Public Bodies (Abolition of the National Endowment for Science, Technology and the Arts) Order 2012

Lord Razzall Excerpts

Monday 19th March 2012 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

My Lords, let me start by reassuring noble Lords that, while this order will abolish the National Endowment for Science, Technology and the Arts as a non-departmental public body, NESTA’s future is secure. It is being reconstituted as an independent charity with the National Lottery endowment transferred to a separate charitable trust. There is no anticipated negative impact on NESTA’s work as a result of these 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, it has promoted innovation through a combination of activities. In recent years, its focus has been on delivering practical programmes, such as the Big Green Challenge, providing early stage capital to innovative companies and carrying out research into innovation.

NESTA’s future was considered as part of the Government’s public bodies reform programme and our commitment to reduce the number and cost of quangos. NESTA performs a valuable function—it delivers highly regarded programmes and research—and we wanted to see its activities continue, but it did not need to remain a public body. Therefore, the Government put forward a proposal to abolish NESTA using the powers of the Public Bodies Act, which, as noble Lords know, received Royal Assent in December.

BIS launched a consultation in October last year on the proposal to change NESTA’s status. Some 85 per cent of responses agreed with the preferred policy option as the most suitable choice for NESTA. Furthermore, more than 90 per cent of responses agreed that NESTA would benefit from increased independence from government. BIS carried out a full impact assessment of the transition and it is estimated that there will be a net benefit over 10 years of £1.84 million.

I should like to give noble Lords more details about 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 already been registered with the Charity Commission and the objects of the charity are sufficiently broad to allow NESTA to continue with current activities. If the noble Lord, Lord Warner, were here, I am sure that he would be pleased to note that, as he asked during the passage of the Public Bodies Act whether NESTA’s activities would be accepted as a charitable purpose by the Charity Commission.

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 objectives. A final transfer scheme will be laid in the House once the 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.

In order to maintain assurance for propriety of the way in which the National Lottery endowment is used, the Government are currently appointing a protector of the trust. The protector will have a fiduciary duty to ensure the integrity of the administration of the trust and the propriety of its procedures. He or she will be able to report any matters of serious concern about the way the endowment is being used to the Charity Commission and to Ministers. This model is already in use by the Millennium Awards Trust.

Following its change of status, NESTA will remain a UK-wide organisation and I understand that it is keen to increase its level 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 order on Wednesday. We have also consulted the Welsh Government and continue to keep them informed of progress. I commend this draft order to the Committee.

[Lord Razzall]

My Lords, I welcome the explanation given by the noble Baroness. Of course, I fully support this proposal, as does, it appears, virtually everybody who has been consulted. My one question relates to the retention of the endowment within the public sector. As I understand it, the Government do not want to transfer the endowment out of the public sector, as the endowment is held more in less in government securities and, if those were to be transferred out, that would lead to an increase in the public sector net debt. Could the noble Baroness assure me that the retention for national accounts purposes of the endowment in the public sector does not imply any form of control of those assets by the Treasury? Clearly, the whole purpose of doing this is to get this out of the public sector entirely. Will she assure me that this is purely a technicality and that there will be no attempt by the Treasury to control that flow of money?

[Baroness Hayter of Kentish Town]

My Lords, the central question facing us on this issue is to ensure that, after replacing NESTA with a charity, it will continue with NESTA’s fine role in helping to grow our innovation economy and have an appropriate level of public accountability and scrutiny, which are not the same as diktats from the Treasury.

NESTA was one of the very successful measures introduced by the last Government to improve the translation of new research ideas into business and jobs. It used lottery money, which is, after all, the people’s money, to make the UK more innovative. As part of that, NESTA forged some interesting partnerships between innovators and policy-makers. As well as the investors, community organisations and educators have been there from the start. Some £50 million of the £320 million of the endowment that the noble Baroness mentioned was invested in start-up businesses. NESTA became the UK’s single biggest seed capital investor, which is something that we probably all applaud. That meant investing in life sciences and the healthcare sector, diagnostics, devices and biomaterials. These went into areas such as immune regulation, using some interesting new research and translating it very closely to patient use, a new generation of nerve repair from an innovative material and even being able to find a means to regrow teeth where they have been lost.

That work continues through the running of programmes with health service providers to improve the way that patients can work with doctors in managing long-term healthcare and, in a different sphere, through helping arts and cultural organisations to develop new business models and reach new audiences. The work also continues through developing with local authorities ways of looking after the elderly and young people and funding new ways to increase the giving of time, skills, assets and money through the Innovation in Giving Fund—something that I think we all welcome. We hope to see NESTA’s work continue to develop, but it has also played a role in encouraging high-flying early-stage researchers to be aware of the possibility of working across other disciplines and communicating science and its innovations to the public. I hope that the Minister will assure us that that work will continue.

As the Public Bodies Act was going through, I never accepted the necessity of moving NESTA from the public sector. I thought that that was being done simply to add another tick to the list. However, as it is now about to become a charitable company limited by guarantee, I hope the Minister will reassure us that it will not be caught by a lot of Charity Commission rules which were developed for a different purpose; that is, to protect normal beneficiaries of normal charities. We hope that it will not therefore have to answer a lot of questions designed for a different reason. Perhaps more importantly, we are about to lose some public accountability over the expenditure of money which has been raised from the public. The Minister mentioned the protector, which is an interesting name. It seems that the protector will ensure that the money is spent only on charitable aims and that NESTA’s procedures have integrity—I think the Minister used that word—but the protector will not be able to ask whether better things could have been done or other projects helped. At the moment Parliament can ask those questions about how NESTA is fulfilling its role and about its record, priorities and effectiveness. It seems to me that this accountability will now disappear. Therefore, the population whose money was spent on the lottery and then given to NESTA will have no say over the new charity via their elected MPs, this House or the Government. I hope that the Minister can reassure us on that point.

I am delighted—I have a feeling that the Minister will agree with me on this—that half the new trustees are women, which is an improvement on the fact that 100 per cent were men when the body was in the public sector, so some good things are happening. However, who in the future will appoint those charitable trustees? Will there be any public accountability over the decisions that those trustees will take on the use of the endowment? As I say, I regretted the original decision that was taken in this regard but we have probably ended up with the best possible outcome. However, I hope that the Minister will reassure me as regards public accountability and how the charitable trustees will be appointed in future. I also hope that she will reassure us that she will encourage the Government to use NESTA as a vehicle for promoting innovative ideas. It will be much better placed to do that outside the public sector. I hope the Government will give it every encouragement to do that.