Definitions of R & D : report with evidence.

  • Great Britain. Parliament. House of Lords. Science and Technology Committee.
Date:
1990
Catalogue details

Licence: Open Government Licence

Credit: Definitions of R & D : report with evidence. Source: Wellcome Collection.

    11/148 (page 9)
    seminars. Perhaps, since different sectors experience different problems, there would have to be different sets of guidelines, or at least different examples, for the various sectors. Since the aim is clear—to make the definitions less dependent on who exactly fills in the relevant forms and in which organisation—examples should be as diverse or sector-specific as possible. 1.35 The DTI and the Central Statistical Office can also contribute a lot to this process. There is general concern in industry about the lack of feedback from the DTI: as one company said about the DTI’s industrial survey, it is a bit of a ““black-hole exercise”’ in which companies are never quite sure whether they are providing the DTI with the right information or not. Other companies shared the feeling that DTI tends to accept the figures offered without question. DTI should at least mount a follow-up exercise to its survey to get a feel for how good the data are, how they tally with disclosures in company accounts, and how they could be improved. The Central Statistical Office, which has taken over compilation of the Annual Review from the DTI, should adopt a more questioning attitude to departmental returns than the DTI, which evidently took returns largely at their face value. 1.36 Even with these precautions, subjectivity will still remain. It remains to a significant extent, for instance, in Canada where a substantial team of specialists has been recruited to assess R&D claims for tax purposes against a set of common and agreed definitions. In short, subjectivity is something to be lived with, while taking such steps as are cost effective to reduce its impact. An effort on the Canadian scale could hardly be justified in the UK unless there were comparable tax implications. Defence R&D 1.37 One sector in which an urgent change is called for, above all because of the magnitude of the sums involved, is defence R&D. It has been alleged by the SBAC (QQ 97-127) and the CBI (Q 172) in evidence, and by many others elsewhere, that MoD definitions of R&D are not the same as the civil sector’s, that they do not conform to the Frascati definitions, and that not more than half the MoD’s annual expenditure of £2.3bn on R&D supports “true R&D” as generally understood. 1.38 The MoD says of its figures that they are “broadly in line with the Frascati definitions. We do this by reporting on the blocks of expenditure from our accounting systems ... Since these systems were created with the needs of financial accounting and accountability in mind questions of classification arise in certain areas. The extent of these is currently being studied”’ (p 80). In oral evidence they rejected the criticisms of their figures on the grounds that their in-house studies do not yet provide a sufficient statistical basis for valid conclusions to be drawn (QQ 225-7). Nothing in their evidence gave any sign that the matter was regarded as urgent or that the concern expressed by others was shared by the MoD. 1.39 The Committee find the MoD’s position very unconvincing. This does not imply any criticism of what MoD spends—there are doubtless good reasons for the expenditure and the money has been voted by Parliament for that purpose. But the Committee feel certain that much of what is now classed as defence R&D is not R&D at all on any reasonable interpretation of the Frascati definitions. When defence R&D appears to be about 50% of the UK total spending on R&D, that matters a great deal. 1.40 The major distortion lies within MoD’s figures for development, because MoD include in that all activities, whether innovative or not, which precede actual production. The MoD fairly point out that Frascati does not deal with defence-specific items, and that very few other departments have big procurement budgets. But with reference to development contracts “companies from several different sectors stated that almost all defence contract work is normally counted as R&D by the MoD, although much of this is essentially product development involving ‘no appreciable element of novelty’”’ (p 69). Strenuous efforts should be made, as a matter of urgency, to get the figures right. 1.41 The ACOST report on Defence R&D has recommended that MoD should publish its R&D data according to the research and development definitions of the Accounting Standards Committee in order to facilitate comparison with private sector information. The Committee fully support the intention behind this recommendation but point out that SSAP13 does not require differentiation between research and development. MoD must continue to differentiate, and must follow the Frascati definitions so that international comparison is feasible.