House of Commons - The impact of spending cuts on science and scientific research

The impact of spending cuts on science and scientific research - Science and Technology Committee Contents

2 Funding science in the UK

7. Science funding in the UK comes from a range of sources: public, charitable and private sector. Public funds are directed to three principal streams. There is the Science Budget, which we discuss in some detail below, QR funding from HEFCE, and departmental research spend. The Science Budget is allocated to the Research Councils which make the detailed decisions, the QR funding is allocated to the universities according to their performance in the Research Assessment Exercise (RAE—soon to be the Research Excellence Framework, REF), and the departments directly administer their own research budgets. The Science Budget, along with some of the departmental research budgets such as the Department of Health's, is 'ring-fenced', meaning that it is protected from being used for other purposes. In practice, this is more complicated than it first seems because what is inside the ring-fence can be increased, thereby stretching it. This breaks the purpose of having a ring-fence and is an issue that deserves further scrutiny.

Figure 1: Sources of public sector investment in science

Source: SET statistics

8. An additional complication is how changes in research spend are tracked over time. For example, this year's SET statistics show a large drop in some departmental R&D spend, much—but not all—of which can be attributed to changes in accounting and definitions of what activities count as R&D. It is not currently possible to track accurately departmental R&D spend over time: it should be straightforward. These issues—the ring fence, tracking spend on science—are extremely important and we regret that we have not had time to devote a full and detailed inquiry to them. Our successor committee may—especially in the context of a new Parliament—consider exploring the full breadth of science funding in detail.

9. The Government uses a mixture of direct and indirect methods to fund science, the biggest single component of which is the 'Science Budget', which is worth around £3.5 billion for each year of the current CSR period. Outside of that, science, engineering and technology spending was anticipated as being £2.2 billion in civil government, and £2.6 billion in the Ministry of Defence in 2008-09.[9] The Technology Strategy Board is a non-departmental public body that was created in 2004 and expanded in 2007. Its budget next year will rise to £267 million.[10] It works with government and industry to stimulate "technology-enabled innovation in the areas which offer the greatest scope for boosting UK growth and productivity".[11] The Strategic Investment Fund, worth £750 million between 2009 and 2011 was announced in the 2009 Budget in order to support investments across the UK economy to support growth. Finally, the Government provides tax credits to support private sector investment in research and development. These were worth £790 million in 2008-09.[12]

10. The Science Budget is administered by the Department for Business, Innovation and Skills and allocated to the seven Research Councils, the three national academies (the Royal Society, the Royal Academy of Engineering, and the British Academy) and a number of separate funds which stimulate investment and commercialisation within higher education. The Research Councils account for over four-fifths of the Science Budget in the current Comprehensive Spending Review period.

Table 1: Science Budget Allocations by Research Council, Comprehensive Spending Review 2007

Research Council (£,000) 2008-09 2009-10 2010-11 Total

Arts and Humanities Research Council 103,492 104,397 108,827 316,716

Biotechnology and Biological Sciences Research Council 427,000 452,563 471,057 1,350,620

Economic and Social Research Council 164,924 170,614 177,574 513,112

Engineering and Physical Sciences Research Council 795,057 814,528 843,465 2,453,050

Medical Research Council 605,538 658,472 707,025 1,971,035

Natural Environment Research Council 392,150 408,162 436,000 1,236,012

Science and Technology Facilities Council 623,641 630,337 651,636 1,905,614

Total (Research Councils) 3,111,802 3,239,073 3,395,584 9,746,459

Total Science Budget 3,554,423 3,715,423 3,970,423 11,240,269

Source: Department for Innovation, Universities and Skills, The Allocations of the Science Budget 2008/9 to 2010/11, December 2007, Table 2.1

11. With these funds, the Research Councils invest in a mixture of grants for researchers, postgraduate awards and international subscriptions. Listed below are the major areas of expenditure for financial year 2008-09, the latest year for which figures are available. Spending not listed falls in areas such as administration.[13]

a) Of the £123 million expended, the Arts and Humanities Research Council spent £64 million on Research Awards, £41 million on Postgraduate Awards and £10 million on Museums and Galleries Awards.[14]

b) Of the £465 million expended, the Biotechnology and Biological Sciences Research Council spent £367 million on Research and Capital Grants and £51 million on Training Awards and Fellowships.[15]

c) Of the £195 million expended, the Economic and Social Research Council spent £119 million on Research and £60 million on Postgraduate Training.[16]

d) Of the £796 million expended, the Engineering and Physical Sciences Research Council spent £507 million on Research, £176 million on Postgraduate awards, and £52 million on Research fellowships.[17] In addition, the EPSRC is responsible for the three international subscriptions, which amounted to £540,000 in 2008-09.[18]

