Scrutinising Science: The Changing UK Government of Science

Scrutinising Science The Changing UK Government of Science Rebecca Boden, Deborah Cox, Maria Nedeva and Katharine Barke...

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Scrutinising Science The Changing UK Government of Science

Rebecca Boden, Deborah Cox, Maria Nedeva and Katharine Barker

Transforming Government General Editor: R. A. W. Rhodes, Professor of Politics, University of Newcastle This important and authoritative new series arises out of the seminal ESRC Whitehall Programme and seeks to fill the enormous gaps in our knowledge of the key actors and institutions of British government. It examines the many large changes during the postwar period and puts these into comparative context by analysing the experience of the advanced industrial democracies of Europe and the nations of the Commonwealth. The series reports the results of the Whitehall Programme, a four-year project into change in British government in the postwar period, mounted by the Economic and Social Research Council. Titles include: Rebecca Boden, Deborah Cox, Maria Nedeva and Katharine Barker SCRUTINISING SCIENCE The Changing UK Government of Science Simon Bulmer, Martin Burch, Calitríona Carter, Patricia Hogwood and Andrew Scott BRITISH DEVOLUTION AND EUROPEAN POLICY-MAKING Transforming Britain to Multi-Level Governance Nicholas Deakin and Richard Parry THE TREASURY AND SOCIAL POLICY The Contest for Control of Welfare Strategy Oliver James THE EXECUTIVE AGENCY REVOLUTION IN WHITEHALL Public Interest Versus Bureau-Shaping Perspectives David Marsh, David Richards and Martin J. Smith CHANGING PATTERNS OF GOVERNANCE IN THE UNITED KINGDOM Reinventing Whitehall? B. Guy Peters, R. A. W. Rhodes and Vincent Wright (editors) ADMINISTERING THE SUMMIT Administration of the Core Executive in Developed Countries R. A. W. Rhodes (editor) TRANSFORMING BRITISH GOVERNMENT Volume One: Changing Institutions Volume Two: Changing Roles and Relationships Martin J. Smith THE CORE EXECUTIVE IN BRITAIN Kevin Theakston LEADERSHIP IN WHITEHALL

Kevin Theakston (editor) BUREAUCRATS AND LEADERSHIP Patrick Weller, Herman Bakvis and R. A. W. Rhodes (editors) THE HOLLOW CROWN Countervailing Trends in Core Executives

Transforming Government Series Standing Order ISBN 0–333–71580–2 (outside North America only) You can receive future titles in this series as they are published by placing a standing order. Please contact your bookseller or, in case of difficulty, write to us at the address below with your name and address, the title of the series and the ISBN quoted above. Customer Services Department, Macmillan Distribution Ltd, Houndmills, Basingstoke, Hampshire RG21 6XS, England

Scrutinising Science The Changing UK Government of Science

Rebecca Boden Professor of Accounting, Bristol Business School, University of the West of England, UK

Deborah Cox Research Fellow, PREST, University of Manchester, UK

Maria Nedeva Research Fellow, PREST, University of Manchester, UK

and

Katharine Barker Research Fellow, PREST, University of Manchester, UK

© Rebecca Boden, Deborah Cox, Maria Nedeva and Katharine Barker 2004 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2004 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN 0–333–74969–3 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Scrutinising science : the changing UK government of science / Rebecca Boden … [et al.]. p. cm. – (Transforming government) Includes bibliographical references and index. ISBN 0–333–74969–3 (cloth) 1. Science and state – Great Britain. 2. Research – Government policy – Great Britain I. Boden Rebecca, 1958– II. Transforming government (Palgrave Macmillan (Firm)) Q127.G4S47–2004 338.941⬘06—dc21 10 9 8 7 6 5 4 3 2 1 13 12 11 10 09 08 07 06 05 04 Printed and bound in Great Britain by Antony Rowe Ltd, Chippenham and Eastbourne

2003054919

Contents List of Tables

vii

List of Figures

viii

List of Abbreviations

ix

Acknowledgements

xi

Foreword

xii

1 The Changing Nature of Scientific Organisation 1 Introduction 2 Science, society and change 3 Science dynamics and conceptual frameworks 4 Science dynamics: a different viewpoint 5 The structure of this book

1 1 2 3 13 27

2 Historical Context 1 Introduction 2 Science in Britain before 1939 3 The post-war era 4 Some conclusions

28 28 29 34 44

3 New Public Management 1 Introduction 2 The concept(s) of new public management 3 New public management in Britain 4 New public management and science in the UK 5 Some conclusions

47 47 47 52 56 72

4 The Organisation of Science 1 Introduction 2 The nature and diversity of services and customers 3 A typography of reform 4 The reformed organisations 5 Some conclusions

75 75 75 78 87 106

5 Science and Markets 1 Introduction 2 Market failure and states

109 109 112 v

vi

Contents

3 4 5 6

Perceptions of state failure A model of marketisation and privatisation Privatisation and marketisation Some conclusions

115 120 125 135

6 Scientific Knowledge Production Processes 1 Introduction 2 Knowledge production processes defined 3 Phases of knowledge production in the UK 4 ‘Shared visions’ and commodified science? 5 Of cost codes and other things 6 Some conclusions

136 136 137 141 145 153 155

7 Lab Reports 1 Introduction 2 Accountability discussed 3 New accountabilities in science 4 Discussion and conclusions

157 157 158 165 183

8 The Future of Science? 1 Introduction 2 3-D change 3 Change 4 Scenarios for science

185 185 186 189 191

Notes

194

Bibliography

196

Index

204

List of Tables 1.1 Argued differences between Mode 1 and Mode 2 knowledge production 2.1 Annual rates of industrial growth 3.1 The first wave – outcome of the first tranche of Prior Options Reviews 4.1 Examples of the range of science and technology services procured by the UK government 4.2 Government Research Establishments, agency status and subsequent status

vii

9 30 73 77 80

List of Figures 2.1 3.1 5.1

Traditional model of science Establishment mission areas A model for marketisation

45 58 121

viii

List of Abbreviations AA ADAS BBSRC BRDC BRE BSE C&AG CEFAS DEFRA DERA DES DoE DoT DRA DSIR DSTL DTI EU FMI GoCo GRE HMSO HSE IPCS IPMS LGC MAFF MINIS MoD MRC NAMAS NATO NEL NIS NPL NPM

Automobile Association Agricultural Development and Advisory Service Biotechnology and Biological Sciences Research Council British Research and Development Corporation Building Research Establishment Bovine Spongiform Encephalopathy Comptroller and Auditor General Centre for Environment, Fisheries and Aquamarine Science Department for Rural Affairs Defence Evaluation and Research Agency Department for Education and Science Department of the Environment Department of Transport Defence Research Agency Department of Scientific and Industrial Research Defence Science and Technology Laboratory Department of Trade and Industry European Union Financial Management Initiative Government-owned, Company-operated Government Research Establishment Her Majesty’s Stationery Office Health and Safety Executive Institution of Professional Civil Servants Institution of Professionals, Managers and Specialists Laboratory of the Government Chemist Ministry of Agriculture, Food and Fisheries Management Information System for Ministers Ministry of Defence Medical Research Council National Measurement Accreditation Service North Atlantic Treaty Organisation National Engineering Laboratory National Innovation System National Physical Laboratory New Public Management ix

x

List of Abbreviations

NRDC NRS OECD OST PPP PREST PSRE R&D RAC RAF RGU RN ROE S&T SO TRL UK

National Research and Development Corporation National Research System Organisation for Economic Co-operation and Development Office of Science and Technology Public Private Partnership Policy Research in Engineering, Science and Technology Public Sector Research Establishment Research and development Royal Automobile Club Royal Air Force Royal Greenwich Observatory Royal Navy Royal Observatory Edinburgh Science and Technology Scottish Office Transport Research Laboratory United Kingdom

Acknowledgements We would like to acknowledge the financial support of the UK Economic and Social Research Council’s Whitehall Programme (grant number L124251011) for financing the three-year study of government laboratories in the United Kingdom on which this book is based. We are also indebted to Professor Philip Gummett for his tireless help and assistance in the fieldwork phase of this project and in the production of this book. We are grateful to Professor Rod Rhodes, the architect of the Whitehall Programme for his academic leadership during this project. Finally, it would not have been possible to undertake the research on which this book is based without the numerous scientists and members of relevant civil service departments and government research laboratories who so kindly agreed to act as respondents and who were invariably generous with their time and thoughts.

xi

Foreword There are few areas of public policy that do not in some way depend upon the input of sound, balanced and independent scientific advice. For decades, and in some cases even centuries, the first port of call for government to provide this advice was that of its own research establishments. In areas as diverse as defence procurement, building regulations, weights and measures and food safety, a reservoir of accumulated expertise was assumed to be needed ‘on tap’. The same or similar establishments also undertook promotional roles in the support of industry or agriculture and other functions. This important book tells the story of how long-standing assumptions came to be questioned as the forces of new public management and of public sector reform more generally came to be applied to the government scientific sector. It derives from a long-term research programme encompassing several funding bodies and projects, which allows the authors to follow-through from the immediacy of policy changes to at least their intermediate consequences. The resulting analysis of change is approached from several directions: ●

●

●

A contextual view grounded in recent models of the dynamics of science; A developmental view which demonstrates the path dependency of many of the changes and their origin in the histories of individual establishments; and A political view showing the sometimes chaotic and rarely systematic way in which new public management was applied in this sector.

With this base the book is then able to explore the emergent system and to show how the provision of science and technology is spread across a variety of models without any sense that particular ownership or governance structures are fit for purpose in a given context. The dissection continues with a consideration of the role of the market and marketisation or commodification of science, which again emphasises the discontinuity between theory and outcome even if real efficiency gains were realised. These new market or quasi-market structures imply new forms of accountability, a topic subject to cogent analysis in this volume. A particularly valuable feature is the way in which several chapters begin with a broader conceptually based account but then return to the xii

Foreword xiii

concrete situation of real laboratories and their problems. This structure enables the messiness of policy outcomes to be captured. Although focused on the United Kingdom I am sure that Scrutinising Science will be a valuable handbook for readers in any country undergoing political reform, particularly but not necessarily in its science and technology support system exclusively. The cost of failing to get it right in terms of scientific advice can be catastrophically high but not be manifested for some years after critical decisions are made. For all of these reasons I thoroughly commend this book to the reader. PROFESSOR LUKE GEORGHIOU

1 The Changing Nature of Scientific Organisation

1 Introduction This book is about change and specifically, the wide-ranging changes experienced by Government Research Establishments (GREs) in the United Kingdom (UK). During the last two decades, the GREs in the UK have been subjected to a process of rapid policy initiated transformation, the dimensions and social consequences of which are still largely unclear. The concept of public administration driving this process of change has been New Public Management (NPM). The NPM underpinning this transformation reflects the fact that it is an integral part of a broader transformation process encompassing the nature and organisation of government, the institutions of science and their relationships with the state, and industry, the practices of scientists, the nature of scientific enquiry, and the concepts of what is science and what is deemed at particular points in time to be ‘good’ science. In this chapter we introduce and critique the concepts and theories currently dominating the analysis of science and its institutions, set out the foundations for our analysis and interpretations and propose an analytical framework to facilitate the exploration of this change. Thus, Section 2 makes explicit the rationale and the main ambitions of this book and the difficulties in attempting to achieve these within established analytical frameworks. In Section 3, some of the concepts currently dominating the analysis of science are presented and critiqued. In Section 4, we set out our alternative analytical framework used in the rest of this volume. 1

2

Scrutinising Science

2 Science, society and change An interest in science and knowledge is neither new nor original. If anything, analyses of science and its place in society are as old as scientific enquiry itself and there have even been claims that after Kant, all philosophy has been about science and cognition. Given that, it is only to be expected that numerous accounts of science would have been produced across the centuries. While having a common subject, these accounts diverge substantively in terms of their focus and both conceptualisation and contextualisation of science. Thus, whilst philosophers have attempted to explain the nature of scientific knowledge and the ‘ways of knowing’, sociologists have concentrated on understanding the boundary conditions of (scientific) knowledge production and utilisation and comprehending the institutional structures involved in these processes. Whereas, economists have adopted another approach and have usually concentrated on the economic value of new knowledge. This book aims to interpret the latest transformations affecting the GREs in the UK and to assess some of the implications that these have had for their structure, the nature of (scientific) knowledge, the meaning of ‘science’ and for the ‘visions’ of science. Fulfilling the main promise of this work demands the use of a conceptual framework that facilitates the simultaneous discussion of the institutional, structural and cognitive aspects of what is commonly referred to as ‘science’. Reference to the literature, however, yields little by way of an existing single conceptual framework that meets these conditions. Existing and dominant conceptual frameworks appear to focus on one or other of the attributes of science without providing a consistent framework for analysis of its various manifestations and dynamics. Moreover, the study and analysis of publicly funded research organisations, including GREs has not been a central focus of the science and innovation literature. Researchers in science, technology and innovation have tended to concentrate their research efforts on discussion of the other major performers of publicly funded research: the universities. Lately, however, there have been signs of increased research interest in the organisation of research (Musselin and Vilkas, 1994; Faulkner and Senker, 1995; Joly and Mangematin, 1996; Boden et al., 1998; Gummett et al., 2000). It is likely that a variety of factors can be seen as contributing to this interest, but some of the most influential are: ●

The most recent wave of transformations of the national research systems.

The Changing Nature of Scientific Organisation 3 ●

●

●

Emerging new (and dormant) policy concerns regarding the place and functions of the research organisations and their links with other performers of research (such as universities and private research labs). The accelerated process of ‘commodification’ of research and research results and the role of research organisations in it. Attempts by governments to influence the establishment of links between research producers and users of research and to speed up the commercialisation of research results.

However, the increasing attention that research institutions have started to attract is pragmatic rather than analytical and the quest is for practical, policy-related solutions rather than for better understanding of the complex dynamics of the research organisations and their relationships with other actors on the national (and transnational) research arena. Our intentions, on the other hand, are to make explicit the dynamic processes in which the GREs in the UK have been involved during the last decade and to explain their origins and expected effects. The inadequacies of theory and the predominantly pragmatic, if any, interest in the GREs bring to the fore the necessity of the development of a middle range analytical framework that will allow us to meet our promises for this book. We believe that the framework suggested here does not constitute a radical break with the existing concepts but rather provides the initial steps towards a much needed synthesis of analytical assumptions. Hence, in the context of the analytical framework used here, science is viewed as a social activity manifested in a particular type of knowledge and embodied in social institutions. Scientific knowledge and scientific/research institutions are involved in complex and multifaceted interrelationships, which are a powerful source of dynamisms and change. Another source of change is the intentional interventions (usually in the form of policies) of particular social agents. Any transformation is therefore the result of a number of different, and sometimes opposing, social forces. At any rate, the framework discussed below helped us shape our understanding, sharpen our explanations and organise the material so that the discussion conveys the complexities and intricacies of the social transformations that have been/are still taking place.

3 Science dynamics and conceptual frameworks A number of theories, derived from different disciplines and allied to various analytical assumptions, have been used in attempts to explain the complex and multifaceted nature of science. Some theories, such as

4


the developments within the structural functionalism in sociology, viewed science as a social institution. These theories were not particularly concerned with explaining the external relationships of science but rather focused on its ‘institutional imperatives’ (Merton, 1968, 1973, 1976). Within the structural functionalist school, science was discussed as an exchange system where the ‘legitimate’ exchange is of ‘gifts of information for recognition’ (Storer, 1966; Hagstrom, 1972). Despite some variations, the structural functionalists invariably saw science as a clearly identifiable and drastically different sphere of social production that functioned according to its own norms and developed following its internal dynamics. In the context of this understanding of science, a strong belief that non-scientists should not intervene in the internal affairs of science was also widespread (Cole and Zuckerman, 1975; Barber, 1990). In other words, the ‘ideology of science’ precluded any intervention from outside its institutional boundaries. Governments/ politicians were expected to fund science generously but they could not expect any tangible returns. The structural functionalist theories of science and the corresponding ideology of non-intervention dominated discourse and social practices until the 1970s, when another, rival intellectual stream gained influence. By the mid- to late 1970s a major change in the epistemological and ontological status of sociology as a discipline and in the sociology of knowledge had occurred. This change could be detected in the fact that structural functionalism, with its positivist programme, lost the epistemological battle to the school of constructivism, which in some of its incarnations was founded on an extreme relativist epistemological platform (Barnes, 1974, 1977; Collins, 1975; Bloor, 1976; Mulkay, 1976, 1979). Where science and knowledge are concerned, the relevant transformation was from sociology of science to sociology of knowledge. These diverged significantly in their epistemological assumptions. Thus, while the sociologists of science took for granted claims such as: ‘scientific knowledge is objective and it reflects a fixed reality’, ‘science discovers truth’, ‘science is a sphere of social production drastically different from (and better than) any other’, ‘science has its own criteria and social norms’, the sociologists of social knowledge questioned all of these. Sociologists of knowledge believed that reality is not fixed but continuously constructed, that science and scientific knowledge are no exception, that the institution of science and the knowledge produced by it are not different (and the knowledge is definitely not more reliable) from other social activities and that social norms in general and those of science in particular do not exist but are part of a discourse.

The Changing Nature of Scientific Organisation 5

Probably, this general shift from positivist to constructivist epistemology made sociology somewhat more intellectually exciting. At the same time, it marked the beginning of an overall drift away from sociology and towards other disciplines (most notably economics) in general discussions and reflections. The advent (and domination) of the relativist platform shook the blind belief in the, a priori, infallibility of science. This questioning led sociologists to lose their influence in wider discussions. Policy making is (usually) founded on expertise and expertise is provided by science/research. Following from its main epistemological assumptions it was impossible for the sociology of knowledge to provide the expertise needed by policy makers. Somebody had to fill in the gap, and the economists were only too happy to oblige. This probably accounts, to a large degree, for the picture existing today where the area of science, technology and innovation studies is dominated by concepts, which are a (sometimes eclectic) combination of multidisciplinary approaches. While providing an exhaustive and profound critique of the existing theories about science is not among the objectives of this book, it is important to critically explore the concepts that are first, currently dominant in the area of analysis of science, research and innovation and second, relevant to and influential for our analysis. Three such concepts are discussed in some detail below, namely the ‘National Research/ Innovation System’, the ‘Modes of Knowledge Production’ and the ‘Triple Helix’. These coexisting concepts have dominated the analysis of science, technology and innovation for the best part of a decade. At the most general level, they all reflect the realisation that science and society are in a relationship of interdependency, namely that science is not exempt from or immune to social and political influences as well as it ought to contribute to the development of the society.

National innovation systems and national research systems The concept of the National Innovation System (NIS) has largely dominated the analysis of science and technology innovation for the best part of two decades. Since the 1980s, when Freeman (1987) introduced and Lundvall (1988) developed the concept of the ‘national innovation system’, it has been used widely to describe the institutions and procedures considered relevant for innovation in a particular nation state. The term ‘national research system’ (NRS), on the other hand, was first used in relation to science policy, and more precisely in Organisation for Economic Co-operation and Development (OECD) studies (OECD,

6


1972, 1974, 1976) from the early 1970s. While both use systems terminology to conceptualise science, technology and innovation, their central concerns diverge. Hence, while in the context of the NIS analyses of technological innovation in firms takes centre-stage, the NRS concept aims to provide a framework for the understanding of the research process and the practices of a large variety of knowledge producers (Rip and van der Meulen, 1995). Of course, there have been attempts at defining the innovation/ research system. These differ significantly depending on the characteristics of the ‘system’ they emphasise. According to Freeman (1987), for example, the NIS is ‘the network of institutions in the public and private sectors whose activities and interactions initiate, import, modify and diffuse new technologies’. Lundvall in his later work (1992) distinguishes between two different possibilities for demarcation of the NIS – the narrow system consisting only of knowledge producers and a broader system incorporating knowledge users as well as education. Nelson (1993) prefers to offer a working definition of NIS whereby each of the constituent terms is discussed separately. Thus, the NIS is the ‘set of institutional actors that, together, plays the major role in influencing innovative performance’ and ‘innovation’ is interpreted broadly as including all processes by which a firm masters products and processes new to them (even if ‘not new’ to the universe or even to the nation). Others, like Trute (1993) for example, when working towards a definition of the NRS, emphasise the importance of ‘the different national frameworks of institutions, norms and cultural traditions formed in the history of the states’ as well as ‘the different models of the relationship between government and science, and different principles of the structure of the public sector and its constitutional and administrative basis’. No fewer than three claims of the concept can be distinguished. These are first, that scientific knowledge is produced (i.e. innovation occurs) in a systematic way within a particular social system, namely the National Innovation/Research System. Second, the appropriate level for analysis of research and innovation and the level at which policies relating to these are possible and make sense is the ‘nation state’. Third, the concept contains a clear shift of focus from ‘science’ to ‘research’ and ‘innovation’. In addition to the three explicit cognitive claims of the concept distinguished here, a fourth claim can be identified. This is that there seems to be a veiled assumption that understanding the ways in which research and innovation occur will facilitate higher levels of social control. In an attempt to assess the cognitive and practical validity (i.e. significance) of this concept we start by examining in detail its key claims.


Following this we discuss its methodological status and practical implications (in relation to different participants in the process of knowledge production and utilisation). One does not need to look far and hard to find arguments and/or empirical evidence against all three main claims of the National Innovation/Research System concept. It can be argued, for example, that scientific knowledge production is not systematic but to a great degree a random process. This process can, and indeed does, occur within different social and institutional contexts, which do not necessarily have systemic characteristics. Following from broader changes, the emergence and role of the European Union, for example, and the overall tendency towards globalisation, the national level is only one of a number of possible levels of social aggregation at which policy for research makes sense. The terminological shift from ‘science’ to ‘research’ and ‘innovation’ is intended to convey the message of activity and dynamics. In contrast to the more traditional Mertonian vision of science, where the main function of science (and by implication, scientific institutions) was ‘… to preserve and enlarge the accumulated body of certified knowledge …’, research is a dynamic and active participant in the process of social production. It is only logical to ask whether a radical and all encompassing transformation of ‘static’ science into ‘active’ research has really occurred and whether such transformation can/does affect all aspects and disciplines of science. Thus, the major (or even all) claims of the National Innovation/Research System (NIS/NRS) can be contested. In terms of providing a framework for carrying research in the area of science and technology studies (a set of assumptions, research agenda and sets of methodologies), the impact of the NIS/NRS concept is two sided. On the one hand, through providing a framework that brings science outside its own institutions and linking both knowledge production and research institutions to a broader social, economic and political environment, it has acquired a sizeable following. One particular expression of this is the extensive use of systems terminology in science and technology research (e.g. national systems and regional systems). On the other hand, the NIS/NRS concept, in being predominantly descriptive, has only limited importance in providing the methodological foundations for research. Thus, while it provides a sufficient basis for comparative data collection and structured ‘thick’ descriptions, it lacks the rigour to provide frameworks for analysis and explanation. Where practical importance is concerned, the significance of the NIS/NRS concept exceeds by far its methodological virtues. It is

8


important in two main ways, namely as a concept allowing some cross-disciplinary interactions in the studies of science, technology and innovation, and as a concept facilitating change in policy thinking. Today, governments usually think about science, with regard to both funding and policy making, in systems terms and science is viewed as inextricably linked with other areas of social life such as education, economy and culture. To summarise, the NIS/NRS concept has become one of the three concepts dominating the analysis of science, technology and innovation. While its value as a conceptual framework is limited to providing structured ways for carrying out descriptive research, its practical significance is extensive, spanning across research communities and policy makers. A major strength of the concept is that contrary to more traditional sociological views about science here both scientific knowledge and its institutions are being viewed as parts of broader systems. The strengths of the concept suggest virtue in trying to remedy some of its inherent faults. One way to do that is to conceptualise the NIS/NRS as involving three different aspects: the institutional, the structural and the cultural/ideological (Nedeva, 1997). Analysis of phenomena within these aspects of the NIS/NRS, using specific analytical methodologies and techniques, allows the researcher to go beyond the purely descriptive.

