Select Committee on Science and Technology Minutes of Evidence

Annex A

Dual support funding

  1.  Public funding for research can most easily be justified under the two headings of `wealth creation' and the `quality of life'. While research and hence knowledge are sometimes perceived as a mark of a civilised society, the more usual association between research and the quality of life is through improved health, social and living conditions where research has had evident successes. (Even so, while few would deny the improvements that have come from a better understanding of disease and its treatment, benefit measurement for health services remains a real challenge for those seeking to determine how NHS R&D funds should be used.)

  2.  If there is evidence that research can be linked to innovation that leads in turn to wealth creation, then why should public funding be used for investment that creates real returns? The principal reason is market failure. Commercial risk assessment dictates that investments should provide an acceptable rate of return. As research projects become more speculative so they tend to have to jump higher hurdles on rates of return in the private sector. If there were no public funding then much of this research would not take place because the gap between the knowledge base and the putative market is initially too great, the uncertainty of outcome too high.

  3.  A further justification for the public funding of research in one country is in order to create the intellectual capacity to understand the intellectual property (IP) generated in another country. The growth of the Asian `tiger' economies was dependent not only on their ability to exploit IP generated originally but not fully exploited in the West, but also on their ability to understand what exploitation might be feasible. This in turn depended on a sound understanding of the underlying technologies. Similarly, even if it does not lead in a field, the UK's ability to enter an area of new technology requires a sufficient initial platform of technological and research competency to exist.

  4.  A further argument in favour of public funding of research is that key knowledge is then held independently of interested parties. This allows a more objective judgement to be made in the public policy interest in such areas as telecommunication hazards, food quality or prescribed drugs. Policy decisions can be based on sound and independent advice, which may lead via regulation to profound effects on the wider economy. It is difficult to see how such advice could sensibly be taken solely from the private sector.

  5.  The Dearing Committee report on the future of higher education in the UK (NCIHE, 1997) concluded:

  6.  `Within the aims and purposes of higher education, there [are] four main roles for research and reasons for supporting it in higher education institutions:

    a.  To add to the sum of human knowledge and understanding.

    b.  To inform and enhance teaching.

    c.  To generate useful knowledge and inventions in support of wealth creation and an improved quality of life.

    d.  To create an environment in which researchers can be Y given a high level of training.'


  7.  Under the dual support system, with the exception of monies paid under specific contracts from Government departments and other public bodies, all public funding for research work done by HEIs comes from one of two funding streams:

    a.  As part of the block grant from the UK HE funding bodies (HEFCE, HEFCW, SHEFC, and DELNI) based on past performance as measured by the Research Assessment Exercise.

    b.  Project grants allocated to a particular researcher by the OST Research Councils (BBSRC, EPSRC, ESRC, MRC, NERC, and PPARC) in response to proposals for programmes to carry out future work.'[13]

  8.  Within that context, the benefit of dual support funding is that it:

    —  provides institutions with an essential degree of flexibility in managing their research

    —  allows institutions, as employers of those who carry out research, to cope with the sometimes short-term and unpredictable character of Research Council funding

    —  supports institutions, in their management of research income in the wider interests of research, for example in revitalising departments that are in decline, or initiating new interdisciplinary initiatives that were possible on their campus

    —  provides the only way of funding the unconventional or unfashionable field, or the unknown researcher who does not yet have the reputation to compete successfully for Research Council grants.


  9.  At the outset funding body and project funding streams were complementary, and broadly in balance—in that the capability created by the funding body element was sufficient to support the projects commissioned.

  10.  It was widely assumed within Government that the dual support system was there to support Research Council-funded research only (cf. para 7(b) above), although this had never been made an explicit tenet of Government policy. Charities, however, would point to the support given to the research they funded by the HEFCE's predecessor (UGC) to argue that prior to 1992 they too were included within the mechanism. HEFCE funds are also used to support research outside the formal Research Council ambit, namely in arts and humanities.

  11.  With the passage of time, however, and following the unification of the HE sector in 1992, both the volume of research and the range of sponsors increased. These included other government departments, business, and more importantly the voluntary sector. Today, the Wellcome Trust has a larger research budget than the Medical Research Council. Although the level of funding via the funding bodies has increased, it has not done so at the same rate as the increase in the volume of project funds for research. The dual support system has consequently become unbalanced, and research infrastructure has not been maintained at a pace commensurate with the increase in project funding.

  12.  Research[14] suggests that this imbalance is more acute in the medical and biosciences sector, where although the Department of Health makes contributions towards infrastructure costs via NHS medical schools located on HEI campuses, the weight of research project funding renders the funding available to support the infrastructure inadequate to the demands placed upon it by those projects.

  13.  The Wellcome Trust has of course contributed to infrastructure costs via the Joint Infrastructure Fund (JIF) and the Science Research Investment Fund (SRIF). Nevertheless, charities generally have been reluctant to contribute to all infrastructure costs, arguing that these have already (and anyway should be) funded by Government. However, the JM Consulting study suggests that the under-recovery of costs by HEIs is broadly constant, whatever the source of project funding.

  14.  Against the background of these developments, there is now a need for all parties—Government, HEIs, funding bodies and charities to clearly agree the purpose of the dual support system and which research sponsors it is designed to support. Clarification of this point will be a necessary precursor to establishing a stable (and long-term) equilibrium within that system.

13   Coopers & Lybrand report on indirect costs of OST Research Council projects and programmes, March 1998. Back

14   Interactions between HEIs and charities, unpublished work in progress by JM Consulting. Back

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