Examination of Witnesses (Questions 240
- 258)
WEDNESDAY 20 FEBRUARY 2008
IAN PEARSON
MP AND PROFESSOR
SIR KEITH
O'NIONS
Q240 Dr Harris:
All I am saying is 92 is close to 80.
Ian Pearson: Even the MRC would
have liked more money, but the fact is that it is getting a 30.1%
increase in its budget over the next three years, and I think
that is widely welcomed in the medical research community. To
get back to your original point about the MRC's commercial fund,
the situation has been that the MRC's commercial fund has been
producing an income stream but without any authority to spend
that. The normal way in which organisations produce income streams
are accounted for by the Treasury is that they will factor those
into their normal budgetary allocation processes. That was not
taken into account at the time of the CSR settlement, and I think
you will find Treasury argue that if you would have taken that
figure into account, we would not have given so much to the science
budget in terms of its headline allocations.
Q241 Dr Harris:
I am not with you, so what you are saying is that the budget was
set and then this £92 million was taken out and that is just
because of Treasury rules? Is that what you are saying?
Ian Pearson: The MRC's commercial
fund did not have authority to spend the money in the MRC commercial
fund and the agreement reached with the Treasury was that £92
million would transfer to the Treasury but £106.9 million
would be available to spend by the MRC over the next three years.
Q242 Dr Harris:
That was money it already had; it was not in exchange for the
92. The point I am making—
Ian Pearson: Can I just carry
on and try and explain a bit more. That was a process of regularising
the position so that the MRC commercial fund could operate like
other parts of government that generate income because it had
not been operating on that basis before. The agreement is that
post this CSR period that the MRC commercial fund will produce
information indicating its income levels. Those will be part of
the budgetary process during the next CSR period and the general
rule that applies all across government is that you will forecast
your income, you are allowed to keep that income, and you are
allowed to keep 20% above that income, and again the agreement
with the MRC is that that will hold for the next CSR period.
Q243 Dr Harris:
Do you think that is a disincentive?
Ian Pearson: And if there need
to be negotiations in the future as well because there are one-off
windfall gains that that can come from, then we will have a separate
negotiation with the Treasury on this.
Q244 Dr Harris:
You are very keen on knowledge transfer and translation and the
entrepreneurial stuff shown by the research councils. Do you not
think it is a bit of a negative message to send to research councils
that if you do better than you plan, and we all hope to do better
than we plan in everything—you will get 20% of it but 80%
of it is for the Treasury when it is entrepreneurial work of the
research councils?
Ian Pearson: I think it is a good
point to raise and certainly we want to encourage organisations
to be entrepreneurial and to raise income where it is appropriate.
Q245 Dr Harris:
So why not give the Treasury 20% and given the research councils
80?
Ian Pearson: Where I have sympathy
with the Treasury—and I think you need to think carefully
with this—is what incentives do you provide for people to
correctly forecast their income. I think there is a point there
and if you have a system whereby you are saying whatever money
you generate you can keep, I do not think that provides any real
incentive to get accurate information of what is likely to be
raised as income as part of this.
Chairman: I must bring this to an end.
Q246 Dr Harris:
If they get it wrong and if they underperform according to their
budget they lose 100%. The Treasury does not come into the rescue
with 80%, so they only lose 20% on that side, so it is not really
fair, is it, that if they do their best guess and fall short they
lose 100% of that funding, because it is indicative, as you say,
in their spending plans, and if they overperform they only get
20%; it is not fair.
Ian Pearson: I think the system
at the moment, which has been a system that has applied right
across government for quite a while, has tried to strike a balance
between providing incentives and getting proper information so
that the Treasury can be aware of the financial position.
Q247 Chairman:
I think the big concern we have here, Minister, is that this £92
million was in fact not unallocated, it was very much earmarked
for the St Pancras development and that was built in, and even
the Chairman of the MRC knew nothing about it until after the
settlement. That seems to be a totally inappropriate way of managing
the affairs of what is going to be a major project.