‘Mode 1’ and ‘Mode 2’ knowledge production This concept was announced by a book published in 1994 entitled ‘The New Production of Knowledge’ (Gibbons et al., 1994). As indicated by the title of the book, it argued that there was an emerging dominance of a new mode of knowledge production referred to as ‘Mode 2’. This mode of knowledge production, it was argued, is distinctly different from the more traditional ‘Mode 1’. The mode-ist concept quite quickly came to dominate the science and technology studies discourse and, judging by citations and references, established itself as one of the most influential concepts in the research area (Shinn, 2002). At the most general level this concept is about change as it announces a drastic transformation in the way knowledge is produced and used (Gibbons, 2000). No fewer than four claims of the concept can be identified. First, it is claimed that two different modes of knowledge production can be clearly identified – the more traditional ‘Mode 1’ and the new ‘Mode 2’. Second, the authors argue that ‘Mode 2’ is a new mode of knowledge production, which has emerged relatively recently. Third, ‘Mode 2’ is becoming the dominant mode of knowledge production. Last but not


least, even in the language that has been used (‘new’ is often equated with ‘progressive’ and ‘socially desirable’) there transpires an assumption that this is a welcome (and probably logical) development in the organisational existence of science and research. ‘Mode 2’ knowledge production was conceptualised in terms of five attributes, namely ‘knowledge produced in the context of application’, ‘transdisciplinarity’, ‘heterogeneity and organisational diversity’, ‘enhanced social accountability’ and ‘more broadly based system of quality control’. These same attributes were used to compare Mode 1 and Mode 2 knowledge production and distinguish between these with some clarity. Table 1.1 provides information on the argued (claimed) differences between the two knowledge production modes in some further detail. The ‘mode-ist’ concept of knowledge production established itself quite quickly and quite firmly as one of the leading developments in the area of science studies and science and technology policy. According to Shinn (2002) the book that announced the ‘mode-ist’ approach had 266 citations between 1995 and July 2002 and the concept itself was/is frequently referred to in conference presentations and policy contexts. Looking in more detail at the references, however, it transpires that in its eagerness to embrace this conceptual development the research community did not carry out a critical assessment. Hence, while being commonly used in the area of science studies and science and technology policy research, the concept has not been seriously tested and is thus part of the researchers’ vocabulary rather than a methodological foundation. The widely diverging use and understanding of the meaning of ‘Mode 2’ is a further expression of the fairly uncritical manner in which

Table 1.1 Argued differences between Mode 1 and Mode 2 knowledge production Mode 1

Mode 2

Agenda setting in academic context Problem solving in academic context

Agenda setting in broader contexts Knowledge produced in the context of application Flat, flexible structures Network based (transient) Knowledge production can occur anywhere High level of accountability and reflexivity Peer review involves other constituencies

Organisational structures are hierarchical Institutions based (permanent) Knowledge production occurs in specialised institutions Low level of accountability Peer review involves only academic community

10 Scrutinising Science

it was accepted. Another expression is that while some criticisms of the concept have been voiced, its main claims have not been tested to date. This can be partly explained by the nature of the ‘mode-ist’ concept and the form in which it was announced. Here, we agree with Shinn that the book ‘… raises few questions about the evolution of science and technology or about changes in their relations with enterprise and society … No questions, but lots of answers. On a parallel plane, almost no concrete evidence is given for the assertions advanced; and no provision is made for future empirical historical or sociological work’ (Shinn, 2002: 606). In fact, Shinn goes a step further to pose the question: ‘… is the New Production of Knowledge a metaphor, or just a catch phrase?’ The assertions made by the new production of knowledge are almost impossible to test directly in their present form. Consequently, it is almost impossible to confirm or reject their ontological status. This probably accounts for the fact that the few criticisms levelled at this concept tend to question whether the two modes of knowledge production can be really distinguished, whether ‘Mode 2’ is really new and/or whether it is really becoming the dominant mode of production. The very nature of the argument does not allow for much constructive criticism or even discussion to occur. It is also not possible for its main claims to become proper methodological foundation for further research and move beyond being the fashion statements of a particular research community. The relationships between the new knowledge production concept and social practice, most notably policy making, are again not simple and straightforward. On the one hand, there is a strong message that the concept has drawn on social practice through its claim that a set of significant transformations in the ways in which knowledge is produced has been identified. At the same time, as already pointed out, the book does not offer much empirical evidence to support its claims. The language used to describe the changes affecting science and research makes the concept very attractive to policy makers. The changes are ‘separate’ and these are ‘new’ where novelty conveys a mixed message of progressiveness and desirability. As a consequence, the new knowledge production concept has entered the political and policy domain either as a part of the discourse (in other words to justify, some times dubious, policy developments) or as an ideological driver for policy change. One example of the latter is the ever increasing share of public funding for research allocated to distributed networks founded on the ideological belief that ‘networks are good while institutions are somewhat deficient’. Assessing the whole range of possible consequences of such and


similar developments for the research and innovation system is not among the aims here. It is clear, however, that the relationship between the new knowledge production and policy making is one of ‘self fulfilling prophecy’ – Gibbons et al. announce the increased importance of networks in knowledge production; policy makers take this as a message that this is the ‘way to go’ so they direct an even higher proportion of the research funds to networks. In conclusion, we argue that, whilst being potentially useful in discussions about change, regrettably this conceptualisation falls short of providing the analytical framework necessary for the discussion of institutional change. The mode-ist concept is not particularly useful for the purposes of our work – if nothing else it in effect proclaims the end of institutions thus denouncing the very existence of the subject of our investigation. The ‘Triple Helix’ In the mid-1990s the emergence of a Triple Helix (Etzkowitz and Leydesdorff, 1995) of university–industry–government relations was announced. The Triple Helix concept is an attempt to model the complex system of innovation in the knowledge-based economy. Using as a starting point the fact that nation states at different stages of development share an innate interest in ‘… fostering knowledge-based economic and social developments requiring the creation of boundaryspanning mechanisms’, the authors go on to assert that modelling innovation in such a global system should account for three dynamics. These are: the economic dynamics of the market; the internal dynamics of knowledge production and governance of the interface at different levels. Leydesdorff and Etzkowitz proposed to model the complex system of innovation as a Triple Helix between university, industry and government. Or in their own words: The Triple Helix model takes the traditional forms of institutional differentiation among universities, industries and government as its starting point. The evolutionary perspective adds to this historical configuration the notion that human carriers reflexively reshape these institutions. The model thus takes account of the expanding role of the knowledge sector in relation to the political and economic infrastructure of the larger society. (Leydesdorff and Etzkowitz, 1996: 280) Where the main claims of the concept are concerned, the Triple Helix has methodological rather than ontological ambitions. In other words,


the authors of the concept do not claim to have discovered and/or explained a new social phenomenon but to have provided a model, a methodological framework, assisting researchers in studying a complex social system (e.g. the institutions involved in the process of innovation). In fact that is the main claim of the concept – that it is a methodological tool and that it is formulated not at the level of phenomena to be explained but to help with the explanation (Leydesdorff and Etzkowitz, 1998: 358). Given that the main claims of the Triple Helix concept are methodological, its impact on the research field as measured by tools such as the Science Citation Index is an indicator for its successful penetration. In his article, however, Shinn (2002) points out that in contrast with the ‘modist’ concept ‘… the impact of the Triple Helix perspective is negligible – almost non-existent’. For a seven-year period (1995–2002), he found only a total of 35 relevant citations. While Shinn goes on to question the ‘… relationship between the growth of ideas and reputations, on the one hand, and what citation counts tell us, on the other …’ (Shinn, 2002: 602) he also contends that the very general nature of the concept as well as the, in some cases, excessively specialised language (impenetrable for researchers not belonging to the inner circle) can partly take the blame for that. We decided to go a step beyond the immediately obvious, namely citation counts, and check whether in cases where the Triple Helix concept has been referred to, this reference expressed substance or if it was simply mentioned. We looked at several papers published in science and technology policy journals (excluding the papers of its main protagonists). It appears that, where a reference to the Triple Helix has been made, it was simply mentioned or used as a metaphor, rather than being employed for its methodological foundations (van Duinen, 1998; Erno-Kjolhede et al., 2001). At the same time, the Triple Helix concept has provided a useful ‘umbrella’ for organising a group of practitioners researching issues arising at the boundaries between research, industry and government and using more sociological analytical frameworks. A number of international conferences and workshops have been organised under this umbrella, and the contributions have been published in prestigious journals. The effect that the Triple Helix concept has had on the positioning of communities reaches beyond the research community as narrowly defined. It has the support of major players in the field of politics of science (e.g. US National Science Foundation) and also prides itself on


a large geographical coverage – practitioners from all continents take part in the Triple Helix conferences. To summarise, the Triple Helix has not delivered on its promise to provide a methodological foundation for the analysis of change that has been occurring in the area of innovation and the links between research, industry and government. Failing to attract considerable following (this includes conceptual acceptance and methodological dependence) it has succeeded in providing a much needed and very popular platform for social researchers working on boundary issues. In conclusion, it is worth mentioning that while recognising the failings of the concepts currently dominating the analysis of science and its relationships with society, we do also recognise their strengths. Aiming to avoid their shortcomings our analytical framework builds on these strengths.

4 Science dynamics: a different viewpoint Our discussion of the main concepts dominating the analysis of science and its interactions with the society at large has helped to illuminate some of their shortcomings from the point of view of the analysis upon which we wish to embark. Hence the necessity to attempt a conceptualisation of the latest developments affecting institutional science, accounting for the complex interdependencies between institutional change, change in the knowledge and practices of science and the shifting visions of science. It should be noted that while benefiting our interpretation and analysis of the changes that the GREs in the UK have been undergoing, the analytical framework discussed here is still emerging. Its two main features are that it distinguishes between two ‘ideal’ types of change, namely organic change and policy-introduced change, and that it attempts an analytical synthesis between the institutional, the cognitive and the ideational dimensions of science. Organic change and policy-introduced change That change is a universally recognised feature of life is reflected in the development of both science and social science. In the social sciences, for example, attempts to explain social change became particularly prominent in the context of the classical sociological tradition of the nineteenth century. This fascination with the issues of social change reflected the massive changes that societies were undergoing at the time. As Tilly (1988) points out ‘… The discipline of sociology grew from the


encounter between worried bourgeois and the massive changes of the European nineteenth century’. Numerous theories of social change have been developed. These theories vary in their ambitions and explanatory frameworks whereby some attempt to explain how society and its different parts change, while others have even more serious claims to predict social change. Boudon (1986) distinguishes four main types of theories of social change. The first group comprises theories the aim of which is to make explicit the existence of more or less general and irreversible trends. Examples here are Comte’s ‘three stages of development’, Rostow’s ‘stages of growth’ and Parson’s ‘trend towards universalism’. The second broad group of theories of social change are those searching for the laws of change. Theories of this type take the form of what is generally known as ‘conditional laws’ or propositions of the type ‘if A then B’. A famous ‘law’ that originates in Parsons suggests that the effect of industrialisation is to make the nuclear family the normal or modal type. A third group refers to theories that do not discuss the content but the form of social change. The theories united under this umbrella do not answer the question what will change but how the change occurs. An example of such theory is that of Kuhn. The last group is formed by the theories that deal with the causes or factors for change. It is apparent that a number of widely varying theories of social change have attempted to conceptualise different kinds and types of social change. For the purposes of this book an important distinction is the one between social change that does not include explicit intentionality and usually occurs as the aggregate effect of a large number of social actions and social change that comprises intentionality and can be traced to/attributed to particular social actions/policy decisions. Further down in this text we refer to the former type of change as ‘organic change’ and to the latter as ‘policy-introduced change’. While in the context of this work, distinguishing between organic and policyintroduced change has clear cognitive and analytical value, its practical relevance can be questioned. In other words, while thinking about the two types of change aids the analysis in practice, these can and usually do converge.

Organic change Organic change refers to a process where no clear intentionality can be identified. The process of historical development of science can provide an example of what is meant by organic change. Taking into account the specific features of the institutional and cognitive organisation of


science, three overall periods in its development have been identified. These are ‘pre-science’, ‘science for gentlemen’ and ‘professional science’. ‘Pre-science’ refers to the scientific ideas developed in Ancient Egypt, Mesopotamia and Ancient Greece and their corresponding social and institutional structures. A lack of very systematic scientific ideas and a relatively low level of theoretical development are two of the defining features of this period in the development of science. If a more everyday terminology were to be used, following Dunbar (1995), this stage in the development of science could be referred to as predominantly ‘cook book science’. In other words, people at the time knew that ‘things’ happen, they realised that certain events occur sequentially and they also realised that on a number of occasions the events are causally related (e.g. thunder and rain or the flooding of the Nile at certain times of the year). But they could not explain why things happen as they do or the type of relationships that exist between these. Thus discoveries were more a matter of trial and error than the expected outcome of systematic enquiry. On the institutional side, science during this period was characterised by low level of institutionalisation and proto-professionalisation. There were no scientific institutions as we know them today and what in ancient Greece were called ‘academies’ referred more to a relatively stable group of people rather than to established institutional practices (an example of that is the Academy of Plato). During the period of the development of science commonly referred to as ‘science for gentlemen’ (roughly between the fifteenth and nineteenth centuries), scientific theories were developed. The discoveries of science started to be seen as having some practical relevance and science itself became more sensitive to practical problems and issues. In terms of institutionalisation of science, the first mature, modern scientific institutions were established and practising science became a profession (Kearney, 1970). This was the time of Newton, Leibnitz and Boyle, and theoretical developments that had been formulated back then are still used as cognitive frameworks. Science, during this period, aimed to explain the world/universe although scientists used to claim that they were simply reading and interpreting God’s will. During the ‘science for gentlemen’ period, the first mature scientific institutions began to develop. Two examples of scientific institutions that had emerged during this period and are still vibrant are the Royal Society of London and the Paris Academy (Purver, 1967; Hahn, 1971). These institutions were established at the same time and share a number of characteristics: both the Royal Society and the Paris Academy specified clearly their conditions for membership;1 both institutions held regular sessions at which their members reported on their latest work


and discussed developments elsewhere; with the establishment of specific scientific institutions clear publications patterns and communications channels also started to develop; and last but not least, both institutions benefited from state patronage. The Paris Academy was the first to introduce salaries for its members. In the mid-nineteenth century, in Britain, as a result of a number of developments (among which are the concerns regarding the perceived decline in British industrial competitiveness, the budding needs of industry for research and trained personnel and the inability of the Royal Society to respond to these needs) a new organisational form, namely the civic university, started to emerge. ‘Professional science’ is characterised by a high level of theoretical development. At this stage of the development of science, not only have theories about natural and social phenomena been established, there is also an acute epistemic interest and a drift towards cognitive reflexivity (Fuller, 2000). Science is characterised by a high level of codification and intellectual coherence. Institutionally, the development of science has reached its peak. A large variety of institutions are involved in knowledge production. Some of these are knowledge producers, others use knowledge and yet another group support research by finance and policy. Moreover, research networks counterbalance the stability provided by institutions by increasing the level of fluidity and change at national, regional and transnational levels of social aggregation. Directly following from its unprecedented level of development, science has become very powerful and all pervasive, and we live in an overwhelmingly ‘man-made’ and scientifically justified world. Professional science demands (and is able to offer) extensive and prolonged professional education and clear career structures have emerged. Today’s science has developed strictly established communication patterns where a clear shift away from books and towards more journal papers can be observed. Science is not simply ‘useful’ but a major contributor to ‘wealth creation’ and ‘quality of life’. Reviewing the stages in the historical development of science, we draw attention to some significant differences that help distinguish between these. Interestingly, in the context of this book, it is not so much what these differences are, but the fact that the transition from one stage in the development of science to the next one cannot be explained by referring to particular policy decisions or intentionality. As a rule this transition is a result of a complex interplay between large numbers of apparently random social factors. The first civic university in the UK, the Victoria University of Manchester, for example, was founded to reflect a social need but its foundation and future development


were made considerably easier by the personal friendship between Henry Roscoe and Thomas Ashton2 (Sanderson, 1972). The Kaiser Wilhelm Gesselschaft in Germany emerged following a change in the patent legislation as a consequence of which the universities with their inflexible structures could not meet the demands of the textile industry and although, as its name clearly indicates, it received the blessing of Kaiser Wilhelm there was no political intentionality involved (Harwood, 1994). The broad historical transformations of science, both cognitive and institutional, happened as a result of the aggregate effect of a large number of individual social actions. To complicate matters even further, some of these social actions are not visibly connected and can be geographically and temporally distant. The transformations described above cannot be attributed to any particular policy and were not a result of implemented policy decisions. As a result this type of (organic) change does not involve axiological statements and assumptions – there is no statement about ‘good’ or ‘bad’ and so on. Lack of explicit intentionality also means that this type of change ‘simply happens’. Most if not all theories of social change have focused on studying and attempting to explain and predict this type of change. Where the New Public Management transformations affecting the GREs in the UK are concerned, however, entirely different processes were involved. The change was initiated as an integral part of a much broader political and policy programme of NPM. In other words, the change that the GREs are undergoing cannot be explained satisfactorily by relying on existing theories of change. Policy-introduced change This type of change differs from ‘organic change’ in that it usually involves a high degree of intentionality. Apart from being intentional, such change is usually also perceived as desirable. In other words, if policy-introduced change is to be initiated, there ought to be a pre-existing belief or a strong conviction that another, different state of affairs is ‘good’, ‘useful’ or ‘right’. While believing that something is ‘good’, ‘useful’ or ‘right’ is a necessary precondition for the initiation of this type of change, it is by no means sufficient. Some further preconditions are associated with power, for example. The social agent(s) – individuals and/or groups – can initiate the change of a social system (or any kind of social entity) only when they are in a position of power or, in other words, they have the ability and influence to do so. To go back to our discussion of the historical development of science, one of the major changes that occurred in the mid- to late twentieth


century is that organic change gave way to policy-introduced change. At the most general level it is possible to identify two groups of factors that contributed to this shift. First is a group of factors relating to and following from changes in science and second, a group of factors relating to changes in society as a whole. Where changes in science are concerned, it suffices to mention its ever increasing complexity, the escalating costs required for its support and its increased social importance. As a result, science from a fairly chaotic endeavour for devotees became an organised enterprise for highly trained professionals. Moreover, following from the emerging expectation that science can contribute to increases in the level of national industrial competitiveness and the proven record of science in delivering military advantage it became a governmental concern. The second group of factors reflects the fact that government perceptions regarding possibilities to exert control have also changed. This resulted in a general increase in policy making, directing and control. In fact there have been voices proclaiming the advent of the ‘audit society’ (Power, 1997). As a particular expression of this, the beliefs regarding the possibilities of influence over the development of science – both institutional and cognitive – have also changed. There was a notable shift from ‘science is autonomous and cannot be controlled’ to ‘science is no different to any other sphere of social production’ during the late 1970s. We believe that three issues associated with policy-introduced change deserve particular attention here. One of these is associated with the axiological nature of this type of change. Being predicated on beliefs regarding desirability, it is very hard to ensure that the level of desirability will remain unchanged in time. In other words, it is almost impossible to ensure that something that sounds like a good idea today will be a good idea tomorrow. The second issue refers to a different aspect of desirability. Change of this type usually aims to achieve a desired outcome(s) in the context of social systems. Due to the extremely high level of complexity, it is not possible to predict all possible outcomes and even less possible to ensure that the desired outcome is among these. In other words, every time policy-introduced change is initiated, it is highly likely that the desired outcome is not going to be achieved and that at least some of the outcomes will be unexpected, undesired or both. The third and very important issue is that policy-introduced change should account for ongoing organic change if it is to succeed. If there is


no congruence between organic change and policy-introduced change it is very likely that the forces contravening the policy-introduced change would be so strong that it would become impossible. The discussion in this book focuses on a particular case of policyintroduced change, namely the intended transformation of the GREs in the UK. We believe that our analysis of the processes involved in this transformation will illustrate the main points made here. For the purposes of this book, we have conceptualised science as a social activity/process occurring within particular institutional forms that have evolved over time. These forms produce particular types of knowledge, particular practices are used in the process and different social groups also view science in different ways at different times. The changeable nature of science as institution, knowledge and practices, and visions, is almost by necessity one of our fundamental assumptions. The dynamics of science have been conceptualised in terms of three interdependent aspects, namely its institutions, the knowledge that is being produced and the visions of science. Science and its institutions Previously, in this chapter, we furnished examples illustrating how during different historical periods of its development, different institutional forms have accommodated the development of scientific knowledge. While it was quite acceptable in Ancient Greece to develop philosophical theories at the market (the agora) as Socrates did, today scientific activity is carried out within the boundaries (or across these) of specific institutions, by a clear-cut group of professionals. It is worth mentioning that, during different periods of the development of science and society, different institutional forms have provided a home for the production of new knowledge. To complicate matters even further, due to a variety of broadly historical and cultural factors, which are not discussed here, different institutional forms have come to dominate the organisation of science in different national contexts. Thus, while in the UK the universities are considered to be the major performers of publicly funded research, this is not the case in Germany, France and a number of other European countries. This institutional organisation should be expected to affect the nature of the GREs – their structures, their relationships with the state and industry, their participation in the scientific division of labour. Accounting for variations of this kind is necessary if policy-introduced change is to be assessed.


Moreover, today the view of science extends beyond science itself to include policies for science as well as measures encouraging the implementation/commodification of research results. Translated into the language of institutions, this means that a number of diverse organisations are currently involved, directly or indirectly, in the affairs of science. At least three broad groups of institutions directly or indirectly involved in the production of knowledge can be identified. These are state organisations, universities and research organisations. During the last two decades or so, all these institutions have undergone quite profound changes. Particularly explicit are the changes affecting the knowledge producing institutions such as the universities and the research organisations. A European level study found that the universities and research organisations (including GREs) have changed in terms of at least five facets of their institutional structures (European Commission, 2001). These are: employment structures, resources and resource management, quality of research and evaluation, research agendas and priorities, and institutional cohesion and networks. For the purposes of this book, these institutional structures have different relative significance where the employment structures, the resources and resource management and evaluation mechanisms have dominance. Lately, a body of evidence about the ongoing change of the employment structures in knowledge producing institutions has been accumulating (Waterton et al., 2001). This change is particularly pronounced within the university sector where studies have found that tenure has all but disappeared and academics and researchers are hired on short-term contracts. This, in turn, affects career paths, employment benefits and career choices. Comparing the changes of employment structures in universities and research organisations, the European study found that, contrary to intuitive expectations, the research organisations are less affected by the process of casualisation of research than universities, that both employees of universities and of research organisations are mainly employed on temporary research contracts, that researchers believe that they have become ‘overworked and underpaid’ and that a higher proportion of good graduate students chose alternative careers outside research. The distribution of resources for research is a powerful lever for influencing directly the social and cognitive strategies of research institutions. The way in which funding is distributed can affect the priority areas of research, the established evaluation mechanisms, the whole mode of operation of the institutions and their social structures.


Two tendencies in this respect appear to be fairly universal – they have been registered in different national and institutional contexts. These are the tendency towards a declining proportion of core institutional funding and an increasing proportion of national funding that is subject to open competition. While these two tendencies are universal, there is some evidence that research organisations have experienced this change more sharply than universities (European Union, 2001). The institutional changes that have occurred or are expected to occur as a result of the changed status of the GREs in the UK, are discussed in more detail in Chapter 4 of this book.

Science as knowledge and practice In congruence with, and sometimes following from, the transformations affecting the institutions of science, deep changes that sometimes affect the nature of what is referred to as scientific knowledge can be clearly detected. These changes include the blurring boundaries between basic and applied science as well as the advent of topic oriented, multidisciplinary science. Until relatively recently, researchers and policy makers assumed that intellectual innovation occurs at three clearly defined stages. This assumption was reflected in the development and wide use of the Frascati definitions of research as basic, applied and research development. A natural extrapolation of this assumption was that different types of research institutions do (and ought to be doing) different types of research. Hence, basic, highly theoretical research was considered to be the domain mainly of the universities in the UK, while more strategic and applied research, and research-related services were assigned to the research organisations such as the GREs. More recent developments in theory and social practice seem to reject the view of research as a largely sequential activity occurring at these three stages. There have been arguments that the distinction between basic and applied research, for example, is becoming increasingly blurred (Proctor, 1991; Webster, 1991). Moreover, as Webster points out: … the distinction between basic and applied research begins to look less and less useful as the research team’s efforts pull in both directions at the same time, indeed as a recent report of the UK’s Advisory Board for the Research Councils said, this distinction was ‘a meaningless dichotomy’ in a growing number of research fields.


The research environment may reflect this: academic departments are increasingly being restructured to accommodate basic and applied interests … (Webster, 1991, p. 4) And later: At a more general level, the distinction between ‘science’ and ‘technology’ also begins to lose its relevance in practice even if in principle it is still possible to distinguish the two. (Webster, 1991, p. 4) Proctor (1991) also points out that this process of blurring of boundaries is particularly advanced in the case of the ‘new’ research area such as biotechnology and computer sciences, where it is virtually impossible to distinguish between basic and applied research. That different types of research institutions – universities, research labs, GREs and industrial research units – compete for resources within the same research space is one particular expression of this process of blurring of boundaries between different kinds of knowledge. Moreover, there are clear indications that not only the types of knowledge that are being produced by the different research institutions have changed but that the expectations of users have changed also. Thus, universities are expected to provide research-related services (Howells et al., 1998) and research laboratories are expected to do more basic, fundamental research. Another important change in the context of new knowledge production is that investigative effort has shifted from ‘research themes’ to ‘research topics’. This is a particular expression of a more general conceptual and practical shift from science to research. Underpinning this process is the concept and practical implications of multidisciplinarity (Jantsch, 1970; Kohler, 1991; Schmoch et al., 1994; PREST, 2000). This has clear implications for the practices of the scientists and for the research culture. In terms of research practices, probably most clear are the implications in terms of managing one’s career. Today, every researcher has to manage a portfolio of short-term research projects. One study (Waterton et al., 2001) found that researchers usually identify a core interest pervading the portfolio of projects as a whole. In particular, university researchers try to observe a very fine balance between more ‘fundamental’ work funded by the research councils and projects funded directly by research users, which by necessity have a more applied, service-related character. In conclusion, we should like to point out that the changes of science as knowledge and social practice are in strong interdependency with the


transformations of science as institution. Any change in institutional structures is very likely to result in altered knowledge producing practices and different types of knowledge being produced. Altered knowledge producing practices, in turn, are likely to impact upon the speed and depth of change in institutional structures. These changes in knowledge production processes are discussed in Chapter 5. The visions of science It is worth emphasising that the dynamics ensuing from the first two aspects of our analytical framework, those of science as institution and science as knowledge, are present irrespective of the nature of change that is being discussed. This is not the case with the dynamics linked to the third aspect, namely the visions of science. This aspect becomes significant only in the context of policy-initiated change. The visions of science consist of a complex hierarchy of elements such as values, norms, ideas and general beliefs, which provide paradigms for social action. People structure their social space according to their comprehensive patterns of belief (Durkheim, 1915; Marx, 1964; Weber, 1968; Ziman, 1978). According to Shills, ‘… these comprehensive patterns of belief comprise outlooks and creeds (“suboutlooks”), movements of thought, and programs, as well as ideologies’ (Shills, 1972, p. 23). Shared and/or dominant patterns of belief regarding the nature of research, its role and place in society and the ‘optimal’ social conditions for its functioning not only define the way in which national research systems are structured but also the way in which their problems are defined. These beliefs function at different levels of social aggregation and can be detected at the levels of the individual, communities, institutions and society as a whole. Patterns of belief or visions of science become a force for change only when individuals or groups in position of power share them. The vision of science as ‘… autonomous and apolitical, concerned solely with the objective pursuit of truth, for example, as “pure academic science” ’ ( Johnston and Jagtenberg, 1978) dominated the research and policy domains for several decades. The vision of science as ‘pure academic science’ is based on the nineteenth-century distinction between ‘pure’ and ‘applied’ science and: … was designed to recognise that whereas technical invention or innovation is almost always goal oriented, there is also pure science – science pursued ‘for its own sake’, not just for its applications. (Proctor, 1991)


Pure science is by definition free. It is free both in the sense that it is ‘neutral’ and in the sense of ‘freedom from political, economic and broadly social interest’. As Ravetz points out, science perceived as ‘pure, academic science’, … is totally inward looking, its only offerings to the outside world are general contributions to knowledge and culture, unpredictable technological applications, and the example of its endeavour. (Ravetz, 1973) However, beginning during the middle to late 1970s the vision of science as ‘pure’, ‘autonomous’ and ‘free of social influence’ in the UK has been diminishing in significance and considerations regarding its ‘freedom’ and ‘autonomy’ have considerably changed their meaning. First, by the 1970s, there was considerable evidence that ‘useful science’ where ‘the results and methods of science are applied directly to technical and practical problems; and those external tasks provide stimuli, goals and partial justification for scientific work’ (Ravetz, 1973) is the most appropriate description of contemporary science. The significance of ‘useful science’ was asserted by the concentration of research in industrial and government laboratories and by the sharp increase of in-house R&D expenditure in particular industries. ‘Useful science’, however, is conducted in social environments demanding profit, growth and accountability, which require that the research be directed towards the general objectives of economic development. Second, science and technology became a central concern for the state and ‘all governments … are involved in the large scale funding, management and regulation of science and technology’ (Webster, 1991). Third, the notion of science as ‘free’ crucially depends on the distinction between ‘pure’ and ‘applied’ science, between ‘passive, disinterested science’ and ‘transformative, engaged technology’. In recent years, the boundaries separating science and its application have become blurred and it has become increasingly difficult to distinguish between pure and applied science along traditional lines. Governments have recognised the ‘usefulness of useless research’. The consequence has been not just a shortened time lag between discovery and application, but entirely new relations of science and industry. In the modern industrial laboratory discoveries are sought in areas of anticipated applicability; the establishment of biotechnology firms to explore recombinant DNA techniques is a recent example of


industries sponsoring ‘basic research’ with the expectation of applying the knowledge gained to medicine and agriculture. (Proctor, 1991) At policy making level the visions of science in the UK and their evolution could probably be most clearly deduced by looking at official documents. Explicit expressions of the core beliefs that underpin the British research system can be found in the Government’s response to the report of the House of Lords Select Committee on science and technology Civil Research and Development (1987) and the White Paper Realising Our Potential: A Strategy for Science, Engineering and Technology (1993). On reading the Civil Research and Development Paper (1987), it becomes evident that the British Government considers science and technology to be central to economic performance, and that its new institutional structures and instruments should improve the effectiveness of the contribution of science and technology to economic performance. Thus, according to this document, the central criteria to be used in allocating funds and determining the main directions and focus of research are ‘selectivity’ and ‘exploitability’. In 1987, a blueprint for the future of basic science, A Strategy for the Science Base, was published by the Advisory Board for the Research Councils. This document … was the first serious attempt to come to terms with the facts of life: a science budget that would at best stay constant in real terms, a scientific establishment that had been conditioned to believe that its income would always grow and that recent history was but a temporary aberration, and a university system in disarray … The Advisory Board’s aim was to encourage scientists to think harder about the management of research in the new era of ‘steady-state’ budgets. (Wilkie, 1991, p. 115) The White Paper Realising Our Potential: A Strategy for Science, Engineering and Technology was published in May 1993 by the Office for science and technology. Its main themes emerged from a wide consultation process involving some 800 organisations. The White Paper aims to help the scientific, engineering and business communities secure the maximum economic benefit from science and technology, while continuing to support excellence in basic research. Its focus is on developing a closer and more systematic partnership between the scientific and engineering communities, industry and commerce, and government. The purpose of this partnership is the strengthening of the contribution of


science and engineering to wealth creation and quality of life (Nedeva, 1995). As Hilary Rose wrote in The Guardian in 1995: The curious paradox of Conservative policy for innovation is that intervening in the science base presents no ideological problem, while intervening in industry does. In consequence, SET policy has been charged with mission impossible: to transform British industry’s technological future. Such a project should be the task of an industrial policy in which SET plays a carefully thought through part. (The Guardian, 1995) A certain continuity between the Civil Research and Development paper and the White Paper on science and technology can be identified in that both documents express the vision that science should contribute to wealth creation and quality of life. Hence, due to the perceived significance of exploitability of research, arguments and policy measures centre on considerations regarding prioritisation, selectivity and competitions for research funds. As Rappert comments on the public sector research base (PSRB): While the commercial exploitation of the PSRB is nothing new, in the past the connections between industry and the PSRB took place in indirect routes. Earlier this century, for instance, the relative autonomy of scientific researchers in the UK was protected by awards from government supported Research Councils, designed to buffer universities from direct political interference. Researchers were held accountable to the public but only implicitly … By the 1970s, however, commitment to scientific autonomy gave way in favour of an explicit and utilitarian emphasis on accountability, primarily as a result of continuing economic difficulties. (Rappert, 1995) The change in visions discussed here has necessarily led to profound transformations of the institutional structure and the knowledge producing practices of science in the UK. Some of these transformations and the concrete visions that led to their initiation are discussed in more detail in Chapter 6 of this book. Based on the three aspects of science discussed here we have outlined three stages in the development of modern science. ‘Academic’ science is characterised by the Mertonian vision shared by policy makers and scientists alike, by well developed autonomous institutions funded by public funds (grants), and by the complementary conviction that


science cannot and should not be interfered with. ‘Useful’ science is described by a more pragmatic vision of science (which in the case of scientists appears to be a justification for further funding rather than deep conviction), expectations that science contributes to ‘wealth creation’ and ‘quality of life’, scientific institutions expected to meet users’ demand and funded by public and private funds (public funding is competitive) and the belief that science can and ought to be steered. The vision of ‘useful’ science, however, still assumes that science is the domain of particular specific institutions and artefacts (results) produced by these are being transferred to users. ‘Commodified’ science goes further exactly in this assumption. Science is not the exclusive domain of scientific institutions, and scientific knowledge is produced in the context of its application rather than its potential transferability. The institutional expression of this is the privatisation of some research institutions and much higher reliance on private funds overall. These three stages of development and the visions that make these distinctive are discussed further in Chapter 6.

