Q51           Chair: Mr Field, at a spending review point, you have bids from Departments saying, “We have done some amazing work here, there and everywhere on innovation for net zero.” There is a value in achieving net zero, but how are you assessing the value for money of certain approaches? How does that impact on whether you are going to continue to fund them?

Steve Field: Taking the last spending review as an example, the process of establishing the framework, as I say, was embedded in the net zero strategy. The judgment was made at that time that £1 billion to £2 billion a year was the right kind of level of R&D expenditure in this area. That was essentially benchmarked against comparator countries, which was how we took that view.

In trying to assess, this is the question: when we come to the next spending review, what are we trying to assess? We need to make good judgments about where we put our money, because we want the money to yield benefits for our net zero transition. We also want to make sure that it supports our economy.

Now, these are relatively small amounts of money in the context of a £2 trillion economy, and there is not a huge amount of value in trying to work out the ultimate GDP impact, because it would probably be pretty small. What you want to do is to collect the right information that supports, with expert advice from the board, a sensible allocation in future. It is the Government’s ambition to continue to invest significantly in R&D.

Q52           Chair: We see optimism bias all the time, and that is on big projects where you can count things and see things being delivered and whether milestones are being met. It is much more esoteric with early research. A fantastic group of academics could be beavering away on something, and they might find a tiny thing that they did not expect to find and not the thing that they did, or the other way round.

In the Treasury, you have to decide which bits to fund when Departments bid in on these things, so what kind of questions are you asking them? Are you relying on the expertise of the Departments? Or do you have people in the Treasury who can really pin it down?

Steve Field: When it comes to choosing individual bits of research to fund, we are relying on our Departments and on the board. The experts know which are the cutting-edge things that we should be investing our money in.

As an overall judgment, the Treasury has taken the position that R&D expenditure is good for growth. There are lots of economic studies that tell you that is the case. Higher levels of R&D spend are associated with higher levels of productivity and growth, and that is why we have been increasing, overall, the amount of money we put in.

Q53           Chair: You are looking at it at that macro level.

Steve Field: Yes.

Chair: That is helpful to know.

Jeremy Pocklington: It is worth emphasising the importance of the Net Zero Innovation Board in guiding these decisions. That changed the approach in the last spending review. It rebalanced the expenditure more towards demonstration from research and development, and increased the focus on transport as a result, based on the advice from the Government’s chief scientist. Another feature of this is that it is very much science-led to support the policy mission.

Q54           Chair: I will come back to that in a moment. I just wanted to go back, picking up on something that Sir Geoffrey was asking earlier.

Ms Munby, there are 115 funding programmes. In the Report the NAO touches on the new innovation hubs and trying to get businesses to come in. As the NAO highlights, there were stakeholders we interviewed who told us that businesses have found it difficult to navigate all the net zero research and innovation sources of public sector funding. We look at this across the piece and not just for net zero. It is quite complex, if you are an outsider to Whitehall, to understand where on earth you go to get this. In your answer to Sir Geoffrey, you seemed to indicate that the hub approach was going to be solving this. Have you thought about trying to narrow down the total number of funds available?

Sarah Munby: That is something we always have to look at. I am not going to sit here and say this is exactly the perfect number of funds, but the idea that it should be five is also wrong.

Q55           Chair: It is more than complexity, is it not? If you are a business, a researcher or someone trying to bid for money and you are looking at this, you are saying that the hub will get you in there and direct you to one of these 115. I am not asking you to give a precise number, but 115 does seem like quite a lot to navigate.

Sarah Munby: Yes, although you could argue that this is a research programme covering the transformation of every single sector across our entire economy on a generation-long timescale. This is a huge topic, and you need quite different programmes for early-stage academic research in blue-sky topics. That does not just need a different programme; it needs different skills and capabilities in the people running it versus some of the things that Jeremy is doing on really specific technologies that we need to deliver right now, where we are partnering with major industrial players. You can see across that spectrum that it is not that hard to start adding up to quite big numbers.