e) Of the £729 million expended, the Medical Research Council spent £229 million on Research Grants, £36 million on other research activities and £68 million on Postgraduate/training awards.[19] The MRC is responsible for the UK's subscriptions to five international programmes (one jointly with EPSRC), which amounted to £15 million in 2008-09.[20]

f) Of the £434 million expended, the Natural Environment Research Council spent £110 million on research grants and contracts, and £33 million on postgraduate training awards.[21] It is responsible for £50 million of international subscriptions.[22]

g) Of the £642 million expended, the Science and Technology Facilities Council spent £108 million on research grants, and £215 million on international subscriptions.[23] Its research grants are split into £61 million on Astronomy, £38 million on Particle Physics, £6 million on Nuclear Physics and £1 million on Neutron and Light Sources.[24] The £215 million spent on international subscriptions increased by £30 million on 2007-08 on account of exchange rate fluctuations, and has been the source of considerable difficulties, which we consider in detail below.[25]

12. Higher education institutions in England are funded by the Higher Education Funding Council for England (HEFCE). During our oral evidence session on 10 February, Professor Adrian Smith, Director General for Science and Research, noted that there was a "slight danger in thinking of the higher education pot and the science and research pot under [...] separate headings".[26] A significant proportion—half by Professor Smith's estimation—of the monies disbursed to the research councils ends up in the universities, so when considering cuts to science and higher education, the two are not necessarily competing against each other. In its Accounts for 2008-09, the BBSRC noted that £260 million of its expenditure of £465 million went into universities.[27]

13. That science and higher education may not be competing with each other is not, however, necessarily good news. There are several reasons why efficiency savings to higher education might very well take a disproportionate toll on science in the UK. The relationship may not be interdependent, but since much science takes place within higher education, any cuts to higher education funding have the potential to impact upon science as well. Science departments are comparatively expensive to run and, in times of economic stringency, are attractive targets for Vice-Chancellors looking to cut costs.

CSR 2010

14. The current comprehensive spending review (CSR 2007) expires in the financial year 2010-11. Funding beyond March 2011 is therefore contingent upon a new Budget and CSR, both of which will involve political judgments regarding the importance of science to the UK. The combination of £600 million-worth of as-yet unallocated cuts, the current economic climate, and the anticipated next CSR, there is considerable uncertainty amongst scientists regarding future funding.[28] The Minister for Science and Innovation (Rt Hon Lord Drayson) confirmed that "I recognise that that uncertainty is real".[29] On the same day as our first evidence session on 3 February, the Institute for Fiscal Studies (IFS) published its 'Green Budget' for 2010.[30] It estimated that cuts to public spending in the region of 10.9% would be needed in the four years from 2011, if the Government kept its commitment to protecting the NHS, education and overseas aid. The IFS predicts that:

Cuts in spending on science and universities are likely to have important long-term consequences. They would lead not only to direct falls in innovative outputs, but also to indirect falls to the extent that the UK would become a less desirable place for firms to conduct research. If the government's aim is 'to strengthen the incentives to invest in innovative industries and ensure the UK remains an attractive location for innovation', as was stated in the PBR, then the revenue loss expected from the patent box—£1.3 billion a year—would be better spent protecting the spending in this area. This would go a long way to shoring up the science budget, which for 2010-11 is £3.2 billion.[31]

15. That same day, Professor Alan Thorpe, Chair of Research Councils UK (RCUK), told us that at present the Research Councils were basing their forward planning "on the basis of flat cash" allocations.[32] This was further to the evidence we took from him on 2 December 2009, when he told us that the Research Councils were making plans on flat cash and "other scenarios".[33] According to Professor Thorpe, the consequences of flat cash allocations or a reduction would be:

[...] extremely serious [...] it is an investment, the research budget, so it has a huge gearing in terms of the economy. If we reduce funding, it is not just a matter of reining back a few research grants; it has a huge knock-on impact right through the economy in terms of the number of highly skilled people we are training in universities. University income levels will go down so universities will find they are less sustainable. Our ability to be world-leading in terms of the excellence of the research will be threatened and, of course, we get a lot of inward investment in the UK because we are seen as having that excellent base of researchers. In terms of facilities [...] negotiations depend on the UK having a significantly strong base. If that is reduced [...] the ability to partner countries that are actually undergoing some stimulus packages in terms of science will be very difficult.[34]

The Government's ambition and international comparators

16. The Government has taken significant steps to increase investment in science in real terms over the past six years, and it is against a background of rising investment and an increased science budget that this inquiry takes place. The Government's strategy for science in the UK was set out in the Science and Innovation Investment Framework 2004-2014. In that document, it was stated that:

The Government's long-term objective for the UK economy is to increase the level of knowledge intensity in the UK (as measured by the ratio of R&D across the economy to national gross domestic product), from its current level of around 1.9% to 2.5% by around 2014. If achieved, this would put the UK in a position to secure a leading place among the major European countries, and substantially close the gap between the UK and the USA, the best performing innovation-driven major economy.[35]

17. The relevant econometric measure is known as gross expenditure on research and development (GERD), expressed as a proportion of gross domestic product (GDP). As the passage above notes, GERD over GDP indicates the "level of knowledge intensity", and is a measure better suited to international comparisons than any comparison of direct funding.