5 The structure of this book The structure of this book broadly follows the logic of the conceptual framework discussed in the previous sections. Hence Chapter 2 sets out the historical context of policy-driven change with explicit emphasis on research organisations and GREs. Chapter 3 complements Chapter 2 in presenting the concept of NPM and the ways and mechanisms through which it pervaded government practices, visions and management approaches. Chapter 4 introduces the nature of science and technology services demanded by the UK government and discusses the diversity of organisational forms, governance models and ownership structures that the GREs might adopt or have imposed on them. In Chapter 5 we deal with the different visions of science, the way these have changed and the impact this change has had on the institutional structure’s knowledge producing process in the context of the GREs. Chapter 6 explores the change in the knowledge production processes in detail. Chapter 7 explores the accountability aspects of the triple shift in public sector science. Chapter 8 presents our conclusions.

2 Historical Context

1 Introduction In Chapter 1, we explored the differences between organic scientific change and policy-driven change. We also explained that this book was about just such a shift from organic to policy-driven change, and the consequences of that. We suggested that a shift from organic to policydriven change could be complicated, or even frustrated, by a failure to achieve congruence between organic change processes and new desired policy outcomes. That is, if the change is too violent and pays no heed to past practices and cultures then policy-driven change will be difficult to achieve. A particular and recurrent theme of this book is that policydriven change was indeed complicated and frustrated by echoes and resonances from the period of organic scientific change and development. In 1675, King Charles II established the Royal Greenwich Observatory. One of the principal tasks of this new institution was to resolve the problem of determining longitude at sea for the benefit of the navy and Britain’s mercantile fleet. The establishment of the observatory therefore marked the formal beginning of British government resolve to procure scientific and technological assistance for both administration and the public good (Sobel, 1996). Between 1675 and the election of Mrs Thatcher’s Conservative Government in 1979, successive British governments recognised the need for, and strove to supply, a wide range of scientific and technical services to itself directly and other beneficiaries (such as the public). Government traditionally sought to do this by means of a complex web of publicly owned or funded research organisations. The period from 1675 to 1979 therefore frames the historical context of subsequent change. 28

Historical Context 29

This period is marked by particular institutional forms and structures for science, visions of science and scientific knowledge production processes. These form the organically grown legacy inherited by the incoming Conservative Government of 1979. In this chapter, it is therefore important to set out the historical antecedence of the policy-driven change under examination by way of setting the context. As we explained in Chapter 1, we discuss this change in terms of the changing institutions of science, the visions of science and the nature of the knowledge production processes. Similarly, we pick up these three themes in this chapter.

2 Science in Britain before 1939 The European Renaissance, characterised as it was by Modernist thinking, prompted the development of science as a distinct practice. Science was usually a discrete activity with its own mores, culture and discipline. It was a largely individual pursuit of cultivated individuals. Lacking any institutional basis, individual scientists from the Renaissance until well into the industrial revolution, were financed and protected by the patronage of the church, governments, universities or the aristocracy. Surprisingly, the ancient universities of England did not act as the loci of the development of science at this time – they were fundamentally religious institutions and new scientific philosophies challenged contemporary theology. As Scott (1984) puts it Three great intellectual movements, the Renaissance of the sixteenth century, the scientific revolution of the seventeenth, and the philosophical ‘Enlightenment’ of the eighteenth, seemed to pass the universities by. (p. 28) As industrial capitalism began to take root in the sixteenth and seventeenth centuries so science became more organised. The growing sophistication of knowledge required the formation of a professional community, working within a professional institution, since knowledge and methodologies had to be transferred from generation to generation. The need for the growing number of scientists to communicate with each other led to the establishment of some 220 scientific societies by 1790 (Rose and Rose, 1969). Scott (1984) does not underestimate the importance of these: Sir Isaac Newton may have been a Cambridge University professor but the most powerful intellectual institution of his day was the


newly formed Royal Society … Furthermore, it can be argued that a fourth great movement, the industrial revolution, that reshaped the intellectual contours of society as decisively as the first three, also took place far away from the world of university. (p. 28) As social organisation shifted and coalesced around new forms in this time of turmoil, so the new scientific organisations had to seek new patrons. They did so most often with governments, who were generally ready to assist. Britain’s Royal Society was founded in 1662, with Royal patronage. At the same time, as society embraced modernism, so the study of science took firm root in the ancient universities. These new organisations and sites of scientific practice were not part of the developing industries. State support was given because the benefits of science were readily apparent to governments: in the newly industrialising world scientific knowledge implied technological development that meant success in developing capitalism. Throughout the nineteenth century, science increasingly sought to assert itself as an organised social activity and to define its role in society. But whilst scientists generally worked with industry and government, they did not work as an integral part of it. Many new institutes and colleges were created with public patronage as science came to be seen by governments as an essential precursor to the development and maintenance of Britain’s industrial pre-eminence: a position science was to hold until well into the twentieth century. Concern over Britain’s competitive position vis-à-vis other major states was well founded, as Table 2.1 shows. The mid-nineteenth century saw the start of an increased recognition by central government in the UK of the need for scientific research and technological development to support statutory, regulatory, procurement and policy activities. Traditionally, this need was met through support to research establishments that belonged to and served government departments. Thus, the Geological Survey was established in 1832, followed by a Laboratory of Table 2.1 Annual rates of industrial growth Period

UK %

Germany %

USA %

World %

1860–80 1880–1900 1900–13

2.4 1.7 2.2

2.7 5.3 4.4

4.3 4.5 5.2

3.2 4.0 4.2

Source: Surendra, 1961.


the Government Chemist in 1843. In 1900 the National Physical Laboratory was established. Gummett explains that: Following German example, the Laboratory was devoted to the task of bringing scientific knowledge to bear upon everyday industrial and commercial practice. It opened the way to substantial State support for scientific research … and research which, moreover will be conducted in State-owned laboratories. (Gummett, 1980, p. 22) The setting up of the antecedent of the Royal Aircraft Establishment followed this in 1905. In 1909, a Development Fund was created to provide for the scientific development of forestry, agriculture and fisheries. By 1914 this had resulted in the establishment of 12 major agricultural research institutes in England and Wales. Under the National Insurance Act of 1911, one penny per insured person went to a fund for medical research administered by what later became the Medical Research Council (Gummett, 1980). However, this financial support was not as generous as that given to German scientists. By the late nineteenth century the most important centres for industrially orientated research were the newly emerging civic universities, such as that at Manchester, which positioned themselves by stressing that they wished to work with industry. The contribution of the civic universities to industry, even in their early days, was remarkable and of considerable importance. These were becoming and later became a leading source of innovation for industry. The importance of the civic universities was further enhanced by the fact that there were no state centres for industrial research, no research associations, and that research within the firms was in its infancy in the 1880s and 1890s (Sanderson, 1972). By 1914 the UK lagged behind her continental industrial competitors and military adversaries and received a rude awakening during the First World War. The crisis generated by the sudden awareness of Britain’s relative weakness in vital war technologies such as explosives, dyes and lens making led to a rapid increase in government funding of science. In 1915, the government established the Haldane Committee to distribute funds for scientific research or, more specifically, ‘to develop and organise the knowledge required for the application of science to industry’ (DES, 1981). Eventually, Haldane’s committee developed into the Department of Scientific and Industrial Research (DSIR) with a brief ‘to promote and organise science research with the view especially to its application to industry and trade’ (DSIR, 1962). The DSIR was possibly


the world’s first government department specifically devoted to the development and diffusion of science and technology. It did this by running its own laboratories, administering the Joint Government– Industry Research Associations Scheme and awarding research and postgraduate training grants to universities. The DSIR attempted to stimulate industrial-based scientific research by promoting and subsidising the formation of research associations where firms would pool resources and share scientific results to the mutual benefit of all. As early as 1920, the eminent scientist Sir Frederick Soddy was criticising the public subsidy of private gain. Nor were the research associations a success as envisaged. Manufacturers entertained mutual suspicions of each other and the envisaged financial independence from government funds never materialised (Rose and Rose, 1969). This failure to stimulate industry into funding scientific research and development provided the government with an imperative to act as a proxy customer on its behalf. Thus, GREs such as the National Physical Laboratory and the Building Research Establishment developed a strong public (i.e. industrial) service ethos from this time. The DSIR became the chosen vehicle for government sponsorship of science in the inter-war years. It began to acquire responsibility for a number of existing laboratories and for setting up new ones. Reflecting its wartime origins, the Department had a penchant for encouraging research that aided military competencies, but failed to promote much funding of the universities for the training of scientists. By 1965, it was responsible for 15 laboratories, the administration of the industrial research association scheme that provided support for co-funded government–industry laboratories and awarded research grants to postgraduate students and academic staff in universities. A council of eminent scientists and industrialists directed DSIR activity from its inception. This unusual constitutional status was designed to leave scientific decisions largely to scientists themselves. It was placed under the aegis of a small committee of the Privy Council chaired by the Lord President of the Council, a Cabinet minister. The Committee rarely met and the Lord President lacked the resources to take much interest in the DSIR’s work. This arrangement enabled DSIR to receive public funds whilst permitting it to think and act largely free of the kind of ministerial control that constitution as a more traditional department of state might have entailed. This arrangement received further endorsement in 1918 in the formative Haldane Report on the Machinery of Government (Cd 9230, 1918). A key point stressed by the report was the need for government to access


‘intelligence and research’. The Haldane Report distinguished between research that was needed for specific departmental purposes and that which was for more general use. The former, the Report said, should be done under departmental supervision, whilst the latter was best not supervised by an administrative department because of its more general utility. Moreover, the report went on, an arrangement such as that of DSIR’s Privy Council committee placed responsibility to Parliament in the hands of a minister who ‘is in normal times free from any serious pressure of administrative duties, and is immune from any suspicion of being biased by administrative considerations against the application of the results of research’ (Cd 9230, 1918, para 67). The suspicion that departmental ministers might sometimes find it inconvenient to support certain kinds of research or to publish or use the results, became the basis for the distinction between departmental research establishments serving their ministries and the research institutes (which later became the Research Councils) with their greater degree of autonomy. Indeed, it has even been used as the basis of what some in later years called the ‘Haldane principle of research council autonomy’. However, Haldane himself never used such a phrase. His intention was not to exclude all government-funded research from direct ministerial control, but only that which was of general value – what, in modern language, we might call ‘basic’, or ‘curiosity-oriented’ research. This distinction held sway for several decades but was not always clear cut – the departmental establishments also retained a strong ‘public good’ element in their work that went beyond their departmental responsibilities. Following the Haldane Report, further research councils were set up for support of agricultural, medical and nature conservancy research. Science–government relations did not otherwise change significantly until the Second World War, beyond a steady growth in state support for various areas of science and technology. A number of these new establishments were not exactly new, having grown by adventitious extension of testing facilities to incorporate experimental work. Others grew out of the slightly more systematic approach that followed the First World War: for example, the Admiralty Research Laboratory and the Armament Research Establishment were set up to fill gaps identified during the War. This approach continued during the Second World War with, for example, the establishment in 1943 of the Naval Construction Research Establishment to do experimental work on underwater explosions and their effects on ships’ structures. Yet others owed their existence to the foresight and vigour of particular individuals. One such


was the Admiralty Experiment Works, set up in 1870 at the instigation of the distinguished naval architect, William Froude, in order to conduct tests of model ships. The other, the organisations which were the forerunners of what later became the National Gas Turbine Establishment, comprising the private firm Power Jets Ltd and the government owned firm of Power Jets (Research and Development) Ltd. These were set up in the 1930s under the influence of Air Commodore Whittle and became the main centres for work on jet engines. Some, finally, took shape under political pressure. For example, during the First World War aircraft manufacture became a commercial proposition. Industrial disapproval of government involvement in this business led to a decision to discontinue the design and manufacture of aircraft at the Royal Aircraft Factory. The Factory was reconstituted as the Royal Aircraft Establishment, with the dual role of technical adviser to the commercial designers and actual designer of aircraft equipment. A reverse example was perhaps the case with the Admiralty Engineering Laboratory, which was set up in 1915 to break the Vickers company’s monopoly in the design and development of submarine engines.

3 The post-war era By the outbreak of war in 1939 Britain was in a much stronger position than it had been in 1914 to fight what has often been described as the ‘Scientists War’. The imperatives of the Second World War generated state-led innovation in the fields of the jet engine, radar (and the birth of the electronics industry), atomic weapons (and the start of the nuclear industry), and polythene (and the plastics revolution). The War saw the introduction and application of new analytical techniques, such as operations research, to government and military planning. There was a growing appreciation in government of the value of scientific advice. Much of the scientific work done during the War promoted British scientific and technological developments afterwards, further enhancing the general regard for science. For instance, the mathematician Turing’s work at Bletchley Park on the German code machine Enigma laid the basis for his later work at the University of Manchester in building the first electronic computer. In addition, after the War, new senior scientific advisory bodies were introduced to assist with policy making on both the civil and the defence fronts. The close association between science and war performance helped to cement the relationship between science, government and society. In 1945, the UK was left with an appreciation of the value of scientific


knowledge, a plethora of government committees and councils with responsibility for science policy. Thus the war reinforced the distinct institutional character of British science (Stewart, 1999). This experience also helped secure further government funds and the UK soon had an ever-expanding state science budget (Stewart, 1999). Government support for science found voice in government funding of laboratories and universities and in the subsidy of projects with industry. Government support for science and technology came through the research councils, university expansion, new organisations such as the Atomic Energy Authority and also, the lion’s share, through the Ministry of Defence (MoD) and associated supply ministries (notably those responsible for aviation). The only civil departments of government with significant R&D outlays were the agriculture departments. There is some suggestion that government funding was particularly important because of its industrial or end-user orientation. As Zuckerman was to put it: a kind of intellectual barrier developed between ‘Royal Society’, ‘Research Council’, and ‘University Science’ on the one hand, and the scientific laboratories of government and industry on the other, the former assuming a far higher prestige. (Zuckerman, 1971) Or, as a vice-chancellor put it in 1958: The crude engineer, the mere technologist are tolerated in universities because the State and industry are willing to finance them. Tolerated but not assimilated. (Ashby, 1958) Government also continued to provide the major share of the total national R&D outlay, although the industrial share had grown from a little under a quarter in 1955–56 to just over a third in 1961–62. Civil science spending rose fivefold between 1945 and 1950, from £6.5 m to £30 m. The formation of the National Research and Development Corporation (NRDC) in 1949 marked one of the first of many attempts by successive post-war governments to promote linkages between scientific research and prospective industrial end-users of the knowledge product (DES, 1981). None of these efforts can be classed as great successes. Under the Conservatives, from 1951 to 1964, science received only distracted governmental interest, but continued to be generously funded, especially in defence related areas. The work of the DSIR was codified in law 1956, including an emphasis on university research and


its role in the advancement of trade and industry (DSIR, 1962). Science, however, remained a discrete activity with little integration with the processes of technological development. By the end of the 1950s, however, questions were being asked about the apparent failure of this growing financial commitment to yield economic results. Questions included: was the balance of priorities (heavily weighted towards atomic energy, aviation, defence, and the research councils) appropriate? With facilities in fields such as high energy physics and space now costing significant amounts by overall governmental standards, were the arrangements for settling priorities appropriate? Was the machinery of government, in particular as it bore on the question of technological innovation in industry, in need of change? Major enquiries were conducted into the organisation of civil and defence science (Office for the Minister for Science, 1961; Cmnd 2171, 1963). Party political debate about the management and use of science and technology also grew, and became a central issue in the 1964 general election (Vig, 1968). From 1961 to 1964, scientists began to work closely with the Labour Party, then in Opposition, to address what were seen as critical issues. They concluded that Britain had a messy science policy and infrastructure and that there was a parlous slippage between scientific knowledge production and its eventual exploitation. The perceived solution was a government-generated scientific revolution, with government actively promoting increased technological development in industry. Science was highlighted as the modernising force of socialism at the heart of Labour’s 1964 campaign, and they returned to power. Support for independent science lay at the heart of a desire to modernise Britain’s ailing industries and thus ensure economic development (Rose and Rose, 1969). Implementation of this idea principally took the form of the new ‘Mintech’: a Ministry of Technology charged with spearheading the modernisation of British industry through the promotion and application of advanced technologies (Vig, 1968; Rose and Rose, 1969). Mintech initially took over responsibility for the industrially oriented laboratories of DSIR, the Atomic Energy Authority and the sponsorship of a limited range of high technology industries. Recognising, however, that Mintech’s ability to influence industrial behaviour was limited in comparison with that exerted through the purchasing power of the Ministry of Aviation (with its huge defence responsibilities), the two ministries were soon merged. The merger brought with it the Ministry of Aviation’s defence electronics and aircraft laboratories, making Mintech responsible for the largest R&D force under one financial control in Europe (Clarke, 1973).


In 1965, a book describing a range of mostly governmental or industrial research establishments was published (Cockcroft, 1965). It is remarkable that the editor, Sir John Cockcroft, a man with considerable highlevel experience in government service, wrote an introduction in which no reference was made to governmental customers or the requirements of Whitehall. Cockcroft et al. discussed problems of internal management of establishments, and noted that the director had to produce an annual budget: and work within it when approved … trimming the estimates of his senior staff to a total which is likely to be approved by his management board. With regard to Whitehall, Cockcroft did say that there was a: not inconsiderable danger that as establishments grow they may be over-administered. A great deal of the valuable time of scientists can be wasted, for example, by detailed costing of basic research projects when the information is not, in fact used. In the same book Sir Edward Bullard (Cockcroft, 1965), wrote a concluding chapter entitled ‘What makes a good establishment?’. Describing the functions of senior staff, he wrote: It is only in the extremest emergencies that one can say, ‘Let us write down what has to be done, estimate the staff required, engage them and get on with the job’. Nearly always one has to say, ‘For the next year at any rate I have such and such staff; what are the most useful things for them to do’. Of course, Cockcroft and Bullard must have been fully aware that government establishments existed to serve the interests of their parent ministries. Nevertheless, what is so striking, 30 years later, is the implicit unimportance of the paymaster in determining what the establishments should actually do and how their resources should be allocated. One could not imagine such attitudes prevailing in the current culture of government. Bullard did, however, recognise that the future would not be like the past, observing that: the doubling of scientific activity every five or ten years which we have come to regard as normal cannot continue much longer.


We shall be forced to discover means of maintaining the efficiency of establishments, the size and expenditure of which does not increase rapidly. Indeed the roles of the government research establishments, as indicated earlier, had never been entirely clear cut. Of particular importance has been a long-running debate about how best to connect them, not only to departmental customers, but also to the wider community of real, as opposed to proxy (departmental) users of their work. In the context of the 1960s, these issues came up in two forms. The first was what to do about those laboratories where demand for their services was likely to fall. The second was how best to put the laboratories in general, especially once concentrated under the aegis of Mintech, to the task of national economic modernisation. Both issues can be illustrated from the experience of the Atomic Energy Research Establishment, Harwell (see Gummett, 1980). This laboratory was set up in 1946 as part of Britain’s nuclear weapons programme but later refocused its work entirely on civil nuclear power. By 1956 it had grown to 6000 staff. In 1965, at the start of the programme for the second generation of nuclear power stations, it was clear that future demand for research into what was now deemed to be a relatively mature technology would be reduced to about one third of the then current level. Yet, the establishment’s managers believed that to reduce the scale of its activity by such an amount would destroy its organisational viability. They therefore sought a new role for the establishments and established a new mission for Harwell – to help industry with research and innovation. Significant progress was made towards this objective between 1966–67 and 1974–75. Within declining staff totals, the proportion of staff employed on work outside the atomic energy programme grew from 5 to 50 per cent, and non-atomic energy earnings reached a similar proportion. About 60 per cent of the non-atomic energy income came from other government customers, notably (in the early 1970s) the Department of Trade and Industry (DTI) rather than from industry directly. In developing its capacity to conduct commercial work, Harwell had to learn how to market itself. This meant not only understanding what its customers wanted, but also getting its staff to work within the constraints of cost and time that customers required. In part, this meant setting up a marketing department deliberately designed to support marketing and industrial liaison by the scientific staff themselves. It also meant developing close links and understandings with private sector


firms. Here, in contrast to the then traditional civil service practice of making knowledge available to all comers, Harwell adopted what its director from 1968 to 1975, Dr (later Lord) Walter Marshall called the ‘Principle of Maximum Unfairness’. This entailed working with single customer companies in conditions of commercial confidentiality. This was justified on the grounds that companies would be more likely to place contracts with government laboratories if this led to a commercial competitive advantage.1 Harwell was a specific instance of a general concern about overcommitment to government laboratories and a perception that the large UK investment in science and technology appeared not to have paid off in economic terms. As the Permanent Secretary at the new Ministry of Technology later observed: It was reasonable enough to believe that a relationship existed between R&D, innovation and industrial performance; but this did not tell the Ministry where it should push. (Clarke, 1973) None of the other major western governmental spenders on science and technology had made as heavy an investment, relatively speaking, in government laboratories as the UK. Some suggested that Britain may have ‘taken the wrong road’ immediately after the war by putting too high a proportion of her research and development into government laboratories and not enough into industry (Blackett, 1967). By 1967, such thoughts were being echoed by the Minister of Technology. He expressed his wish to break down the barriers between research and industrial production. But rather than curtail his own research establishments and put research programmes out into industry (which was the US model of the contract mechanism as applied to science policy), he proposed to encourage his establishments to undertake confidential contract research for firms (Wedgwood Benn, 1967). The Institution of Professional Civil Servants – the professional association of scientific civil servants – supported such developments. They argued that although most staff within government establishments did not work within commercial terms of reference, they were perfectly capable of doing so if required. They cited in evidence the case of the Hydraulics Research Station, where there had long been such a requirement. Moreover, according to the IPCS, there was scope for government research establishments to take the initiative in selling their ideas to firms and performing research for industry with payment being made for services on a royalty basis. The IPCS also saw scope for establishments to


discriminate between firms as a necessary means of ensuring successful commercial exploitation of research (IPCS, 1968; Lyons, 1969). These ideas continued to evolve. In January 1970, a Green Paper, issued by the Minister of Technology, proposed placing the overwhelming majority of government research establishments into a centralised research and development (R&D) organisation called the British Research and Development Corporation (BRDC). This was to work on a customer–contractor basis for both government organisations and the private sector. The BRDC was to be jointly financed by general government grants, specific government contracts and the sale of services, royalty income, joint ventures, and other contract work from industry (Ministry of Technology, 1970). As Sir Richard Clarke later put it: The size and health of the organisation was intended to depend upon its ability to provide economically and commercially for industry’s needs; and it [the proposal] was an attempt to introduce a market test into predominantly government-financed research establishments. … If BRDC could not sell its services, its scale of operation would have to be cut down. (Clarke, 1973) The idea of a test for market relevance for civilian industrial-related research (at least for that which fell outside the aerospace and nuclear sectors) became central to thinking about research policy within the Ministry of Technology and its successor, the DTI. It represents an attempt to grapple with the problem of how, as ‘proxy’ customers, they should spend public money on research that was intended to benefit industry and the economy as a whole. This idea found further expression in the 1970 Green Paper: No Government department can decide centrally what research programmes are best designed to serve the needs of industry. As a general rule, only the ‘customer’ knows what he wants, and by his readiness to pay for it, makes the ‘supplier’ aware of his requirements. (Ministry of Technology, 1970) The BRDC lapsed in 1970 when a Conservative Government, under Edward Heath, was returned. The Ministry of Technology, for Conservative free marketeers such as Sir Keith Joseph, had come to represent the worst sort of socialist interventionism. Mintech was transformed into a new DTI by the addition of most of the responsibilities of the Board of Trade and the loss of some aviation responsibilities. The latter


went temporarily to a new Ministry of Aviation Supply. This Ministry was in turn incorporated into the newly formed Procurement Executive of the MoD. The establishment of the Procurement Executive, following a report by Sir Derek (later Lord) Rayner (an executive with Marks and Spencer plc), represented the culmination of moves in the previous decades towards centralising responsibility for defence policy and defence procurement within the MoD (Cmnd 4641, 1971). The Procurement Executive became responsible for defence R&D at its own research establishments. These establishments were therefore removed from the possibility of closer linkage with civil establishments that they had enjoyed when at least some of them were part of Mintech. The Procurement Executive was also responsible for contracts placed with industry and universities and for the procurement of all defence equipment. As such, it became responsible for about half of government expenditure on R&D. It also became the biggest single customer of British manufacturing industry, especially in high technology products. The emphasis on strengthening lines of responsibility and accountability, and on programmatic analysis, did continue under the Conservative Government. Thus, Programme Analysis and Review, in the early 1970s, was an attempt to try to set clear governmental objectives, backed by thorough appraisal of outcomes. Lord Rothschild, head of the newly created Central Policy Review Staff, conducted a review of the organisation and management of government research and development (Cmnd 4814, 1971). One of his recommendations was that applied research, which he defined as ‘R&D with a practical application as its objective’ (in contrast to basic research, where no such immediate application was envisaged), should be governed by the ‘customer–contractor principle’. This principle was simply stated as ‘the customer says what he wants; the contractor does it (if he can); and the customer pays’. In applying this principle not merely to GREs, but also to the applied research of the nominally autonomous research councils, he opened a furious debate about scientific independence and government interference (Williams, 1972, 1973). There was a warmer welcome for the recommendation that all departments with a significant interest in science and technology should have a Chief Scientist with access to ministers and responsibility for formulating departmental R&D policy. Responsibility for implementing those policies, however, was to lie with a separate official – the Controller R&D. This division of responsibilities was intended to clarify lines of accountability and to separate the responsibility for managing a ministry’s laboratories from that for determining what tasks, if any, were required of them.


