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

Volume 736: debated on Monday 19 March 2012

Considered in Grand Committee

Moved By

That the Grand Committee do report to the House that it has considered the Public Bodies (Abolition of the National Endowment for Science, Technology and the Arts) Order 2012.

Relevant documents: 51st Report from the Merits Committee, 39th Report from the Joint Committee on Statutory Instruments

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.

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?

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.

My Lords, I will not repeat what was said by my noble friend Lady Hayter, or by the noble Lord, Lord Razzall, so I shall be brief. As my noble friend said, we are discussing a casualty of the quango bonfire. Given the praise that the Minister heaped on NESTA, I wonder: if it ain’t broke, why did we bother to fix it? However, that question was covered by my noble friend.

I have a couple of points. The Minister spoke of staff being transferred. Am I right in assuming that they will be transferred under TUPE arrangements? I see a nod: that is good. I, too, am interested in the question of accountability and found the title of “protector” interesting. It has a Cromwellian overtone, so I hope that it will not go to his or her head. My noble friend Lady Hayter made a point about the fiduciary duties of the protector to ensure that the charitable trust performs its duties and to report to the Minister. I, too, would be interested in the general activities—apart from ensuring financial probity—of encouraging innovation and investment in the kind of areas to which my noble friend referred. If a report is made by the protector to the Minister, will we be able to question the Minister on it? I would also be interested to know how trustees will be appointed in future. I will not comment on the more technical points made by the noble Lord, Lord Razzall, and await with interest the Minister’s response.

I thank noble Lords for their consideration of the order and will try to answer the questions asked by my noble friend Lord Razzall, by the noble Baroness, Lady Hayter, and by the noble Lord, Lord Young. I can assure my noble friend that there will be no attempt to control how the endowment is spent by the Treasury once the transfer scheme comes into effect. I hope that he will find that answer reassuring.

The noble Baroness, Lady Hayter, asked several questions. I will try to answer most of them. Of course I agree—as I did in my earlier speech—that NESTA has done a wonderful job. The idea is to set it free to be able to do even more. Its objectives were registered with the Charity Commission and the Office of the Scottish Charity Regulator. Perhaps the noble Baroness did not ask about the Scottish Charity Regulator, so I have given her a bit more information than she asked for—but it is jolly nice to know these things.

In answer to the noble Baroness’s next question, once NESTA is reconstituted as an independent charity and trust, it will continue to support innovative companies, both as part of a diversified portfolio invested for financial return and through grant funding and programme-related investment in line with the charitable objectives that have been cleared. I hope that the noble Baroness will accept that reassurance.

In answer to the noble Baroness's third question, the new NESTA trust and charity will be subject—as is the case with all charities—to charity law and charity accounting rules. There are currently four trustees of the charity. The appointment of trustees to the charity will be a matter for the charity itself. We understand that the NESTA charity intends to appoint a number of new trustees in April 2012. It has established a nominations committee to consider the skills and experience required for the board, and is currently running an open applications process for new trustees. There will be no government involvement in that.

I am as delighted as the noble Baroness that half the charitable trustees are women. We will see if that continues—or perhaps it will finish up as an all-women board, whereupon the men will start to complain that they are not getting in anywhere. However, we will deal with that when we get to it. She mentioned that the previous Government had done a lot of work with NESTA, and we have been able to take on a concern that is going extremely well. We think that it will be very happy with this new move.

The noble Lord, Lord Young, asked about the protector—like him, I immediately thought “Cromwell” when I heard the word. There are no plans for the protector’s report to be presented to the House. The Government will continue to collaborate with NESTA in the future. As I said, there is a previous organisation; the model is already in use by the Millennium Awards Trust. We are watching carefully how that runs.

NESTA promotes innovation and creativity to help tackle social and economic problems, and provides the independent, well informed commentary on innovation policy that we have been asked should continue. However, after consideration of the conditions set out in the Public Bodies Act, the Government have concluded that NESTA does not need to be in the public sector to carry out its work. Abolishing NESTA as a non-departmental public body and reconstituting it as an independent charity and charitable trust will give NESTA greater freedom to pursue its valuable activities, which noble Lords have praised this afternoon.

I thank noble Lords for their contributions to this interesting debate, and I commend this draft order to the Committee.

Motion agreed.