18. On 17 February 2009, President Obama signed the American Recovery and Investment Act into law, which made provision for $17 billion worth of investment in scientific research.[36] On 27 April 2009, in a speech to the National Academy of Sciences, he committed the United States to spending 3% of GDP on GERD.[37] The huge investment as part of an economic stimulus package was welcomed by the scientific community in the United States.

19. At the meeting of the Liaison Committee on 2 February 2010, the Chairman asked the Prime Minister why he had not made such a commitment to using science as a route to economic recovery. In answering, the Prime Minister claimed that "What America has not done is what we have done over the last ten years which is to double the science budget and America is trying to catch up in a way that we have been investing consistently in science over these last few years".[38] This assertion was disputed the next day by Nick Dusic, Director of the Campaign for Science and Engineering (CaSE).[39] He said that whilst the UK Government has invested heavily in science, particularly during a period when the science in the United States was not seen as a priority, the figures relating to GERD indicate that any "catching up" by the USA was hardly necessary. The latest year for which the Organisation for Economic Co-operation and Development (OECD) has produced figures for GERD is 2008. As the figures show, there was no significant difference in the proportion of GERD financed by government between the UK and USA in the period 2000-2008, but the USA had a well-established higher ratio of GERD to GDP. The UK's GERD to GDP ratio increased by 11% in the four years from 2004, an annual rate of 2.75% per year. For the Government's target of 2.5% of GDP being spent on GERD by 2014, the rate of increase would have to be 33% over six years, or 5.5% per annum. From the Prime Minister's remarks at the Liaison Committee, we do not anticipate that such an increase or Obama-style stimulus package is being contemplated.

Table 2: Gross Expenditure on Research and Development as a proportion of GDP 2000-2008, UK and USA

2000 2001 2002 2003 2004 2005 2006 2007 2008

United Kingdom 1.81 1.79 1.79 1.75 1.69 1.73 1.75 1.81 1.88

% of which financed by government 30.2 28.9 28.9 31.7 32.9 32.7 31.9 30.2 29.5

United States of America 2.71 2.72 2.62 2.61 2.54 2.57 2.61 2.66 2.77

% of which financed by government 25.8 27.2 29.1 30.0 30.8 29.3 29.3 28.3 27.0

Source: OECD Main Science and Technology Indicators 2009/2

20. Iain Gray, Chief Executive of the Technology Strategy Board, agreed that uncertainty in terms of future funding could also damage private sector investment.[40] Far from the private sector 'picking up the slack', Professor Thorpe said that the two were correlated.[41] In the Royal Society's report on The scientific century, the relationship between public and private sector investment in science is illustrated very effectively.

Figure 2: The relationship between public and private sector investment in science

Source: The Royal Society, The scientific century, p53

21. Although gross expenditure on research and development has increased since 2004, the Government is some way off its target of 2.5% of GDP being spent on R&D by 2014. Indeed, the annual rate of change would have to double between 2009 and 2014 compared to 2004 and 2008 if the target were to be met. Such a doubling could only be met if public sector investment were to increase dramatically. Any cuts to the rate of increase, with the attendant decline in private sector investment, would be seriously damaging.

22. In the next chapters, we consider the roles of demonstrating impact, setting priorities and higher education in the funding of science and scientific research.

9 Department for Business, Innovation and Skills, SET Statistics: Science, Engineering and Technology Statistics, November 2009, www.dius.gov.uk/science/science_funding/set_stats, Table 2.1 Back

10 HM Treasury, Comprehensive Spending Review 2007, D4.7 Back

11 Technology Strategy Board, About us, www.innovateuk.org/ab`outus Back

12 Department for Business, Innovation and Skills, About R&D tax credits, www.dius.gov.uk/innovation/business_support/randd_tax_credits/about Back

13 The money that research councils receive each year are not exactly the same as they money they spend. Back

14 Arts and Humanities Research Council, Annual Report and Accounts 2008-09, HC 780, p 62 Back

15 Biotechnology and Biological Sciences Research Council, Annual Report and Accounts 2008-09, HC 587, p 53 Back

16 Economic and Social Research Council, Annual Report and Accounts 2008-09, HC 710, p 102 Back

17 Engineering and Physical Sciences Research Council, Annual Report and Accounts 2008-09, HC 801, p 70 Back

18 As above, p 77 Back

19 Medical Research Council, Annual Report and Accounts 2008-09, HC 914, p 69 Back

20 As above, p 81 Back