Select Committee on Science and Technology First Report


CHAPTER THREE: RESEARCH FUNDING (continued)

JOINT RESEARCH EQUIPMENT INITIATIVE

30. Nevertheless, there are ways in which Government initiatives can lever in private sector funding for research infrastructure. Some witnesses pointed to the success of the Joint Research Equipment Initiative (JREI) although we heard some reservations about the way it had initially been launched.[83] Under the JREI, first run in 1996, academics are invited to bid for funds, made available by the HEFCs and the Research Councils, for equipment for particular research projects provided that the money they bid for is at least matched by private sector funding and that the research they wish to conduct is of high quality and relevant to science and technology priorities identified under the Foresight Programme. Results of the JREI to date are shown in table 2.

Table 2


Joint Research Equipment Initiative 1996 and 1997

Year

Applications for funding

Awards made

Public sector contribution

Private sector contribution

1996

250

172

£25 million

£25 million

1997

400

250

£44.5 million

£65 million

Sources: Office of Science and Technology; Department for Education and Employment

31. Although the figures show that the JREI has been successful in attracting private sector support for investment in research equipment, it is not clear to what extent the Initiative has succeeded in attracting new money. The CBI told us "although CBI companies have responded to joint initiatives, such as ... the Joint Research Equipment Initiative, they have stated that these do not attract new money, but rather cause a re-allocation of existing budgets".[84] The implication of this statement is that industry is using the JREI to lever Government investment into research equipment rather than the other way round.

32. On 13th January 1998 the Government announced, following the success of the first two rounds, that the JREI would become an annual event. This is a development which we applaud. We also congratulate the Minister for Science for successfully arguing that the £7.2 million saved from the science budget on international subscriptions, as a result of the strength of the pound, should be diverted to the JREI.[85] However, as the MRC pointed out, the JREI only goes a small way towards closing the research infrastructure funding gap.[86] It is not certain for how long, or to what extent, companies will continue to support the JREI: "industrial participation in future rounds of the JREI ... should not be taken for granted", although indications of over-subscription in the latest round suggested that there is some scope for extension of the scheme.[87] Nor will the extra £165 million which the Government announced in September 1997, £25 million of which is intended for research and teaching infrastructure, resolve the crisis. We accept that not all the money attracted from industry by the JREI is new money and are convinced that, in isolation, the Initiative will not solve the funding crisis in research infrastructure. Nevertheless, we welcome the JREI and the fact that it is to become an annual event as it will provide significant additional resources.

INVESTMENT IN INFRASTRUCTURE

33. Estimates of the amount of investment needed to bring infrastructure up to the standard required vary. Following a detailed survey in 1996, Policy Research in Engineering, Science and Technology (PREST) estimated that £474 million would be needed over the following five years for research equipment alone.[88] The HEFCE pointed out that this figure was based upon researchers own estimates of their needs and suggested that it would be legitimate to reduce the figure by 25% to £355 million to reach a more realistic figure.[89] If the revenue generated by the two JREIs to date is then taken into account, the figure required for research equipment is in the region of £225 million. As the HEFCE pointed out, it is then necessary to add the funding required to bring physical premises up to scratch which, according to a recent survey, is in the region of £200 million.[90] Based on these assumptions, the overall funding needed to bring research infrastructure up to the required standards is in the region £425 million. A more recent study conducted by Segal Quince Wickstead on behalf of the HEFCE, using a different basis for determining the level of investment required, proposed a figure of £445 million for both equipment and premises. If, say, half the £25 million earmarked for infrastructure of the extra £165 million the Government have provided for higher education, is spent on research infrastructure then both figures will have to be adjusted downwards by £12.5 million. This means that the total investment needed in research infrastructure to bring it up to an acceptable standard is between £412.5 and £432.5 million.