In the event, few ministries adopted the recommended pure Rothschild model. In particular, most did not truly distinguish between the roles of Chief Scientist and Controller R&D. Moreover, and at least as regards the implications of Rothschild for the Research Councils, time saw a gradual return of the initiative over science and technology programmes to the Councils themselves. Nevertheless, in most cases, systems were introduced that began to develop a culture of bidding for funds attached to defined activities, rather than establishments receiving an undifferentiated block grant for distribution at the discretion of the establishment director. Prior to 1971, science and technology services were typically supplied to ministries by GREs, which were an integral part of the ministry. The only significant exception being, MoD, which also drew extensively on industry. Following Rothschild, customers and contractors were somewhat more sharply differentiated, although in general they remained within the same ministry. By early 1972, the Chief Scientist of the DTI was to claim that the department was moving: to quite a different concept of determining the programme and monitoring it. We have, indeed, moved quite a long way toward the customer–contractor relationship. (HC 375, 1972, Maddock) Changes made to the systems included the introduction, for example, of research requirements boards intended to specify the programmes in different fields of activity. Despite these changes and developments the basic shape of the government system for funding and drawing upon science and technology services was not fundamentally altered. In particular, the civil service culture within the establishments, and the dominance of the director and the establishment over the ministry in the formulation of programmes, do not seem to have changed dramatically. For the most part, the government research establishments continued to receive funds in ways that were not closely monitored and with the laboratory defining much of the work to be done (Boden et al., 1998). These rather loose regimes of control were to remain in place until the 1980s. The steam seemed, at least for a time, to have run out of the movement for bold organisational reform. What marks the period from 1945 to 1979 is a reverence for science and a commitment to its public support through government laboratories, universities and publicly funded projects with industry. A new rhetoric justified a largely state-driven supply and allocation of economic


resources for science (Nelson, 1959; Arrow, 1962). These arguments stressed the high degree of uncertainty attached to the economic payoffs of fundamental scientific research. Allied to this, the rents from such scientific work are difficult to establish and defend because of the open nature of science as a social practice. This led to the conclusion that science is subject to market failure: markets cannot efficiently allocate resources because of the mismatch between social and private returns (Dasgupta and David, 1994). Such economic analyses provided a rationale for government funding of science from 1945 to 1979. Of course, up until 1979 most science was a product of a particular set of social circumstances and decisions that led to it occupying an independent and discrete social location. As such, it was not part of the market economy and therefore it is of little surprise that a classical economic argument should find it market dysfunctional. This economic/market reasoning reflected and reinforced a prevalent ideology that science expenditure could not be controlled in quite the same ways as other activities. For instance: Research, more especially basic research, is often a gamble. The working out of imaginative ideas, sometimes on the basis of slight clues, or perhaps just intuition, may lead to whole new fields of knowledge, or to nothing. On the other hand, it is contrary to custom and tradition to encourage speculation with public money, in view of the very proper requirement of answerability to Parliament, and yet it is at the early uncertain stages of research that help is most necessary and most valuable. (DSIR, 1962, p. 129) Whilst science was becoming inordinately more expensive, no processes or techniques appeared to exist in government to control or monitor spending. Rose and Rose (1969) describe how one 1950s government committee on the management and control of R&D concluded that: some research projects could not be justified and that Directors of research establishments should consider carefully before embarking upon them, and should ensure that a rough timetable of progress should be maintained. When it is considered that the period covered by this committee included such scandals in the administration of defence research as the £100 million lost on the Blue Streak [a rocket] following a sixfold escalation in estimated costs the propriety of these delicate conclusions may well be pondered. (p. 84)


There were sporadic efforts to impose control. In 1968 the Fulton Committee (Cmnd 3638, 1968) recommended that executive agencies be set up for certain government functions and that they should have: clear objectives and their performance should be judged by their results. … Wherever measures of achievement can be established in quantitative or financial terms, and individuals held responsible for outputs and costs, accountable units should be set up. (Cmnd 3638, 1968) Yet, despite these recommendations and those of Rothschild (Cmnd 4814, 1971), there was little real shift in actual practice.

4 Some conclusions We turn now to an analysis of this history in terms of the three central arguments of this book – the institutions/structures of science, the visions of science and knowledge production processes. During the period prior to 1979, we argue, government-funded science went from being perceived as largely ‘academic’ in nature to a concern to ensure it was somewhat ‘useful’. However, the completeness of this transformation is less marked in some areas than others. Institutionally and structurally, GREs were largely autonomous. Physically distinct and distant from their host departments, they enjoyed considerable funding support largely free from any accounting control. The laboratories had their own hierarchies and control mechanisms, again largely distinct for the mainstream civil service. Simultaneously, the GREs evidenced real commitment to the public service ethos that had led to their founding. In many instances, they were there to do work that, it was felt, could not and would not be done privately. Towards the end of this period, there were moves towards making the GREs more closely controlled by their departments, through measures such as customer–contractor arrangements. Whilst the impact of these was of a limited nature, what is in evidence from the 1970s onwards is a concern to make such science and technology services useful to the departmental customer (proxy or otherwise). It is interesting here to contrast the scientific control and management exercised over the DSIR and the new forms of control mooted by the Green Paper in 1970. The vision of science that is hegemonic throughout this period is that of the Mertonian ideal. That is, science as an activity is discrete and independent. Management and funding controls did little to impugn this independence. Nevertheless, as with structures, some shift in


Funding applied research minor source of funding

Codifiable open knowledge public good The public

Industry and commerce

Science Scientific knowledge for commercial benefit

Accorded status and recognition generally trusted

Independent scientific knowledge products for policy advice

Government

Major (main source of funding)

Figure 2.1 Traditional model of science

emphasis from academic science to useful science is in evidence here. For instance, it is certainly the case that, increasingly throughout this period, there was concern over the perceived lack of direct utility of science being funded and undertaken by government. This suggests a real shift in time with regard to perceptions of what science was for and a desire to move more towards demonstrable usefulness. However, this shift did not go as far as to endorse the full commercialisation of scientific knowledge production. Finally, the scientific knowledge production processes during this period were traditional and Mertonian. For the most part, the GREs saw themselves as producing public good knowledge, funded by government. Towards the end of the period, in instances such as Harwell, there is some indication that GREs (usually to ensure their own existence) were willing to compromise this public service ethos and engage more actively in producing knowledge within a commercial environment. However, for the most part these were isolated examples. In summary, the GREs inherited by the incoming Conservative Government in 1979 were very much public sector organisations, in every sense of the word. They were Mertonian science institutions imbued with a public service ethos. At the same time, the norms of the institutions and the absence of any real managerial or accounting controls meant that they enjoyed a very significant degree of autonomy from the rest of government. Figure 2.1 sets out diagrammatically the


position enjoyed by the GREs. The winds of change were, however, already blowing. Numerous commentators and government reports had indicated that there were misapprehensions about this situation. However, attempts at reform had been somewhat half-hearted and prone to only marginal success.

3 New Public Management

1 Introduction The driving forces of the public sector reform processes to which GREs were subject from 1979 onwards are collectively and generically known as New Public Management (NPM). In Section 2 of this chapter we define, insofar as possible, NPM in general terms. In Section 3 we contextualise this general discussion by critically documenting and describing the manifestations of the NPM reform process in the UK generally. In Section 4, we detail how that process of reform was operationalised in the field of government funded scientific services. This chapter therefore presents contextual material of a conceptual or, some might argue, ideological nature. It therefore complements the historical contextual material discussed in Chapter 2, the two together facilitating our analysis of the change process in Chapters 4 to 7.

2 The concept(s) of new public management Since 1945, public administration in Western countries has undergone two major periods of change. In the first phase, states grew with rapidity, inexorably expanding their functions and budgets in a relentless attempt to compensate for what was seen as widespread market failure in the provision of services and the allocation of resources. In the UK, this expansion saw widespread nationalisation of core industries and utilities and rapid increases in the level of public expenditure in areas such as health, education and, to a lesser extent, science. This was the era of the so-called ‘Big State’. For science, the roots of such changes are discernible from the experiences of the Second World War, often referred to as the ‘Scientists’ War’, when science had proved itself invaluable to the war effort 47


(Rose and Rose, 1969). Britain’s wartime experiences keenly emphasised the necessity of maintaining a strong and independent science base. The work of Arrow (see for instance, Arrow, 1962) and others in the 1960s provided an intellectual justification for the argument that science was inherently susceptible to market failure and therefore future economic and social well-being depended upon generous state support free from commercial imperatives. A second paradigm shift occurred towards the late 1970s as budgets were squeezed and concerns expressed about the efficiency and efficacy of the Big States. Critics came to see the Big State as too large, consuming resources with an insatiable appetite and providing poor return for the wealth of nations consumed. The new mantra was that, by emulating and learning from the commercial world, states could be run more economically, effectively and efficiently. Unsurprisingly, this critique also came to be directed at science. The result of such a shift in thinking has been tangible. The practice of public administration underwent major reforms in the 1980s and early 1990s across all policy domains. Informing these reforms was a widely shared belief that the modern state was overlarge and inefficient, and that practices drawn from private sector management could be applied with benefit to the public sector. Above all, the boundaries of the Big State were seen as needing to be rolled back and the soft underbelly exposed, as far as possible, to the rigours of the marketplace. The generic term applied to the particular techniques used in these reform processes is New Public Management. With a vocabulary, and associated concepts, drawn from accounting and business practice, the prospect was offered as a toolbox that could be used for the efficient management of virtually anything, public or private. Since such tools were said to work at the level of process rather than content, they carried with them the promise of political neutrality, thus making them available to governments of all persuasions. As if mirroring this change, the study of public administration in Britain (and elsewhere) went through troubled times in the 1980s and 1990s. Rhodes (1995, 1997) describes these travails in terms of a continued decline in the critical, institutionalist theoretical tradition coupled with invasion by other social sciences. This, he has argued, has led to a loss of focus and an erosion of the institutional base, with academic public administration departments merging with business schools under the higher education funding crisis. Epitomising this process, the Royal Institute of Public Administration passed into receivership in 1992. The intellectual territory of public administrationists was captured

New Public Management 49

by managerialist and rational choice doctrines and at times dogma, suggests Rhodes. It became, he argues, a bystander to the changes in governmental practice of the 1980s and 1990s, and by 1995 ‘had no coherent intellectual identity’ (1997, p. 23). Boyne (1996) queries whether there has been a paradigmatic shift in the discipline, theories and concepts of public administration, towards a new theory of public management. He concludes, however, that there has been no revolution in our theoretical apparatus: it is not the interpretation of the world that has changed, but the world itself. Instead of the traditional pattern of large line bureaucracies providing services directly, the public sector began to consist of markets and contracts. In much the same way that the wider political science community failed to predict the fall of communist regimes at the end of the 1980s, so public administration was taken by surprise by the decline of bureaucracy. (Boyne, 1996, p. 687) This chapter both discusses these new practices and theoretical responses and contextualises them with special reference to the case of science and technology in the UK. We explicate how science and technology became subject to the general pattern of administrative reform in Britain and identify features of this particular policy domain that, from the outset, distinguished it from the norm, thus raising questions about the applicability of these approaches in this context. Against this background, we then outline the specific phases of reforms that have swept over science and technology organisations in the UK, focusing in this chapter on the nature of these waves, their form, and the arguments deployed. A central feature of this chapter is the consideration of the impact of NPM reforms on the fundamental nature and functioning of science as a social activity in the UK. New Public Management is an umbrella term, which captures a diversity of administrative tools, concepts, and changes that were deployed by many countries in the 1980s (Hood, 1990). These sought to subvert traditional bureaucratic ‘public service’ approaches to public administration by approaches that were argued to be more dynamic and efficient (du Gay, 2000). These approaches developed an idiosyncratic language and conceptual toolbox, including a commitment to downsizing the state, cost-cutting, marketisation, competition, the devolution of executive functions to quasi-autonomous agencies, a commitment to customer–contractor and other quasi-commercial policy making and management principles. All of this was heavily overlaid with both the


language and the practice of management by accounting, with the emphasis on explicit standards and measurements of performance, and on output controls (Hood, 1991; Rhodes, 1991; McSweeney, 1994; Pollitt, 1995). Dunleavy and Hood (1994), argue that NPM involves a shift in the two basic design co-ordinates of the public sector. First, it is moved ‘downgroup’, making the public sector less distinctive from the private in terms of personnel, reward structures and methods of doing business. Simultaneously, it is moved ‘down-grid’, reducing the extent to which discretionary power over staff, contracts and money is limited by uniform and general rules of procedure. Hence it emphasises budgetary transparency, with costs attributed to outputs, and outputs measured by quantitative performance indicators. Organisations come to be viewed as a chain of low-trust principal/agent relationships. There is a disaggregation of separable functions into quasi-contractual or quasi-market forms. Provider roles are opened to competition between agencies or between public agencies and private organisations. Finally, provider roles are ‘deconcentrated’ to the minimum feasible sized agency, allowing users more scope to ‘exit’ from one provider to another, rather than relying on ‘voice’ options to influence how public service provision affects them. Central to all NPM reform has been a fixation on the so-called three Es: economy, efficiency and effectiveness. Economy can be defined, quite simply, as satisfying oneself that, relatively speaking, no more money is expended than is necessary. Efficiency reflects the relationship between inputs and outputs – the more outputs there are for any given unit of input the more efficient the organisation. Effectiveness has always been a difficult concept for public organisations. Reflecting the fact that the public sector is not, in the main, profit oriented, effectiveness measures seek to indicate the extent to which public sector organisations have achieved their objectives and met social need. These developments have been geographically widespread, especially among OECD countries. At the same time, national variants are also apparent. Or, to put the point differently, what some have called NPM ceases to exist, if it ever did, as a clearly defined approach to administrative reform once national boundaries are crossed. Pollitt and Summa (1997) observe that it is fashionable to think of NPM as a tide of basically similar management changes sweeping through Western Europe, North America and Australasia, with British ministers proclaiming that the UK is an admired and copied leader in public sector reforms. In a study of 15 years of reforms in Finland, New Zealand, Sweden and the UK, they found not only significant differences between each of the countries,


but also a more general and persistent distinction between the two Nordic countries on the one hand, and the UK and New Zealand on the other. In the ‘Westminster system’ countries, they argue, the aim appears to have been to minimise the extent and distinctiveness of the state sector, whereas in the Nordic countries much greater emphasis has been placed on modernising the state apparatus so that it can deal better with a changing environment. Reform was led from the Right in Britain, but from the Left in New Zealand, by Social Democrats in Sweden and by a conservative-led coalition in Finland. Pollitt and Summa (1997) explain these differences in terms of the nature of the pre-existing institutions rather than party ideology: the most convincing explanations of the trajectories observed in our four countries appear to rest not on economic performance or party doctrines … but … upon the characteristics of the political and administrative systems already in place. (p. 15) Pollitt and Summa suggest that it was these system characteristics that most significantly influenced what was actually possible in terms of the scope, process and speed of reform. Ideological shifts may be a starting point for radical change, but in themselves they cannot account for the extent and nature of any change, which they stimulate. Ridley (1996) likewise resists the notion of a uniform body of practice sweeping across Western Europe. He notes that the standard explanation of the managerial wave in public administration derives from economic pressures, expressed in some drive for economy, efficiency and effectiveness. Yet, in practice, he finds the environmental factors leading to the reform of bureaucracy to have been more complex than this explanation suggests, and have combined differently in different countries. In partial contrast to Pollitt and Summa (1997), he finds ideology to have been as strong a force as economic need, at least in the British case. Of particular interest to our study is his conclusion that: Moves to ‘deprivilege’ the civil service were a clear example of Mrs Thatcher’s hostility to civil servants. The redefinition of the role of top civil servants from policy advice to management also reflected her preference for advice from other sources. The Efficiency Scrutinies were intended to save money, which they did but not on a scale that really mattered in the circumstances: they reflected an absolute conviction that business was efficient, public administration was not. … The more


dramatic reforms that followed, the split between policy making in ministries and policy implementation through agencies headed by chief executives, reflected a political philosophy as much as a search for efficiency driven by financial constraints. (p. 17) Ridley further stresses that ‘there is nearly always a personal element in reforms, depending on who is making policy at the time’ (1996, p. 19). The largely uninterrupted continued development and application of new public management in the UK under successive Labour Governments since 1997 under the guise of a Giddensian ‘Third Way’ (Giddens, 1998) illustrates the mutability and near-universal appeal of the techniques.

3 New public management in Britain The current phase of reform in the UK began clearly with the election of the first Thatcher Government in 1979, supporting Ridley’s (1996) perception that NPM variants are dependent upon, inter alia, ideology and personalities. McSweeney (1994) argues that this Government, ‘described the “public sector” in almost exclusively pejorative terms’ (p. 237). However, as McSweeney acknowledges, to place the reforms solely at the feet of Mrs Thatcher is to ignore the antecedent conditions pertaining that made reform not only possible, but also attractive. The 1968 Fulton Committee Report on the structure, recruitment and management of the Civil Service (Cmnd 3638, 1968) was the first such review of the Home Civil Service since the nineteenth-century Northcote–Trevelyan Report. A basic tenet of Fulton was that a modernisation of the Civil Service should encompass improved accountability of civil servants, who should be set clear objectives and their performance measured against these. An essential tool in this modernisation was to be accounting. Accountancy was seen as the means by which resources consumed could be matched with outputs, facilitating the measurement of performance. As McSweeney (1994) notes, this mooted reform was not motivated by a desire to shrink the state by resource constraint. Rather, it was seen as a desirable management tool, the ultimate aim being ‘accountable management’. Despite the saliency of the Fulton Report, to a significant extent the call for accountable management was not acted upon. Yet, the accelerating economic crisis into which Britain was plunged throughout the sixties and seventies united both Labour and Conservatives in a desire to control public expenditure. They successively deployed and abandoned techniques such as management by objectives and programmatic analysis in


this unsuccessful quest (McSweeney, 1994). As we discussed in Chapter 2, the reforms along these lines proposed by Rothschild for science were only very partially successful (Cmnd 4814, 1971). The 1970s were dominated by arguments about economy and efficiency. More transparent accounting reporting requirements were advocated and the imposition of ‘cash limits’ was seen as a way of promoting the efficient use of resources. However, the accounting data deemed central to not only verifying economy in public expenditure but also to addressing issues of effectiveness and efficiency was simply not available (McSweeney, 1994). More fundamentally, reforms mooted in this period were based on the expectation that efficient and effective management could be achieved through the use of accounting data rather than any root and branch reform of the structures and processes of the public sector itself. The most immediate effect of the Thatcher Government assuming power in 1979 was the imposition of very strenuous cash limits in support of monetarist policies to control money supply. But these were stopgap measures. Later that year, Thatcher appointed Sir (Later Lord) Derek Rayner, of Marks and Spencer, to lead a series of Efficiency Scrutinies, the immediate aim of which was to eliminate waste and do more with less. Confident assertions were made about savings achieved. McSweeney (1994) argues convincingly that this proving of savings pointed to the need for wholesale reform of the public sector in order to achieve lasting reform. A commitment to reduce the size of the public sector followed the Pliatsky Report (Cmnd 7797, 1980). The first such reform was closely associated with Michael Heseltine whilst he was Secretary of State for the Environment. Later, at the DTI, the home department for many government research establishments, Heseltine was to have a significant impact on the application of NPM to the laboratories. The so-called management information system for ministers (MINIS) was aimed at providing effective decision making information at senior levels in the civil service. MINIS was quickly followed and built upon by the introduction of the Financial Management Initiative (FMI) in 1982, conceived inside the Efficiency Unit headed by Lord Rayner. The aim of FMI was to ensure that managers would have clear objectives, and the means to measure performance against them; well-defined responsibility for making best use of their resources; and appropriate information, training and advice. For the Treasury, FMI was double-edged (Thain and Wright, 1995). It did offer better management information in departments, and hence improvements in the efficiency and use of resources. But the disadvantage


was ‘the expectation that it nourished in departments that it would give them more freedom’ (Thain and Wright, 1995, p. 68). From the Treasury’s perspective, therefore FMI was intended less to promote the radical management change thought necessary by the Efficiency Unit and some others in the Government, and many outside Whitehall; rather it was designed for the more limited objective of promoting changes in departmental management systems to achieve better value-for-money, to improve financial discipline, and to enhance the Treasury’s capacity to control expenditure. (Thain and Wright, 1995, p. 69) Hence, while the FMI came to symbolise ‘management change’ in the period up to Next Steps, Thain and Wright (1995) argue that this was a mistaken attribution. Criticism that FMI failed to deliver the radical ‘holistic’ management reforms desired by the ideologues and zealots of the ‘new right’ at the Efficiency Unit and elsewhere was misconceived – because it was never designed to do so. The Treasury’s aim, in other words, was always a limited financial management revolution. Moreover, McSweeney (1994) maintains that it was one with very limited success. More fundamental management reform had to await the Next Steps initiative. In 1988, a report of the Efficiency Unit (Efficiency Unit, 1988) maintained that the civil service had lacked accountable management responsibilities and precision about expected outcomes. It further argued that the civil service was focused on inputs at the expense of outputs and handicapped by uniform structures and procedures, including pay. The overall conclusion was that it had a real need for sustained pressure for continuous improvement. The Efficiency Unit review advocated a new management structure (as opposed to new accounting regimes) to address these issues. Recognising that much public sector work was in fact associated with the execution rather than the formulation of policy, the report recommended that executive functions should be hived off into ‘agencies’. Agencies were to operate under specific contracts with host departments and to be freed, to a significant extent, from bureaucratic constraints. Contracting was seen as meeting the needs of control whilst permitting flexibility in finding economic, efficient and effective means of meeting those demands placed on them. The Prime Minister accepted these proposals in early 1988 and a new process of reform began. By September 1998 there were 138 executive


agencies, employing over 75 per cent of all civil servants. Agencies operate within a framework document that sets out key responsibilities and targets. Targets are defined as quantifiable objectives to be attained by a specified date (Jones and Pendlebury, 2000). The introduction of the Next Steps Initiative proceeded in the face of Treasury resistance: … the implications of the [1988 Efficiency Unit] review were potentially so radical that vested interests within Whitehall were affected, pre-eminently the Treasury with its legitimate concern to maintain control of public expenditure. It only reluctantly accepted the decision to go ahead with the Next Steps programme … At stake here was the Treasury’s responsibility for controlling pay and expenditure, the source of its authority in Whitehall. (Thain and Wright, 1995, pp. 73–4) It is interesting, as indicative of this caution, to note that the initial 12 nominees for Agency status (which included the Driver and Vehicle Licensing Centre, the non-nuclear defence research establishments, the Meteorological Office and Her Majesty’s Stationary Office) were selected mainly because they already had a degree of distinctiveness from mainstream departmental business and therefore less day-to-day ministerial involvement; they already had a great deal of managerial independence and autonomy, or the potential for such independence. (Thain and Wright, p. 80) Spending departments, on the other hand, were quick to see Next Steps as a lever to win from the Treasury greater financial autonomy for the managers of their services. While the Treasury continued to fight hard to retain central control through the financial framework agreements negotiated with the sponsor departments of the new agencies, the principle of decentralised budgeting and more financial autonomy for line managers had been conceded. (Thain and Wright, 1995, p. 509) As Next Steps moved forward, the Treasury came under increased pressure to grant more autonomy to the new agencies. It did so by adjustment to the running costs regime, increased scope for virement, and, most far-reaching, extension of trading fund status. Similarly, in some


instances departments were reluctant to cut the new agencies loose from traditional controls. There were criticisms by chief executives of both departments and the Treasury for ‘undue interference in the discharge of their managerial responsibilities’ (Mellon, 1993). As greater numbers of agencies began to be established so pressure mounted to privatise them. In fact, by 1998, some eleven original executive agencies had been privatised and a further three had been completely contracted out (Jones and Pendlebury, 2000).

4 New public management and science in the UK Government organisations with scientific and technological functions also became subject to the NPM reform process. This sector represents an area of special interest in this process because of its endogenous diversity and exogenous distinctiveness. Endogenously, the science and technology sector, whilst often perceived as a collectivity, in fact encompassed considerable diversity, making wholesale standardised approaches to public sector administration especially problematic. Despite this endogenous diversity, exogenously the sector as a whole might be said to constitute a discrete part of the public sector, with very distinctive issues and problems. This again makes the generalised application of NPM approaches problematic. Diversity within the sector is in the range and nature of activities, of organisational forms and in terms of customers or end-users. Research activities encompassed everything from routine investigation to strategic and perhaps highly speculative work whilst services included routine testing, consultancy work involving either evaluations of the work and products of others and the dissemination of technical advice and expertise. Organisational forms varied from high security establishments undertaking advanced high technology research through to test farms or field offices for agricultural consultants. For some establishments the only customer was a Whitehall policy maker, or some government executive function (e.g. testing urine samples for evidence of drug abuse on behalf of the armed services). Whitehall departments also acted as proxy customers, securing services for industry generally (such as metrology) or for the public good (e.g. road safety). Some advice services procured and facilitated by government were delivered directly outside government (e.g. agricultural advice to farmers). Exogenously, a number of inherent characteristics distinguished this group from the rest of the public sector. These characteristics may not have been unique amongst public sector organisations, but their


particular combination and dominance in this sector is marked and especially problematic under NPM regimes. First, science and technology can involve a range of cognitive skills, practices and expertise that distinguishes them from the more prosaic functions of government. For instance, scientific and technological work frequently involves contracting (implicitly or explicitly) for work where there is no certainty as to results or outcomes. The risky aspects of this work may have implications for the applications of NPM techniques: the writing of meaningful contracts, their audit and the setting of performance indicators in such circumstances is obviously problematic and may make traditional scientific and technological practices difficult to capture within an accounting framework. Second, difficulties of specification in areas of specialist expertise where there may be low certainty in outcomes may render close co-operation between providers and users essential. Yet such ‘shared visions’ or ‘partnerships’ may conflict with NPM notions of strict separation between customers and contractors in arms length relationships. The complexity of specification combined with the degree of expertise involved in some (but by no means all) of this work means that it may be inefficient or even impossible to give purchasers choice by ensuring a range of competing providers. This again conflicts with NPM principles. Third, some work may have no discernible or immediate impact on the core visible activities of government, such as research designed to maintain the longer term national science base. And some activities may have some of the characteristics of public good: for instance, road safety or metrology (Metcalfe and Smellie, 1991). In such circumstances government acts as a proxy customer to secure wider commercial or social benefits. Yet NPM techniques imply the shrinkage of the public sector away from functions, which have no direct and discernible paying customer. Some may argue that if a public administration technique is applied which is inappropriate to the functions of government in this regard (e.g. the maintenance of the science base) it may lead to a failure of government to fulfil its primary purposes. Fourth, some of this work involved giving policy advice to Whitehall policy makers, often in circumstances where the Whitehall department was entirely reliant on the laboratory in respect of its specialist expertise. Science and technology services must be both appropriately responsive to government needs and seen to have impeccable impartiality. These twin imperatives inevitably constrain government from choosing alternative ‘suppliers’ in an open market if public trust in government action is to be maintained. If the government laboratories are


required to sell their expertise elsewhere as part of an NPM inspired marketisation, they may come to regard the execution of government policy advice work as either less pressing or, conceivably, the advice they give may be influenced by their plans in other areas. Finally, the physical practicalities of this work, and the specific skills required to undertake it, have meant that both virtually and physically the laboratories tended to be sited away from the Whitehall policy departments. This in itself may have served to make these establishments ‘different’ and distinguished as a group. For instance, Shore and Wright (2000) describe how specific professional groups within the public sector may have been more successful than others at resisting NPM strategies. At a more mundane level, the number, functions and affiliations (organisational and scientific) of these establishments made for bewildering complexity, inevitably making any reform process problematic. To illustrate, an attempt by one of the government reviews to classify them simply in terms of mission areas led to a diagram (Figure 3.1).

Figure 3.1 Establishment mission areas Notes: * ⫽ Research Council Institute/Unit or Scottish Agricultural Research Institute. LGC and IVEM appear twice. Source: Efficiency Unit (1994), Multi-Departmental Scrutiny of Public Sector Research Establishments, London: HMSO.