Ian Pearson: I certainly am aware
that the MRC very strongly felt that these monies were legitimately
theirs and that they had indeed earmarked them for projects. What
I can say though is, subject to the business case, that the Government
has confirmed that it is very strongly supportive of the UK CMRI
and other big, exciting projects such as the Laboratory for Molecular
Biology at Cambridge, and we do believe that there is sufficient
resource in budgets that can be available to make sure those projects
come to fruition.
Q248 Chairman:
So "Minister guarantees project" is the statement from
this morning?
Ian Pearson: I can definitely
confirm, subject to all the caveats about it being good value
for money and a proper business case that the proposed St Pancras
development is extremely exciting and offers a prospect of really
world-class science and international leadership and we want to
see it continue.
Q249 Mr Cawsey:
Having joined this Committee knowing nothing about how science
funding works, and heard all the evidence, I now definitely know
nothing about how science funding works, but at least I am certain
about it now! I want to move on to the relationship between the
Department and research councils. You have been going for a few
months now with the new department. I wondered how you feel the
relationship between yourselves and research councils is developing.
Is it just business as usual with you having a different name
or is it all very different from the old OSI?
Ian Pearson: I only saw the OSI
from the outside of course because I took an interest in these
matters and have done for a number of years, but just as an interested
MP rather than as a minister with responsibility. What I can say
is this: like any new job I have made it my business to get to
know the senior staff in research councils and to personally build
up a relationship. I have started a programme where I will see
a chief executive of a research council once every fortnight,
so there will be a regular period of communication, and I would
like to think that is what you would have expected of an active
minister that wants to be involved and engaged. The basis of the
relationship is still very much one of accepting the Haldane principles
when it comes to making decisions. It is not my job, and frankly
it would be irresponsible of me, to try and second guess decisions
that research councils take on the basis of peer review.
Q250 Mr Cawsey:
So are you confident that these lines of independence that the
Haldane principles hold up and they are still in place and the
relationship is not being tested in that way in any respect?
Ian Pearson: What I can say is
that as a Government we clearly need to take a view on what the
strategic research priorities are for our future. I think there
is a debate that we will continue to have about to what extent
we want to focus research spending on some of the big challenges
facing society and our economy today. That is why we have talked
about the grand challenges such as environmental and climate change,
energy, global threats to security, aging, and it is why those
are reflected in the programmes of the research councils. However,
if you look in that broad area you would say that it is right
for government to say we want research done in these areas because
they are strategically important; it is right for the government
to say things like the digital economy and nanotechnology are
areas where we want to see research being done. It would not be
right for us to say that that particular nanotechnology research
project should be funded and that one should not. That is where
the Haldane principles and the peer review process need to strongly
come in. I think we have got the right sort of balance but we
need to continually review this.
Q251 Mr Cawsey:
It is interesting you say that because is it not true that politicians
do not spend years and years climbing up the ladder to give it
all away when they finally get there. If you look at what has
been happening and you see the fEC and cross-council programmes
and other pre-determined expenditure being set before things get
through to the research councils, it could look like the Department
and the Treasury are setting most of it. What would you say to
give a degree of reassurance that you are not micromanaging the
research councils specifically about how they spend the money
that has been allocated to them?
Ian Pearson: I would say look
at the facts and I think the facts demonstrate that we are not
looking to micromanage. The facts are that we have some overall
strategic priorities as a government, but we make broad funding
decisions in allocating money to research councils, and we agree
at a relatively high level their delivery plans and then we let
them get on with it, and that is what we do. There is a question
when you look at the cross-council programmes that I was talking
about such as Living with Environmental Change and the others
as to whether we should be encouraging research councils to spend
more money in those areas. There is an argument that says, yes
we should because these are important to our future and that we
ought to encourage greater funding. At the moment when you look
at it we are putting through the research councils some significant
money in these areas, but there are still tremendous opportunities
across all the research councils for response-mode funding for
blue-skies research, and there will always be a peer review process,
I believe, because that is the best way to allocate resources.