34. Both the Ministers who gave evidence acknowledged that there was a serious problem in funding research infrastructure but we were concerned that there seemed to be confusion over which department should be responsible for providing a solution.[91] The Baroness Blackstone told us that it was a joint responsibility between the DfEE, the DTI and the OST whereas Mr Battle told us "it is really within the bailiwick of the Department for Education ... they are responsible".[92] While we do not ignore the responsibility that the Research Councils, and therefore by implication the OST, have for contributing towards infrastructure where the work they fund places demands upon it, we are clear that this is primarily a matter for the HEFCs and therefore for the DfEE and the corresponding departments in Scotland, Wales and Northern Ireland.

35. We are convinced that there is still a real and urgent need for the Government to provide additional resources to resolve the immediate crisis in research infrastructure in the UK's universities. We recommend that this issue be treated with the utmost priority in the Comprehensive Spending Review. We further recommend that the Government allocate a total of between £410 and £430 million of new money, earmarked for research infrastructure, over the next three public expenditure rounds.

Indirect Costs

36. In addition to resolving the immediate crisis in research infrastructure in universities there is an obvious need to guarantee infrastructure standards in the longer term in order to sustain high-quality research and to ensure that the greatest possible value for money is achieved from the capital investment we have already recommended. The NCIHE recognised this and sought to address it by making recommendations that would ensure that those who funded research in universities made an appropriate contribution to what are termed the indirect costs of research.

THE RESEARCH COUNCILS

37. Much of the Government's science budget (some 96.3% in 1997-98)[93] is allocated to the Research Councils who, after deducting their own costs and amounts to support their own units and institutes, allocate money to research projects (see para 16).[94] Originally the Research Councils made no explicit contribution to the indirect costs of the research they funded in universities but, following the dual support transfer from 1992 to 1995, Research Council grants included a nationally applied figure of 40% of the non-academic staff salary costs associated with that project.[95] This figure was subsequently increased to 45% and more recently to 46% of salary costs. Nevertheless, it has been argued, and the NCIHE were convinced, that the true level of indirect costs are between 55% and 65%.[96] Consequently, the NCIHE recommended that the indirect costs element of Research Council grants should be "increased to 60%, [of staff salary costs] or such higher rate up to 100% as the institution can justify".[97]

38. Traditionally it has been accepted that there should be no need for Research Councils to pay the indirect costs for research as the other leg of the dual support system provided for the academic salaries and indirect costs. However, as we have already seen, there has been a fundamental shift in the balance of resources provided by each leg, based partly on an increased recognition of the need to target research in priority areas. As the Royal Society argued, the result of this shift has been that the vast majority of R money from the HEFCs is consumed in providing the salaries of academic staff carrying out basic research and the facilities they require for it. This is the essential foundation, the baseline, for speculative research which forms the springboard from which these researchers can apply for funds from other sources. Consequently, the block grant from the HEFCs is no longer sufficient to meet even those indirect costs of Research Council funded projects which are not already covered by Research Council grants.

39. Each of the Research Councils has accepted in principle that they should pay the indirect costs of the research they that fund in universities.[98] The ESRC told us that "full funding of research by Research Councils outside of academic staff salaries would be welcome";[99] the EPSRC said "it seems appropriate that the Research Councils should provide the correct overhead for the work which they support. It has a logic to it which is compelling".[100] We agree. We recommend that the Research Councils should pay the full indirect costs, excluding academic staff salaries, of the research which they fund in universities.

40. There are two ways in which this could be achieved: either by the Research Councils negotiating a figure for indirect costs with each institution, perhaps even for each research project or subject discipline, or by the Research Councils and universities agreeing a notional rate as an average reflection of genuine indirect costs. The first option is certainly workable, as the US experience demonstrates, but we accept that it has some disadvantages. The BBSRC, for instance, told us that "a system of variable indirect costs level ... would be expensive to manage".[101] The ESRC believe that it is "doubtful if the additional complexity and administrative resources required for multiple rates are an efficient and effective way of providing for public support of research".[102] Nevertheless we, like the BBSRC, could not accept "the imposition of a 60% rate which is not based on any reliable analysis".[103] Such a system would lead to gross inequalities between research projects where academic staff costs form a substantial proportion of the overall costs, such as is often the case in the social sciences, and research projects which require substantial non-staff related expenditure. Unless robust procedures are introduced to ensure that the indirect costs paid by the Research Councils are a genuine reflection of the costs imposed on the university some the inadequacies of the present system will persist. For these reasons we recommend that the Research Councils agree with universities, rates for indirect costs which recognise that such costs may vary from one type of research to another.