What the organisational acronyms stand for is irrelevant here; the important point is the complexity of the picture. Moreover, the diagram addresses only one of the dimensions on which these organisations could be classified – it does not begin, for example, to address the functional differences between the establishments. Following the acceptance of the Next Steps Initiative, Whitehall departments worked throughout the summer of 1988 to identify candidates for agency status. This new agenda was pursued energetically within various ministries with significant science and technology elements, particularly the DTI and the MoD. Simultaneously, pressure mounted for the implementation of competitive tendering for funds and for the measurement and audit of outcomes utilising performance indicators. These pressures for change occurred in the context of downward pressure on levels of public spending on science and technology. Between 1989 and early 1996, some 18 science and technology establishments were transformed into Next Steps Agencies with funding allocated using customer–contractor mechanisms. In many senses, the government research establishments were easy targets for such reform. They were already somewhat distinct from their mainstream Whitehall departmental homes, and had acquired something of a reputation, deserved or not, for harbouring inefficiency. Certainly, in the context of cash-straitened Whitehall departments the prospect of disciplining idiosyncratic departmental outposts into greater efficiency and conformity with immediate departmental objectives was extremely attractive. Agencification gave individual establishments substantially greater freedom in terms of appointments, investments and activities. However, the quid pro quo was the transformation of substantial budget lines, traditionally given as block grants, to Whitehall ‘customers’ who mounted tendering exercises for contracts and the imposition of significant audit and performance measurement regimes. These appear as significant changes, but the reality is far more complex and subtle. For instance, although the shift in budgetary control was significant on paper, in reality Whitehall departments were often far from ‘intelligent customers’ – that is, customers with an acute appreciation of what services they needed to procure. This led, in some instances, to the situation where newly created agencies were contracted by their Whitehall customers to tell them (their customers) what services should be contracted for. The reality behind these policy changes forms a significant focus of the rest of this book. Concomitant with these developments, in 1988 the Government’s Chief Scientific Adviser in the Cabinet Office, Sir John Fairclough, set


out the broad principle that public spending on R&D should be directed to work which was far from the development of a marketable product or process. Consistent with notions that government expenditure and interventions should only occur in areas of market dysfunctionality, ‘near market’ R&D was to be left to industry. Government expenditure was to be confined to areas where the market would ‘fail to operate to produce maximum benefits to the economy as a whole’ (Wilkie, 1991). This decision led to the withdrawal of most government support for civil near market and single company R&D, the main exception being in aerospace. In 1989, Fairclough also restated the customer–contractor principle with the aim of encouraging development of an internal market in which public sector research providers would compete for public funds for R&D (Levene and Stewart, 1993). By April 1992 some 15 science and technology establishments had been translated into Executive Agencies. However, it appears that ministers were dissatisfied with the progress made and wished to push on the pace and extent of reform further. In 1993, ministerial sights turned once again to science and technology in general, and the research establishments in particular. A series of reports and a white paper between 1993 and 1995 demonstrates the policy emphases of the time:

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1993: A Review of Allocation, Management and Use of Government Expenditure on Science and Technology conducted by the Efficiency Unit. The authors of the report were the Prime Minister’s Adviser on Efficiency, Sir Peter Levene, and the then new Chief Scientific Adviser, Professor (later Sir) William Stewart (Levene and Stewart, 1993). 1993: Realising our Potential: A Strategy for Science, Engineering and Technology, a white paper that led to the wholesale restructuring of publicly funded science and technology in the UK (Cm 2250, 1993). 1994: the Multi-Departmental Scrutiny of Public Sector Research Establishments, conducted by a multi-departmental team attached to the Efficiency Unit (Efficiency Unit, 1994). 1995–97: a series of Prior Options Reviews of those organisations within the Scrutiny that had not already been privatised. These reviews were announced in September 1995 and performed in three tranches, all initially due for completion in 1996, and actually completed in early 1997. In a further round, some of the establishments examined in the first tranche of Prior Options Reviews were referred to in yet another review by a committee chaired by Sir Peter Levene.


This means that some of the organisations concerned were under repeated review from 1992 until 1997, when the incoming Labour Government announced the suspension of the process. Nevertheless, few close observers of the subject could believe that a new equilibrium had been reached. The position over agricultural and biological establishments that had been the stimulus to the first of the reviews that we are about to consider, evidently continued to require attention. And by early 1998, discussions had reopened about the future of the Defence Evaluation and Research Agency (DERA), with privatisation mentioned as one of the options to be considered, albeit more probably within the framework of some form of public–private partnership than a privatisation in the normal sense. Revisiting these reviews not only provides detailed contextual data but also the very terms in which they were presented, and the reactions that they provoked, reflect the processes of the application of NPM to British science at this time.

The Levene–Stewart Review The Review of Allocation, Management and Use of Government Expenditure on Science and Technology was published in May 1993 (Levene and Stewart, 1993). It adopted a classic NPM approach in addressing issues of resource allocation, customers, suppliers and questions of the ownership of research providers. The Review subsequently strongly influenced the restructuring of science and technology in the public sector. In considering resource allocation, the Review recommended a strengthening of arrangements, through the Office of Science and Technology (OST), for identifying objectives and priorities for expenditure on Science and Technology. It also sought to ensure that these priorities were reflected in departmental spending plans, in advice to the principal Cabinet committees on overall spending priorities for science and technology and in the balance of spending across departments in order to inform final public expenditure settlements (pp. 2–3). The Review emphasised the need for customer capabilities to be properly resourced in order to ensure effectiveness (para 4.15). This reflected the difficulty experienced by policy customers in developing as ‘intelligent customers’ capable of defining their own priorities and controlling the contracting process rather than abrogating this responsibility to their (publicly owned) suppliers. The Review found that relationships between departmental customers and in-house suppliers put a premium upon co-operation. This included the development of ‘shared visions’,


co-ordinating programmes to minimise overlap between work allocated to preferred suppliers, ‘working co-operatively to ensure intelligent, contractor-educated status for the departmental customer’ and long-term contracts offering close working and continuity (para 4.17). Such closeness was ‘compared’ (presumably favourably, and by the suppliers and customers, not the Review group) with the private sector’s use of partnership sourcing, and ‘contrasted’ (presumably unfavourably) with ‘allegedly more adversarial relationships considered inappropriate to the procurement of science and technology. In criticism, the Review went on to note that the features of partnership sourcing which the private sector used to ensure value for money (such as switching suppliers or intervening to restore value) were not much in evidence in government departments (para 4.18). In short, the Review team was not satisfied with the steps taken to shake up existing supplier arrangements. The Review highlighted the claims of the DTI that it had made serious efforts to build up the informed customer capability in order to be able to seek out alternative suppliers and to be in a position to challenge bids and to develop competitive tendering. In such instances, it was argued, the benefits in terms of savings considerably exceeded the costs (para 4.20). On the supplier side, the Review focused yet more sharply on the perceived need for the development of an internal market for science and technology services. The Review noted that, despite widespread awareness among departments of the benefits of the internal market, ‘we found widespread ambivalence among departments about the application of competition to their GREs’ (para 5.6). Even a customer such as the Department of the Environment, which had substantially increased the proportion of its science and technology work put out to tender, felt constrained in its ability to move towards an arm’s length relationship with its own Building Research Establishment (BRE). Expressing what the authors saw as a ‘widely held attitude towards in-house suppliers’ whose primary role was support for departmental policy and executive responsibilities, the Department of the Environment was quoted as describing its relationship with BRE in terms of maintenance of a broadly-based set of high quality research and consultancy capabilities able to link effectively together, familiar with policy requirements and available to meet immediate needs for investigations or new policy initiatives. (para 5.6) Departments, unsurprisingly, saw advantage in developing co-operative arrangements with in-house suppliers who could develop ‘specialised skills and facilities dedicated to the demands of their customer–owner’, who


could be ‘encouraged to give particular [science and technology] programmes continuity of resources and direction’ and could be called on urgently at short notice, rather than in developing competitive arrangements (para 5.7). The Review team was unimpressed with overall progress towards competitive tendering. Despite exceptions, they ‘saw little evidence of market liberalisation gathering pace’ (para 5.9). Where it had been tried, for instance in the DTI and the MoD, significant savings were claimed. However, in some instances ‘improvements’ had been short-lived: for instance, police demand for the Forensic Science Service dropped sharply for a year after the introduction of direct charging, only to return to preAgency levels in the second year of operation (para 5.11). Data on the distribution between intramural and extramural spending indicated, with the exception of the Department of the Environment, increasing spending with owned suppliers at the expense of extramural suppliers (para 5.18). In analysing why progress to greater marketisation was so slow, the Review argued that the benefits of clearly defined customer–contractor relationships and of competition were seen as less immediate and tangible than the costs and risks that government customers and their in-house suppliers believed they would incur by moving from traditional practices. The Defence Research Agency and the DTI agencies were seen as exceptions in this regard. Barriers to the development of internal markets that were identified included ●

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‘The value placed upon continuity and co-ordination of work, closeness of the supplier–customer relationship and preservation of capacity on a “just in case” basis.’ The Review conceded that there were facilities that it would not be sensible to replicate and work of a long term or periodic nature that called for continuity and co-ordination of effort. ‘The cash cost of change’, in particular, the fact that departments, being owners as well as customers of their GREs, would be left with a problem if their in-house supplier failed to win a competitive tender. ‘The costs of running competitions’, both on the customer side, where there were staffing implications, and on the supplier side, where effort spent on marketing and bidding was often seen as unproductive. ‘Level playing field concerns’, with the key issues being the uneven extent to which customer-owners were prepared to expose in-house suppliers to competition, and the comparability of the costings upon which prices were based. ‘Perceived risks to the excellence of the Agencies/Institutes, or even to their continuation, if departments pursue competition.’ Suppliers were particularly concerned that their principal customers might fail to invest in new


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capital programmes and personnel policies; or defer funding of the efficiency gains needed to enable them to compete. Government suppliers also feared that their owners might give them the least stimulating work. ‘Reliance upon owned suppliers for independent policy advice.’ This was the service that departments regarded as the most important provided by suppliers and was said to be the principal reason for wishing to control the availability of such expertise. Some departments argued that only in-house expertise could be authoritative, independent or objective, while others took the view that ‘assurance of quality and of supply can be achieved without owning or tightly controlling the activities of important suppliers even where work is politically sensitive or urgent’. ‘Reliance upon owned suppliers for impartial procurement advice.’ This was a concern principally of the MoD, whose Defence Research Agency was said to contribute to its ability to get value from large, technologically complex procurement. Nevertheless, MoD was moving the DRA towards fixed price, fixed rate and other incentivised terms of trading. ‘A need for high levels of responsiveness.’ This was something regarded as especially important in conditions of crisis – a good example here might be the Foot and Mouth crisis of 2001. ‘Preservation of unique experience or facilities.’ That is to say, from the perspective of advocates of internal markets, government science and technology customers tended, perversely, ‘to regard the replication of capabilities as duplication of effort or the creation of over capacity, rather than an alternative source likely to create value through its competitive impact’. (Levene–Stewart, 1993, para 5.21)

The Review considered suppliers’ responses to these concerns (para 5.22). It noted the strategies of setting of performance targets where change was measured against past performance rather than a competitive benchmark and the adoption of a variety of remuneration and other personnel practices designed to make public sector scientists and engineers more ‘commercially-rounded and customer-oriented’. Some research establishments intended to introduce commercial incentives for key managers, but no plans were identified to substantially reward individual scientists for the exploitability of their work, although it was frequently put to the Review team that such schemes were desirable. ‘One or two departments’ also reported their belief that in-house contractors were ‘colluding’ to avoid competition.


The Review team had been unable to carry out an audit to quantify the savings or additional science and technology output that an open market might generate. Nevertheless, it noted that ‘comparisons with the private sector and examples we were given of the scope for overhead reductions’ indicated considerable scope for improvements (para 5.23). The Defence Research Agency (DRA) was cited as a ‘telling example’ of what could be achieved. Having compared its practice with commercial practice, DRA was cutting its overheads through the closure of a large number of sites and the reduction of around 2000 posts. The Review went on ‘we see no reason why savings and performance gains should not be achieved among the civil GREs where there is considerable variation of utilisation and widely admitted overcapacity’ (para 5.25). There is something of an elision of argument here: nothing in what DRA had achieved had been shown necessarily to be the result of agency status or of marketisation. It could as plausibly have been attributed to better management and a tougher financial environment. DRA might also have had more scope than some other GREs to cut overheads because of a large number of sites. That is to say, an uncritical assumption that the perceived benefits were due to marketisation, points to the difficulty of correctly attributing the outcomes of reform processes (Pollitt, 1995). The Review concluded that there had been an impetus since the late 1980s to a more market-oriented approach to the management of science and technology but that the introduction of competition was slow. Whilst the transformation of most GREs to agencies had given them the opportunity to develop a more commercial focus, at the same time links and dependencies between GREs and departments appeared to have strengthened. The Review at this point starts to address the question of how to accelerate reform. The Review argued, syllogistically, that competition over the provision of science and technology services was the key to savings and greater output and that current ownership arrangements were impeding the spread of competition. The conclusion was that ownership arrangements must be changed. Thus it was suggested that it seems to us that segregation of the market, rather than bringing about competition within it, is contributing to [science and technology] oversupply. While it would take more work to say which of the wide range of monopoly–monopsony Government [science and technology] relationships are ‘natural’, and which may be artificial, it is not difficult to imagine how artificialities arise. (para 5.30)


Hence, the introduction of ‘more demanding customer–contractor relationships’ was urged. The Review considered the common parlance term ‘Internal Market’ to be unclear because it implied restriction and protection. Instead, the term ‘Open Market’ was proposed (para 5.31), within which there should be a presumption in favour of open competitive tendering. To achieve this goal, the Review team recommended the separation of the ownership of science and technology capabilities from procurement functions (para 5.32). By securing a ‘clean divide between customership and ownership’ they hoped to achieve an improved ability to rationalise government-owned science and technology capacity. It was felt that reform would give increased credibility and chances of success in competitions within the Open Market, with associated assurances that government customers would award work solely on supplier merit. It was further felt that reform offered greater opportunities for providers to search more widely for work, to work more closely with industry and to improve competitiveness by market testing non-core activities (para 5.33). Against this background, the Review advocated that serious consideration be given to privatisation (para 5.37). Where this was not an early option (i.e. within about 3 years), they recommended instead transferring ownership of civil GREs away from customer departments by consolidating them into a small number of, or perhaps only one, Civil Research Agencies, possibly owned by the Office of Public Service and Science (paras 5.42–5.45).1 This conclusion had been reached after examination of a range of ownership options, which were all rejected (para 5.47). The Review did recommend that the defence research agencies be left in their present relationship with the MoD, even though this failed to separate customer from contractor. It was noted that ‘a price may well be paid for this’ (para 5.49). Two reasons were given for this proposed exemption. First, the potentially counter productive consequences of making major changes to the DRA’s relationship with MoD while the DRA was already working energetically to make itself competitive. And second, the ‘exceptionally high degree of sensitivity’ of the work of another of the defence agencies, the Chemical and Biological Defence Establishment, which made it ‘akin to MoD’s nuclear establishments’ and seemed to rule out distancing it from its department (para 5.48). This may seem an anomalous comment given the previous decision to place the Atomic Weapons Establishment under contractor management (para 5.48).


Realising our potential The broad thrust of the recommendations of the Levene–Stewart Review, though very little of the detail, and much less of the tone of zealotry, were carried through into the white paper Realising our Potential: A Strategy for Science, Engineering and Technology of May 1993 (Cm 2250, 1993). This white paper prompted major change in the nature of publicly funded science and technology in the UK: for instance, restructuring the research council system with an enhanced emphasis on responsiveness to users reflected in the new mission statements with which they were equipped. We do not consider here all aspects of the white paper, only summarising those that relate to the development of the old government research establishments. Echoing the Levene–Stewart Review, the white paper asserted that: many of the services currently provided by Government research establishments could be carried out in the private sector, and that privatisation is a realistic prospect for a number of establishments. (para. 1.18 (9), p. 6) The white paper said that where privatisation was ‘not currently a realistic option’ and establishments were therefore to remain ‘for the time being’ in the public sector, ‘careful consideration will need to be given to holding the level of such capacity to the minimum necessary to meet the Government’s statutory responsibilities and other essential requirements.’ The Government announced its intention therefore to ‘undertake a scrutiny of the public sector research establishments to review, sector by sector, the future status of establishments, looking in depth at privatisation, rationalisation and different options for ownership’ (para 5.12–13). The review fell within the Prior Options process of Next Steps. It was announced too that it would also take account of a separate review into the establishment of the DTI, announced at the same time by the President of the Board of Trade, Michael Heseltine, who was evidently keen to press ahead independently of the outcome of the wider review.

Multi-Departmental Scrutiny of Public Sector Research Establishments These passages in Realising our Potential naturally created considerable uncertainty, not to say anxiety, in the scientific community. Such anxieties


were not allayed by the short time span allotted by the Efficiency Unit to the review (about 90 days), despite the complexity of the task (involving around 50 establishments, with staffs of between 48 and 8000). The report was published in June 1994 as the Multi-Departmental Scrutiny of Public Sector Research Establishments (Cm 2991, 1995). It concluded that a number of science and technology organisations should be privatised (particularly those, such as the Agricultural Development and Advisory Service (ADAS) that were not providing ‘front-line’ services to departments). It also argued that the Prior Options review of the scope for privatisation should be extended to all Research Council Institutes and Scottish Agricultural Research Institutes. The report also asserted that where privatisation was deemed inappropriate, there should instead be significant rationalisation of the then existing pattern of public sector research establishments. Much provision, it was suggested, could take place either on a ‘market sector’ or on a geographical basis, pulling together on the one hand Scottish establishments, and on the other, a new Ministry of Agriculture, Fisheries and Food agency covering all food and agriculture research in England and Wales. For instance, the creation of new organisations concerned with marine resources and environment, environment (non-marine), biotechnology, and food and agriculture was suggested on account of these being the sectors in which the report found the greatest duplication and overlap between existing public sector research establishments (see Figure 3.1). The market sector approach would have resulted in some geographically curious lines of accountability – transferring, for example, the Plymouth Marine Laboratory to the Scottish Office, and the Scottish Office’s Macaulay Land Use Research Institute to Natural Environment Research Council, which was based in Swindon. The geographically based model, in contrast, would have broken the links between, for example, MAFF laboratories in Scotland, and England and Wales, or between the northern and southern Forest Research Stations of the Forestry Commission (para 5.22; para 5.23). As with the Levene–Stewart Review, the need to separate clearly the ownership and customer roles, to ensure that these were properly resourced and to require owners and customers to take a long-term view of departmental needs and the part to be played in them by suppliers was emphasised. The issuing of the report was followed by a four-month period of consultation. During this period, reports were also produced by the Science and Technology Committees of both Houses of Parliament (HC 19, 1994; HL5-1, 1994). The tone of these Parliamentary reports, and of much of


the associated debate in the scientific press, was heavily critical of the proposals. One concern was the sheer speed of the scrutiny relative to the scale and complexity of the task. According to the Lords report, the scrutiny team began on 13 December 1993, produced a working document at the end of March 1994 and published their report in July 1994 (para 2.7, HL5-1). The Commons report cites Dr Michael Elves (a senior manager from the Glaxo company) as unhappy with the time scale (HC 19, 1994, para 13). For so complex a set of organisations of major importance this appeared to many to be acting with unseemly haste. Another criticism was the apparent arbitrariness with which the sample of 53 public sector research establishments had been selected. There was also concern over the fact that what most observers had imagined would be a inquiry restricted to the government research establishments turned out to include a number of research council institutes also. Whilst the sample included all the major civil government research establishments, thereafter the criteria for inclusion were less evident. Witnesses to the Parliamentary enquiries wondered why some Medical Research Council (MRC) institutes but not others had been selected. Others questioned the appropriateness of reviewing together such differently focused organisations as government research establishments and research council institutes, the former being oriented towards support of departments and the latter to maintenance of the national science base. A third criticism was the apparent presumption that privatisation was the preferred option, other options to be considered only where this was deemed inappropriate. This assumption was indeed axiomatic in the Prior Options review process. In emphasising this point, the Lords report added that, in a comment which challenged another tenet of the narrowly accountancy-based tone of the report We do not believe that sufficient attention has been paid to the question of the effectiveness of public sector science in the pursuit of wealth creation and quality of life as laid down in the White Paper, without which any study of the efficiency of the management of that science has little value. (para 2.6, HL5-1) The House of Commons Select Committee on Science and Technology raised three main criticisms of the Efficiency Scrutiny. The first was that privatisation could only be supported if it did not lead to a reduction of the country’s scientific and technical knowledge base. The Committee quoted the external adviser to the scrutiny team, Dr Elves, of Glaxo: ‘[science and technology] is unlike many other commodities and cannot be switched off and on to suit short term objectives’ (HC 19,


1994, 1995 para. 24). Second, the Committee reasoned that repeated reviews detracted from the morale of those working in the establishments. And third, it was argued that the scrutiny team had failed to understand the crucial differences between the departmental laboratories and the research establishments operated by the research councils as an integral part of the fulfilment of their mission. The Lords committee substantially agreed with the proposals for privatisation, although they also argued that it was essential not to break up the BRE. The Commons also noted that no members of the construction industry had supported the scrutiny report’s proposal for the partial privatisation of the BRE. The industry believed in the need to maintain an independent arbiter of standards and that the building industry was too disparate to provide the facilities for all the research that it needs (HC 19, 1994, para. 31). The recommendations for rationalisation proved highly controversial. The Lords rejected them, bluntly stating We reject the idea of reorganising PSREs [Public Sector Research Establishments] on either disciplinary or regional lines. We believe that large-scale reorganisation is very costly, involving very high risks. (HL5-1, para 3.14) The Lords expressed a preference instead for the particular approach that had been followed in the case of horticultural research. This had arisen as a result of the identification of industrial need rather than from any general organisational blueprint. The Commons were similarly sceptical that a case had been made for the benefits that such a reorganisation might yield (HC 19, 1994, para 22), and that the appointment of proposed Directors of Rationalisation would be of any real benefit (HC 19, 1994, para 23). Of the geographical rationalisation model, the Lords noted that horizontal integration of Scottish institutes was already taking place and should be maintained. However, the Committee argued that it should not be pushed to the point of separating the ‘Scottish system’ from the rest of the UK (HL5-1, para 3.15). The Multi-Departmental Scrutiny of Public Sector Research Establishments raised more problems than it resolved. The complexity of the picture that it uncovered was far greater than had been anticipated, beginning with the misconception that the organisations under review were all concerned solely with research. The Government’s response came only in September 1995 (Cm 2991). By this time plans had been laid by DTI


(driving ahead under the influence of Michael Heseltine) to privatise the work of AEA Technology, the National Engineering Laboratory (NEL) and the Laboratory of the Government Chemist (LGC) and to contractorise the operation of the National Physical Laboratory (NPL). In addition, the Department of Transport (DoT) planned to privatise the Transport Research Laboratory (TRL) and the MAFF, planned to move a range of its Agricultural Development and Advisory Service’s (ADAS) activities towards privatisation. The Government’s eventual response to the Scrutiny Report acknowledged that there had been ‘concern about the specific proposals to group establishments, in terms of the disruption that would be caused and the complex lines of accountability which could result’. The Government had therefore decided not to proceed with these particular proposals, but rather to continue to seek ‘more co-ordination and co-operation in managing research establishments across Departments and Research Councils’ (Cm 2991, 1995). A further Prior Options Review was to be set in train, extending the review process to include all public sector research establishments, including research council establishments. The aim was to complete this process by the end of 1996, with departments and research councils reporting in the meantime, in the May 1996 Forward Look, on steps taken to strengthen co-operation between research establishments. Prior Options The Government duly set in train another Prior Options Review, extending the process to include all the public sector science and technology research establishments included in the previous Efficiency Scrutiny with the exception of those already privatised, merged, or on their way to being so. Whilst the initial expectation had been that this latest review would take a broad view of the problem of rationalisation, the guidelines actually issued focused primarily on the option of privatisation. They asked two key questions. First, ‘must the public sector be responsible for the function?’ and second, ‘must the public sector provide the function itself?’ (IPMS, 1996, p. 2 and annex 1). The review procedure to be followed was complex. The 37 institutions under review were to be examined in three tranches, each with different reporting dates (March, July and December 1996). There were to be a set of review teams, each with steering committees made up of officials from various departments, the research councils and with the occasional independent member. The committees were on fisheries; plant science and agriculture; physical sciences; police and forensic science; animal


science; marine and non-marine environment; food and nutrition and, finally, health. The first four subjects constituted tranche 1; the next two, tranche 2; and the last two, tranche 3 (IPMS, 1996, annex 2). Further complexity was added by the decision to overlay this structure with an additional review by a small committee led by Sir Peter Levene from the Efficiency Office. Its terms of reference were ‘to give further consideration to the practicalities of extending the scope for private sector involvement in the operation of research establishments’ (IPMS, 1996, p. 5). In particular, according to the Institution of Professionals, Managers and Specialists (IPMS), the Levene group was concerned to explore ways of resolving the problem of ‘crystallising pensions’, which was a particularly troublesome roadblock in the path of any proposed privatisation. The outcome of the first and largest tranche, comprising 18 establishments, was announced in May 1996 and is summarised in Table 3.1. From this report flowed the privatisation of the ADAS research and development establishments alongside the advisory service and a decision that the Central Science Laboratory was to be subject to yet a further review, this time by consultants, to determine whether it should remain an agency, be contracted out as a GoCo or privatised totally. The HSE laboratory remained as an agency and it was determined that the BRE should be privatised. A number of research council and Scottish Office (SO) institutes were referred to Sir Peter Levene to examine further the feasibility of privatisation. The outcomes of the Prior Options Reviews resulted in only two of the 37 laboratories that were studied being moved to the private sector. This seemingly radical reversal of policy was widely attributed to the fact that the government envisaged difficulties in finding the cash to create adequate pension funds for staff transferred into the private sector (New Scientist, 1997).2 It was in this fashion that the momentum behind the greatest upheaval in the organisation of central government provision for science and technology petered out.

5 Some conclusions It is evident from the description of the reform process undergone by GREs outlined above that they were subject to NPM reforms of the types variously described by Hood (1991), Rhodes (1991), McSweeney (1994), Dunleavy and Hood (1994) and Pollitt (1995) and described in Section 2. It is also very evident, as Boyne (1996) argued, that this was real change

New Public Management 73 Table 3.1 The first wave – outcome of the first tranche of Prior Options Reviews* Institution

Sponsor

Future

Agricultural Development and Advisory Service Building Research Establishment Central Laboratory of the Research Councils Central Science Laboratory

MAFF

To be privatised in 1997

DoE

To be privatised in 1997

DTI/OST

To remain in public ownership

None

MAFF

Possible privatisation

MAFF

Next Steps Agency 1.4.97

Referred to PA Consultants, since referred to Levene None

SO

Next Steps Agency 1.4.97

None

MAFF

No indication

Levene

HSE BBSRC

No change Possible independence from the public sector Possible independence from the public sector

Directorate of Fisheries Research Forestry Commission Research Division Horticultural Research Institute HSE Laboratory Institute of Arable Crops Research Institute of Grassland and Environmental Research John Innes Centre Macaulay Land Use Research Establishment National Weights and Measures Laboratory Police Scientific Development Branch Scottish Agricultural Science Agency Scottish Crop Research Institute Scottish Fisheries Research Services Silsoe Research Centre

BBSRC

BBSRC

Further action

Levene Levene

Levene

SO

Possible independence from the public sector Possible privatisation

DTI

Next Steps Agency

None

Home Office SO

Statement deferred

Levene

Scottish Office

SO

To remain in public ownership but possible merger/rationalisation Possible privatisation

SO

Next Steps Agency

None

BBSRC

Possible independence from the public sector

Levene

Levene

* Table compiled from IPMS report on the Prior Options Review, HC 643 and HC71-I.


as opposed to some conceptual shift in perceptions of how government works. Ridley (1996) counsels against regarding NPM reform as homogeneous. Certainly, with regard to the laboratories, the diversity of outcomes indicates that single solutions were not ubiquitously successfully applied. Indeed, it is clear from the messy and turbulent period of successive reviews that this was something of an ad hoc process driven by a clear, some would say ideological, commitment to the rectitude of free market ideas. Certain individuals, especially Michael Heseltine, played a central role in much of this reform process. Both the complicated and messy nature of the reform process and the diversity of outcomes indicates that it is difficult, contrary to what its advocates implied, to have a ‘one size fits all’ NPM agenda. Yet science was neither the first nor the only part of government to come under such reforming pressures. It may well be that the somewhat distinctive nature of scientific activity at that time contributed towards the problematic path that reform took. In our meetings with various civil servants we asked why the lens of NPM was only turned on science and technology service providers comparatively late in the day. The answer, when we got one, was that science was a relatively minor part of government, which had concentrated in the first instance on those parts of itself where much bigger financial issues were at stake. A subject for consideration is what the drivers for reform have been, as these may determine outcomes. There appears to be two main drivers: administrative rationality and/or (for the two are not mutually exclusive) the existence of opportunity. Tentatively, we would suggest that the application of managerial rationalism, driven by a commercial ideology, led to the establishment of the laboratories as agencies and in particular the introduction of customer–contractor relationships. These reforms led to change in the laboratories that have, in the main, been widely welcomed by both departments and the agencies (Boden et al., 1998). Privatisation outcomes appear to have resulted from less planned processes and are more reliant on opportunity and indeed political personality. The availability of buyers and government willingness and determination to manufacture a sufficiently attractive package appear to have been particularly important here. Whilst the biggest changes for the newly privatised laboratories have tended to come with agency status, there may yet be impacts from the change of formal ownership. When existing work guarantees expire or major facilities run the risk of closure or obsolescence then the implications of ownership may become apparent (Boden et al., 1998).

