Select Committee on Science and Technology First Special Report




The Office of Science and Technology is pleased to provide the following statement on the present situation concerning some of the recommendations made by the Committee in a number of its reports during this Parliament.

2. For ease of reference in the following, the titles of these particular reports are shown in bold and the italicised text indicates the questions about these particular recommendations which are raised in a letter of 18 October 2000 from the Committee's clerk.

First Report 1997- 98: Implications of the Dearing Report for the Structure and Funding of University Research, HC 799, 2 April 1998

Regarding recommendations (g), (h) and (i) about Research Council funding for the indirect costs of university research, the Government's reply stated that consideration would be given to the suggestion that the Councils should meet the full indirect costs of the research that they fund in universities as part of the then (1998) Comprehensive Spending Review. Has any further consideration been given to this issue and if so, with what results?

3.  The Government is still considering the resource implications of these recommendations, and will not be in a position to accurately quantify them until the autumn of 2001. By that time the most research intensive universities, accounting for some 75% of publicly funded research, will have reported fully transparent costing data following implementation of the Transparency Review. This review is covered more fully in paragraphs 10-16 below.

Regarding recommendations (j), (k) and (l) about the full economic costs of university research being met in cash or kind by all funders outside the dual support arrangements, the Government's original reply announced a three year strategy to support institutions in adopting good practice in costing and pricing for research, with funding of £2.8 million to facilitate the integration of financial and academic planning and to provide training for managers. What progress has been made against the three year strategy and what are the plans for the future in this regard?

4.  During the past 18 months the Higher Education Funding Council for England (HEFCE) has conducted a fundamental review of its research policy and funding. The review addressed the nature and role of the Research Assessment Exercise, but it did so in terms of whether there were currently, or could be developed, better approaches to support the allocation of the block grant that the Funding Council provides to HEIs rather than to directly explore the point in the Committee's recommendation (j) - whether it should be amended to reward institutions which attract grants or commissions for research on terms which provide for meeting the full economic costs either in cash or in kind. The Funding Council believes that this issue is better addressed through the funding model which HEFCE operates and into which RAE scores feed.

5.  One of the central issues that the Review addressed was how to ensure that a sustainable project infrastructure funding balance was created and maintained for the long term in order that appropriate research infrastructure was provided within HEIs in order for them to carry out to a high quality work funded by research grants or other commissions. The review did not conclude that HEFCE should only reward institutions which attract grants or commissions for research on terms which provide for meeting the full economic costs either in cash or in kind. It is the HEFCE's role under the dual support system to provide for the infrastructure costs that are not included in grants provided by the Research Councils.

6.  However, it was concerned to ensure that project activity in general was properly supported and made a number of significant recommendations in this respect:

Recommendation 25: The HEFCE should consider ways of modifying its funding method to remove incentives to recruit research staff and students at the expense of appropriate investment in research infrastructure.

Recommendation 26: The HEFCE should no longer include an element which recognises income from charities in calculating the total funding for each subject, but should instead agree an explicit basis of support that reflects the contribution by charities to the direct costs associated with projects.

Recommendation 27: The HEFCE should consider whether it is necessary to amend the funding model to explicitly recognise that funding provided as EU grants and contracts currently does not cover all the costs associated with the project.

Recommendation 28: In general, institutions should charge prices which cover at least the full cost of research which they carry out under contract.

In these recommendations the Review distinguished between collaborative research, where the institution deemed that there was an inherent benefit in undertaking the work and therefore the sum sought from the sponsor would not necessarily be expected to equal cost, and "Contract Research" where the HEI was simply providing a service and in which circumstances the full cost should be charged.

7.  This distinction is important as much intellectually valuable work, which ultimately adds to the public knowledge base and contributes to the public good is sponsored by users on a collaborative basis and in such circumstances they should not be expected to meet the full costs of research in purely cash terms. The level of contribution in a given case should be a matter of discretion for the institution, based on the particular circumstances and a good understanding of its cost base, such as that provided by the Transparency Review. The Funding Council's concern would be to ensure that in general there was a level of investment in infrastructure such that public and private funders alike could expect researchers to be able to access appropriate infrastructure within institutions in order for work to be carried out to a high standard.