Q56           Chair: I get that. Going back to the point that Mr Pocklington was just raising about demonstration models versus research and where you balance it, the board made these decisions about this ratio back in 2021. Figure 9 and paragraph 2.18 refer to this. How flexible can you be on that? Obviously, you have the timetable of funding, so you cannot just shift completely within a funding round.

The Royal Society is one example, but there is quite a lot of evidence about businesses wanting to move from that incubator stage, if you like, to actual commercial investment. That is good for the economy but also practically delivers some of these net zero programmes, which is vital for the 2050 target.

Jeremy Pocklington: The funding has shifted in response to that advice. It shifted from approximately 40-45-15, in terms of percentages, to roughly a third, a third, a third in those three categories of research, development and demonstration. We have shifted our approach across the portfolio as a whole.

Q57           Chair: Was it reflecting the maturity of the portfolio or the pressure from businesses?

Jeremy Pocklington: It is reflecting where we can most add value. It is reflecting the best science advice where we can most add value with our money to bring in private sector investment to deliver net zero.

Sarah Munby: It is also reflecting a wider shift across the research and innovation system. It is almost a truism in policy circles to say that the UK is brilliant at doing research and not as good as it should be about commercialising it. That is why at the last SR, for example, Innovate UK’s funding was increased by over 60% on the previous SR, to try to make that shift.

Apologies, but I am just going to spend two minutes on something that is really important to land. It is always true that businesses will tell you they would like to have more research at the commercialisation end of the funnel, because that is the bit that benefits them today. It is right that we have made more of a shift to it.

Chair: To be fair, just to balance that, it benefits them today, but also if it works—

Sarah Munby: Yes, absolutely, and the shift is completely correct, but there is a reason why we invest in early-stage research as well. If we are looking at the next generation of problems, if we do not invest in that now, we will not be in a position to solve them then. That is why it is a balanced process. That is why the ratio is the way of thinking about it. It is never going to move to 0-100.

Chair: We have heard that the ratio has shifted. By now, we are getting to more of the later-stage projects and delivering on some of those.

Q58           Anne Marie Morris: Can we move on to how you are going to judge progress and success with all of this? There is not a lot of point doing it unless we get the outcomes that we have targeted. Specifically, we are looking at a carbon objective that we need to meet and an economic objective. How are you going to test each of these research areas and the work you are doing in each of them to see whether they are delivering those key outcomes about carbon and the economy that we have set?

Jeremy Pocklington: Should I start? I will perhaps bring in Dr Adikaari as well to give a little more detail. Of course, we will evaluate the programme. We have committed to do that, beginning in 2025. It will end in 2027.

Why will it take a while to fully evaluate this programme? Because many of these individual investments and projects will take time to evaluate properly. They are harder to measure the outcomes on. As we have discussed, they are multifaceted by their nature. At the early stages, it is often quite difficult to estimate the carbon savings that will be generated.

Yes, we will absolutely evaluate the outcomes, including the important areas that you have highlighted, but we have an ongoing process of review and deep dives, using both the Net Zero Innovation Board and the delivery board to monitor progress. For my Department’s own portfolio, we also have evaluation work and monitoring in place. Dr Adikaari and his team lead that.

Dr Adikaari: If you just take an example, the NAO Report identified 26 individual programmes for the Department for Energy Security and Net Zero. Individual programmes have their own near-term outcomes, and outputs that drive the outcomes. We have structured how we can evaluate all of them as a portfolio. That is what Mr Pocklington was highlighting in terms of running for longer after the full investment is made and the results come through.

We do that using a set of key performance indices. We evaluate the projects first, then the programmes and then the portfolio. It is quite a structured way of how the portfolio impact would come through, but that is not the only way we ensure that we get the best learning from the overall portfolio. That is the standard evaluation approach that we use.

