Memorandum from the Office of Science
and Technology
"RESEARCH COUNCILS
INSTITUTES (RCIS)"
This memorandum has been produced on behalf
of the Departments of Trade and Industry, Health, and Environment,
Food and Rural Affairs
1. The role of RCIs in maintaining the UK
research and skills base
The institutes, centres, surveys and units (collectively
called institutes for the present discussion) of the Research
Councils undertake a very broad range of research activities.
Research Council Institutes should not, as a general principle,
duplicate the research missions or raison d'être of
Higher Education Institutions (HEIs) or industry. The rationale
for such institutes is to provide research capacity for the UK
which does not exist in the private sector and which would be
difficult for HEIs to sustain on a long-term basis, for instance
as a result of the sheer size of the investment needed, or its
long term nature.
Individual Research Councils are responsible
for determining the activities and funding for the Institutes
they own and for deciding how much of their Science Budget allocation
goes to each Institute. In some cases, funding is also provided
by Government Departments such as Defra.
2. The balance between Research Council expenditure
on RCIs and on grant funding
It is for the Research Councils to determine
the distribution of expenditure between their Institutes and other
activities in the light of their overall allocation from the Department
of Trade and Industry. Data submitted by Research Councils to
the Department shows that planned expenditure by the Councils
during the period 2006-08 can be broken down as follows.
|
| % |
|
| Grants | 41 |
| Research institutes | 22 |
| Training | 14 |
| International subscriptions | 8
|
| Capital | 9 |
| HQ | 3 |
| Other costs | 3 |
| 100 |
|
3. The rationale behind the different approaches adopted by the Research Councils to supporting RCIs and the case for greater harmonisation of practice
| |
Individual Research Councils are responsible for choosing
the precise way in which they manage and fund their Institutes.
The Department of Trade and Industry is aware, nonetheless, that
practices differ markedly in this respect, and therefore undertook
a review (The Costigan Review) of what best practice existed and
whether this could be adopted more widely. The Review concluded
that there was not a strong case for introducing a single governance
structure for the Institutes, but that improvements could be made
in some cases. The Department has asked the Councils affected
to consider what action they need to take in response, and to
inform the department of the action they are taking.
The specific findings of this Review are the following:
BBSRC INSTITUTES
Improvements are needed in the current governance arrangements
for BBSRC institutes to make them compatible with best practice.
BBSRC Council needs to consider the relationship between
itself, the institutes, and their governing boards, and achieving
clarity on the different roles. Given the rolling nature of membership
of all these bodies, it will be a constant challenge to maintain
good links and to ensure that everyone involved is fully aware
of their responsibilities.
If the BBSRC Council wish to move towards further independence,
it may make sense to ensure that sufficient independence is given
to the institutes to put them outside the Accounting Officer responsibilities
of the Chief Executive.
There are a number of options available to BBSRC Council
for changing the governance model of the BBSRC institutes.
MRC INSTITUTES
The overall governance structure employed by MRC in respect
of its institutes (ie the fully-owned model) is compatible with
best practice for corporate governance.
There needs to be a balance between scientific freedom and
proper levels of assurance within a corporate governance framework.
MRC has been actively considering this issue and developments
are underway. I recommend that MRC Council take stock of the current
situation with the new developments, along with recent reports
from Research Councils Internal Audit Service which outline concerns
about the engagement between establishments and the MRC corporate
management process, and consider whether further assurance is
needed.
Consideration should be given to the introduction of a review
mid-way through the five year period.
The Chief Executive of MRC does not have the time to carry
out any meaningful assessment of the performance of 32 institute
and unit directors. MRC Council should consider specifically whether
some or all of the institute directors should report to another
director within MRC Head Office.
MRC are introducing changes to the five year review process,
and I recommend that MRC Council should look at whether those
changes match the requirements for five year reviews set out in
the Quinquennial Review of the Research Councils.
NERC RESEARCH CENTRES
AND COLLABORATIVE
CENTRES
The overall governance structure employed by NERC in respect
of its Research Centres (ie the fully-owned model) is compatible
with best practice for corporate governance.
Greater commercial freedom might allow British Geological
Survey to increase its commercial activity, potentially delivering
greater value for money from current and previous investments
in science. There are a number of ways of achieving this.
Similar arguments may apply to CEH.
NERC's interaction with Plymouth Marine Laboratory and Scottish
Association for Marine Science (SAMS) are compatible with best
practice for corporate governance, although SAMS itself has a
conflict of interest in governance terms which needs to be carefully
managed.
The current governance of National Oceanography Centre, Southampton
is not compatible with best practice in corporate governance.
The revised structure currently being discussed is a considerable
improvement. The fact that under the new model the director reports
to both organisations is less than ideal but is probably the best
available solution. NERC and the university need to work together
to ensure that this potential conflict is carefully managed.
PPARC SITES
The fully-owned model used by PPARC is compatible with best
practice in corporate governance.
The corporate governance of the island sites (telescopes
in the Canary Islands and Hawaii) is complex given the international
agreements, telescope boards and co-funding of the programme of
work, but it is nonetheless clear that PPARC exercises control
over its funding in a way which is compatible with best practice
for corporate governance.
