Overheads
67. Much of the evidence received by the
Committee raised the issue of the funding of overheads in grant
awards. There appeared to be dissatisfaction with the arrangements
made by the Commission, arising perhaps from the difference between
the percentage of funding provided by the Commission and the UK's
Research Councils. The Research Councils currently contribute
46% of the staff costs towards Higher Education Institution's
indirect costs of research projects. The issue of how research
costs are funded is currently under consideration by the Government
following its consultation document The Sustainability of University
Research: a consultation on reforming parts of the Dual Support
system,[78] which
will discuss why 46% has become considered the "going rate"
for contributions towards indirect costs.
68. Many witnesses felt that universities
and institutes were subsidising the Framework Programmes by funding
the overhead costs from other sources, for example, funding council
grants received by universities.[79]
The University of Newcastle commented "In that sense, the
EU undoubtedly gets value for money from the UK research base
rather than vice versa."[80]
Professor John Turner of the University of Surrey told the Committee
"Every time we do a European research project we have to
subsidise it from somewhere else. One of my real nightmares is
that we might do too well and get a lot of them".[81]
69. The options available to participants
are the full cost model in which all actual direct and indirect
costs can be charged, and for which the Commission will refund
50% (this is the model the Commission recommends to participants);
and a variant of the full cost model in which a flat rate of 20%
of all actual direct costs can be charged to cover indirect costs.[82]
However, Professor Ebrahim Mamdami of the Royal Academy of Engineering
said: "we tried additional funding comparison and costs with
full funding comparison and costs, one hundred per cent or 50
per cent, one hundred per cent with 20 per cent overheads and
50 per cent with full funding and it works out exactly the same,
but there is not much advantage in going for additional funding
as opposed to going for full funding."[83]
70. We were told by the Commission in Brussels
the European Court of Auditors would not increase the amount contributed
by the EU towards overheads. The current arrangements had been
discussed with representatives from the Member States and there
was no room for negotiation on this matter. The Commission considered
that it was a case of many universities being forced to improve
their accounting practices and choosing their funding carefully.
71. An improvement from FP5 seems to be
that the Commission will provide 100% funding for consortium management
and training, up to a total of 7% of the total cost of a project.[84]
This is, of course, only if the project is successful; the cost
of preparing a proposal for a large consortia that is unsuccessful
must be found by the consortia themselves.
72. We were told in Brussels that overheads
were not an issue in other Member States and that movement on
this by the Commission could not be expected. From the evidence
we received, we consider that there is an issue of the cost of
overheads in the UK which needs to be addressed by the UK Government,
particularly if SMEs and universities are reluctant to participate
as a result. There are a number of ways in which this could be
tackled. The simplest is for the Government to provide help actively
and guidance through the National Contact Point Network on the
best way for participants to approach the issue of overheads and
which cost model to apply for in order to optimise the overhead
contribution from the Commission. There may also be a role for
RDAs to provide financial or administrative assistance to SMEs.
It remains the fact that the Commission contribution is still
only a contribution, and the situation remains unsatisfactory
with the most successful bidders at greatest financial risk. The
UK Government's refusal to contribute to the indirect costs associated
with Framework Programme grants compromises the already delicate
finances of our universities and therefore the participation of
our best researchers. The Government has an opportunity to make
the UK the clear leader in European research but to realise that
aim requires that the Government provide extra funding in SR2004
to meet these costs. At a time when the Government wishes to encourage
universities to charge for the full costs of their research, its
stance is untenable.
EUROPES and Departmental Expenditure
Limits (DEL)
73. RCUK raised the issue of EUROPES (the
European Public Expenditure Settlement) in its memorandum—where
Departmental budgets are top-sliced in advance by HM Treasury
(HMT) according to estimated EU income from the Framework Programmes.
HMT was also planning to charge Public Sector Research Establishments,
including some Research Council Institutes, for their returns
as coordinator or indeed of all UK participants in any successful
project. However, by the time of the evidence session on 9 April,
following discussions between OST and HMT this issue had been
resolved.
74. On EUROPES Dr Taylor, Director General
of the Research Councils said:
"for the last two cycles at least that has
not been taken into account in spending review processes, so,
as far as we are aware, there is not a penalty in that sense.
People have not said, 'You have got this additional money from
Europe, so we will take it off your science budget allocation.'
[…] The other part of this is DEL and that is department
expenditure limits and that says, 'When you actually receive some
money in an organisation, then previously if it flowed to a public
body, then that money essentially was counted against your expenditure
from the budgets you have,' so, if you like, you can say that
if the money came into a research council as a public body from
a particular Framework Programme activity, then I would have to
provide them some money to pay the Treasury back for that amount
of money. We have recently negotiated the concession so that now
we only pay half of it back, so we are now in twice as strong
a position as we were in terms of the DEL activities."[85]
75. Whilst RCUK are now satisfied with
the settlement over DEL, we remain concerned that there is a potential
for HM Treasury to claw back money from Government Departments
and research institutes in respect of money received from the
EU. The Chancellor wishes to build a knowledge economy. It is
unfortunate, therefore, that the Treasury wishes to penalise Government
Departments which wish to participate. If Departments wish to
support increased research through EU funding, the Treasury should
not undermine their efforts.
60 Q 310 Back
61 Ev 89 Back
62 Q 8 Back
63 see http://europa.ey.int/comm/budget/agenda2000/reports_en.htm. Back
64 Qq 23 and
24. Back
65 Q 26 Back
66 Q 94 Back
67 Q 95 Back
68 Q 112 Back
69 Q 121 Back
70 Q 141 Back
71 Qq 134 and
135 Back
72 Q 141 Back
73 Q 137 Back
74 Q 189 Back
75 Q 141 Back
76 Q 239 Back
77 Q 240 Back
78 Department
of Trade and Industry and the Office of Science and Technology,
The Sustainability of University Research: a consultation on
reforming parts of the Dual Support system, May 2003. Back
79 Q 3 Back
80 Ev 9 Back
81 Q 96 Back
82 Participating
in European Research, p 18 Back
83 Q 100 Back
84 Q 357 Back
85 Q 373 Back
