Select Committee on Science and Technology Sixth Report

4  Budgets and other financial issues

The SR2004 settlement for science

34. Public spending on science has increased significantly since 1997 and science was again one of the winners of the SR2004 spending round, with an initial 5.8% real annual growth in the budget announced in the Science and Innovation Framework for 2004-2014. In March 2005, an allocation of £10 billion was announced for the period 2005-08, broken down as in the table below.Table 2: Science Budget 2004-05 to 2007-08
£m 2004-05 2005-06 2006-07 2007-08
Science Budget2734 30873235 3451
Of which
Resource2519 28833001 3197
Capital215 204234 254

Source: Science Budget Allocations, 2

Table 3 shows the allocations made by the then OST from this overall total to each element of the Science Budget (figures in brackets indicate capital element included in the total allocation):Table 3: Science Budget Allocation 2004-05 to 2007-08
£000's 04-05 allocationi 05-06 allocation 06-07 allocation 07-08 allocation % uplift in 2007/08 against 2004/05
Research Councilsii 2,210,199 (166,630) 2,432,634 (164,085) 2,638,409 (179,327) 2,791,943 (155,067) 26% +581,744
of which
Arts and Humanities Research Council 67,746








Biotechnology and Biological Sciences Research Council 287,571 (6,308)336,186 (11,141) 371,644 (14,998)381,829 (18,855) 33%
Council for the Central Laboratory of the Research Councilsiii 127,940 (19,262)167,004 (19,853) 182,256 (30,150)212,507 (40,356) 66%
Engineering and Physical Sciences Research Council 497,318 (6,457)568,193 (13,229) 636,294 (13,248)721,172 (13,268) 44%
Economic and Social Research Council 105,252 (1,780)123,465 (3,250) 142,468 (3,250)150,336 (3,250) 43%
Medical Research Council 455,279 (28,034)478,787 (34,573) 503,461 (38,261)546,514 (41,948) 20%
Natural Environment Research Council 314,256 (15,852)334,047 (19,576) 359,367 (21,757)367,248 (23,937) 18%
Particle Physics and Astronomy Research Council 274,037 (8,137)293,916 (11,963) 306,540 (12,708)315,245 (13,453) 15%
Diamond Synchrotron capitaliv (80,800)(50,500) (45,000)(0)
Knowledge transfer 78,96091,440 103,500108,500 37%


of which
Higher Education Innovation Fund 60,30569,425 83,00085,000
Public Sector Research Establishment and other Knowledge Transfer initiatives 18,65522,015 13,00016,000
RC Knowledge Transfer Fund 00 7,5007,500
Regional Development Agency and RC Capacity Buildingv 00 2,0003,000
Sustainability 296,570419,560 300,000300,000
of which
Science Research Investment Fund 296,570300,000 300,000300,000
Full Economic Costvi 0119,560
Large Facilities 53,628 (48,628) 45,406 (40,406)60,414 (55,164) 104,681 (99,423) 95%


Academiesvii 50,24552,420 62,32972,209 44%


of which
Royal Society31,045 32,52036,359 41,07232%
Royal Academy of Engineering 5,6005,850 7,8859,752 74%
British Academy13,600 14,05018,085 21,38557%
Science and Societyviii 7,175ix 7,665x 9,97511,395 59%


International collaboration 3,000 3,000
Restructuring and contingency 37,70038,011 56,95760,014
TOTAL2,734,477 (215,258) 3,807,136 (204,491) 3,234,584 (234,741) 3,451,742 (254,748) 26% +717,265

i.  Includes figures, for comparative purposes, for AHRB/BA which did not become the responsibility of the Science Budget until 1 April 2005

ii.  Figures from 06-07 include allocations made to enable Research Councils and Academies to pay a greater proportion of the Full Economic Cost of projects they support

iii.  Excludes capital funding for Diamond synchrotron, which is shown separately below

iv.  The Diamond synchrotron, announced in 2000, will be completed in 2006-07

v.  RDA and RC Capacity Building funds are included in EPRSC's allocation

vi.  Sustainability funding of 120/200M 06-07 folded into individual RC and Academies figures. Distribution of £120M to HEIs in 05-06 will be handled centrally by ESRC

vii.  Includes figures, for comparative purposes, for AHRB/BA which did not become the responsibility of the Science Budget until 1 April 2005

viii.  Science and Society includes work on public engagement, diversity in the science workforce and promoting science in schools (SETNET)

ix.  Includes £2.925m DTI funding for SETNET

x.  Includes £2.925m DTI funding for SETNET

35. The OST/OSI announced that these allocations were "designed to:

36. This was undoubtedly a good settlement for science and one which was widely welcomed across the science community. However, on two occasions since the settlement, the DTI has taken action which appears to challenge the strict ring-fencing of the science budget which should ensure that it cannot be raided to meet other departmental needs. First, on 14 February 2006, the Secretary of State for Trade and Industry announced a loan of £115m from the Science Budget to the DTI's non-science budgets in 2005-06, to be repaid over the period 2006-08 by increases in the baseline figures. The OST/OSI stated on 17 February that "the loan is being made from funds which are not immediately required by the Research Councils and other programmes within the Science Budget" and that it would "be repaid by the time the funds are required for investment in science".[70] This "loan" included reductions in the end of year flexibility within the Science Budget.