However, we work with this large number of projects and ensure that we have regular, timely information coming back to the Departments. That is one of the main reasons why a large number of demonstration-type activities are driven by the individual Departments who own the policies. We do that because that helps us to ensure that the learning can be used to advance the policies that are advancing rapidly.

If you look at hydrogen or CCUS, it is quite pertinent that the rapid advance of science, and so innovation, is regularly fed back into the policy impact. In fact, of our key performance indices, the 10th is policy impact—understanding how much impact we have had from those learnings.

There is some near-term and very tangible work. One good example is the small modular reactor design and development. We have a very clear target of achieving generic design assessment step 2 approval by the regulator.

Q59           Chair: For those of us who are not engineers, Dr Adikaari, can you explain what step 2—or whatever it was—means in terms of what comes prior to actual delivery?

Dr Adikaari: Let me try again. The small modular reactor design and development project, which is led by Rolls-Royce SMR Ltd, is going through the Office for Nuclear Regulation and the Environment Agency’s regulation process. The generic design assessment is a three-step process, and step 2 is what we are in at the moment.

Q60           Chair: Yes, but how long is it from step 2 to deployment?

Dr Adikaari: The expectation is that if we deliver the outcome, which is a clear outcome, by the end of 2024, we have a very good possibility of having a first of its kind in the UK by the early 2030s. It is quite tangible. It needs quite a bit of work but, at the same time, there is a clear output and then an outcome associated with it.

Jeremy Pocklington: It is interesting because there is a link between the policy around commercialising deployment and the establishment of Great British Nuclear, which will be running a process for small modular reactors as well, with a process around down selection later in the year. We are providing a route forward. We will need to see what happens in the process as well, but that route to market is there as well, depending on progress.

Q61           Anne Marie Morris: Mr Pocklington, I suppose I am a bit concerned that you are not going to do the evaluation until 2025. It seems to me that we are already putting a shedload of money in. Right now, we absolutely need to be clear about how we are going to evaluate whether what we are doing is delivering on these two objectives. That is my first question.

Secondly, we need clarity about what is an output and what is an outcome. You are using the word “outcome” for things that most people would talk about as outputs. One of the criticisms that the NAO uses is that, while there are measurements in place, they are about outputs, not outcomes. I must admit that I have not yet heard anything to tell me that I am going to get the carbon reduction and the economic upturn that we are targeting.

Jeremy Pocklington: Those are very good points, Ms Morris. What Dr Adikaari and I are trying to communicate is that, although a formal, full evaluation will take place towards the end of the programme, there is ongoing evaluation and monitoring on a continuous basis through deep dives from the Net Zero Innovation Board and the Innovation Delivery Board, monitoring progress on an ongoing basis around these programmes.

Just to be very clear, it is not the case that we are sitting back and waiting for 2025. I know that is not what you were assuming, but that is not what we are doing. It is about an ongoing cycle of learning that feeds into our work. The same people who are overseeing the programme are providing advice and technical support to policy teams as we are developing and continuing to evolve policy around the delivery of net zero.

The issue around outputs versus outcomes is a good one. It is a good challenge that we should continue to strive to do as much as we can on. The reality of a lot of these individual projects, though, is that the most practical way to consider success is around the output and whether that is achieved.

If we are talking about small modular reactors, another related technology is advanced modular reactors. We have support for the next generation of reactors. They are further away from deployment and commercialisation than SMRs, but success means understanding whether they will operate. Will we be able to switch them on? Can we extract the heat? They run at a higher temperature. How could we use that heat? That will mean success for work in that area, rather than the total carbon saving that AMRs can contribute to achieving net zero.

Q62           Anne Marie Morris: Thank you, that is very helpful. We had a communication using WhatsApp, but when you are reading the question it is quite hard to work out what it says, so we land up with a paper chase.

I was listening to your answer. Even you would probably accept that while measuring outputs is, as you rightly say, a necessary part of the process, we are not yet there with outcomes, but I like to hear that you recognise this as important.

