously, have pointed out the oddity of the present situation. The thing about the appointment of the new chief executive, and particularly Keith Mason who is the Chief Executive of PPARC, is this is an outstanding appointment. I would hope that within this new structure these outstanding people continue to contribute. There is a very big piece of territory there for them. I would not expect them to feel threatened and I do not believe they do.

  Q157  Dr Turner: I am still not entirely clear, Sir Keith, about what problems you are trying to address or resolve in, for instance, putting CCLRC and PPARC together. Would the final outcome, if it is a merger, be treated as and function as a Research Council because it sounds as if it will be a slightly different body?

  Professor Sir Keith O'Nions: It will be different. I think these large facilities are different, they require a long-term view. Dr Harris made the point that EPSRC only gives grants within five years and that basically they have very few commitments into the future. Investments in these big facilities are very long-term things. Just to give you the list, within the UK we have the biggest science investment in Diamond, the synchrotron at RAL. This a UK investment which is going to run for several decades. We have the neutron sources; we have the lasers; then jointly we have the international contributions to CERN, particle physics, the European synchrotron in Grenoble, a whole host of things. We have got a big budget relative to many countries and we are the envy of them. But there are two things we have got to do. One, we have got to be able to prioritise because the things people would like to do exceed any reasonable expectation of budget growth. If we double the budget over another 10 years we would not be able to do all the things we would wish. You have got to prioritise, you have got to know what is right for the UK, but more and more we have got to get more knowledge transfer, more innovation and more benefits for business out of these large facilities. We have not been in that world before; they have never been put together with the notion of, "What extra benefits will we get from those investments?" that is the change.

  Q158  Dr Turner: Will you ring-fence the current grant awarding budget that PPARC operates because it would be very easy for them to get sucked into large facilities, would it not?

  Professor Sir Keith O'Nions: Let me be clear, the science budget is ring-fenced and the Secretary of State has given assurances on that. It would be foolhardy across eight Research Councils to take one or all of them and say, "This is your budget forever more". Had that been done we would never have been able to accommodate the huge growth in biomedical sciences. There has to be shifts of budgets between Research Councils. The advice I give to the Secretary of State has got to be, "My advice is that you spend the budget in this way and these will be the optimum outputs we will get from this investment for the benefit of the UK". To ring-fence anything in a Research Council long-term I think would be foolhardy and I would never give that advice to the Secretary of State.

  Q159  Chairman: That was a very, very clear answer, if I might say, Sir Keith. Can I ask you finally, Alan, the National Institute for Energy Technologies, which was again mentioned within the Budget, what stage are your plans at for that? How would this research institute interact with the other Research Councils?

  Alan Johnson: The stage we are at is busily getting commitments from funders like BP, E.ON and Shell, that they want to be become involved in this, and getting everything in place. We have got the basic structure. The concept is at an early stage and there are many of the details to work through. We have got the basic idea here, that we can do something quite exciting to attract more private sector investment into energy research. David might want to say a word on this about how we would interact, but I certainly think it is an enhancement to the Energy Research Partnership. Indeed, I think the Energy Research Partnership in many ways has driven this. There are lots of details to go on this, but I think it is a very exciting development.