Q36 Sir Geoffrey Clifton-Brown: That was a long answer to demonstrate your current strategy, but clearly any Government needs to adapt to what is going on in the world. If the Americans or the Europeans are crowding out final-stage investment and this company that has had £15 million of initial investment—just to use it as an example; I am not expecting you to comment on the individual company—fails to get this product to market, but the US or the Europeans do because they fund it more towards demonstration, that is surely not a terribly sensible policy, is it?
Jeremy Pocklington: We are looking very closely at what is happening in the US, and also the EU’s response. I know it is something that my Secretary of State and also the Chancellor are very focused on. We adapt our strategy in response to that. That was what we said when we published the Powering Up Britain plan in March as well, but obviously it is something we need to keep doing in order to maximise the benefit to the UK.
Q37 Sir Geoffrey Clifton-Brown: When you say “keep doing”, you mean keep under review.
Jeremy Pocklington: Keep under review, yes. The balance here is certainty and continuity, but also sufficient flexibility to respond.
Q38 Sir Geoffrey Clifton-Brown: Ms Munby, what have you done to make it easier for businesses and others to navigate the complex net zero and innovation funding routes?
Sarah Munby: It probably builds on what I was just talking about. For businesses, the particular bit of this that we have the most direct responsibility for is the activity that Innovate UK undertakes in this area. That is the most business-facing bit of UKRI, just for those who do not know the landscape well.
In fact, I think they have just launched yesterday the latest version of their innovation hub. That is not net zero specific, because obviously lots of small business innovators are not just looking for information about net zero; they are looking to bring together the whole picture of financing, just as you were discussing, including innovation grants. That is allowing you to see the whole range of Government support that is available for innovative businesses in one place.
I do not pretend that is a panacea, but it is a useful and important step forward and it is something that Innovate UK will continue to iterate. That is the front door for helping businesses to understand the landscape.
Q39 Sir Geoffrey Clifton-Brown: What are you doing to assess the longer-term costs of supporting net zero technologies in this short-term budget? There are some longer-term budgets that have been indicated. The UK has set out budgets extending to 2033 and 2037. Is there not more we can do? We are talking about expenditure round to expenditure round.
Do you want to answer this, Mr Field? I am very happy for you to do so, because this involves the Treasury’s policy. Ms Morris has already alluded to this. If we are going to provide the confidence to research and then implement that research into industry, we are going to have to have a slightly longer-term financial view, or at least a longer-term indicative financial climate as to how this is going to work. What can be done?
Steve Field: I will come to the point on spending reviews but, listening to the conversation, we are not trying to drive the entire net zero transition from our research spending outwards. We have a strategy, and we have frameworks against which we hope the private sector will come in and do much of the transition for us.
One of the things that we do in the Treasury, for example, is provide R&D tax credits at a substantial cost to the Exchequer. That supports private sector R&D. Much of that private sector R&D, I imagine, in the years to come, will be focused on dealing with some of these net zero challenges, because there are massive opportunities for businesses if they tackle them.
Conceptually, we need to not think that it is all coming from the programmes in this portfolio and moves from there, which is why Mr Pocklington comes back to the issue of the broader framework, CfDs and the regulatory certainty we can provide. It starts with our legislative framework. All of that provides the certainty about the direction of travel that the private sector is able to invest against. Our framework is much stronger than that of many other countries.
When it comes to the issue of spending reviews, as I was saying earlier, we finance things through spending review periods. It is not in the research space, but we have just made a very significant commitment to CCUS.
Chair: That is carbon capture, utilisation and storage.
Steve Field: Yes, sorry.
Chair: Sorry, we are swimming in an alphabet of acronyms.
Steve Field: We always are. That goes well beyond this spending review period. We also have the Sizewell C programme, which goes well beyond this spending review period and well into the 2030s. It is possible to manage those longer-term programmes while coming back to the overall level of departmental spending on a three or four-year basis, which has been our practice.
Q40 Sir Geoffrey Clifton-Brown: I have a final question for you, Mr Pocklington, on the balance between public and private spending. If we are going to get to net zero by 2050, what sort of estimate has been made? This is the longer-term stuff. As you can see, I am a little critical of the Government for not putting more detail on the bones of how we are going to get to 2050. What sort of balance is there going to be between public spending and private spending?
Jeremy Pocklington: The significant majority of investment needs to come from the private sector, but that needs to be within market-based mechanisms, exactly as Mr Field said. Research and innovation is very important, but our role in the public sector is mainly about creating the markets and the certainty in the revenue streams in order to drive that investment, whether in electric vehicle charging points or whatever. Research and innovation is only a component of that.