Let us turn to the Treasury, because it is absolutely key here. One of the things that all this has to drive is not just the carbon piece, but UK plc has to feel the win in terms of its economic position. How is the Treasury looking at this? How is it evaluating that success? How are you looking at that outcome in financial terms?

Steve Field: Again, when it comes to business cases for individual projects, there will be a Green Book assessment for those. They will look at the economic case and so on, but you do not try to work out what the benefit is of the individual project. You tend to look at the benefits of R&D for the economy as a whole, because the benefits from an individual project are going to be very uncertain, for all the reasons we have been discussing.

When it comes to the point at which we are monitoring and evaluating this, we can clearly get a sense of the economic benefits that those particular projects are generating, and there are a number of ways that you could look at that. It depends on what stage you are talking about, but there could be jobs supported, and you can look at wage premia. There are a number of ways that you can make some assessment of the economic benefits of particular projects. That is something we are going to do.

In the way that the criteria have been set up for the board, one of those criteria is to think about UK companies and support for UK companies. It is embedded within those criteria that they should be doing things that support the UK economy.

Q63           Anne Marie Morris: I hear what you say, and I appreciate that it is very difficult for any one project to be evaluated to see what individual impact it has, because you have a suite of R&D. That said, we have 115 pieces of work. This is the biggest piece of work that the UK Government are involved in. Surely there has to be, within Treasury, a desire to come up with a mechanism to look holistically at the impact of these 115 projects down these seven categories, to see whether it is driving what you are looking for, which is investment, more jobs and many other things that are dear to the heart of Treasury. What is the Treasury doing to take that higher-level, big-picture view? I am sure it would want to shout about it if we achieve it.

Steve Field: Again, that will all form part of the evaluation process for the individual projects. That will be aggregated ahead of the next spending review and, over time, we will look at the economic benefits in the round.

Sarah Munby: It is a nested process. If you are literally an individual research project within, let’s say, a programme that is run by UKRI, you have to justify yourself to that. UKRI is looking across its 60 programmes here and evaluating them. If some are not performing, they are not going to get repeated funding.

Then you are up to my departmental level where I am, with Treasury involvement, looking at the allocation of R&D spending to UKRI versus other levers. Then you are up to Treasury spending. Each piece of the puzzle needs to justify itself up to the level of the next layer, because otherwise Steve would be reviewing thousands of individual research applications, which cannot be a good plan.

Chair: I think we got that from previous answers.

Steve Field: As Mr Pocklington was saying earlier, success here is multifaceted. If we exclude bad ideas and that makes the transition more efficient and potentially cheaper because we are pursuing good ideas, that is a good thing for the economy as a whole.

Chair: We are clear that failure in this area is not necessarily failure. Some research does not work; knowing that early is a good thing.

Q64           Anne Marie Morris: Finally from me, all this is clearly very important to the public, because they are going to have to put their hands in their pockets. There is no such thing as money that belongs to the Government: it is all money that taxpayers have contributed. How are you going to report to them as to the success, in terms of both where we get to against the carbon objective and the state of the British economy?

Jeremy Pocklington: Ultimately, this needs to feed through into successive iterations of our overall net zero strategy. That is also where we regularly report on progress around our performance and delivery against the carbon budgets. Ultimately, at the top, most strategic level, that is going to be the key vehicle to provide that communication with the public and investors as to what our overall approach is and the delivery path towards net zero.

Q65           Anne Marie Morris: That sounds great if you are an investor but, for your average man or woman in the street, the carbon budget is not going to cut it. Are you going to do something a little more meaningful, given what you are asking everybody who resides in the UK to do to make this happen?

Jeremy Pocklington: That is a much wider question, really. The question about how we best influence and communicate to consumers is almost a topic in its own right.

Chair: We have been discussing this for well over a decade.

Jeremy Pocklington: How do we best engage consumers to drive decisions and behaviours? Yes, we can provide support, particularly to the vulnerable in society, but often it is best done by the Government creating market mechanisms so that the private sector is incentivised to deliver and engage with consumers in individual markets.