8.  These recommendations are currently the subject of a wide-ranging consultation exercise including HEIs, private and public sector funders of research, research users and other stakeholders, which will run until 8th December 2000. Responses to this consultation will be placed before the HEFCE Board for consideration when it meets on 29th January 2001.

9.  The £2.8m to support institutions in adopting good practice in costing and pricing for research has been made available through the Joint Costing and Pricing Steering Group (JCPSG) which was established by the sector representative bodies and the higher education funding councils in July 1997 to support the general development, and promote the adoption, of good practice in costing and pricing.

10.  Following the 1998 Comprehensive Spending Review, additional funding for higher education was made conditional on improved transparency concerning the way public funds are spent in universities. A Government initiative, known as the 'Transparency Review' was initiated by OST, working closely together with the Education Departments, Research Councils and Funding Councils.

11.  Considerable complementarity and joint working has been established between JCPSG and the Transparency review secretariat. A large of number HEIs have applied for funding under the JCPSG initiative (representing 60 per cent of the sector to date) and the remainder are expected to apply during the coming year. Two National Co-ordinators have been appointed who are in close contact with all institutions to promote the benefits of costing and pricing in informing decision-making, to support the development and delivery of training materials, and help institutions meet the Transparency Review requirements.

12.  Progress to date includes

  • Increased level of commitment by governing bodies, institutional heads and senior managers to view costing and pricing as mainstream within institutions' overall strategies.

  • Wider adoption of a more standardised approach to the identification and allocation of costs.
  • Increased awareness of the financial implications, including opportunity costs, of academic decisions, both locally and across disciplines.

  • Better-informed pricing decisions leading to improved net contributions with no loss of markets or quality.

  • Increased understanding of costs and cost drivers, initially on a pilot basis, but increasingly rolled out consistently across institutions.

  • Increased appreciation of the need to tackle cultural issues while recognising the time and resources necessary to achieve real progress.

13.  In addition, 14 regional groups have been established across the UK to help institutions develop their costing and pricing systems and to facilitate discussion of issues relating to the implementation of the Transparency Review, the dissemination of good practice and to provide an opportunity for the benchmarking of results. A number of examples of institutional costing and pricing intranets have been established, and these have been made available through the JCPSG web-site (

14.  The JCPSG is securing the acceptance by government departments of the principles enshrined in the "Transparent Approach to Costing (TRAC)" document as the basis for pricing government contracts.

15.  The priority areas will be:

a.  Securing the implementation of the TRAC across all research intensive institutions by July 2001 to allow for reporting in January 2002.

b.  Securing the adoption of TRAC as the basis for pricing government contracts.

c.  Delivering improved awareness and understanding of pricing issues to secure improved net contributions from activities.

d.  Addressing the 'low price' culture that has developed across the sector.

16. The Government's timetable requires the whole sector to implement the Transparency Review by 2002; to achieve this the UK higher education funding councils have provided the JCPSG with additional resources to July 2002. These will allow JCPSG to continue to provide support at an appropriate level for the whole sector throughout the implementation period.

What progress has been made since the Government accepted recommendation (m) concerning the introduction of some flexibility, to allow funding of indirect costs beyond 20% where appropriate, into the European Commission's Framework Programme?

17. In Framework Programme 4, organisations with analytical accounting systems received funding at a rate of 50% of the full cost of the project under the Full Cost Model. Most universities did not at that time operate an analytical accounting system and so the Additional Cost Model was introduced. (See below for details.) Universities continued to have concerns about funding.

18.  During the negotiations for Framework Programme 5, officials addressed the issue of funding models. There are now 3 funding models:

Full Cost, actual overhead rate: as in FP4, total eligible costs using a real rate of overheads—for organisations with analytical accounting systems. Commission contribution = 50%.

