Select Committee on Science and Technology Eleventh Report

6 The Dual Support system and HE funding

93. A strain on the dual support system has been that over the years, a marked imbalance has arisen between the two streams. Project funding from the Research Councils and other sources (such as charities, industry and the EU) has increased disproportionately to that from the Funding Bodies, particularly in the medical and biosciences. Between 1993-94 and 1999-2000, project funding to universities from all sources increased by 52%; research funding from the Higher Education Funding Councils increased by only 25%. Sir Howard Newby said this imbalance had risen to £900 million a year.[155] Universities UK says that "QR funding levels are inadequate to support current volume, and there is an enormous strain on this side of the dual support system".[156] There have been concerns that the reviews of the two legs of the dual support system have not been fully integrated. The Biosciences Federation reports criticism in its community that there is a "failure to integrate the RAE review with the ongoing assessment of dual support, or to set it in context with the whole of government policy on higher education".[157] In our 2003 Scrutiny report of the OST, we expressed concern over the "Government's piecemeal approach to research funding".[158]

94. In its Science and Innovation Investment Framework 2004-2014, the Government has sought to consider both legs of support holistically. Its solution, prompted by the Transparency Review undertaken in advance of SR 2002, is to move to a situation where universities are obliged to recover the full economic costs of the research that they undertake. The Research Councils will move, towards the end of the decade, to a situation in which they pay the full economic costs aside from any investment in capital infrastructure. Much of the annual real-terms increase in the Research Councils' budget (5.6%) over the SR 2004 period will contribute to these costs. In addition, HEFCE's research budget will increase 6% annually in real terms. Thus the imbalance in the two funding streams has been significantly closed. This is welcome but it is not clear to us that this has been achieved in the best way. The Royal Society is "concerned about the extra administrative burdens and over-management of university research in the recent proposals for costing Research Council projects".[159] The Royal Society's President, Lord May, recently blamed the move to fund the full economic costs on "career civil servants, who know very little of the world they are looking at, who have produced a set of rules which, in my opinion, are little short of lunatic in their notion […] Kafka couldn't have dreamed this up!".[160] He told us that the review had been "incompetent" and had not looked at the consequences of the change nor considered other countries' funding models.[161] The Government says it will assess the "trajectory" towards the full economic cost model in 2006 in time for the next Spending Review. We hope that it will use the opportunity to review whether the model is a viable one and whether the aim of rebalancing the dual support system could be achieved by a straightforward increase in the research funds available to the Funding Bodies.

95. The Government has repeatedly stressed its commitment to the dual support system and recent reviews by the OST and HEFCE have looked into the mechanisms used for allocating funding for each leg rather than a reappraisal of the whole system. By using a prospective peer review for one leg (Research Councils) and retrospective review for the other (Funding Bodies), the dual support system is generally considered to provide a good balance. The Royal Society published a paper in November 2003 in which it questioned the functioning of the system. It recommended a fundamental review but it did not suggest alternatives. A key issue was that the funding through both streams corresponds closely and that in effect there were two parallel review systems coming to the same conclusion. The Government's Science and Innovation Investment Framework 2004-2014 reaffirms its commitment to the dual support system, although it recognises that reform of both legs is required.[162] In giving evidence Lord May told us that "the ultimate aim for us is to have a tertiary sector which has much of the genuine diversity of the strengths of the US".[163] Professor Joyner agreed that an advantage of the US system is that "there is a whole range of places where you can go to get something".[164] Lord May's comments are consistent with many of the sentiments we expressed in our 2002 Report, that the RAE had a distorting effect as the only game in town, and as Natalie Fenton complained "now governs absolutely everything … that goes on in institutions".[165] The British Medical Association's Medical Academic Staff Committee reports that medical schools are putting an increasing emphasis on research at the expense of clinical and teaching functions.[166]

96. Diversity can only be achieved by a range of funding incentives or a range of funders employing different funding criteria. The Government has set a target for industrial R&D expenditure of 1.7% of GDP, an increase from the 2002 level of 1.24%. It would be reasonable to expect some of that increase to be used to fund research in UK universities and this should provide a welcome counterbalance to the QR funding. We would like to see diversity in higher education research funding but it is hard to see how this can be achieved while the RAE dominates the funding landscape. We have concluded that new incentives for all areas of universities' work are needed. Quality assessment for teaching has proved problematic and unpopular. The Government should consider more radical solutions, perhaps awarding teaching funds on the basis of outputs rather than inputs as has been the case. The "third leg" funds for knowledge transfer have grown in recent years but it is nor clear whether they are yet sufficient to act as an adequate counterbalance to RAE-based funding. We conclude that a greater diversity of funding streams would act as a counterbalance to the RAE. The proposed European Research Council could contribute, as would the greater availability of research funds from other Government Departments.

155   Q 52 Back

156   Ev 51 Back

157   Ev 51 Back

158   Para 66 Back

159   Royal Society response to the 2004 Spending Review, 12 July 2004 Back

160   Bob May: Political science, Education Guardian, 20 July 2004 Back

161   Q 6 Back

162   Para 3.5 Back

163   Q 14 Back

164   Q 97 Back

165   Q 82 Back

166   Ev 54 Back

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Prepared 23 September 2004