It may be worth revisiting the relationship between the Astronomy
Technology Centre and the Island Sites and the flow of information
during a project.
CCLRC SITES AND
DIAMOND LIGHT
SOURCE LTD
CCLRC introduced a new corporate structure in December 2005.
Not all of the changes have been implemented at the time of writing,
so it is difficult to make a firm conclusion on whether the new
structure meets best practice for corporate governance.
In most areas, the corporate governance of Diamond is compatible
with best practice. However, there remain issues where there is
a lack of clarity—particularly in the areas of transparency
about how decisions are taken.
CHARITABLE STATUS
Research Council Institutes which are charities are not allowed
to pay their trustees. It is becoming increasingly difficult to
find people with the skills required to act as directors and trustees
who can put in the required level of commitment, without being
paid.
Charitable Incorporated Organisation (CIO) status might be
an attractive model for at least some Research Council Institutes,
and if the Charity Bill is passed it would be worth examining
whether CIO status was appropriate.
The Governance issues for BBSRC institutes are similar whether
those institutes are exempt charities or registered charities,
but there may be some long-term advantages of moving to exempt
charity status.
If charitable status is removed, it is important to ensure
that the assets of the organisation can be retained in a non-charity
future entity.
The estimated financial benefit to BBSRC institutes of charitable
status is about £2.3 million per year (approximately 2% of
turnover). Most of these financial benefits represent costs moved
from one Government funding stream to another.
The benefits of charitable status need to be weighed up against
the constraints which charitable status imposes.
THE ROLE
OF OTHER
FUNDERS
The current lack of clarity about Defra's future needs and
budgets presents real challenges to the Councils, especially BBSRC.
As employers, BBSRC is liable for the costs of any redundancies
resulting from reductions in Defra's budgets. In some cases, BBSRC
is carrying a significant risk whilst Defra establishes its R&D
allocations and its own science needs.
4. The role of Research Councils UK in monitoring and
improving the effectiveness of Research Councils' support for
RCIs
RCUK will be responding to this question.
5. The role of the Office of Science and Innovation in
providing support for RCIs
The Department of Trade and Industry, through its Office
of Science and Innovation, provides funding to Research Councils
to support the whole range of their activities. Individual Councils
allocate funding to their Institutes in the light of their overall
priorities. The Management Statement agreed between each Council
and the Department of Trade and Industry makes the Chief Executive
of each Council accountable and responsible for the oversight
of any Institutes controlled by the Council. This includes a responsibility
to ensure the proper maintenance of the infrastructure of such
Institutes. It also states that the Chief Executive is to be the
line manger of the Director of such institutes and is responsible
for assessing their performance on an annual basis.
The Department also undertakes a number of specific activities
that impact directly on the work of Research Council Institutes.
These are set out in the following paragraphs.
Public Sector Research Exploitation Fund
Research Council Institutes are among the organisations which
are eligible to apply for funding from OSI's Public Sector Research
Exploitation Fund, which provides support for the commercialisation
of public sector research. A total of nearly £50 million
has been awarded to public sector research establishments from
this fund over three rounds of the competition, including £8.5
million for the Rainbow Seed Fund which provides early stage funding
for a variety of Public Sector Research Establishments including
those owned by BBSRC, CCLRC, NERC and PPARC.
Research Establishment Sustainability UK
To help Government Departments and Research Councils implement
full economic costing for PSREs, the OSI, with the support of
the Treasury, has established the "Research Establishment
Sustainability UK" forum where matters relating to the implementation
of Full Economic Costing and the Research Council Institute and
PSRE Sustainability Study guidelines can be discussed. OSI is
completing the first annual survey of sustainability in PSREs
and this information will provide a baseline against which to
measure future progress.
Large Facilities Capital Fund
Councils may seek additional financial support for their
Institutes from OSI's Large Facilities Capital Fund (LFCF). The
LFCF (currently worth in the region of £100 million per annum),
is a centrally held DTI fund, managed by OSI, to which Research
Councils can bid to support UK participation in large scale research
projects. It is designed to help Research Councils manage large
and lumpy capital investments that they would otherwise find difficult
to fund from their standard allocations from the Department. Bids
to the LFCF are considered roughly every two years and are prioritized
by RCUK on the basis of its Large Facilities Road Map. A list
of prioritized bids is then submitted to the department, which
then earmarks funding to individual projects. Recent bids to the
fund have been for the construction of facilities operated by
RCIs or for the redevelopment of the institutes themselves.
British Antarctic Survey (BAS) Review Group
The Office of Science and Innovation chairs the British Antarctic
Survey (BAS) Review Group. BAS is a wholly-owned research centre
of the Natural Environment Research Council (NERC). The Group
was set up by the Cabinet Office in 1987 and provides a mechanism
at official level specifically to tackle and clarify issues of
BAS funding and extent of operations. It includes representatives
from BAS, NERC, OSI, Foreign and Commonwealth Office and HM Treasury.
6. A review of progress on current reorganisations involving
RCIs, including the Centre for Ecology and Hydrology, the National
Institute for Medical Research and the Roslin Institute
These are matters for individual Councils.
June 2006
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