Q252 Dr Iddon:
Finally we are looking for some clarification on how full economic
costs have worked. I assumed, rightly or wrongly, that this has
been a three-year phased programme and in the next financial year
we are going from 70% full economic costs to 80% full economic
costs. I may be wrong.
Professor Sir Keith O'Nions: Can
I just correct you. We have been 80% since September 2005. Next
year with the restructuring of the capital funding it will effectively
be 90.
Q253 Dr Iddon:
So we are going from 80 to 90, so the figure of £700 million
to universities that you mentioned earlier, Sir Keith, represents
that extra 10%?
Professor Sir Keith O'Nions: We
spent something in excess of £400 million on full economic
costs in the last Spending Review. Obviously we started with zero
and we ramped up to 400+. It is our estimate that it will be in
excess of 700m.
Q254 Dr Iddon:
That ramping up has been over a three-year period?
Professor Sir Keith O'Nions: It
started in September 2005 but of course it was a trickle fund
and it still building up, but it will be more than £700 million
in this next Spending Review.
Q255 Dr Iddon:
My question is one that I put down as a parliamentary question
three weeks ago to this Department, DIUS, but for some mysterious
reason the parliamentary question has been transferred to the
Cabinet Office. I put it to the Minister straight this morning:
if all seven of the research councils had been responsible to
meet full economic costs, of which we have all approved on this
Committee, some of those economic costs for running research came
from other budgets previously, so what has happened to the money
in those other budgets, perhaps QR money, perhaps the universities
themselves were funding the cost of that research? Have those
budgets been transferred in any way whatsoever to the research
councils to help them meet the full economic costs of 90% next
year?
Ian Pearson: Firstly, I do not
understand why your question should have been transferred to the
Cabinet Office—
Q256 Dr Iddon:
--- Neither do I.
Ian Pearson: --- So I will make
enquiries. Secondly, just to confirm, full economic costing is
part of the science budget. There is a well-established ring-fenced
science budget. There was in SRO4 and full economic costs were
part of that and similarly with SR07 the science budget settlement
contains money for full economic costing, and as Keith says, that
will be £700 million-plus over the next three years.
Q257 Dr Iddon:
Before we had full economic costs somebody was funding the research.
Professor Sir Keith O'Nions: What
was happening before full economic costs, as all the analysis
has shown—and by the way there has been no shift since QR
from HEFCE and the other funding councils also increased apace
over the this same period, so there is something of a golden age
here—and then one gets beyond analysis into anecdote, that,
in effect, the volume of research had expanded in universities
through the 1990s into the early part of this decade and the expansion
was actually unfunded. Some universities were probably taking
money out of teaching and the teaching infrastructure, in others
it may just not have been fixing the roof of the laboratories
and so on, but in effect it was on a trajectory that was absolutely
unsustainable into the future. What we are seeing is how much
money it takes to get back into a sustainable situation where
our universities in the UK, I believe, are as competitive and
as attractive as anything in the world and you can see that in
terms of the ability of our major universities to appoint global
talent, and you are working now and competing for global talent,
which costs a lot of money over a long period of time, but it
has not raided other budgets; it just was not funded.
Dr Iddon: That is what we wanted to clarify,
thank you.
Q258 Chairman:
Could I ask either the Minister or Sir Keith to drop us a note
because we have run out of time. It really goes back to this question
of the MRC's commercial fund and the fact that all the research
councils and indeed the universities also will be making significant
income from intellectual property in the future. You gave a hint
that the Treasury was going to re-visit that relationship between
those commercial funds into actually pocketing the profits thereof.
Could you give us a note to say what discussions you have had
with the Treasury about that and if there is a timescale for actually
developing a new proposal?
Ian Pearson: The MRC situation
has been regularised. There is not a new proposal, but I am happy
to write to explain the detail in terms of what is going on.
Chairman: On that note, could I thank
you very much indeed, Minister, for giving us a very, very frank
exchange this morning and again thank you, Professor Sir Keith
O'Nions.
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