We have estimates. The estimates are imperfect, as they inevitably will be, but they are in the Report. The £50 billion to £60 billion of additional capital investment needed each year from the late 2020s into the 2030s gives us a sense of scale. A significant ramping up is needed. That will then need to ramp up again, but I do not have a global total with exactly the amount of investment that will be needed by 2050. There is too much uncertainty around technology pathways and costs to focus on that in detail. The ranges would be too wide.
What we need to do is, sector by sector, provide certainty, demand signals and investment signals in a very strong way. We have done some of that; I am sure there is more to do in the years to come.
Q41 Sir Geoffrey Clifton-Brown: Finally, Mr Field, we have talked about the complexity of the system and how it is inevitably going to need to change. Mr Pocklington says he is going to keep this international competition under review. When you get a new business case in the Treasury, you say it might come out of that pot of money or it might come out of another pot of money, but it makes navigating for potential investors extremely difficult. Can we not, when we change and introduce a new system, make sure that there is a new, clear financial pathway as to how you are going to fund those new systems?
Steve Field: We are trying to provide some clarity on those pathways. If you look at the latest green finance strategy, we did some sector road maps where we were trying to make it clear, for different sectors—because that is how the private sector will come at this issue—what money is available and where the support would be available. We are trying to provide more clarity about that.
Q42 Peter Grant: Ms Munby, I want to come back to the question of the transition between research, development and innovation, and turning it into a commercial reality. A lot of the time, your Department will be responsible for whatever part Government play in assisting and encouraging the research. When it gets to the stage that they want somebody to pick up that research and turn it into a marketable product and service, will it still be your Department that leads for the Government on that, or will it transfer to the Department for Business and Trade?
Sarah Munby: On the question of who leads overall on all the different levers that you need to help an innovation scale from the end of the research pipeline right into deployment, there is no one Department that has overall responsibility for that.
There is a series of questions about funding and financing in which the Treasury has an important role. There is a series of questions about tax policy, which will be Treasury-related. There is the British Business Bank, owned in DBT, and the catapults sitting in my Department. Again, that is such a big and complex problem that many parts of Government have to act on. There is not one place that owns it.
I will take the opportunity to do a plug for the work we are doing on the science and technology framework across Government, in which one of the 10 priorities is around scaling and growing, exactly in the way that you are describing. That is an HMT lead. They are the SRO—senior responsible owner—for that topic across Government, responsible for drawing together the strands of thinking into a coherent strategy. While not all the delivery tools sit directly under HMT control, HMT has responsibility for making sure that we are coherent in that space.
Q43 Peter Grant: I will pass that on to you then, Mr Field. From the Treasury point of view, given the enormous complexity that has been described, sometimes you could have two different Departments effectively doing the same thing in relation to different sectors of the economy. How do you make sure that the standards of public accountability and control of public finances are maintained without the whole thing being strangled by Treasury bureaucracy?
Steve Field: With all these programmes, the usual accounting officer framework applies. When you are at the level of an individual project, there are SROs in Departments.
Chair: That is the bit that is easier to track, because it is an individual project.
Steve Field: As Mr Pocklington was saying earlier, this is the nature of our challenge in net zero. It is not specific to net zero, but it is particularly acute in net zero that we need to make sure that we are joining up effectively between Departments, and that is what we do. We join up very effectively in the net zero space.
Q44 Peter Grant: One of the issues that the Committee has looked at, particularly in relation to the funding of the defence equipment plan, which involves a lot of very long-term investment, is the question of whether the traditional one-year, cash-limited budget and a three to four-year spending review plan is fit for large-scale investment that is going to run for 10, 15 or 20 years. Maybe I should ask the other Permanent Secretaries, but are you satisfied that the way in which public expenditure is approved on an annual or multi-year basis is the correct way to do it for the kind of work that is involved here?
Steve Field: As I was saying before, there are many programmes in Government that extend beyond three or four years, and we manage those. It is not as though at every spending review we start with a zero base. For example, in the next spending review, we are going to have a health service and we are going to have an army.
Chair: Those are very bold policy announcements, Mr Field.
Steve Field: You heard it here first. It is true across the piece. We do not start from zero when we come to the next spending review and we manage those programmes between spending reviews.