41. The Dearing Report outlined the three options for financing the additional costs that the Research Councils would incur in paying a larger sum in respect of indirect costs, namely:

  • by reducing the volume of research funded;

  • by transferring the shortfall from the Funding Bodies to the Research Councils (ie further dual support transfer); or

  • by a real increase in Government funding.[104]

As the NCIHE pointed out reducing the volume of research funded by the Research Councils "would not be in the long term interests of the UK given the economic, social and cultural importance of research".[105] The MRC inter alia agreed, saying that it would cause "irreparable damage to many research programmes". The ESRC quantified the effect it would have on their research portfolio saying that an increase in the indirect cost element of grants to 60% of non-academic staff salaries would decrease the volume of research they could fund by 8% and that an increase to 100% would reduce volume by 25%.[106] Additional dual support transfer would increase the imbalance between the two legs of, and therefore would serve to undermine further, the dual support system itself. Nor would it, as the EPSRC argued, "reinvigorate the research base-as the baseline funding for research would not be increased by such a transfer".[107] The NCIHE was clear that the third option was preferable. We are clear that it is the only acceptable or possible option. We recommend that all increased expenditure incurred by the Research Councils as a result of paying a higher rate for indirect costs be matched by increased Government funding for the Research Councils.

Indirect Costs of Non-Dual Support Funded Research

42. The main emphasis of the research sections of the Dearing Report was on the way the dual support system worked and Government funding for research. However, the last decade or so has seen a substantial increase in the volume of university research funded from non-Governmental sources.[108] Indeed, the BBSRC argued that "the growth of ... non-research council funding at less than full economic cost is the principle source of the funding gap".[109]

43. Table 3 shows the relative importance of the different sources of university research income in comparison to dual support and other Government funding in 1995-96.

Table 3


University Research Income in Real Terms (£ million) (1996-97 = 100)

Source

1992-3

1993-4

1994-5

1995-6

% in 1995-6

HEFCs

1047.7

1038.0

1073.9

1045.2

39%

Research Councils

380.6

453.7

508.0

546.7

21%

UK Charities

271.3

310.9

330.5

347.6

13%

Government Departments

156.7

159.0

257.7

277.0

10%

UK Industry

133.5

138.8

166.8

174.1

7%

EU Bodies

83.8

104.0

153.1

151.7

6%

Other   

132.4

116.8

101.4

99.4

4%

Total

2206.0

2321.2

2591.4

2641.7

100

Sources: Derived from SET Statistics 1997, Table 5.1; Striking a Balance, Table 4.2; HESA, Resources for Higher Education, 1995-96; Office of National Statistics.

Note: "Other" includes individuals, local authorities and higher education institutions.

44. Whether research charities, industry and Government departments do pay, or indeed should be paying, the full economic costs of the research they fund by contract, or by grant, has been debated without resolution for a number of years.[110] Nevertheless, as the significance of such funding has increased and the pressures on public funding for research have risen, it has become more important that the issue should be resolved satisfactorily. As Sir John Cadogan put it "in some of those cases there is perhaps a shortfall of overhead funding and this in turn puts pressure on those who do pay overheads like the research councils".[111] One recent study estimated that the shortfall in 1994-95 amounted to more that £500 million.[112] Another study, commissioned by the HEFCE and the CVCP, also concluded that there was a shortfall and that it was growing.[113] It is not an area to which the NCIHE, unfortunately, devoted much attention beyond commenting "that charities may be willing to share more of the indirect costs of research with institutions if there is greater clarity in how those costs arise".[114]