Additional Cost: as in FP4, 100% funding of the additional direct costs of the research (eg temporary staff hired for the project, consumables, computer usage etc) plus a sum totalling 20% of these additional direct costs to contribute to the indirect costs ("overheads")—for organisations operating only a basic level of accountancy.

NEW. Full Cost, flat overhead rate: total eligible costs using, in respect of overheads, a lump sum amounting to 80% of the eligible personnel costs—for organisations whose accounting system enables identification of the direct costs relating to research, including that of its permanent personnel, but which cannot identify overheads with a sufficient degree of precision. Commission contribution = 50% of all eligible costs.

19.  The Full Cost, flat overhead rate model is designed to address some of the concerns of the Additional Cost Model and to ease the transition between the Additional Cost model and the Full Cost, actual overhead rate model . However, UK universities are not generally able to fulfil the criteria for using the Full Cost, flat overhead rate model, due to an inability to identify the direct costs of research.

20.  Paragraphs 10-16 above set out the work currently underway to improve the transparency of costing of research in universities and the Government's timetable for this work with full implementation by 2002. FP6 is expected to start in 2003 by when UK universities should be able to identify accurately all the costs of their research, and so be well placed to seek funding on the Full Cost, actual overhead rate model, assuming that the funding mechanisms remain the same as in FP5.

The Government accepted the Committee's recommendations (x), (y), and (z), on the quality of training for post-graduate research students. What progress has been made on the introduction of the code of practice and what is the involvement of the Quality Assurance Agency?

21.  The Quality Assurance Agency drew up a code of practice for the assurance of academic quality and standards in postgraduate research programmes, which was published in January 1999. This provided guidance and precepts on a number of factors, including the research environment, promotional information, the selection, admission, enrolment and registration of students, student information and induction, the approval of research projects, skills training, supervision, assessment, feedback, complaints, appeals and evaluation. It has not been chosen by QAA as one of those against which institutions will be routinely audited.

22.  The HEFCE Fundamental Review report mentioned above was in line with the Committee's recommendations on this issue. It concluded that more did need to be done to improve the training of post-graduate research students. The relevant recommendations were:

Recommendation 33: Research training should be the subject of a separate, but linked, assessment process to the RAE.

Recommendation 34: Funding provided by the HEFCE for the training of research students should be calculated and allocated separately from the funding provided for research.

Recommendation 35: The HEFCE, together with the Research Councils and other stakeholders such as industry and charities, should develop minimum requirements which departments would need to satisfy in order to be eligible for HEFCE funding for postgraduate research student training. The research assessment process should be extended to establish whether departments comply with these minimum standards.

Recommendation 36: Collaborative arrangements should be established to enable units to meet all aspects of the postgraduate research training requirements, which might not be able to do so alone. The HEFCE should separately work up the practical arrangements to implement this recommendation.

23.  As mentioned above, these recommendations are currently the subject of a consultation exercise, which will run until 8th December 2000. And discussions have already taken place between the Funding Councils and other partners, including commercial organisations and other stakeholders, to prepare a draft minimum standard that will be the subject of consultation in early 2001.

What progress has been made on the implementation of the ( Research Careers) Concordat and what is being done to monitor improvements in research careers, as the Government indicated in its response to recommendation( aa) in relation to staff on short term contracts?

24.  Progress and monitoring arrangements are detailed fully in the Research Careers Initiative reports and supporting documentation available on the CVCP website at . Hard copies of the reports (only) are enclosed with this reply for ease of reference.

25.  The Government's recent Science and Innovation White Paper (paragraph 2.34) encourages the university employers and the Funding and Research Councils to take forward the latest RCI report's main recommendations.

Sixth Report 1997-98: Science and the Comprehensive Spending Review, HC 1040, 1 December 1998

26.   Please refer to paragraphs 3 to 16 above in relation to recommendations (d) and (g) of this report concerning the Transparency Review, Research Council funding of indirect costs and the provision of £2.8m by the Funding Councils to support higher education institutions in adopting good practice in costing and pricing for research.

