Select Committee on Innovation, Universities, Science and Skills Fourth Report

5  Medical Research Council


118. One of the highlights of the Science Budget Allocation is the Medical Research Council's allocation: a 30.1% increase over the CSR period, which amounts to an extra £341 million (£266 million of which is near cash). £119 million of this is earmarked for FEC and £132 million is set aside for the new Office for Strategic Co-ordination of Health Research (OSCHR), which will focus the efforts of MRC and the National Institute of Health Research (NIHR) on translating medical research into health and economic benefits for the UK. We welcome the large increase in MRC's budget and a sharpening of its focus on knowledge transfer.

The commercial fund clawback

119. Our one concern over the MRC allocation relates to a matter that came up some time before the budget allocations. In summer 2007, the Treasury took £92 million (nearly half) of the MRC's commercial fund (the fund which has been built up with profits from its intellectual property).[155] This occurred because the Treasury applied some rules to this fund that had previously not been applied.[156]

120. DIUS argued that this had not left the MRC worse off. The Rt Hon John Denham MP, Secretary of State, told us that:

The change in the accounting rules around the MRC research fund was known about within the Whitehall system prior to the CSR settlement, and therefore, having been through this, I am happy that the overall funding that is available to things the MRC would have funded is not different from what it would have been if the accounting treatment had not changed.[157]

In other words, the money that was taken away from MRC has been given back in a different form. This is puzzling since the overall science budget was set in March 2007 and the MRC claw-back was decided later, in June 2007.[158] Therefore, the extra money that the Secretary of State said was given to MRC in compensation must have been taken from the (already agreed) Science Budget, leaving less for the other Research Councils. Furthermore, it cannot be said that the claw-back was specifically compensated for in an increased science budget.

121. The funding claw-back additionally causes problems in terms of the message it sends to Research Councils that are being entrepreneurial. We agree with the Minister for Science and Innovation who is keen "to encourage organisations to be entrepreneurial and to raise income where it is appropriate".[159] The Government has reassured us that this is a good settlement for MRC because "MRC did not have the authority to spend this money [in its commercial fund]" but now "the MRC will be able to spend £106.9m of the accumulated income".[160] We maintain, however, that, as we have said previously: "Encouraging the MRC to be self-financing to a degree and then appropriating its savings, thus forcing the MRC to come cap in hand for funding, is hardly redolent of good faith."[161] We also note that the rules are such that Research Councils have to bear a much higher "excess" on any shortfall on predicted revenue than they are allowed to enjoy when there is a surplus on predicted revenue. We ask the Government to justify the Treasury rules on the treatment of excess on shortfalls or surpluses as predicted revenue by Research Councils and in particular the effect it has on higher risk innovation and on the accuracy of revenue predictions.

122. We are concerned that the Treasury's decision to take £92 million from MRC's commercial fund will act as a disincentive for the Research Councils to be entrepreneurial. This outcome goes against the Government's aim, which we applaud, to improve the translation of research into wealth. We urge the Treasury to commit to a set of rules that encourages the kind of entrepreneurship that DIUS is attempting to foster.

155   Nature, vol 450, 20 December 2007, p 1140 Back

156   Innovation, Universities and Skills Committee First Report of Session 2007-08, UK Centre for Research and Innovation, HC 185; Q 91 Back

157   Oral evidence taken before the Innovation, Universities and Skills Committee on 16 January 2008 (2007-08) HC 186-i; Q 44 Back

158   Q 238 Back

159   Q 244 Back

160   Innovation, Universities and Skills Committee, Third Special Report, Session 2007-08, UK Centre for Medical Research and Innovation: Government Response to the Committee's First Report of Session 2007-08, HC 459 Back

161   First Report of Session 2007-08, UK Centre for Medical Research and Innovation, HC 185, p 5 Back

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