45. In 1988, as it became increasingly clear that universities were not recovering the full costs of externally funded research, the CVCP issued guidance to universities which pointed out that in some cases the indirect costs of research would equal the direct costs.[115] In the early 1990s the Advisory Council on Science and Technology (ACOST) recommended that universities should recover the full costs of sponsored research and the then Government agreed that universities should have a better idea of the costs of conducting research.[116] Nevertheless, as others have noted before us, it is still the case that "the indirect cost contribution from non-government sources has not been sufficient to meet the full costs of research".[117] A number of reasons, which might explain why such a shortfall has arisen, have been suggested, chiefly that:

  • in an effort to be competitive universities have understated the actual costs of doing the research;[118]

  • as the RAE rewards universities for obtaining research income from non-dual support sources, universities have a direct incentive to accept research projects below full economic costs;[119]

  • universities have had difficulty in persuading research funders to pay a higher rate towards indirect costs than that paid by the Research Councils;[120] and

  • in the case of research charities, there has traditionally been an agreement with the HEFCs that the infrastructure they provide should support charity-funded research.[121]

46. We, like the NCIHE, believe that universities have the solution to the first three of these in their own hands.[122] Universities have discretion over which research project grants, either from Government or non-Government sources, to accept and which to decline; they should not accept research contracts which do not provide for the full economic costs of the research without fully weighing the consequences of doing so.

47. The RAE (which we discussed more fully at paras 60-83) rewards universities for attracting non-dual support funding for wholly justifiable reasons. It is right that universities should be encouraged to develop external sources of funding and that some recognition should be made of the additional costs this imposes. However, we do not consider that this should lead universities to accept research funding at other than full economic costs, unless such research is undertaken in collaboration or partnership with the funders and other benefits in kind flow to the university. We recommend that the HEFCs examine the operation of the RAE with a view to ensuring that it only rewards those institutions which attract grants and commissions for research on terms which provide for the meeting of the full economic costs either in cash or in kind.

48. We consider the issues surrounding charity funding for research below (see paras 52-4).


83  Q. 157. Back

84  Ev.p. 96. Back

85  Q. 550. Back

86  Q. 354. Back

87  Ev.p. 97. Back

88  Policy Research in Engineering, Science and Technology (PREST), Survey of Research Equipment in United Kingdom Universities, 1996, p. 66. Back

89  Ev.p. 113. Back

90  Ev.p. 113. Back

91  QQ. 516 and 539. Back

92  QQ. 503 and 545. Back

93  Striking a Balance, p. 24. Back

94  HEFCE funding, as it comes from the Department of Education and Employment, is part of the Education Vote and therefore is not part of the Science Vote. Back

95  Q. 534. Back

96  Coopers and Lybrand, Review of Dual Support Transfer, 1995; The Dearing Report, paras 11.18 and 11.29. Back

97  The Dearing Report, para 11.29. Back

98  Ev.pp. 116, 119, 189 and 196. Back

99  Ev.p. 22. Back

100  Q. 368. Back

101  Ev.p. 116. Back

102  Economic and Social Research Council's Response to the Report of the National Committee of Inquiry into Higher Education, para 14.3.iv. See also Ev.p. 24. Back

103  Ev.p. 116. Back

104  The Dearing Report, para 11.31. Back

105  The Dearing Report, para 11.31. Back

106  Economic and Social Research Council's Response to the Report of the National Committee of Inquiry into Higher Education, para 14.2. Back

107  Ev.p. 211. Back

108  Striking a Balance, p. 20. Back

109  Ev.p. 116. Back

110  "Full economic costs" means all direct and indirect costs including the salaries of academic staff. Back

111  Q. 23. Back

112  Report of the Forum on Research Infrastructure, CVCP, 1997. Back

113  CVCP, Research in Universities: The Funding Gap, 1997. Back

114  The Dearing Report, para 11.19. Back

115  CVCP, The Costing of Research and Projects in Universities, 1988. Back

116  Striking a Balance, p. 21. Back

117  The Dearing Report, para 11.19. Back

118  Q. 67. Back

119  Q. 402. Back

120  The Dearing Report, para 11.21. Back

121  Striking a Balance, p. 21. Back

122  The Dearing Report, para 11.21. Back


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries

© Parliamentary copyright 1998
Prepared 2 April 1998