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Time to consider privatising research labs, argues report

The government should consider privatising more public sector research establishments, argues a report by Liberal Democrat-leaning think tank CentreForum.

It says privately owned or operated public-sector research labs achieve better value for money.

The report, Getting better value from public sector research establishments, was published on 14 November. It was compiled by Quentin Maxwell-Jackson, a former partner of the US audit, tax and advisory services firm KPMG.

The report concludes that it is time for the government to review whether some of its labs could be privatised or operated by contractor organisations.

In particular, it says, it is “difficult to see” why 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 government.

The report compares seven public sector research establishments (PSREs) that have become private enterprises with seven that are owned and operated by the government. It also looks at three government-owned labs that are operated by contractor organisations, including the National Physical Laboratory (NPL) and the Atomic Weapons Establishment (AWE).

Private organisations include the forensic science provider LGC, the defence-technology company QinetiQ, and energy company AEA Technology.

Fully government-operated labs include the Defence Science and Technology Laboratory, the Food and Environment Research Agency, and the Health Protection Agency.

The report argues that privately owned or operated PSREs are more efficient, particularly when it comes to using technology transfer “at the heart of their business models to drive profitable growth and increase employment”.

It says that the success of some of the privatised establishments—such as LGC and QinetiQ—is attributable to the freedom from constraints seen in government-operated labs. Such constraints, it argues, include slow decision-making, high overheads and a lack of access to capital and “industry best practice”.

The report highlights the Forensic Science Service, which is due to close in March 2012, as an example of a poorly functioning body, with “large, annual losses—over £50m in 2010”.

However, Andrew Miller, Labour MP and chairman of the House of Commons Science and Technology Select Committee, told Research Fortnight that he disagrees with several arguments in the report, in particular its comments 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 says.

“Where I disagree with them is their comment about the [FSS]. The value-for-money argument there has to be looked at as the value-for-money as it impacts upon justice … and I’m not convinced that an unregulated lab fits the bill,” he added.

Imran Khan, director of the Campaign for Science and Engineering, says that it is important to think carefully about the role of a PSRE before changing its status.

“It’s important to remember that PSREs aren’t just there to make money. They have strategically important roles for the UK, and we would have to be sure the market would preserve those functions,” he said.

“That doesn’t sway the argument conclusively either way… but it’s very hard to reverse these decisions once they’re made,” he added.

The report, however, notes that “all the [government-owned, government-operated PSREs] have met their financial targets, returning consistent surpluses.

“AWE revenues have grown very strongly since 2000, while NPL has managed to increase third party revenues by 16 per cent per annum since 2004,” it concludes.

It also acknowledges that the private non-profit companies Building Research Establishment and Natural Resources Institute have experienced “significant turnover dips” since privatisation.

The report authors say they have spoken to several former government scientists who have continued to work for their organisations after privatisation.

“Those we interviewed were very positive about the benefits to them and their careers of the move from the public to the private sector,” reads the report.

It says that it is time for the government to review the future status of PSREs:

“The UK coalition government is facing unprecedented pressures on government spending,” reads the report.

“Now is an ideal time to reopen the question about the future status of publicly owned PSREs. Fewer constraints mean better value for money for government, and we have seen that there are opportunities which merit investigation now,” it adds.

Ian Taylor, a former conservative MP and minister for science and technology, who says he has not yet read the report, told Research Fortnight that he thinks there are certain cases where there is a “strong argument in saying that government can contract for services with independently-owned laboratories.

“When I was minister, I looked at this on a sort of case-by-case basis with an open mind, not a presumption that it had to be owned by the government,” he says.

“If I’d had my way, I would have looked earlier at the national forensic laboratory,” he added.