First Report 1998-99: Scientific Advisory System: Genetically Modified Foods, HC 286, May 1999

What progress has been made on recommendation (e) about reducing the risk of fraudulent use of GM free labels by obliging retailers not to claim GM free status unless a full audit trail from seen to supermarket shelf is in place?

27.  The EU Commission has indicated in its White Paper on Food Safety that it intends to bring forward a proposed Commission Regulation on the labelling of GMO-free foods. The Food Standards Agency Board has endorsed the current GM labelling rules but has also recognised that there may be a need for further legislation

28.  The ability to detect the presence of GM ingredients in food reliably is at the limit of current detection methodologies. A proficiency scheme was launched by the Food Standards Agency to look at the ability of labs to detect the presence of GM material at the single ingredient level, the results of which will be published in December. Similar studies have also been carried out with more complex foods. The Agency will launch a pilot study in the first instance to determine the ability of laboratories to detect the presence of GM material in commercial samples before launching a full surveillance programme to monitor the GM labelling position on the high street.

What progress has been made on recommendation (aa) towards creating a health surveillance system for monitoring any long term impact on health of consuming GM Food?

29.  The Food Standards Agency has commissioned the feasibility study on the post market monitoring of novel foods referred to in the original Government response. The aim of the study is to determine if there are differences in food purchasing and consumption patterns at the district level and whether such differences could be linked to differences in health outcomes. This study started in July 2000 and will take 21 months to complete.

Second Report 1999-2000: Engineering and Physical Sciences based Innovation, HC 195, 31 January 2001

In its response to recommendation (q) concerning 1998 and 1999 changes to the Capital Gains Tax regime, the Government stated that the impact of the changes would be monitored. What has this monitoring shown?

Capital Gains Tax

30.  The new system of taper relief was first introduced in 1998. It reduces the amount of Capital Gains Tax the longer an asset has been held, with a more generous rate of taper relief for business assets than for non­business assets.

31.  In 1999, the Government consulted a range of interests, including "business angel" investors and venture capitalists, on possible changes to taper relief in the light of experience so far. This consultation showed that a more generous, shorter business assets taper would fit better with entrepreneurial investment patterns. Secondly, the entitlement to the business assets taper excluded a number of areas vital to promoting entrepreneurial behaviour. The subsequent changes were announced in the Spring 2000 Budget and implemented in the Finance Act 2000.

32.  The maximum rate of taper relief for business assets is now reached after four years, rather than ten. With full business assets taper relief, the effective rate of CGT for a higher rate tax­payer is only 10%. The Government has also broadened the entitlement to the business assets taper. In addition to assets used for a person's trade, business assets taper relief is now available on:

  • All shares and securities in unlisted trading companies;

  • All shares and securities owned by employees and officers in the trading companies where they work; and

  • Shares and securities in listed trading companies if the share­holder is able to exercise at least 5% of the votes.

33.  These changes have been widely welcomed and will boost investment, in particular investment in small high tech companies, and will encourage employee share ownership, thus furthering the productivity agenda. As before, the effects will be monitored.

34. In the November 2000 Pre­Budget Report, the Government announced that, subject to consultation, business assets taper relief would be extended to employees' shares in a range of non­trading companies, including companies in the venture capital industry. This measure will further encourage employee share ownership. It will also simplify the administration of companies who will no longer have to consider whether they are "trading" for the purpose of taper relief.

Employee Share Schemes

35.  In addition to the Capital Gains Tax measures outlined above, the Enterprise Management Incentives and the new All Employee Share Plan were also introduced by Finance Act 2000, after a successful period of consultation. Knowledge and experience of an advisory group drawn from private practice, companies, an academic and trade union representation helped to ensure that the new measures would be attractive for businesses to operate in practice.

36.  These are new measures, so it is too early to say what effects they have had on recruitment, retention and the reward for entrepreneurial endeavour. The Inland Revenue has mechanisms in place to collect data that will enable them to keep the policy under review and ultimately evaluate its effects.