37. A year later in February 2007, the end of year flexibility of the Research Councils for 2006-07 was reduced again by £68 million in order to meet the DTI's budget deficits in non-science areas. This time the reduction was permanent and not a loan. Professor Ian Diamond of RCUK, speaking on behalf of all the Councils, stressed that, while the Councils were "satisfied that the Government remains committed to the 10-year science and innovation investment framework, reductions in Research Council budgets will inevitably have an impact on our ability to maintain the quality of the Research Base and to fully realise its benefits".[71] We deplore the willingness of the DTI to "raid" the Science Budget to meet its obligations elsewhere. Ring-fencing the budget should mean that it is guaranteed and not available for other purposes. We recommend that the DTI make an absolute commitment to observing the strict principle of ring-fencing the Science Budget in future. We welcome the assurance from the Chancellor and DTI that the end of year flexibility for 2007-08 is guaranteed. We note that this difficulty arises because of the embedding of the OSI within DTI, a department with priorities other than science and innovation.

The 2007 Comprehensive Spending Review

38. This year will see the conclusion of the latest Comprehensive Spending Review (CSR). Originally planned for July, the full outcome of the CSR is now expected to be announced in October but an early settlement of the DTI's Science Budget was announced in the Chancellor's Budget speech on 21 March 2007. This gave the Science Budget an average annual growth of 2.7% over the CSR period of 2008-09 (£3,525 million), 2009-10 (£3,746 million) and 2010-11 (£3,971 million). The Minister for Science, advised by Sir Keith O'Nions, will now take responsibility for dividing up the global Science Budget between the Research Councils and other science headings. Malcolm Wicks MP downplayed the significance of the CSR for science, pointing out that, "only a few years into" the ten year strategy for science, the Government "do not have to make important strategic decisions over every year or every financial year".[72] Nevertheless, a new financial settlement is clearly an important development. We note that the 2.7% represents an increase of £1,093m for the Science Budget over the spending period, compared to a baseline figure for 2007-08. We welcome the early settlement of the bid as providing greater certainty for the OSI and the UK research base and agree with the Secretary of State for DTI that it "represents a very good settlement for science".[73]

39. We asked both the Minister and the DGSI what the OSI was doing to promote the priorities identified for the CSR by the Research Councils. Sir Keith told us he had spoken to all the Councils "about what are their first thoughts on the big priorities for the next three, four, five years which will colour the nature of the DTI submission in the Comprehensive Spending Review" and that each of them had as "their highest priorities … interdisciplinary research topics".[74] We note that in the SR2004 not all of the highest priority areas identified by the Research Councils in their "rigorously prioritised programmes" were given extra support and that others received only part funding.[75] It is inevitable that the Treasury will not be able to meet the full demands of all bidders in the CSR process and that other priority requests may later be turned down when the OSI comes to distribute the funds awarded to the Science Budget as a whole. However, we are particularly concerned in the CSR 2007 round that having encouraged the Research Councils to think in interdisciplinary terms, due priority should be accorded to spending in this area. We will examine the outcome with attention as to whether this proves to be the case.


40. Also expected at the same time as the CSR is the outcome of the review by Lord Sainsbury of science and innovation policies across Government. The announcement of this Review accompanied the news of Lord Sainsbury's resignation from his post as Science Minister and the breadth of the terms of reference of the review led to mischievous speculation that he was continuing with his portfolio out of office. Reporting to the Chancellor of the Exchequer and the Secretaries of State for Trade and Industry and Education and Skills, the Review is intended to "take a forward look at what needs to be done to ensure the UK's continued success in wealth creation and scientific policy-making".[76] Its term of reference explain that the Review will:

    "take stock, in the context of globalisation, of the overall impact and balance of Government interventions, at national and regional levels. In order to reach its conclusions it will include examination of:
  • industry R&D and investment in innovation;
  • publicly funded R&D (including government departments) and investment in innovation;
  • knowledge exchange between universities and business, including examining progress made since the Lambert Review;
  • the supply of skilled people;
  • the supply of venture capital;
  • patents, measurement systems and standards; and
  • International science and technology collaboration."[77]

    41. The review has been officially welcomed by Lord Sainsbury's former department. The incoming Minister for Science told us that he "was genuinely very pleased" when he heard that Lord Sainsbury was to undertake this project[78] and that as of January 2007, the two of them had already "discussed the review, and we will discuss it again".[79] Sir Keith O'Nions drew particular attention to the inclusion of venture capital within the terms of reference, saying "we are all looking forward to the Sainsbury review" and the outcome of Lord Sainsbury's "conversations" in this area.[80] We very much look forward to the outcome of the review, emerging conclusions from which were included in the 2007 Budget, and we would welcome an early opportunity to discuss his findings with Lord Sainsbury himself.