4 The Organisation of Science

1 Introduction In Chapter 3 we explained the context of new public management within which UK government S&T service providers have been transformed. In this chapter we specifically address three issues related to the organisational reform consequent to these public management transformations. In Section 2 we explore in general terms the nature of science and technology services demanded by the UK government, emphasising their diversity. We do this in order to indicate the sort of functional requirements placed on organisations supplying such services. This leads, in Section 3, to a discussion of a typography of organisational forms, governance models and ownership structures (all of which we see as interlinked) that service suppliers might adopt or have imposed on them. The aim here is to indicate the organisational models available for meeting the functional requirements placed on suppliers. In Section 4 we introduce the specific service providers that formed the basis of our study group. We describe their organisational form and governance structures in the context of our typography. The objective here is to provide a description of the nature and context of the organisations to inform our discussion and analysis in the following chapters.

2 The nature and diversity of services and customers The range and nature of science and technology services demanded by government is extremely diverse. Until the NPM reforms of the 1980s and 1990s, such services were usually provided by government organisations collectively known as the GREs. However, this collective noun 75


was something of a misnomer as they provided a range of services that included, but extended well beyond, narrow notions of scientific research. Research services demanded by government vary from routine investigation to strategic and, often, highly speculative work. Other services may include such activities as routine testing, consultancy work involving either evaluations of the work and products of others and the dissemination of technical advice and expertise. These services encompass the full range of scientific disciplines. The ‘customer’ range is diverse too. For some areas the only customer is a Whitehall policy maker or a government executive function. Thus policy makers may need advice on BSE (Mad Cow Disease) or the risks of agricultural pesticides. But Whitehall departments may also act as proxy customers, securing services for industry generally (such as metrology) or for the public good (for example road safety). Some advice services procured and facilitated by government are delivered directly outside government (for instance, agricultural advice to farmers). Table 4.1 indicates the range of science and technology services procured by government. Despite this diversity, there are a number of general characteristics in the supply of science and technology services to government, all of which have implications for the organisational and governance forms adopted. These characteristics have been detailed in Chapter 3 but to summarise: scientific and technological activities can often involve cognitive skills and expertise that distinguish them from more prosaic government executive functions. Difficulties of specification in areas of specialist expertise where there may be low certainty in outcomes may render close co-operation between providers and users essential. Some work may have no discernible or immediate impact on the core visible activities of government. Science and technology services must therefore be appropriately responsive to government needs and be seen to have impeccable impartiality. Government may therefore sometimes be extremely constrained in its choice of ‘suppliers’ by virtue of an imperative need for a high-trust assured-response relationship or a shortage of alternative sources of expertise. Attempts to develop alternative sources of advice may be constrained by the availability of relevant expertise and a consequential diminution of trust in impartiality. If the providers are required to sell their expertise elsewhere they may come to regard the execution of government policy advice work as either less pressing or, conceivably, the advice they give may be influenced by their plans in other areas. As ever, this matter is one of degree. However, a situation where a government department was wholly reliant on highly specialised technical advice on the safety of a product from either the

The Organisation of Science 77 Table 4.1 Examples of the range of science and technology services procured by UK government Service needed

Example of supply

Pure scientific research to support the national science base

Astronomical research by the Royal Observatory

Strategic policy related research

Research by the Defence Evaluation and Research Agency into the fighting soldier of the twenty-first century

Routine testing

Testing of vehicle safety features by the Transport Research Laboratory

Forensics

Analysis of suspected drugs

Consultancy

Advice on building materials to the construction industry by the Building Research Establishment

Information to support executive functions of government

Weather forecasts and data supplied by the Meteorological Office to the armed forces

Services to industry

Metrology calibration services offered by the National Physical Laboratory

Regulatory functions

Checking of live fish imports by the Centre for Environment, Fisheries and Aquaculture Science at points of entry

Public information services

Weather forecasts by the Meteorological Office

Policy advice to Whitehall Departments

Advice on defence procurement to the Ministry of Defence by the Defence Evaluation and Research Agency

Reference and standards

The Veterinary Laboratories Agency is a world reference laboratory for a wide range of infectious and non-infectious diseases in farm animals

Archives

The Veterinary Laboratories Agency maintains a bank of BSE (Mad Cow Disease) and scrapieinfected material

product provider or a government laboratory, which, under NPM-type pressures, had contracted with the private sector to test the product, might give rise to justifiable concern. In addition, some of this work may involve the utilisation of highly specialised and perhaps unique instruments and other facilities. The nature of these instruments and facilities may make them unsustainable as commercial operations.


Scientific and technological support and advice to government in the UK therefore takes a variety of forms, requires sophisticated instruments and expertise, can involve complex inter-disciplinary and interinstitutional relations and depends upon the application of specialised skills and knowledge to both routine testing and non-routine advice and investigation. This is true whether the substance of policy be international negotiations over product standards, provision of an appropriate infrastructure for industry and services, participation in the international environmental debate, evaluation of military threats or an assessment of the safety of medical technologies or agricultural practices. It also depends for its effectiveness upon close mutual understanding between customers and contractors of needs in a context where these may be difficult to specify in advance in a contractually rigorous way. Consequently, and significantly for NPM, it may be intrinsically difficult to assess value for money ex post facto.

3 A typography of reform The GREs providing science and technology services to government until 1979 were, despite a great deal of diversity in their customers and work, generally homogeneous in organisational form. Most laboratories were adjuncts to specific Whitehall departments, with their location often following some functional logic. For instance, the TRL was a part of the Department of Transport. On occasions, the location within departments was sometimes historical accident – for instance the Meteorological Office was part of the MoD. As geographically distant and functionally idiosyncratic departmental outposts they were frequently rather semidetached from their home Whitehall department. The scientists and engineers therefore enjoyed a very high degree of autonomy in terms of the definition of work. Funding was usually by a block grant included in the annual Parliamentary Vote and the specific application of resources was most often left to the laboratory chiefs, who therefore enjoyed some considerable autonomy. There is little evidence of the development of the principle of the customer saying what they wanted, and the provider supplying it, if they could, as was recommended in the Rothschild Report in 1971 (Cmnd 4814, 1971). The reform of the GREs as a result of the application of new public management policies during the period of successive Conservative governments from 1979 to 1997 led to radical change in the formal organisational arrangements and governance structures of the laboratories.

The Organisation of Science 79

Almost all GREs now fall into two principal types: those that have been privatised and those that remain within government as executive agencies. But, within those two types, there is a significant variety in actual organisational outcomes. We now explore the complexity of these forms of public and private ownership and governance that have evolved since 1979.

Agencies Distinguishing between public and private organisational forms can be problematic. Ogus (1994) sets out three principal forms of public ownership. First, the organisation may be constituted as a government department subject to ministerial control – for instance, the Post Office until 1969. Second, organisations may exist as companies registered under the 1985 Companies Act in which the government retains all or a substantial majority of shares. These organisations are subject to all of the usual principles of company law. Third, there are statutory public corporations in which functions and powers are determined by Parliament (Ogus, 1994, p. 271). The government department form is comparatively rare and has usually been used for the supply of goods and services, which are ‘traded’, and where an attempt is made to charge a price related to cost (Ogus, 1994). Ogus suggests that NPM-type executive agencies allow a separation of such trading activities from core government itself. This not only exposes the ‘business’ elements of government activities to commercial rigour but also allows politicians to distance themselves from what might be unpopular actions or decisions. During the 1980s the GREs, which form the focus of our study were progressively distanced from their departments. In a significant semantic shift, their work was relabelled as ‘business’ and the organisations were reconstituted as executive agencies formally supplying services to Whitehall customers. Table 4.2 lists some of the GREs that became executive agencies and their status in 2003. This list does not cover all the GREs that were reviewed under Prior Options but includes those that we were most concerned with for the purposes of our study. The stated rationale for the transformation to executive agency status was to enhance efficiency by exposing the ‘businesses’ to quasicommercial governance and management mechanisms. For a number of GREs, agency status was to become a staging post to privatisation and it is probably fair to say that the exposure to commercial pressures inherent to agency status assisted that subsequent transformation.

80 Scrutinising Science Table 4.2 Government Research Establishments, agency status and subsequent status Government Research Establishment

Agency launch date

Departmental owner at launch

Status in 2003

Building Research Establishment

1990

Department of the Environment

Privatised in 1997

Centre for Environment, Fisheries and Aquaculture Science

1997

Ministry of Agriculture, Executive agency of the Fisheries and Food Department for the Environment, Food and Rural Affairs

Central Science Laboratory

1992

Ministry of Agriculture, Fisheries and Food

Central Veterinary Laboratory

1990

Ministry of Agriculture, Executive agency of the Fisheries and Food Department for the Environment, Food and Rural Affairs and known as the Veterinary Laboratories Agency

Chemical and Biological Defence Establishment

1991

Ministry of Defence

Since July 2001 part of the Defence Science and Technology Laboratory, an executive agency of the Ministry of Defence

Defence Evaluation Research Agency

1995

Ministry of Defence

In July 2001, 25% became an executive agency named Defence Science and Technology Laboratory, 75% became a government owned company called QinetiQ. In December 2002 the Carlyle group acquired a 33.8% share of QinetiQ

Forensic Science Service

1991

Home Office

Executive agency of the Home Office

Laboratory of the Government Chemist

1989

Department of Trade and Industry

Privatised in 1996

Executive agency of the Department for the Environment, Food and Rural Affairs

The Organisation of Science 81 Table 4.2 (Contd.) Government Research Establishment

Agency launch date

Departmental owner at launch

Status in 2003

Meteorological Office

1990

Ministry of Defence

Executive agency of the Ministry of Defence

1990


Privatised in 1995

National Physical Laboratory

1990


Government-owned contractor-operated (Serco) since 1995

National Weights and Measure Laboratory

1989


Executive agency of the Department of Trade and Industry

Natural Resources Institute

1990

Overseas Development Agency

Became an Institute of the University of Greenwich in May 1996

Scottish Agricultural Science Agency

1992

Scottish Office

Agency of the Environment and Rural Affairs Department, Scottish Executive

Transport Research 1992 Laboratory

Department of Transport

Privatised in 1996 and now owned by the Transport Research Foundation

Veterinary Laboratories Agency

1995

Ministry of Agriculture, Executive agency of the Fisheries and Food Department for the Environment, Food and Rural Affairs

Warren Spring Laboratory

1989


National Engineering Laboratory

Closed in 1993

Under executive agency arrangements the agency and the government both commit to a Framework Document: essentially an explicit, formal contract that defines the general functions, financial arrangements, performance measures and resources of the agency. Agencies are held responsible for delivery of services within the arrangements defined by the Framework Document. Periodically, annual work programmes and performance targets are set and resources agreed.


A major qualitative difference between agencies and departments is that the former have more overt performance measures and accountability regimes. This is exemplified by the fact that agency chief executives can be, and have been, removed or allowed to leave before the expiry of their fixed term contracts when their agency’s performance is regarded as substandard. But agencies are not run as commercial businesses. Performance is not judged by profit, but rather by reference to customised performance indicators. Some of these indicators may be very general (for instance, to recover 100% of full economic costs from the sale of services). Others may be more specific – for instance, to complete a certain percentage of work programmes undertaken for government within the agreed time limits. Agency status did tend to presage full privatisation where this was feasible. The setting of targets for winning work from nongovernment customers often marked such intentions. Financial controls over science and technology agencies vary. However, in every instance there was an abandonment of the old block grant system under which the laboratories tended to receive large and undifferentiated amounts of cash with regard to which little financial accountability, with the exception of cash probity, was demanded. In some instances, agencies received agreed payment for work done. Others were on a Net Vote basis: that is, running costs over and above those recovered from ‘customers’ (who may be governmental or private) were reimbursed by government within agreed operating parameters. Both of these types of financial control were ‘annual’ in that each financial year was treated as a distinct and bounded financial episode. As such, surpluses, deficits and unused cash were returned to the Treasury each year rather than treat the ‘business’ as ongoing. The subsequent introduction of resource accounting by the UK government has somewhat alleviated the unhelpful pressures (for instance, to spend allocated budgets by the end of each year) generated by annuality. Some agencies operate on a trading fund basis under the Government Trading Funds Act 1973. The accounting methods and reporting format of trading fund accounts compare with those of private sector commercial undertakings. Thus they have different Treasury rules, are allowed to generate a surplus on activities and have regular accruals budgeting (i.e., surplus and deficit can be carried from one year to the next within the organisation). Trading funds generally are required to demonstrate a specified return on capital assets. Annuality still has an impact on agencies that have trading funds: although they may be free of the constraints of annuality, prior to the introduction of resource accounting in


central government in 2001, their major customer may not have been. This affected the pattern of cash flows in the business, with departments often holding back expenditure to the year end in order to ensure that they did not go overbudget and then spending anxiously before the year-end to avoid the claw back of cash by the Treasury. Unsurprisingly, this customer spending pattern proved financially disruptive for many agencies. Executive agencies therefore constitute a new form of public ownership, organisational form and governance. Although still publicly owned, the business is separated from the core of government and is defined as a service to be delivered under the terms of a formal contract. Agencies are given greater autonomy and encouraged to act in a commercial way to generate efficiency gains. Yet they may also be more accountable: they have formally defined tasks and explicit performance indicators against which they are measured and held answerable. Finally, governance mechanisms may also be more formal: they follow the route of contracts for services (against which performance is judged) and more formal financial accountability, often on a commercial basis. Finally, separation from the core of government facilitates the winning of work from other, non-governmental, customers. However, such freedoms may mask an underlying continued substantial dependence on and allegiance to government customers.

Privatisation A number of the GREs that were turned into executive agencies were subsequently privatised. Privatisation, like public ownership, can be difficult to define. It is a process that organisations undergo, rather than a state or condition of itself. It involves the transfer of the ownership and/or legal control of a government owned organisation or function out of the public sector in whole or in part to the private sector. The private sector organisational form commonly employed to supplant public sector ownership and control is that of a company, bound by company law. Privatisation can therefore be defined, for our purposes, as the transfer of some organisation or function of the public sector to a company governed by company law, that company not being legally controlled by government. In some privatisations, government may retain an interest in the company by, for instance, a shareholding. For executive agencies, privatisation can therefore be seen as constituting a change not just in ownership but also in the organisational


form (i.e. a private company) and governance mechanisms adopted. ‘Governance’ can be defined as the systems and practices that determine the nature of decision making and control with regard to policy making, executive actions and the delivery of objectives within an organisation. Privatisation therefore, indubitably, affects the governance mechanisms of the privatised organisation. In the majority of companies, the members in general meetings exercise formal governance. There may be instances where voting rights are unequal. By law, auditors, who examine the financial accounts of the company and issue a certificate regarding the extent to which they give a true and fair view of the company’s financial position, assist the members. Neo-classical liberal economic arguments suggest that the market for corporate control will sanction inefficient directors. That is, if a company underperforms it will be subject to takeover attempts as shareholders ‘exit’ rather than exercise ‘voice’ (i.e. they sell underperforming shares rather than press the directors to improve matters). The Cadbury Committee (Cadbury, 1992) concluded that in the UK these governance mechanisms were not working well, with too many members distant from the affairs of the company, preferring to exit rather than to exercise voice. Moreover, Cadbury concluded, the auditors may be rather too close to the directors and thus inhibited from giving an independent opinion on the financial position of the company. As such, doubts have been raised about the efficacy of the market for corporate control. Finally, externalities such as regulation may also affect the corporate governance of companies. Considerations of corporate governance extend beyond this formal and general level. Companies also have stakeholder communities: parties who have an interest in the manner in which the company is run. Stakeholders may include creditors, principal customers, employees and even the general public. All of these interests may, to some extent or another, be able to play a role in the governance of companies. For organisations being privatised then, the transition is much more fundamental than a change in ownership. Change brings with it new organisational forms and also new governance arrangements and conditions. The company forms and governance methods available for government in its privatisation of science and technology executive agencies were diverse. However, because of the comparatively small size of these organisations, none were privatised by public flotation (in which shares are offered for sale through the capital markets such as the London Stock Exchange). We explore below the most common forms of privatisation adopted in practice.


Government owned–contractor operated – the ‘GoCo’ GoCos are a hybrid form on the privatisation scene. Under these arrangements, government enters into a contract for the operation of a business, or part of it, for a fixed number of years with a private sector outsourcing specialist. Staff contracts of employment are transferred to the contractor, along with the small assets of the business whilst government retains ownership of the basic business and the larger assets, which are leased to the contractor. Such contracts aim to share the risks and rewards of the business between the public and private sectors. The outsourcing contractor’s risks are limited as the amount of capital investment involved is minimal compared with the size of the business. It is reasoned that, despite such minimal risk transfers, government benefits because the contractor contributes its skills and expertise in running commercial ventures in an efficient, effective and cost-effective way. Contracts can be written between government and contractor to ensure that such efficiency savings are shared. Thus the government may let a contract with the contractor for the operation of the business providing x amount of a service for y years for a payment of z. If the contractor manages to provide 1.5x for z because of efficient working, the arrangements should ensure that the rewards are shared. Thus the government may get 1.2x in work done for the same payment of z and the contractor will be free to sell the other work capacity elsewhere at zero cost. One of the major contractors for government under such operations is Serco plc, a major public company. Governance in such situations is both interesting and complex. The contractor will control executive operations of the company in the usual way. Yet the highly specific nature of the complex contractual arrangements, their limited duration and the retention of ownership of the business itself by government might all be expected to have a major impact on the ability and willingness of government to exercise stakeholder control over operations. Companies limited by guarantee All companies have members. In most companies those members contribute capital in return for ‘shares’ (which usually implies a right to share in profits by way of dividend or other distributions). However, in companies limited by guarantee the members do not contribute share capital, but instead agree to guarantee the debts of the company in some nominal sum (usually £1). Such guarantors have no right to


receive a profit share because they have not made any investment. Instead the surpluses of such companies may be applied in accordance with the criteria set out in their memorandum of understanding and articles of association. Although such companies often attract a ‘notfor-profit’ label this does not mean that they are necessarily not committed to generating a surplus. Charities are frequently constituted as companies limited by guarantee, as are the companies that manage leasehold flats. Major examples of companies limited by guarantee include BUPA and The Big Issue. In the summer of 2001, following the entry of Railtrack plc into receivership, the government announced plans to reconstitute the business of running the UK’s rail network as a company limited by guarantee. Other than matters related to the distribution of profits, companies limited by guarantee are largely subject to the same company law as companies with share capital. Being a member of such a company can bring no direct financial reward in the form of dividends. It might therefore be fairly assumed that members participate because of some vested interest or public duty to exercise voice within the company. Companies limited by guarantee have increasingly been used for privatisations where the business might be seen as having limited commercial value or where matters of public interest mean that it is seen as imperative that stakeholders have a formal mechanism to exercise voice, and are encouraged to do so rather than exit. The inability to receive profit distributions means that the value of membership of such a company lies only in the ability to exercise voice. Membership may be constrained by the articles of association of the company to a specified group. At the same time, such company forms may be perceived as a way of exposing businesses to commercial rigours and pressures thereby encouraging efficiency and effectiveness. In some instances, where the stakeholder group consists of a range of institutional interests in both the public and private sector, this vehicle might be seen as a useful means for facilitating the exercise of stakeholder voice. Trade sales Trade sales are where the ownership of organisations such as GREs is transferred to companies established by government and then the shares in those companies are sold. Some trade sales have resulted in the incorporation of the organisation into a pre-existing business. This occurs when private sector firms buy the majority or all of the shares in the companies created by government to which organisations have been transferred. In such cases, the lines of accountability and control


become entwined with those of the purchasing or parent company. But in acquiring the business, the purchasing company may also acquire a new group of stakeholders. This may particularly be the case if the government remains a major customer, or if a condition of sale was that certain long-term undertakings (such as the maintenance of facilities) were entered into. In these circumstances, government may be an influential stakeholder even though the organisation is no longer subject to formal public accountability. Other forms of trade sale have been more in the tradition of management buy-outs, where the existing management of a laboratory acquires ownership and control of the business through a transfer of shareholdings. Such ownership and control may be in conjunction with other shareholders. For instance, the managers may have to raise capital to buy-out the business or may have to take on shareholders deemed desirable by government whose role is to exercise voice within the governance of the business to ensure the representation of wider public interest. Again, such companies may have a complex web of stakeholders, including the government itself if it is a major customer. These types of privatisation may facilitate continuity in relations between the supplier and the government customers because of the persistence in post of former civil service managers and other senior personnel. NPM therefore generated significant organisational, accountability and governance change for the old GREs. A group of broadly homogeneous organisations that were an intrinsic part of Whitehall departments were translated into a variety of new types of public and private sector organisations. In exploring these new organisational forms, we aim to understand what specific reasons, if any, there were for adopting particular ownership, governance and accountability patterns for particular organisations.

4 The reformed organisations In this section we introduce the eight science and technology service providers that constituted our study group. We do so by discussing their original and transformed organisational form. The National Engineering Laboratory In 1948 the government established the Mechanical Engineering Research Laboratory, renamed The National Engineering Laboratory (NEL) in 1959. The Laboratory was located on a 65 acre site with purpose


built engineering facilities on the Scottish Enterprise Technology Park in East Kilbride near Glasgow because of political pressures in the late 1940s (Heim, 1988). NEL developed into a business providing engineering technology services in the areas of metrology, lubrication, fluids, materials, plasticity and heat to a wide range of UK and international public and private sector clients in diverse sectors such as oil and gas, energy, transport and defence. NEL has substantial engineering testing facilities, many of which are not replicated elsewhere in the UK. Operations currently include the Centre for Flow Measurement; part of the government’s National Measurements System and NEL maintains the UK standard for flow measurement. The largest customer of NEL was and remains the DTI. As early as the 1980s the laboratory was commonly perceived to be in a state of long-term decline, leading to a government decision principle to sell NEL. A potential buyer, a French company, was found in 1988. However, this sale fell through when the poor state of NEL’s commercial business was made explicit. It is interesting to note that the rigours of pre-sale scrutinies far exceed the levels of public accountability to which such organisations were usually subject, despite the beneficence of public funding. This failed sale led to efforts to streamline operations and move the laboratory to a more commercial orientation. The trade union representing staff members, the Institution of Professionals, Managers and Specialists (a professional association/trade union), claimed that these efforts caused substantial job losses (Nature, 1993). From 1990 until 1995 NEL’s workforce was cut from over 650 to 223 and the calibration service facility was closed (Hansard, 1994).NEL became an executive agency of the DTI in October 1990. NEL had two principal financial targets set by DTI. These were the recovery of the full economic cost of its work from customers and a 50 per cent increase in the number of nonDTI clients generating more than £100 000 annual turnover each year. Despite draconian cost-cutting measures, NEL still consistently failed to meet its financial targets. The laboratory obtained just under half of its £13.5 m turnover from the private sector in 1993–94. Despite its ailing finances, direct closure of the laboratory was seen as potentially damaging to industrial confidence, particularly in view of NEL’s position as one of Scotland’s centres of scientific and technical excellence. This led government to look at the option of privatisation. Pressure for rapid privatisation came from the self-styled President of the Board of Trade (the senior DTI minister) Michael Heseltine. His aim was ‘to get as much as possible of the DTI’s activities into the private


sector as quickly as possible’ (Guardian, 1993). The accountancy/ consulting firm KPMG Peat Marwick was engaged to review the DTI laboratories and recommended that NEL should be transferred to the private sector. The use of private sector consultants to produce the case for transfer to the private sector was a hallmark of many privatisations. NEL was advertised for sale in December 1994. A difficult period ensued during which staff overwhelmingly voted against a proposed management buy-out. Concerns were also raised about the ability of a privatised laboratory to provide impartial advice. It was suggested that the sale of such an asset was a dogma driven policy embodying a disregard for the public good and an abdication of public responsibility for science and technology (The Independent, 1995). On 31 October 1995 NEL was ‘sold’ to Assessment Services Ltd, a Hampshire based subsidiary of the German electronics group Siemens involved in test and consultancy work. Almost the whole operation was included. However, when NEL failed to meet its financial targets in the period leading up to the sale, the eventual transaction involved DTI paying Siemens £1.95 m to take over the laboratory (DTI, 1995a). To this dowry was added some £30 m of guaranteed metrology work from DTI over the following five years. In order to privatise NEL, the business was transferred to a specially created company for a short period. Soon after the sale, Assessment Services Limited became a division of a Siemens group called the National Engineering Assessment Group. In turn, in 1996 another German company, TÜV Product Service GmbH, entered a joint venture with Siemens, taking a majority interest in the National Engineering and Assessment Group. This was subsequently renamed TÜV Product Service Ltd. TÜV originated in the 1870s and was formed from a merger of a network of product safety laboratories. In the UK another part of the group offers ‘contractorisation services’ particularly to the MoD. The shares are not separately listed so there are no means of assessing the financial aspects of the privatisation or indeed the financial performance of NEL. The DTI has expressed the view that since NEL is in the private sector, its management is no longer DTI’s concern (Research Fortnight, 1996). The privatisation attracted criticism from several quarters. The Institution of Professionals, Managers and Specialists felt that the impartiality of the laboratory would be called into question: ‘Siemens is a commercial business while NEL is an impartial public body. How can future clients have confidence in its objectivity when they might be in direct competition?’ (The Herald, 1995). Suggestions were made in some


quarters that the deal with Siemens was linked to that company’s largescale investment in a microelectronics plant in North East England, which has since closed. The circumstances of this transfer of ownership demonstrate that the privatisation of the GREs cannot necessarily be seen as a cash bonanza for government. Treasury justification for the sale would have had to come in the form of relieving government of future liabilities for the laboratory, especially staff redundancy payments. Such accounting rationales are problematic however, predicated as they may be on an assumption that the laboratory would be run down in public hands and in the absence of (hard to quantify) indications of the benefits of retaining public control over the laboratory. Thus, a rational accounting justification of necessity rests on assumptions about future subjective policy decisions. Paradoxically, the terms and conditions of privatisation meant that NEL was guaranteed more work than a publicly owned laboratory was likely to have received. The DTI remains the largest customer of NEL. The only counterbalancing advantage might be that the laboratory would gain from perceived greater efficient working practices in the private sector, but the loss of lines of transparent accountability makes this hard to gauge.