37.  The Pre-Budget report of November 2000 includes details of the initial take-up of these two new measures since their introduction in July 2000:

  • Over 160 companies have applied to set up an All Employee Share Ownership Plan and more than 20 company plans have already been approved (covering over 30,000 employees); and

  • Over 100 companies have notified the Inland Revenue that they have granted options to a total of more than 500 employees under EMI.

38.  The Government also announced in the November 2000 Pre-Budget Report that it would consult on expanding the Enterprise Management Incentives, so that smaller businesses can make more flexible use of these benefits in a way best suited to their needs.

Regarding recommendation (t) about reviewing the legislation on bankruptcy and insolvency law, what has been the outcome of the consultation exercise and what further action is proposed and on what time scale?

39.  The closing date for the receipt of responses to the consultation "Bankruptcy—A Fresh Start" was 30 June 2000. From an analysis of the 124 written responses to this paper, along with the information obtained from the numerous consultation meetings that were held, it is clear that there is broad-based support for most of the reforms suggested. Consideration is now being given to conducting a further consultation on more detailed matters towards the end of this year and early next.

Regarding recommendation (jj) about Regional Development Agencies, the Committee would welcome further details on the operation of £50 million regional innovation fund and the £50 million capital fund, as well as information on other activity in this area.

40.  In the March 2000 Budget, the Chancellor announced £50 million from the Capital Modernisation Fund to support cluster development, including business incubation, in the English regions. This funding is being channelled through a new fund - the Innovative Clusters Fund (ICF) - and is going to the Regional Development Agencies (RDAs), including the London Development Agency, to enable them to invest in projects which will assist in the development of clusters in their regions (in line with their Regional Economic Strategies). The money is spread over two years, £15 million in this Financial Year (2000-2001) and £35 million in the next FY (2001-2002). The RDAs have moved quickly to put forward positive proposals for using the new funding via individual Business Plans.

41.  The Spending Review 2000 announced a strengthened role for the RDAs, with a new focus on economic development, together with significant additional funding to take forward this agenda. The RDAs will be given greater flexibility to use their budgets to support regional priorities through a single funding stream under which the RDAs will be managed through outcome and outputs agreed in the corporate planning round. This new "single pot" will operate from 2002-03.

42.  This new Regional Innovation Funding (RIF) is worth £115 million over three years from 2001-2002 (£15 million in 2001-2002 and £50 million in each of the following two years 2002-2003/2003-2004). Together with the ICF, this will provide RDAs with £50 million a year (2001-02 through 2003-04) to spend on additional activities, which they identify as priorities, to support competitiveness, innovation and economic development within their regions. These priorities will support the aim of the Department (shared with DETR) to improve economic performance of all regions, measured by the trend in growth of each region's GDP per capita.

43.  The RIF will support new activities, and complement current ones supported by the ICF, to promote innovation and enterprise and to support clusters and networks of businesses in their regions, delivered through agreed business/corporate plans. It will:

  • support innovative sectoral/ geographical networks (including clusters);

  • provide business incubator facilities;

  • promote access to, and application of, new technologies by SMEs; and

  • establish innovation centres and other centres of excellence in response to business needs.

44.  The RIF will subsume the ICF in 2001-02 to provide RDAs with a single DTI programme funding stream and will, itself, be part of the RDAs' single budget in 2002-03 and 2003-04.

Regarding recommendations (kk) and (ll) concerning the importance of clusters and changes to promote their development, the Committee would welcome a review of its activities to date and an indication of whether or not it has undertaken work that might address recommendation (ll).

45.  The Clusters Policy Steering Group (CPSG) has now met three times and has discussed a number of themes. Foremost amongst these have been the role of incubation in cluster development; the impact of the planning system on clusters; and the role of Regional Development Agencies (RDAs). Work on all three areas is on-going. The next formal agenda item will be the role of Higher Education Institutions. Whilst the work of the CPSG is not limited to high technology or new economy clusters, the need to foster innovation has a high priority in each of the areas considered to date and will continue to do so.