    Science and Innovation Framework 2004-14: Next Steps

    42. In March 2006 a discussion paper to take forward the proposals in the 2004 Science and Innovation Framework was published as part of the Budget package. Entitled Next Steps and sponsored by HM Treasury, DTI, DfES and the Department of Health, the document set out further measures aimed at meeting the overall ambitions of the original paper. The key elements were:

    Seven questions were highlighted for discussion and consultation:
    Summary of discussion questions from Science and Innovation Investment Framework 2004-2014: next steps

    1. The Government would be interested in views about whether the existing framework for supporting science and innovation enables an appropriate level of risk-taking, and if not, suggestions of how any gap might be addressed.

    2. The Government invites views on measures to remove any remaining bias which unfairly favours established research fields over innovative ones. The Government also invites views on how funding mechanisms can be made more responsive to new research challenges.

    3. The Government would welcome views on the barriers limiting greater business innovation and business-university collaboration in the regions, and on what more could be done on a national and regional level to tackle these barriers effectively.

    4. The Government would welcome views—in particular from outside Higher Education -which can be taken into account in developing best practice models for business-university collaboration. In addition, the Government would welcome views on how to encourage businesses to work with universities for the first time, perhaps by introducing short-term, low-cost mechanisms for business-university interaction.

    5. The Government would welcome views on whether all large facilities operations should be integrated under a new Large Facilities Council, or whether there is a case for some facilities to remain under the management of other Research Councils.

    6. Furthermore, in the event of a merger, should the grant-giving functions of PPARC be moved to EPSRC?

    7. The Government would welcome views on what further measures could be taken by the Research Councils to improve their effectiveness.

    Source: Science and Innovation Investment Framework 2004-2014: next steps, March 2006

    43. The consultation period ran for 12 weeks from 22 March 2006 to 16 June 2006. In the light of the strong criticism by our predecessor Committee of the six-week consultation on the original Science and Innovation Framework document, we welcome the compliance with the Cabinet Office guidance on Government consultation in the case of Next Steps. Our predecessors also commented that in 2004 it was "unclear how the submissions have helped to shape the policies outlined in the Framework".[81] Here too there is evidence that the consultation was better handled on this occasion. A summary of the 190 responses received was published by the OSI in September 2006, which also set out "the first steps in actively responding to the points made".[82] These actions were mainly steps taken by the Research Councils but the summary also referred to the view of the "majority of respondents in favour of the creation of a Large Facilities Council and opposed to the transfer of PPARC's grant giving function to EPSRC".[83] A separate summary of these responses had been published earlier, and on 26 July 2006 the Government had announced its decision along the lines suggested by that majority of respondents (see further below).

    44. We discuss in the next chapter the main changes to emanate from the Next Steps agenda and their implications for the Research Councils. Here, we note the publication of the Next Steps document as proof of the continued interest shown by the Treasury in science. The former Secretary of State for Trade and Industry, Rt Hon Alan Johnson MP, told us that "Without the help and involvement of the Treasury and without the passion of the Treasury for this, we would have a great deal of difficulty in doubling the science base as we have done since 1997".[84] He added that "it is crucial that [the Treasury] are involved" and that "I would not look at it in any way as a negative feature that the Treasury are so closely involved".[85] We acknowledge the commitment shown by the Treasury to developing science and innovation and its willingness to grant the money necessary for this task. We have consistently argued that the Treasury should address its position as the only major Government department without a departmental chief scientific adviser. We remain strongly of the view that this would add rigour and credibility to Treasury thinking on science.

    69   Department of Trade and Industry, Science Budget Allocations 2005-06 to 2007-08, May 2005, p 8 Back

    70   Note by OST on DTI Spring Supplementary Estimates 2005-06 Back

    71 Back

    72   Q 286 Back

    73   Letter from Rt Hon Alistair Darling MP to the Chairman of the Committee, 21 March 2007 Back

    74   Q 289 Back

    75   Department of Trade and Industry, Science Budget Allocations 2005-06 to 2007-08, May 2005, p 5  Back

    76 Back

    77   Ibid Back

    78   Q 257 Back

    79   Q 259 Back

    80   Q 278 Back

    81   HC [2004-05] 8, para 30  Back

    82   OSI, and HM Treasury, Response to the Science and Innovation Investment Framework 2004-2014: next steps, September 2006, para 1 Back

    83   Ibid, para 27 Back

    84   Q 129 Back

    85   Ibid Back

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