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Research labs: is more privatisation coming?

Top Lib Dem think tank looks to complete Thatcher’s revolution

Officials at the Department for Environment, Food and Rural Affairs are studying a report that recommends moving more public research agencies into private hands to boost value for money.

Getting Better Value from Public Sector Research Establishments was published this month by the CentreForum think tank, which is close to the free-market tradition within the Liberal Democrats.

The report says the labs would benefit from being more commercially-savvy and that it is “difficult to see” why Defra’s three research agencies—the Animal Health and Veterinary Laboratories Agency, the Centre for Environment, Fisheries and Aquaculture and the Food and Environment Research Agency—need to remain fully owned and operated by the government.

The report has been shared with Defra ministers and others on the management team. The Department for Business, Innovation, and Skills has also confirmed it has received the report. When asked by Research Fortnight whether the department would act on the recommendations, a Defra spokesman said in a statement: “We are continuing to review ways to maintain the high quality of these services whilst delivering the best possible value for money.”

The Defra agencies have emergency-response roles and cover areas including public and animal health, climate change, food security, environmental sustainability and marine biodiversity. Defra’s chief scientific adviser Bob Watson says value for money should not be the only reason for privatisation: public acceptance also needs to be considered.

One of the agencies, Fera, for example, is responsible for food emergencies and the government’s decontamination service. “If there were to be a radiation problem…would the public expect that to be managed by government…versus in the private sector?” he asks. “…Value for money is a valid factor but there are other factors as well.”

Chris Gaskell, former chairman of Defra’s science advisory council and a board member of its animal health and veterinary lab argues that decisions on private control or ownership need to be made on case-by-case basis: “There’s a balance between whether a more commercial environment would benefit the labs, and the level of public service that they necessarily need to provide,” he says. “Some agencies, for example, have public sector and societal responsibilities in the management of sudden and epidemic disease outbreaks.”

The report compares seven public research establishments that have become private enterprises, with another seven that are still owned and operated by the government. It also looks at three labs, including the National Physical Laboratory and the Atomic Weapons Establishment, that are owned by the government but managed by private companies, such as Serco.

The fully privatised labs include the analytical and diagnostic services provider LGC (formerly the Laboratory of the Government Chemist), the defence-technology company QinetiQ, and energy company AEA Technology. Government owned and operated establishments include the Defra agencies, the Defence Science and Technology Laboratory, the Food and Environment Research Agency, and the Health Protection Agency.

The report highlights the Forensic Science Service, which is due to close in March 2012, as an example of a poorly functioning body because of its large annual losses. In contrast, it praises the former public labs, such as LGC and QinetiQ, that have moved away from the model of government as main contractor and instead use technology transfer “at the heart of their business models”. It says that LGC and QinetiQ are also successful because they are free from constraints experienced in government-operated labs, such as slow decision-making, high overheads and a lack of access to capital and “industry best practice”.

Andrew Miller, the Labour chairman of the House of Commons Science and Technology Select Committee, told Research Fortnight that he disagrees with the report’s conclusions, especially on the FSS. “There is something about freeing research from the constraints of government which is good…but that doesn’t mean to say that every government lab is a bad thing,” he said.

Chris Nicholson, chief executive of CentreForum says it was the decision to close the FSS that sparked the idea for the study. The report was funded by several companies, including LGC and Serco who own or run former public research labs. Its conclusions need to be seen as objective, says Nicholson. “I suspected that the report might come up with conclusions like that, but we approached it in an objective way. It was important it was someone separate who carried out the report…who couldn’t be accused of approaching it with any preconceived ideas.”

The report was compiled by Quentin Maxwell-Jackson, a former partner at the financial services firm KPMG, where Nicholson has also worked. KPMG, along with other consultants, advised the government in 2001 on the value of QinetiQ at privatisation.

Maxwell-Jackson says: “We want to change the presumption that it has to be done by government. Given that you can remove some of these operating constraints and get more science for your money—surely that’s what you want to do.”

However, he also acknowledges that certain establishments, such as the AWE, need to remain in government ownership. “Clearly the UK has made a decision that it wants atomic weapons, and that needs to be done in a proper, safe way,” he says. “But the way the government does that, which is totally funded through the [Ministry of Defence], is to bring in contractorised management through Jacobs and Serco”.

The seven government-owned and operated research labs cost £1.3 billion a year and employ 14,000 staff.