The Laboratory of the Government Chemist The Laboratory of the Government Chemist (LGC) was established in 1842 to detect adulteration of tobacco on behalf of the Board of Excise. By the 1980s it was a research establishment of the DTI. The Laboratory developed into the provider of analytical, investigative and advisory services and policy support to government departments, public institutions, local authorities and other organisations. Most of the issues it dealt with related to consumer protection, revenue protection and public health. It also co-ordinated government activities in analytical science and has statutory functions as the official reference analyst under various Acts of Parliament. It recently diversified its work into areas such as urine testing for illegal drugs and the sexing of parrots using DNA testing techniques. Despite the centrality of its role, it appears unlikely that the Laboratory provided any substantial services that could not be adequately undertaken at many other UK analytical chemist laboratories. The Laboratory became an executive agency of the DTI in October 1989. Its agency status reflected its reliance on government for its work: in the year to March 1995 its turnover was £15 m, £6.7 m of which was


derived from its main customer, the DTI. A further £6 m came from other government department customers and £2.3 m from non-governmental sources (LGC, 1995). The Laboratory’s location within the DTI meant that it was included in the review announced in April 1994, which aimed to facilitate the transfer of all the Department’s research establishments to private sector ownership or management. Consequent to this review, the transfer of the laboratory to the private sector through the use of a company limited by guarantee was mooted. However, this form of privatisation was eventually rejected because of what were described to us as ‘capital structure problems’. In November 1995 it was announced that LGC was to be sold to a management-led consortium also comprising the Royal Society of Chemistry and venture capitalists 3i plc. The Government completed the sale of LGC on 31 March 1996 for a payment of £360 000 by the Consortium. At the same time, the DTI made a payment to the Consortium of £1.96 m for building dilapidation works and to relieve the DTI of the liability for various site remedial works (DTI, 1996). In the event, because LGC’s trading performance failed to meet expectations in the year to March 1996, the DTI had to make a net payment of £329 000 to LGC (Research Fortnight, 1996). In addition, LGC received the benefit of a generous guaranteed five-year programme of government work. It seems likely that the size of this work programme is greater than might have been expected had LGC remained an agency. The Laboratory has retained its name and the new company is known as LGC Ltd. It also continues to carry out the statutory responsibilities of the Government Chemist, acting as the referee in cases where there is a dispute over analytical results or their interpretation. This residual statutory role, whilst statutorily important, is a very small part of LGC’s work by turnover. Nevertheless, the need to meet statutory imperatives led to a perceived need to find an ownership arrangement that could guarantee the impartiality of LGC. This need was met by the involvement of the Royal Society of Chemistry. Any future transfer of share ownership (which could potentially prejudice this built-in impartiality guarantee) could result in government exercising its reserved rights under the sale agreement to terminate the guaranteed work programme. Once again, this case suggests that privatisations can be far from cash bonanzas for government – indeed, quite the reverse. As with the sale of NEL, the rationale may have been saving the public purse future expense, but again this would be contingent on future policy choices. Moreover, the DTI locked itself into a programme of work with LGC


when there were plenty of other private sector suppliers, a process that contradicts NPM principles. In this instance, the statutory need for a government reference analyst required the retention of stronger and more open governance controls than might otherwise have been the case.

The Transport Research Laboratory The advent of motorised traffic in Britain before the First World War prompted the establishment of the Ministry of Transport (MoT) in 1919. Early technical and scientific concerns related to the impact on road surfaces of the new traffic and the laboratories of the DSIR conducted research in this area. By the 1930s, the growth in highway expenditure led to the establishment of the specialist Road Research Laboratory, a small outstation of the MoT and the precursor of the Transport Research Laboratory. Whilst it was acknowledged at an early stage that the laboratory was not engaged on pure research, it was perceived as having the potential to be of immense national economic value if it led to the improvement of the road system. It was acknowledged at this time that no individual local authority was willing to undertake substantial expenditure on research (Charlesworth, 1987). The laboratory was renamed the Transport and Road Research Laboratory in 1972 to reflect the increased scope of work being undertaken and eventually became known as the Transport Research Laboratory in 1992. TRL is now the UK’s national centre for road transport research. Whilst its remit is primarily roads, it does have some involvement with other modes of transport. TRL provides research and scientific advice to government, its principal customer, and other customers, mainly local authorities. TRL describes itself as a centre of excellence in surface transport issues providing research and consultancy services to the public and private sectors. The laboratory provides technical help and advice to: enable the setting of standards for highway and vehicle design, facilitate the formulation of road safety, environmental and transport policies and, encourage good traffic engineering practice. TRL operated as an integral part of the then Department of Transport (DoT) until 1992, when it became an executive agency. The first chief executive of the new agency was brought in from the private sector. During the agency period the relationship with the DoT became quasicontractual: departmental customers held the budget and as much work as possible was put out to competitive tender. TRL was guaranteed a fixed element of this budget, reducing gradually to zero over four years


(60% in 1992–93, 50% in 1993–94, 40% in 1994–95 and 0% in 1995–96). In practice the actual proportion secured by TRL is in the 70–80 per cent range. To meet the potential competitive challenge from consultants and universities, the laboratory sought to improve its cost base through a reduction in support staff and shifting its human resource organisation from the hierarchical civil service model to a matrix of resource centres. Although privatisation was not foreseen at the time of agencification, the process began the following year under ideological driven pressure from the then Secretary of State, John MacGregor. Pressure from the Treasury led to a competitive sale process with a short timetable. The call for tender stressed the importance of maintaining impartiality and independence in TRL’s work. The impartiality issue became salient because one of the two short-listed bidders was a consortium consisting of two consulting engineers (Pell Frischman Consultants and Mouchell Consultants) and the two main motoring organisations (the Automobile Association (AA) and the Royal Automobile Club (RAC)), both of which were mutual trading organisations1 at that time. The anti-road lobby expressed concern at this group dominating road research because of their vested interests in developing roads (New Scientist, 1996). In the event, the other bidder was successful. This was The Transport Research Foundation, a company limited by guarantee established by the senior management of TRL. The Transport Research Foundation’s members included some 86 transport sector interests and 25 employee representatives. Members ranged from universities, scientific and engineering organisations, consulting engineers to, eventually, the motoring organisations. The management of TRL was given financial assistance by the government to prepare the bid, but had to raise the purchase price of £6 m through bank loans. The sale was completed on 31 March 1996. TRL Ltd, a business with a turnover of £32 m, is now a wholly owned subsidiary of the Transport Research Foundation (Department of Transport, 1996). Ownership of the land and buildings was not included in the sale, apparently to keep the price down. The estate was sold separately in 1997 for £18.2 m with TRL continuing as a tenant with a 14-year lease remaining. The company limited by guarantee form provides a non-profit distributing structure that should allow surplus funds to be ploughed back into long-term research. However, the burden of debt from the buyout prohibits this in the foreseeable future and may have created pressures for short-termism in research. The transaction costs involved in bidding for fragmented work packages from the DoT were found by


the laboratory to reduce efficiency and to hamper its ability to support longer term strategy. The general consensus among both customers and the laboratory was that the efficiency gains could have been achieved without privatisation and without the burden of debt.

The National Physical Laboratory In 1902, at the opening ceremony of the National Physical Laboratory (NPL), King Edward VII stated that this was almost the first instance of the state taking part in scientific research. He called attention to the major objective of the laboratory – ‘to bring scientific knowledge to bear practically on everyday industrial and commercial life’ (The Independent, 1995). The foundation of the NPL changed the nature of the relationship between government and science, opening the way to substantial state support for scientific research conducted in state owned laboratories. In contrast, government had previously subsidised scientific work in independent institutes or restricted its own work to the routine application of scientific techniques. By 1990, the NPL had become a research establishment of the DTI. Whilst work is undertaken for other government departments, the European Commission, industrial and other non-public sector customers, NPL’s principal customer was the DTI. NPL was and is the UK’s centre of research in metrology. Metrology is a vital service for industry and the public alike, and in this regard DTI acts as a proxy customer for the rest of government, UK industry and the general public. NPL is also responsible for the maintenance of the UK’s primary standards for measures such as, inter alia, the metre. Maintenance of metrology standards is a vital component in ensuring UK competivity and public safety. NPL became an agency of the DTI in July 1990. In the year to March 1994 NPL employed 740 staff and had a turnover of £48 m, of which over £40 m came from the DTI (Hird, 1996). During the period of agency status from 1990 to 1995 NPL was allowed enhanced autonomy in terms of managing its finances, staffing and the organisation of the laboratory. It operated within a negotiated framework which defined the additional delegations and which was set out in a formal Framework Document. Responsibility for finance rested with the laboratory, which had to produce an annual corporate plan to be presented to Ministers for agreement. Whilst agency status resulted in a certain amount of financial freedom, the control of capital expenditure still lay firmly in the hands of the Treasury. NPL remained subject to annuality and to operating on


a Parliamentary Vote. The laboratory found it difficult to ensure that income matched its expenditure on such a yearly basis because of significant fluctuations in public spending. Matters reached a crisis point in 1992 when the government imposed substantial budget cuts. These cuts meant an annual DTI budget reduction from £45 m to £30 m over three years. NPL reacted by cutting a major radiation research programme in preference to the more expensive option of making staff redundant. NPL also sought alternative sources of finance from Europe in the form of Framework IV money for metrology and also funding from industry. NPL were negotiating a transition programme to deal with these cuts with DTI when Michael Heseltine became Secretary of State for Trade and Industry. As a result, the laboratory became involved in the review of options for the reform of DTI research establishments. Accountants KPMG were employed as consultants to assess the possible futures for NPL. The option of abolition was rejected because of the volume of support for NPL and its role from industry, the science lobby and trade associations. Privatisation emerged as an extremely problematic option for several reasons. First the work of NPL is central to UK’s economic competitiveness and in this regard DTI acts as the principal and proxy customer for British industry. Therefore, placing such an organisation in private hands would be extremely contentious. Second, the NPL site itself was extremely problematic: part of the laboratory worked from Bushey Park, a royal palace on royal parkland subject to restrictive covenants prohibiting the operation of any business there. The GoCo option emerged as the favoured option for reform. The consultants advised government that NPL required greater commercial freedom in order to allow it to respond efficiently and effectively to increased competition and also to a declining workload brought about by government’s changing research priorities. The GoCo option would, simultaneously, secure the independence and impartiality of the NPL and ensure that it remained capable of satisfying the national need for metrological standards. Selected bidders were invited to tender to carry out NPL’s work under contract to the DTI. These included a consortium comprised of EDS Scicon, a US software and services giant, the government’s own DERA and Taylor Woodrow. A second consortium was headed by Brown and Root, a leading US engineering contractor, in partnership with Imperial College, University of London. The nuclear engineering division of Rolls Royce and WS Atkins, one of the UK’s major civil engineering specialists also bid.


The contract was awarded to Serco plc, an international outsourcing specialist in collaboration with AEA Technology and Loughborough University as subcontractors for particular tasks.2 This consortium has managed NPL as NPL Management Ltd (a wholly owned subsidiary of Serco plc) since October 1995 and was contracted to deliver the DTI’s measurement programmes for the next five years. From 1995 to 2000 DTI-funded work at NPL represented around 75 per cent of planned annual income. DTI made an initial payment to Serco of £1.55 m to take over the Laboratory and stated that, beyond the initial five-year contract, it was likely to want to continue to procure the kinds of services provided by NPL from a UK based institution. The contract agreed the minimum value of work to be placed with the establishment by DTI over a fiveyear period – an arrangement deemed necessary to make NPL sufficiently attractive to potential contractors. There were complicated arrangements in the contract to ensure payment by achievement milestones on various projects, the retention of monies if performance by NPL was below that expected and arrangements by which NPL Management Ltd and the DTI could share efficiency gains. The government will have, in addition, come under heavy cash flow pressures in creating a pension fund for the NPL employees. The benefits to the laboratory of GoCo status were significant. It enjoyed a guaranteed work programme and a long-term programme of expenditure from the DTI. It was also able to compete confidently for market-tested DTI expenditure. NPL also benefited in August 1997 when the Labour government approved a £300 m Public Finance Initiative for the redevelopment of its site at Teddington. The NPL was a government owned, government funded public organisation. It is now a government owned, predominantly government funded but privately operated organisation. It has become profit oriented whereas before this was not an issue. It has become profit making – the benefits of which pass to the shareholders of Serco. Prior to becoming a GoCo, NPL published its own annual reports and accounts. Now the accounts are subsumed into the accounts of the Serco group and are less comprehensive and the amount of money spent by UK government is not discernible from other operator income. Consequently, for the independent observer it is difficult to assess the true costs to the UK taxpayer of the new organisational arrangements on a historical trajectory and subsequently any possible benefits of increased competition inherent in the arrangement.


Building Research Establishment The Building Research Establishment (BRE) was founded in 1921 (as the Building Research Station) in order to address technical aspects of the housing crisis that emerged after the First World War. Its establishment as a centrally funded government laboratory was designed to counter the problems of a fragmented industry that lacked scientific knowledge and technical skills in materials and construction. It provided a focus of expertise in the emerging areas of knowledge in construction and building sciences not only for the UK, but also for the Commonwealth and European countries, particularly after the Second World War. From the outset, the Building Research Station (BRS) was concerned with standards and guidelines for practitioners, long-term testing, advisory services for industry and more fundamental research. Its mission was to serve the users of buildings, not the construction industry. Thus, it has always had the character or mission of an applied research institute. A Scottish laboratory was created in 1949 to meet the needs of different construction practices and climatic conditions in Scotland and Northern Ireland. In 1972 the BRE was created from the BRS, the Fire Research Station and the Forest Products Research Laboratory. The new BRE was then transferred to the recently created Department of the Environment (DoE). In 1990 BRE, along with most other central government laboratories, changed in status from being an arm of a government department to an executive agency. Agency status was seen as a step towards full privatisation. BRE gained a chief executive, some financial autonomy and was expected to negotiate specified programmes of work with the DoE. The agency was expected to win a minimum of 10 per cent and a maximum of 15 per cent of its income from private work. Agency status made formal the change which had taken place in 1988, when BRE ceased to be funded directly from the Parliamentary Vote, instead winning its funding through contracts drawn up by the DoE. As an agency, BRE was subjected to more stringent accountability, and operated on a Net Vote basis. The Net Vote basis was one where government organisations were encouraged to recover their costs from customers, with any shortfall being met by government and any surplus being returned to the Treasury. In fact, BRE was a net contributor to Treasury funds. In 1992, after the general election, the DoE formally adopted the role of sponsorship of the construction industry and launched various reviews in order to define the nature of its sponsorship role. The Department’s research programmes, which were mostly placed at BRE,


became more driven by industry. This was to be achieved by strategy setting focused on innovation and commercial impacts and including collaborative research sponsorship. However, BRE’s stated mission was still to serve the public interest and to advise the government. Full privatisation took place in 1997. Many thought that this was pushed through with extreme haste because of political considerations and the imminent general election. After a failed initiative to take BRE into an industry-funded ‘National Centre for Construction’, the government announced the sale of BRE by competitive tender. The bid put together by the BRE management team was successful (Boden et al., 1998). BRE Ltd is a wholly owned subsidiary of the Foundation for the Built Environment (a company limited by guarantee). The Foundation’s members are firms, professional bodies and other organisations across the construction industry and building users. They include some universities with built environment research groups. The members are grouped into ‘colleges’ representing interest groups, and each college appoints members to the Foundation’s council. The governing structure aims to prevent any single interest group having undue influence, thus preserving BRE’s independence and impartiality. The Foundation funds research through a managed programme and PhD scholarships. Any profit which BRE makes is passed to the Foundation. The Foundation also owns subsidiary companies concerned with certification, accreditation and loss prevention, research and project management and consultancy. The Foundation is seeking charitable status in order to extend its mission to include educational activities. BRE’s income is around £30 m per year, and this has remained stable since privatisation. Government work has dropped from 95 to 60 per cent of income since privatisation.3 When BRE was privatised, government income was guaranteed for five years. In March 2002, the guaranteed work from government (part of the privatisation deal) expired, and another review of construction industry R&D was undertaken, culminating in the ‘Fairclough report’ (DTLR, 2002). This report explicitly stated that ‘although BRE is widely respected, and has particular strengths in many areas relating to Building Regulations, it must in future win work without any special government support or favour’ (DTLR, 2002). The report recommended that specialist research teams should not be maintained on a ‘just in case’ basis – for example, experts on unvented hot water systems which are liable to explode. Instead, the report recommended government support centres and networks of excellence, including university teams, funded on a longer term basis


with industry leading the research agenda. BRE expressed support for this (Research Fortnight, 2002), probably due to its being in a strong position still to claim research excellence and to win this type of research funding. Income from non-government sources has grown significantly and is divided more or less evenly between problem-solving/consultancy and testing/certification work. Income from the European Commission has grown very slightly since privatisation. BRE has partly been able to reorient itself, away from its public service ethos and towards technology based services to industry. It is not clear how renewal of capital and its own knowledge base will be guaranteed in the privatised regime, but it is currently developing linkages and positioning itself to win public funding for research as well as private funding for consultancy. One issue, which is salient in the case of BRE, is how a longstanding organisation with a very explicit public interest focus quite purposively reinvented itself, of necessity, into an organisation devoted entirely to the satisfaction of the needs of paying customers. Thus organisational reform also impacted significantly on the underlying mission of the organisation.

Defence Evaluation and Research Agency UK government has a long involvement in and commitment to defence research. In 1991 the MoD created both the DRA (by amalgamating several of its research establishments) and the Chemical and Biological Defence Establishment Agency (at Porton Down). In April 1995 the Ministry amalgamated these two agencies, together with the Defence Operational Analysis Centre, the Directorate General of Test and Evaluation and a number of smaller organisations, to create a unitary agency known as the Defence Evaluation and Research Agency (DERA). DERA brought together all of the UK MoD non-nuclear science and technology research resources and became the largest of the science and technology agencies. DERA had an important dual role in the service of UK government. First, it provided independent technical advice to government on the evaluation of defence bids and research. Second, it carried out research and development when assessing new military technologies. In 1998 the MoD undertook a strategic review, which recommended a Public Private Partnership (PPP) arrangement as the best means of maximising the strategic value and operational cost-effectiveness of the


UK’s defence research capabilities. As a result On 2 July 2001 DERA was separated into two organisations. A science and technology company called QinetiQ and the Defence Science and Technology Laboratory (DSTL), an agency of the MoD. Prior to the split, DERA had an annual turnover of approximately £1 bn. It employed 12 000 people (9000 of them scientists and 1000 with PhDs), and had 17 sites across Britain. At the time of the reorganisation, DERA’s civilian sector innovations, including world-leading computer voice-recognition technology and flat audio speakers, caused its value to soar (Sunday Times, 2000a). DSTL is now located on ten sites in southern England, has approximately 3000 staff and represents almost 25 per cent of the former DERA. It remains an integral part of the MoD and continues to handle the most defence-sensitive areas of research. The focus of the organisation is on the needs of the MoD and the government with an objective of providing impartial and expert technical advice on defence related issues. DSTL covers most of the old DERA’s technical areas of expertise and provides a core competence capability for the MoD in chemical and biological defence, chemical technology, electronics, defence analysis and defence research information. This is work that is still considered best conducted by government. Its purpose remains that of providing an impartial source of advice and specialist research and its mission is to create the edge for UK forces and the government through the best use of science and technology. QinetiQ describes itself as the largest science and technology organisation in Europe. It comprises 75 per cent of the former DERA and is a public–private partnership that provides technology-based solutions and innovations. QinetiQ is a wholly government owned public limited company. In 2002 QinetiQ’s laboratories were located on 18 different sites and employed approximately 8000 people. Eighty per cent of its turnover of £800 m was generated from MoD. Operating profit before exceptional items to March 2002 was £42.7 m (QinetiQ Group plc, 2002). The justification for the adoption of this organisational form is that QinetiQ now has greater freedom and access to private capital, allowing it to exploit its technologies and capabilities into wider markets. There was considerable opposition to this reorganisation of Britain’s public defence research establishment. In the House of Commons concerns were raised about the nature of the division of DERA. It was argued that the divided DERA must retain its research capacity in order to retain top quality scientists on whom the government relied for advice and evaluation. If the research function of DERA was moved entirely to the


private sector the scientists would also move to the private sector leaving the government with ‘second- and third-rate people undertaking evaluation and advisory roles’ (Hansard, 2 November 2000). The trade unions were concerned that the part of DERA moving to the private sector would not be financially viable and that the essential strength of DERA as an interdisciplinary team would be undermined (Sunday Times, 2000b). The defence manufacturers fretted about increased competition from a privileged body, the Americans and Members of Parliament worried about military security and the environmentalists were concerned about the chemical warriors of Porton Down. The Pentagon was extremely influential and initially blocked the idea of privatisation, influencing the decision to retain certain elements in the public sector (Financial Times, 24 July 2000). Nonetheless despite the reluctance of previous (Conservative) governments to privatise DERA on the grounds of national security the second term Labour Government decided to go ahead, albeit with a compromise solution. The initial planned stock market flotation of QinetiQ was abandoned due to unfavourable market conditions. Subsequently, in September 2002 the MoD announced it was seeking a strategic investor for the sale of up to 51 per cent of QinetiQ. The MoD planned to hand control of QinetiQ to the strategic investor, but to retain a significant shareholding. It intends to proceed to a full stock market offering within two to four years. The income to be generated for MoD from this part of the privatisation was estimated at £250 m. This action was not without controversy and in particular a political row broke out when the MoD offered QinetiQ a 20-year indemnity for losses it might suffer because of contamination of some of its sites. MPs were concerned that the taxpayer was being made liable for a long-term burden of an unspecified amount. On 5 December 2002 the MoD announced that the Carlyle Group4 would become its strategic partner in QinetiQ, acquiring a 33.8 per cent share. The MoD was estimated to receive between £140–150 m from the transaction, having already received £50 m from Qinetiq. The MoD confirmed its plan to retain a special share in the business for a three to five year period, after which the intention was to sell its entire stake probably through stock market flotation. A small percentage of shares (3.7%) were made available to employees (MoD press notice). Some UK MPs criticised the arrangement, as they were concerned about the possible conflicts of interest arising from allowing a foreign owned investor a stake in the British defence market. However the Defence Minister Lewis Moonie assured that ‘… robust safeguards would be in place to


ensure the integrity of the Government’s procurement process is not compromised’ (Hansard, 2002). In March 2003 QinetiQ signed a 25-year contract, known as a long term partnering agreement (LTPA), to provide the MoD with test and evaluation service. The LTPA worth £5.6 bn, came into effect on the 1 April 2003 and covers the management of the MoD’s 22 principal ranges. Up until the later years of the 1990s privatisation had not been considered an appropriate option for DERA due to its pivotal role in providing independent advice to the MoD on technical matters. Thus DERA escaped the privatising pressures felt by other agencies. A trade sale of the whole of DERA was not a serious consideration as there was an awareness that the private sector would have cherry picked certain aspects of the organisation, leaving the rest to wither. Indeed some commentators suggest that one of the key drivers for the privatisation of DERA has been the insight of key players within the organisation to foresee the potential for commercialisation of specific aspects of work carried out by DERA.

The Meteorological Office (The ‘Met Office’) The Met Office was formed in 1854 as a small department within the Board of Trade. It was and remains primarily concerned with forecasting weather. At the end of the First World War it became part of the Air Ministry because of the importance of weather forecasting to air defence. It later moved to the MoD, became an executive agency in 1990 and started operating as a trading fund in 1996 (Meteorological Office, 2002). The Met Office provides meteorological and related services to government, the armed forces, the public, aviation and commercial customers. It is also concerned with the development of the science of meteorology in order to facilitate effective service provision. Staff employed in the year 2001–02 numbered in the region of 2100, 70 per cent of whom were scientists. The turnover for 2001–02 was £154 m of which some £125 m was from the MoD and other government department business. Government was the largest customer accounting for 81 per cent of income. The asset base of the Met Office is just over £100 m of which more than half represents the UK share of weather satellites. Forecasts are provided to the Royal Air Force (RAF), Royal Navy (RN), the Army, DERA and North Atlantic Treaty Organisation (NATO). The Met Office also provides the Public Meteorological Service on behalf of the government for the ‘public good’. This service includes the shipping forecast on BBC Radio 4, the National Severe Weather Warning Service


and the Storm Tide Warning Service, together with gale warning and pollution services. This is the agreed range of weather services directly funded by government and freely available to all. In 2002 the Met Office won £1.2 m of funding from the Treasury to develop its work on health forecasting. The Met Office differentiates between information (i.e., its forecasts) and data (the primary weather observations from which forecasts are compiled). In order to project forecasts a large amount of observational data is required. To ensure access to such data, the Met Office is a member of the World Meteorological Organisation. The 179 member countries of this organisation exchange data 24 hours a day, seven days a week without any charge. This data is quite basic and might, for example, state the sea temperature at any given point in the oceans. The Met Office gathers 2 per cent of the data required for its own forecasting and is therefore reliant on 98 per cent of its required data from other countries. The Met Office is also a member of Ecomet, a European organisation which co-ordinates weather forecasting activity within Europe. Data is made available through Ecomet, which operates a set scale of charges. Data coverage can be poor in certain parts of the world, which can be problematic as these sometimes affect the UK weather systems. The move to trading fund status removed the Met Office from the managerial and financial control of its parent department, the MoD, and permitted greater commercial freedom. Trading fund status also meant that the Met Office had to start to meet all its running costs by selling weather services to the MoD and other customers. It was perhaps a more significant step in terms of commercialisation than the introduction of agency status in that it provided a strong imperative to address the issues of charging for information. Under trading fund rules the Met Office must recover the full economic costs (of about £150 m a year) of its operations. This means that customers must be found to buy Met Office information. The Met Office and the New Zealand weather bureau are the only national weather organisations to be subject to such financial requirements. All the other national weather services receive some kind of government grant – although many make charges to private customers in commerce and industry. Met Office funding is complicated and is worthy of note because it reflects the complexity of many of the financial arrangements that exist between government and executive agencies. Funding is divided between what is called core and non-core. The core group of customers consists of government departments, principally the MoD. They fund,


through a grant, a core capacity to produce a basic range of weather forecasts. The same core customers are then charged for all the services that they use. This core funding covers almost half the costs of the Met Office. Non-core customers are simply charged for services used. Charges are calculated at marginal cost plus an element for the core costs. This obviates any accusation that the public sector is subsidising private sector usage. The core customers are charged using an old existing formula. The more risk the Met Office carries, the greater the profit it tries to take. The core customers agree to the core programme of Met Office work collectively. The only way the core customers can reduce costs is to persuade the other core customers to reduce the programme. Customers must give three years notice to withdraw from the core programme. The Met Office performance indicator of ‘profitability’ is to obtain a return on capital employed of about 10–11 per cent – about £25 m. Sales to the private sector contribute towards achieving this return. In recent times the portfolio of commercial activity carried out by the Met Office has broadened. Commercial services are provided to all areas of commerce, industry and the media. They include an independent television business unit, which produces the ‘Weather Channel’ in the UK and the Netherlands. Supermarkets are provided with information to link the volume of sales of particular products, such as beer or salads, with the commercial benefits being felt all the way down the supply chain. In 2001 the Met Office took a 49 per cent stake in a weather derivatives company called weatherXchange. Trading in weather derivatives is a hugely successful business in the US. For this business the Met Office makes data available from its weather centres to companies who want to hedge on bad weather affecting their business. This venture has not proven as successful as originally envisaged and this may be due to lack of initial investment. In order to move further into these newer areas of commercialisation the Met Office has to borrow money from the MoD, which may or may not be able or willing to assist. Borrowing from the markets is currently restricted under the trading fund status of Agency. In 2002 the Met Office relocated its headquarters from Bracknell to Exeter. The move was financed through a public–private partnership. In addition, for the first time ever, the Met Office has to lease its new supercomputers, at a cost of £27 m for three years, from the private sector. The Met Office exhibits many of the more interesting aspects of the GREs. It is, undoubtedly, an organisation deeply imbued with a public service ethos producing many services of a public good nature for which government acts as a proxy customer. At the same time, it is a vital science and technology service provider to government (principally the


armed forces). In addition, the Met Office provides many commercial and commercially-priced services direct to non-governmental users (such as supermarkets or farmers). The information that it produces is mostly derived from data provided free of charge as a result of public sector international collaborative arrangements. Thus the Met Office is locked into an international mutual (data) trading arrangement that would preclude wholesale commercial exploitation. As such, it is not hard to see why the Met Office, even under Conservative governments, was never a serious candidate for full-scale privatisation. At the same time, the investment restrictions that its agency status brings have required it to find novel methods, through public–private partnerships for instance, to meet its funding needs.