Q45 Peter Grant: I want to finish up with you, Mr Pocklington. You made a comment earlier that this is just like any other cross‑cutting work in Government—I do not know what your exact words were—but you went on to say later that it may be a bit more complex than some. One of the biggest themes that come through from a lot of the work we do is that when there are major projects that need a great deal of interdepartmental co-ordination, very often that is where problems arise. There are a lot of major IT projects, for example, where the Cabinet Office has a role and the individual Department has a role. Very often, whether or not it is a breakdown in communication, that tends to be the bit where things go wrong.
Do you appreciate that members of the Committee might not feel particularly reassured by the comment that it is just the same as any cross‑cutting project in Government, which you perhaps made in order to give us reassurance? We have seen that part of Government fail so often in the past.
Jeremy Pocklington: I completely understand the concern whenever you hear that something is cross‑cutting. Those of us in Government know that it is inevitably harder.
I can say a couple of things. First of all, not necessarily all, but almost all the individual projects that we are funding through the research and innovation programme belong to an individual body that is overseeing them. I will see if Dr Adikaari wants to correct me on that. The individual projects are being overseen by either individual Departments or individual research bodies. It is the portfolio that needs to be overseen on a cross-Government basis. That needs to be done and we are doing that.
That is why we have established the Innovation Delivery Board, which brings together the SROs. Yes, it relies on governance in each delivery body, but it pulls together all the management information.
Q46 Chair: We have talked about this a lot. Crucially, is it honest? If I was an SRO in a Department and I had to go to that board, and the project that I was responsible for was not going very well, or perhaps lower down the chain a bit of research was not getting to where it should be, is there an honesty about admitting that?
Jeremy Pocklington: There is an honesty about it.
Q47 Chair: From our point of view, a failure in this respect is not a failure if you get there early. Fail fast.
Jeremy Pocklington: I strongly agree with that. I will give you a personal impression from my four and a bit months in the Department. There is an honesty around our experience of this. It feels very different when you are involved in research and innovation projects than if you are perhaps doing something else, because you know that this is about the portfolio. It is about seeing what works and what does not work.
Finding out something that does not work is a successful outcome. You know not to keep going back to that and to try something else in future. This is a different part of Government. Some would argue that even thinking about that as a failure is wrong, and that is my personal view. You learn through this.
Success is also multifaceted and more complicated in research and innovation. This is not the same as building a road or something like that. What you learn is sometimes hard to tell in advance.
Q48 Chair: Also, a failure might be a failure for what it was designed for, but there might be a successful element.
Jeremy Pocklington: Exactly: you might learn something else. That is why we ultimately need to monitor progress and take those tough decisions, but it is about system leadership of the overall ecosystem and feeding that through into policy.
Q49 Chair: Who is tracking the money on this in terms of the success? If you have a project or a bit of research and, after three years, it turns out it is not worth continuing to invest in it, but there is a nugget in it that might be valuable—there is a value to that Exchequer-wise, or value to that in delivering projects—how are you tracking the money through in an overarching way?
Jeremy Pocklington: Can I bring in Dr Adikaari, who is on the Innovation Delivery Board and lives this on a day-to-day basis?
Dr Adikaari: At the Innovation Delivery Board, through the SROs, we track the existing investment and what the outputs are alongside the risk management. I think your question is that, once the investment completely delivers what it was intended to, what do you do about it?
Chair: Yes, or indeed if it does not deliver.
Dr Adikaari: Exactly, but there is learning, as Mr Pocklington said, from proving the negative. My PhD is a very good example of that. I made sure that no one ever researched the subject I have researched. I have made sure that that is the case.
As for the benefits or successful projects, there are mechanisms within those individual organisations to evaluate and understand what the benefits are, and there are mechanisms to then support them and the follow-on aspects associated with it. One example from the Department’s net zero innovation portfolio is that we are providing acceleration support services for businesses, especially targeting small and medium enterprises where their ideas could be great. Some of them fail but, even if they are successful, they do not know how to take it to the next level. The Department provides services for incubation support, how to take it to the next level and creating opportunities.
Q50 Chair: Where you provide that support, do you follow through to ensure that that incubation of the programme has delivered something tangible in the market that is helping our GDP, helping build the economy, and ultimately helping to raise taxes? I guess Mr Field will be counting that at the other end.
Dr Adikaari: It depends on the sector and what mechanism we have to follow. For example, if you take a new home installation product, there is a different route for us to ensure that that happens. Aviation might be different; the power sector might be different. There are different approaches.
What we are trying to do is to have more visibility and transparency of that. That is the whole objective of putting together the Innovation Delivery Board. There is a forum and there is clarity and transparency as to how, as a portfolio, the investment is coming through and what the outputs are.