Third Report 1999-2000: Scientific Advisory System: Diabetes and Driving Licences, HC 206, 7 March 2000

The Government accepted the Committee's recommendation (a) and stated that the Honorary Advisory Panel, at the invitation of the Department, was willing to re-examine its advice and the Government was seeking to establish a clearer picture of practices across the EU. Has the panel yet reconsidered this matter and with what outcome ?

46.  The Driver and Vehicle Licensing Agency (DVLA) has obtained information from Belgium, Sweden, Denmark, Spain, Germany, and Norway. This was presented to the Honorary Medical Advisory Panel at its meeting on 4 October.

47.  In light of this and other available information, the Panel reconsidered its previous advice and recommended that individual assessment should be introduced for category C1 (3.5-7.5 tonnes) applicants. They recommended that those with good diabetic control and no significant complications can be treated as "exceptional cases".

48.  The Panel met to finalise the details for those new to insulin treatment on 8 November. It is expected that public consultation will begin shortly with a view to having the legislative changes in place by Spring 2001. As far as categories D1 (minibuses), C (lorries over 7.5 tonnes) and D (large buses) the Panel felt unable to change its long held view that driving should not be allowed. Their view was that further hard data was needed before any changes could be recommended.

49.  Once the results of a recently initiated programme of research into diabetes and driving become available in two to three years time, the Panel will review the situation again.

The Government accepted the Committee's comments in recommendation (b) about regularising the rules concerning insulin treated drivers and medium sized vehicles in consultation with the voluntary sector. Has this consultation yet taken place and with what results? What changes have been made following that consultation?

50.  Progress on consultation with the voluntary sector has been put on hold pending the Panel's reconsideration of category D1 minibus entitlement for drivers with insulin treated diabetes. The Panel re-affirmed on 8 November that this entitlement should be withheld. Work will now begin on addressing the voluntary minibus driver anomaly.

The Government accepted recommendation (g) about appointing a road traffic accident statistics to the Honorary Advisory Panel on Driving and Diabetes Mellitus and considering similar appointments to the other Honorary Medical Advisory Panels. Has this yet been done in regard to the Honorary Advisory Panel on Driving and Diabetes Mellitus or any of the other Honorary Medical Advisory Panels?

51.  Each of the Panels has considered how the expertise of a statistician or epidemiologist might be used. The Advisory Panel on Diabetes has reservations about the usefulness of such an expert in view of the current absence of data. However an epidemiologist is to be involved in the diabetes research project which is currently out to tender. The other Advisory Panels intend to invite relevant expertise when needed.

What progress has been made by the Government in considering how best to give effect to recommendation (i) about identifying jointly with the British Diabetic Association an insulin-treated diabetic to attend and participate in meetings of the Honorary Advisory Panel as a non-voting member?

52.  Diabetes UK has been asked to identify suitable persons for appointment to the Honorary Medical Advisory Panel. It is expected that appointments would be made by the time of the next Panel meeting in April 2001.

Are there now plans for the Honorary Panel to publish an annual report and/or hold such a meeting with interested organisations, following the Government acceptance of the suggestions in recommendation (k) that the Honorary Panel publishes an annual report and, shortly afterwards, holds an annual meeting with the British Diabetic Association and other interested parties to discuss matters of common interest and to explain any complex recommendations made?

53.  Plans are in hand for the publication of an annual report on Panel proceedings. It is anticipated that the report will be published on the Internet in January 2001. Comments will be invited and meetings held with Diabetes UK, DVLA officials and/or the Panel, as necessary.

Regarding recommendation (l), is the Honorary Advisory Panel now publishing its agendas in advance of meetings and minutes shortly after meetings, with the privacy of any individuals discussed protected?

54.  The agendas of all the Panel meetings held this Autumn have been posted on the Internet. The minutes of the meetings will be posted when finalised (excluding details of individual cases discussed).


November 2000

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