Centre for Environment, Fisheries and Aquaculture Science The Centre for Environment, Fisheries and Aquaculture Science (CEFAS) is a scientific research and advisory centre for fisheries management and environmental protection. It is an agency of the Department of the Environment, Food and Rural Affairs, formerly the Ministry for Agriculture, Fisheries and Food. The origins of CEFAS date back as far as 1902. In 1997 the Directorate of Fisheries Research was reformed and became the executive agency CEFAS. CEFAS provides contract research, consultancy, advice and training in fisheries science and management, marine environmental protection, aquaculture and fish and shellfish disease and hygiene, to both public and private sector clients. Staff at CEFAS also engage in policy formulation and policy development at national and European levels. The agency employs over 550 staff at four sites around the UK and has an annual turnover of around £30 m. It has three main coastal laboratories, Lowestoft, Burnham and Weymouth and two research vessels. In 1995 the Weymouth centre benefited from a new £12.5 m laboratory. The laboratory management sensed that the organisation would be turned into an agency and used this as an argument to win the funding for the new building. The new facilities are capable of competing effectively for commercial work. In the years since agency status was granted, CEFAS staff have increased quite markedly. In 1997–98, CEFAS had 423 staff and by 2000–01 this had risen to 537, of whom 75 per cent are scientists. This growth in staffing is not reflected in a growth in commercial activities – non-UK government income increased from a 7 per cent share (£1.5 m) in 1997–98 to just 9.5 per cent in 2000–01 (£2.5 m). UK government income increased from £21.5 to £26.5 m over the corresponding period.


In fact, the introduction of the European Single Market had significant implications for the management of fish disease control in the UK. Recent rises in the number of staff are in part attributable to UK entry into the single market and the consequent introduction of free trade in live fish for the first time since 1937. Thus, CEFAS’ growth is attributable entirely to its governmental regulatory function with regard to fish disease. Government was and remains by far the largest customer of CEFAS and this is a situation that is unlikely to alter (CEFAS annual report and accounts 1997–98; 2000–01). There is resistance by both the parent department and the laboratory to allow commercial pressures to undermine the strong public service culture of CEFAS. The reluctance to embrace privatisation by MAFF (now DEFRA) was evident throughout successive Conservative governments. It was one of the few government departments to successfully resist the trend. In recent years, the department has aligned itself increasingly less with industry, offering it less support, especially financial. The role of the new DEFRA, established in the aftermath of the 2001 foot and mouth crisis (when MAFF was roundly criticised for being only concerned with commercial interests of farmers and those in the food supply chain), has been defined much more in terms of public health and environmental issues. This may shed light on why CEFAS has been retained as an executive agency and not been pushed more forcefully towards privatisation.

5 Some conclusions In this chapter we have explored scientific organisational change in the context of GREs under NPM in the UK. It is evident that, prior to the start of reform, the laboratories all enjoyed a common organisational structure, regardless of their function or tasks. They also had in common, as science and technology service providers, a number of functional characteristics such as the cognitive nature of their work and the reliance of government on their confidential advice. Despite this commonality, the more prosaic characteristics of their work differed markedly. Some were cutting edge research establishments (such as DERA) whilst others largely conducted routine testing (such as LGC). Some served government principally or solely, giving it confidential and reliable advice (such as CEFAS) whilst others served the public, either directly or with government acting as a proxy customer


(such as NPL). Some were deeply embedded in international public sector networks (such as the Met Office), others were much more self-contained (such as TRL). The imperative of NPM disrupted the homogeneity of the structures that defined these organisations. The new forms of organisation brought real, deep and lasting organisational change because they embodied radical and fundamental alterations to the concept of what the public sector was. The shift to agency status both liberated these laboratories, for instance in terms of the ability to define pay levels, and made them subject to much increased accountability and control through mechanisms such as contracting and performance indicators. Similarly, privatisation did not just change the ownership of the laboratories but also the governance and accountability regimes as well. Privatisation brought about cultural change in organisations as they realigned their missions to suit the changed circumstances. The diversity of organisational outcomes that resulted from the most intensive period of NPM reform is marked. So complex and indeed ‘messy’ is the range of outcomes that we can only suggest the factors that contributed to such diversity. First of all, it is clear that the nature of the work done was a critical factor in the trajectory of organisational form. Whilst the creation of agencies was relatively straightforward (and in most instances welcomed by the GREs themselves), privatisation represented a quantum change in the fundamental nature of organisations. This should not be surprising – for it was this level of change that was so earnestly sought by successive Conservative governments. However, what became apparent even to Tories during this period is that some organisations simply could not be privatised. This was because the fundamental nature of the ‘business’ – what they did and whom they served was not amenable to this. Thus the Met Office and DERA stayed in public hands. Where businesses were squashed into the private sector box this did, in some instances, result in a real transformation of their core identities – as in the case of BRE. Second, we do not underestimate the role played by prominent politicians and laboratory staff, nor the importance where it occurred of institutional resistance. The old MAFF proved itself remarkably adept at avoiding the privatisation issue whilst Michael Heseltine was a major architect of much reform across many GREs. This in a sense is the reality of supposedly ‘rational’ managerialist reform processes such as NPM – they ultimately rely on humans to implement them or not. Resistance takes many forms, and some GREs seized the opportunities offered by NPM reform to secure significant advantages either for the


incumbent organisational leaders (in the form of management buyouts) or for the organisation (as in the case of CEFAS’ new building). Third, in the final analysis, with regard to some GREs there was simply not a suitable opportunity to privatise. Sometimes, where there was no buyer, organisational change was affected by paying groups to take laboratories away – such as with LGC or NEL. Conversely, sometimes the costs were simply too high – as in the case with pension funds. The impact of these diverse outcomes is an even more complex issue to judge, and not a direct focus of this study. Most GREs saw positive outcomes in terms of the shift to agency status. They felt that it had given the organisations focus and purpose together with greater managerial autonomy to get their particular, often unique, job done away from the strict confines of civil service structures. Privatisation outcomes were more problematic. Our observation is that privatisation did indeed lead to a shift away from the public service ethos (even though in all cases the government remained a major customer). Moreover, there was a loss of public accountability for which government contracting mechanisms somehow failed to compensate. At this point in time, it is unclear what the long-term effects on investment of these reforms are likely to be. Nor is it possible to reliably discern whether or not there has been any identifiable impact on the quality of science and technology service provision to government. We would only suggest that the continuing strong reliance of some Whitehall customers on privatised firms implies they have little scope to ‘exit’ from such relationships and one is left wondering about the means by which they are able to exercise ‘voice’.

5 Science and Markets

1 Introduction In Chapter 3 we discussed how privatisation to the maximum extent feasible and marketisation/commercialisation of the remaining public sector were themes central to NPM in the UK from 1979 to 1997. These themes have not been attenuated under subsequent Labour governments. In Chapter 4 we explored how NPM had prompted the development of new organisational forms for science and technology providers. But, as we explained in Chapter 1, change in science was characterised not just by organisational reform but also new visions of what ‘science’ was. In this chapter we will explicate what these new visions were and how they were synergistically related to and underpinning of policydriven organisational change during this period. In Chapter 6, which follows, we demonstrate how new organisational forms and new visions of science have come together to generate new scientific knowledge production processes. At the heart of NPM in the UK lies a belief that markets constitute the optimal form of any sort of activity or organisation. Where service and other product provision cannot be located in the private sector, then public sector providers must be ‘marketised’ – that is, emulate private markets insofar as is possible. Thus, NPM was not just about organisational transformation but necessitated a ‘re-visioning’ of how society, both in part and in whole, could be and should be optimally organised. It follows from this that if science was to be successfully subject to NPM then it too would have to be re-visioned as an activity most suitably organised along free market lines, whether it was situated in the private sector or not. Moreover, that new market-based vision of science would have in some way to be made real; that is, embodied and embedded in 109


the organisation of science and its functioning and operation. To put it briefly, the hegemonic vision of science would have to be changed from the academic or Mertonian to the market-based or commodified. Achieving a transformation to a commodified vision of science involved the real development of a market for science and technology service providers. Markets require two basic things – a range of customers and a range of suppliers. Government, in creating a market for science and technology service provision therefore had to achieve a shift in two key regards. First, the government as customer had to seek, through processes of competitive tendering, alternate suppliers for goods and services outside of its own in-house capacities. Second, government as supplier had to be compelled to find a wider customer base. This can be achieved by: privatisation (thereby breaking special links with government); processes of competitive tendering; and performance targets aimed at requiring government organisations to achieve certain levels of non-governmental work in order to prove competitivity and efficiency. The purpose of this chapter is to describe, theorise and evaluate the attempts made to change the vision of government science and technology service provision to a market-oriented one. In doing so we aim to explore the feasibility of the development of such a marketised vision of science and technology and to draw attention to the particular barriers to change that might be encountered here. As ever, the changes that took place with regard to the provision of science and technology services must be and are set within the broader context of public administration and management. By 1945, a widespread perception of the failure of market mechanisms to produce optimum social welfare outcomes across a wide range of socio-economic activities prompted an expansion in the size and range of state activities in the Western world. States increasingly intervened to adjust for market inefficiencies in the production and allocation of goods and services and to correct market dysfunctionalities through increased regulation. Science and technology had of course long enjoyed state patronage. After 1945, the British state considerably widened the range of socio-economic activities it undertook to include health, education and social welfare. However, as we described in Chapter 2, science and technology continued to enjoy a somewhat privileged position; with little real control over work undertaken, compared with these new additions to the state’s portfolio. This general expansion of the role of the state was followed some thirty years later by allegations of state failure. Some commentators

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argued that states had grown too large, unwieldy and inflexible to provide goods and services efficiently and that regulation had an insufficiently light touch to ensure that there was no undue interference with market mechanisms. Amongst right wing ideologues in particular, this prompted a renewed espousal of the virtues of markets and an assertion that states should be ‘rolled back’ to the minimum possible size (see e.g. Hayek, 1982). Such thinkers argued that everything that could be done in the private sector should be done there because, ipso facto, markets were more efficient at producing optimal outcomes. Even among the less libertarian, there was a growing acknowledgement that market deficiencies did not necessarily mean that the state was always the most suitable vehicle for taking direct responsibility for the production and allocation of goods and services. Amongst New Labour from the mid-1990s, there was a belief that a ‘Third Way’ might be possible: a reformed public sector utilising markets and market principles where appropriate (Giddens, 1998). NPM, as described in Chapter 3, promised solutions to such perceived problems. In the UK, NPM facilitated the commitment of successive Conservative governments to privatisation where possible and to ensuring that the remaining public sector emulated so-called free markets in order to achieve improvements in economy, efficiency and effectiveness. Thus, NPM was to play an important role in the downsizing of the state and the (re)assertion of market principles. Science and technology was to be eventually caught up in this reform process: new market-based visions of the state and its activities spread to science and technology by virtue of the latter’s positioning within the former. This re-visioning of science paid scant attention to the traditional Mertonian model of science (Baskaran and Boden, 2004). The fact that science and technology was one of the last areas of government sponsored activity to be subject to NPM and the diversity of outcomes already noted in Chapter 4 suggests the persistence of the Mertonian vision of science and its institutional embeddedness. In this chapter we will explain that the persisting resistance of science and technology to marketisation was the result not just of alternative and competing visions but also because of the inherent economic characteristics of Mertonian science as an activity. Section 2, the next section, examines theoretical explanations of market failure and relates these to justifications for state provided science and technology services. Section 3 looks at state failure theories, highlighting the specific position of science and technology service providers. Section 4 presents a model of marketisation and privatisation.


Section 5 looks at the increasing marketisation to which these organisations were subject throughout the latter part of the 1980s and into the 1990s. The extent to which this proved feasible is evaluated and we also focus on the extent to which finding specific organisational ways of overcoming barriers to change has resulted in diversity in NPM outcomes. We conclude that the diversity is indeed a product of finding solutions to these barriers. In Chapter 6, which follows, we analyse the customer–contractor relationships that arose as a result of this reform process, thereby demonstrating the newly emerging knowledge production processes in science.

2 Market failure and states As demonstrated in Chapter 2, the prevailing vision of the role and nature of science and technology service provision had been Mertonian rather than market-based. Some examination of market failure theories provides a useful explanation as to why it made rational sense for such work to be part of traditional public administration at that time. There are five generally cited reasons why markets might be seen to have allocative or productive inefficiencies with regard to goods and services (Walsh, 1995). First, some goods and services may have the character of public goods. This means that their value is not diminished by use and it may also be difficult to prevent usage. The general utility and availability of public goods may mean that no private interest is willing to undertake their provision in the quantity required because of free riding by other users. It might be argued that the state, as a unitary decision-maker, might be best placed to determine the true level of demand for such goods and services and make arrangements for their proper provision. True public goods are rare, but a large number of goods and services have public good elements. Public street lighting and defence of a country represent fairly pure public goods. The best examples of the largely impure public goods produced by science and technology providers can be found where the state acts as a proxy customer for society as a whole. For instance, research to improve road safety does not diminish in social value according to usage (in fact, quite the reverse) and it is difficult to stop people gaining the benefits through improved roads and so on. The second reason for market failure is that some goods and services are naturally monopolistic. Natural monopolies cannot be prevented (but can be regulated) and cause market failure because they prevent the


entry of competing suppliers. Natural monopolies commonly arise because of the capital expenses associated with supply: the provision of domestic water supplies is a classic example here. Some natural monopolies may arise as a result of the domination of sources of expertise, or limited market opportunities. In the area of science and technology service provision, metrology provides a good example of a natural monopoly. The purpose of metrology is to provide measurement standards that are as widely accepted as is congruent with economic and other social activity. So, a doctor in Birmingham will require the certainty that the ultrasound equipment they are using has the same calibration as the equipment they were trained on in Glasgow. This implies a natural monopoly in the supply of ultimate reference standards, or metrology, as a practical science, would disintegrate into chaos. Given the social and economic value of metrology, and the implied natural monopoly, the good sense of having a single responsible body to supply ultimate reference standards is selfevident. Moreover, such a body must act in a socially optimal way if the full benefits of metrology are to be enjoyed and competivity and public welfare not compromised. The imperatives placed on such a body mean that, if extensive regulation is to be avoided, it is best kept in public hands. The argument for state control is even greater when the social and economic arena of the metrological system widens. Thus, as the UK has entered increasingly into the European market place, there has been a harmonisation of metrological work across the European Community (EU) through organisations such as EUROMET and the European Cooperation for Accreditation body, with individual national bodies taking responsibility for specific areas of metrology. Such co-ordination and cooperation might be difficult to achieve if the bodies were competing commercial private sector organisations. A third dysfunctionality is that there may be external costs or benefits, known as externalities, in decision making that may lead to sub-optimal decision outcomes. For instance, a production decision that requires choice between a (more expensive) non-polluting and a (cheaper) polluting process may vary in outcome according to whether or not there is a charge levied on the polluter to compensate society for the pollution caused. If there is not, then the costs of pollution are external to the decision and may well not be factored into commercial decision making. The argument for state intervention is that the state can force the factoring in of such externalities (e.g. by levying pollution charges), taking a broad view beyond that of narrow individual or organisational interests. Building research is an interesting case in point here.


The BRE was first established because of poor standards in construction. Part of the reason for this was that individual building firms could not individually bear the costs of research, which could be rapidly copied by competitors, and did not bear the social costs of poor housing. This dilemma was resolved by the State intervening to provide the necessary research capacity for the benefit of the entire industry and society as a whole. Fourth, some goods may be merit goods: these are goods which it is a good thing for the public to have access to, but which might enjoy only limited take-up because of lack of understanding and interest if they were only available through a market. Compulsory education is a good example of a merit good. If uptake of such goods was left to the private markets then people might, arguably misguidedly, decide to spend their money elsewhere. Certain meteorology services are examples of such merit goods. The Met Office provides severe weather warnings free of charge because of the obvious social and economic benefits implied. Because of the infrequency of such warnings, it is hard to conceive of a situation where the public would subscribe to such a service in the same way in which, say, they might utilise a premium rate telephone weather information service if they were planning a sailing trip. Fifth, markets may not be perfectly efficient in that there may be information asymmetries between the customer and the contractor. Contractors may be profit-motivated to provide more of particular goods or services than is essential or desirable and the customer may be unable to discern an efficient level of utilisation. This may be particularly problematic where the provider has specialist expertise. Defence technology represents a good example of information asymmetry problems. Weapons systems utilise advanced technologies. The infrequency with which the customer assesses true demand or quality (i.e. by using them in a combat situation) creates information asymmetries between the state (who may be uncertain of demand or quality) and the suppliers (who have specialist expertise that may well be commercially confidential). This can be remedied, to some extent, by building up a significant in-house technical capacity in organisations such as DERA. Finally, all but the most extreme of libertarians, would agree that even the most optimal of real markets require some level of regulation to protect public and individual interests – remedies not always being available through the law of tort. This is a further justification for state intervention. A good example here in the science and technology area is in health and safety. Organisations might find it economically optimal to let their workers endure dangerous conditions at work and to pay


compensation rather than institute costly health and safety regimes. However, this is not socially acceptable. Thus, there is a social and moral obligation on the state to regulate conditions. Some science and technology service provision is therefore in support of this regulatory function. A case in point here is the Health and Safety Laboratories of the Health and Safety Executive. Because of the key support, forensic and judicial role played by these laboratories in support of a regulatory function it might be deemed inappropriate to procure such services from the private sector, where conflicts of interest might arise. It can be argued, therefore, that market failure arguments represent a strong justification for the carrying out of at least some science and technology services in the public sector rather than in the private. There are, of course, other reasons why these activities might be better placed in the public sector – such as the need for sensitive unimpeachable policy advice, but these issues are considered elsewhere in this book. The long history of these laboratories points to the early recognition (well before the growth of states after 1945) that their activities could not originally have been adequately undertaken in the private market. Not only the nature of the function, but also the limited nature of available forms of public management and private suppliers will have made state intervention imperative at the time the laboratories were established. However, solutions that appeared appropriate some years ago were being seen as less appropriate by the 1980s in the UK.

3 Perceptions of state failure As states grew in the post-war world so perceptions and accusations of inefficiencies mounted, often from right wing thinkers. One strand of state failure theorists argue from a public choice perspective (e.g. see Niskanen, 1991). This perspective rests ultimately on the premise that individuals will behave as rational self-interested individuals and that, as such, state activities are doomed to inefficiency and failure because there is an absence of market discipline to ensure socially optimal decisions are made by rational self-interested individuals. Thus, it is argued, politicians will logroll votes and bureaucrats will empire build, leading inexorably to inefficiencies. Because of the initial assumptions in public choice theory, which are not verifiable, the theory has serious intellectual weaknesses. Nevertheless, it has been utilised by many politicians of the right as a means of implementing major governmental reform (see for e.g. Froud et al., 1998).


A second strand of state failure theory, epitomised by Hayek (1982), asserts that states suffer from an inherent information deficit, which will always prevent them from making efficient well-informed decisions. Hayek maintained that states could never achieve the efficiencies of markets because of these information failures. There are more moderate state failure arguments that have merit and which also address the issue of the information flows essential to the efficient functioning of markets. These argue that states suffer from the same problems of imperfect information as large private organisations do. That is, it is difficult for states to make efficient decisions because they work on insufficient information. Difficulties in measuring outputs and indeed outcomes are identified as particularly problematic here and may be exacerbated by imprecision in policy definition designed to avoid accountability. Performance measures in the public sector are notoriously difficult to construct and there is no equivalent of the bottom-line profit figures used in the commercial arena (although, of course, such measures are themselves problematic and ambiguous). There are few external measures available to states to help them to gauge performance equivalent to share price movements in the private markets. There are other issues that might make the public sector particularly predisposed to inefficiencies. Traditionally the public sector has offered few incentives to individual employees to increase efficiencies and effectiveness because they do not share in the rewards. Fixed salary scales typical of bureaucracies make it difficult to build in incentive payments based on organisational performance, even if this could be measured with certainty. Resource utilisation within states may also be inefficient because of institutional factors. Wildavsky (1964) argued that budgets become entrenched as a result of bureaucratic strengths and that they only subsequently alter at the margins, making it difficult to reform underperforming areas and to abandon unsuccessful programmes. The introduction of resource accounting into the UK public sector represents an attempt to force government to critically address the efficient use of resources as part of the budgeting process. Of course, this critique is predicated on the implicit (and almost inevitably fallacious) assumption that budgetary processes within the private sector are rational and objective. It might be seen from the above that states may, in theory at least, be subject to some failures in efficiency and effectiveness. This does not mean that they are predestined to fail, merely that there is a potentiality


there. The origins of NPM approaches can perhaps be discerned from these diverse theories of state failure. In the UK the right wing ideologues of successive Conservative governments took the view that states were inherently less efficient than the private market and that privatisation was therefore always the most desirable option. Only if this option failed to prove practicable would some form of reformed and marketised public sector be deemed acceptable. In other states, most notably the Nordic countries, there was a similar acceptance of the desirability of public sector reform, without the predisposition to privatisation wherever possible. Both strands of NPM reform have their origins in the recognition of the potentiality for state failure. In the UK, the ideological commitment was founded on the inherent inferiority of the state as opposed to the private sphere, whilst in other countries there was a greater desire to use NPM to improve the functioning of states. Objective evidence that the unreformed science and technology service providers in the UK were ‘failing’ in the sense of embodying large-scale inefficiencies is largely missing. The argument for public sector reform becomes tautological at this point. Arguments for NPM reform rest partly upon assertions that states have an information deficit that leads to inefficiencies. That same information, of which there is a deficit, is also used to measure efficiency. Moreover, the measures are predominantly of a private market commercial type. Therefore, in the terms of NPM, it is impossible to judge whether there is inefficiency at the outset of reform. Success or failure under NPM is ultimately measured in self-referential terms. It might therefore be argued that the improvement in information flows associated with privatisation and marketisation are in fact about developing alternative criteria for evaluation and are inherently socially constructing. For instance, a laboratory may lack information about the ‘true cost’ of its services. It may be turned into an executive agency and as a consequence forced to institute a new system of management accounting that ‘accurately measures’ costs so that these can be driven down. Costs, as measured by the new system, are reduced and this is credited to the marketisation/ commercialisation attendant to agency status. An absence of measures of outcome and output in the traditional UK State made it almost impossible to gauge the efficiency and effectiveness of existing operations and hence the desirability or necessity of reform. The argument for reform becomes, in such circumstances, essentially normative. Pro-reformers would argue that, given the potential for failure and the inherent inferiority of the public sector vis-à-vis the private market, it is sensible to organise activities on the ‘best’ possible lines in


order to minimise risk. The critical task is to evaluate whether the reforms really do constitute an improvement (however defined) although no objective comparators will be available. In the UK under successive Conservative governments arguments for privatisation or marketisation quite often did not rest on any analysis of the relative merits of either form of management and ownership, but more on an ideological commitment that the private sector was inherently desirable over the public. At the heart of such commitment lie normative assumptions grounded in liberal market economics. Certainly such an approach dominated the thinking of both Thatcher and Heseltine, the latter being a driving force in the reform of much of the science and technology service sector. Therefore the successive reviews detailed in Chapter 3 tended to concentrate on finding those institutions which could be privatised, not those which should be. The virtues of privatisation were taken as a foregone conclusion, and the advantages of marketisation were deemed to be self-evident. Reports such as the Levene–Stewart Review (1993) were more about evaluating the extent to which privatisation and marketisation had been achieved than about assessing their suitability as management–ownership practices. This lack of critical debate evidences the crisis in public administration thinking detailed by Rhodes (1995). What we can do here is to review, ex post facto, the extent to which the laboratories that we studied were organised along the lines criticised by state failure advocates. We can also report the extent to which those working within the system see the reforms as an improvement and detail what the greatest changes have been. Reliance on accounts by serving civil servants and other laboratory staff may not be valid: some have only limited experience of the old regime and, in many instances, the process of reform produced a rush of early retirements and other resignations by staff anxious not to be part of the reform process. Before the application of NPM, public sector science and technology service providers may well be seen as exemplars of the state failure thesis. They were headed by career bureaucrats (albeit usually of a scientific or technological background) who did not share in a directly personal way in the risks and rewards of the organisation. The signifiers of influence and measures of success of these people may have been the resources accreted for the purposes of research. Many had been established for considerable periods of time and not subject to periodic review as to their purpose and continuing utility. In fact, in the manner described by Wildavsky (1964), their budgets had become largely entrenched and were not subject to rigorous programmatic review.


When a critical gaze was turned on these laboratories some suffered serious fates: for instance protests over the sale of the site of the Warren Springs Laboratory led to a review the conclusion of which was the closure of the very laboratory itself. There was no notion of the ‘customer’ in any real, economic sense. One policy maker in a Whitehall department described to us how the departmental laboratory would be given a large sum of money each year. It would go off and do largely as it determined (with little effective control from the department) and then produce reports that would often be of such limited utility that would usually just be shelved. In our interviews, civil servants in the laboratories consistently emphasised that the transfer of budgets to newly designated departmental customers and the ending of the de facto block grant system had been the single most influential factor in causing the laboratory to think critically about their function and to focus on the delivery of services of maximum utility to their customers. There was then a near complete absence of what could be recognised as any market mechanisms. There were no formal contracts, very little competitive bidding for work, money usually came in block grants and there was little or no explicit measurement of performance. Whitehall departments were, in the main, locked into a monogamous relationship with their suppliers of science and technology services. This is not to say that the organisations were necessarily failing. As we shall discuss in Chapter 6, there was a set of deeply embedded long-standing relationships between the laboratories and the Whitehall departments that sponsored them which may have provided their own efficiencies. In this sense it is not therefore surprising that the laboratories had a reforming eye turned on them. Indeed, perhaps what is most surprising is that it came so late in the day of the reform process. We asked a number of departmental civil servants why the reform of the science and technology service providers happened relatively late. The answer was consistently stated to be one of simple priorities: science and technology is a relatively small budget area and, as such, had to wait its turn. This prioritisation on the basis of budget size may not be as rational as it first appears when one considers the relative importance of science and technology activities to Britain’s underlying competitivity and economic efficiency. What is certain is that the reform process did not start because of evidence of inefficient practice, but rather as a result of the acceptance of a normative viewpoint that public sector organisations run in this way must inevitably be inefficient. Our discussions with those involved in the reform process indicate that almost overwhelmingly there is an


acceptance that, with the benefit of hindsight, the application of NPM has been of benefit in terms of what NPM seeks to achieve (i.e. efficiency gains) but that the move to privatisation was not essential and largely politically motivated. It was constantly emphasised to us that management practice was of greater relevance than issues of ownership. Measures of change are all ex post – on the basis of no comparators the reformed organisations were deemed ‘improved’ because they now embodied marketised practices that were not evident before.

4 A model of marketisation and privatisation We turn now to consideration of the ways and means by which government sought to actualise this new vision of science as a marketised activity. Government is both a provider and a consumer of science and technology services – a supplier and a customer. This dual role, which varies in mix across the range of services, is a significant factor in shaping the sector. The supplier function may be to the host department, other parts of government, external customers or a mix of all three. In acting as a customer, government may be a real customer (i.e. procuring services to support its own functions), a proxy customer acting in a public welfare function or a customer sponsoring curiositybased research. Reform along market lines suggests a number of shifts in the basic operating parameters of Government. We set out here a model that illustrates the transitions that must be made. A model for markets Any market requires both customers and suppliers, and with regard to science and technology, government may be both simultaneously. Markets exhibit greater or lesser amounts of monopoly and monopsony. In the supply and consumption of science and technology services the UK government exhibits varying amounts of monopolistic and monopsonistic control. We argue below that the relative extents of (sometimes natural) monopoly and monopsony may be critical in determining the extent to which a service can be privatised or marketised. Figure 5.1 models the supply of and demand for science and technology services in monopolistic/monopsonistic and openly competitive scenarios. Conservative government policy dictated that Box A was the worst case scenario for the public sector and Box D the best. In Box B government is a heavy consumer (therefore breaching the imperative to minimise what the state does) but buys in a lot of the work from the

Science and Markets 121 High degree of government supply monopoly

Government >50% supplier by value

A

High level of government customer monopoly

Government >50% customer by value

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