HC 618-iii - Spending Review 2010

Oral Evidence

Taken before the Science and Technology Committee

on Wednesday 14 September 2011

Members present:

Andrew Miller (Chair)

Gavin Barwell

Stephen McPartland

Stephen Metcalfe

David Morris

Stephen Mosley

Graham Stringer

Roger Williams


Examination of Witnesses

Witnesses: Professor David Delpy, Chief Executive, Engineering and Physical Sciences Research Council, Professor Keith Mason, Chief Executive, Science and Technology Facilities Council, Professor Rick Rylance, Chair, Research Councils UK and Chief Executive, Arts and Humanities Research Council, Dr Steven Wilson, Interim Chief Executive, Natural Environment Research Council, and Professor Sir John Savill, Chief Executive, Medical Research Council, gave evidence.

Q167 Chair: Good morning, gentlemen. Thank you for coming. For the record I would be grateful if the five of you would identify yourselves.

Professor Delpy: I am David Delpy. I am Chief Executive of the Engineering and Physical Sciences Research Council.

Professor Mason: I am Keith Mason, CEO of the Science and Technology Facilities Council.

Professor Rylance: I am Rick Rylance, Chief Executive of the Arts and Humanities Research Council and Chair of RCUK Executive Group.

Professor Savill: I am John Savill, Chief Executive of the Medical Research Council.

Dr Wilson: I am Steven Wilson. I am the Interim Chief Executive of the Natural Environment Research Council.

Q168 Chair: There are a few questions that stem from our observations on the published figures. The BIS Annual Report and Accounts show that AHRC, BBSRC and STFC spent less than was estimated in 2010-11. Is there an explanation for that?

Professor Mason: Shall I kick off on that one? It is basically the difference between cash and accruals accounting. BIS are required to forecast the amount of cash that they give us in grant in aid and to report against that number but actually operate an accruals accounting system. Our expenditure and commitments are measured by the time we take on a commitment, i.e. accrue the commitment. Most of the differences that you have spotted are due to the fact that the time you take on the commitment and the time the cash flows out to meet that commitment might be different. If you are on an end-of-year boundary, things can move from one year to the next relative to one another. That accounts for the difference. Certainly, the BBSRC are not here, but my colleagues tell me that that accounts for the difference in BBSRC. In the case of STFC, there are a couple of other factors. First, we re-profiled our CSR 07 allocation to better meet the demands, in effect spending more in the first year and less in the third year. Part of the difference is the repayment of that effective loan.

Q169 Chair: There are two supplementaries from that, Professor Mason. First, you used the phrase "most is accounted for by this process". What are the other factors?

Professor Mason: There is the loan that I was just telling you about. The other major factor in the case of STFC is that the BIS numbers include our spend on capital, including the spend for the Large Facilities Capital Fund on Diamond and ISIS. That was more in 2009-10 than it was in 2010-11, so there is a reduction there.

Q170 Chair: Let us be clear. Does this mean that each of the three bodies have additional sums of money to spend this year?

Professor Mason: We do our accounting on the basis of accruals and that is the basis on which the allocations are made. There is no variance compared to the allocations.

Professor Rylance: The situation in the three Councils is different. I understand that the one in AHRC is because the AHRC moved offices from Bristol to Swindon in that year and so money was made available to effect that transition in terms of the buy-out of the lease in Bristol, redundancy payments and general costs of transfer. In the event, we managed to bring that in significantly under the budget that had been allocated for that, so this is admin spend and not programme spend.

Q171 Chair: Does that mean that in their case there is about £3 million left in the kitty to spend this year?

Professor Rylance: As far as I am aware, yes.1

Q172 Chair: Does the same logic apply to the BBSRC and STFC in terms of what are substantial sums?

Professor Mason: In the case of BBSRC, it is just the timing of cash outflow against accruals. A commitment was made in one year but the cash might have flown maybe only a day later, but in the next financial year. It is the same amount of resource, so there is no spare. In the case of STFC, again it is just moving funds between years in the case of the loan that I told you about. In the case of the capital spend on Diamond and ISIS, it is the profile of that spend. We were building more instruments in 2009-10 than we were in 2010-11. It follows the predicted spend profile.

Q173 Chair: The same report shows that expenditure rose across all Research Councils in 2010-11 compared with the previous year, with the exception of BBSRC and STFC. Why were those two different?

Professor Mason: For the reasons I have explained.

Q174 Chair: It is all to do with that?

Professor Mason: It is all to do with the phasing of cash with respect to accruals and, in our case, the moving of money between years to-

Q175 Chair: There must be a neater way of putting this down on paper for the lay person to understand.

Professor Mason: I could not possibly comment. Apparently I understand that is the way BIS are required to frame their Annual Reports, but by whom I am not sure.

Professor Rylance: I will say it caused some head scratching back in the office.

Chair: And here.

Q176 Gavin Barwell: Good morning, everyone. I would like to ask about capital funding. Back in January, Professor Thorpe said that the biggest challenge you would face over the next four years would be to minimise the detrimental effects of the reduction in capital spend. How are you coping with that challenge?

Professor Rylance: With some difficulty. Alan was right then and were he here today he would continue to be right. It is the biggest challenge. We have had significant reductions in capital. The capital is of two kinds. How do we maintain existing equipment and how do we invest in future equipment? Both of them are crucial to the future competitiveness of UK science.

There is a capital equipment fund. We maintain a list of necessary developments. That is a matter of continual negotiation with BIS. I have to say that BIS’s position on this is broadly sympathetic. They do appear to understand the predicament that we are in. Of course, an extra £100 million was released recently for capital projects and we will continue to put the case to BIS. Hopefully, BIS will be able to respond positively to it, but it remains a serious concern for us. I don’t know if my colleagues would like to say anything.

Professor Savill: Can I just enlarge on that? Obviously the Medical Research Council is different from some, in that about half our science is done in our own units and institutes by our own employees. Therefore, we are expected to provide all the capital requirements. To give you a recent example, many of you will know about the new laboratory for molecular biology in Cambridge-Britain’s Nobel Prize factory. It is a new £220 million building. We recently reviewed the science for the next five years: stellar international outstanding science. The International Committee thought a request for £24 million of capital for the next five years was modest, but at the rate of allocation we have, that is something of the order of one sixth of our capital over the next four or five years on one fifteenth of our recurrent spend. It is very challenging for those Councils that have their own operations because you cannot expect anyone else to fill the gap.

Conversely, in the extra-mural environment where we are giving grants to universities, MRC has already seen a big change in applicant and university behaviour. Universities understand that we are strapped for capital. They are now, in a completely different way, producing the majority of the capital themselves. They understand about equipment-sharing and are justifying this. It remains a major worry for us, but I underline that, certainly in the discussions we have had with the Department, they do understand and they have been trying to help. Part of it is about making a case to the Treasury that investing capital in science equipment will have the economic impact that investing capital in something else like road building might have. I would reiterate what Rick has said. The Department seem to understand and have already tried to help.

Q177 Gavin Barwell: I will pick up on the point that you made about the additional £100 million. As I understand it, you provided a list of projects to BIS for that. I have three specific questions. How did you generate that list with your respective scientific communities? Were the projects that the Government chose at the top of your list? Did you prioritise the list that you gave or did the Government pick some itself from that list? What is the impact on the projects from the list that did not get chosen? Is there any other way that you are going to find money for those?

Professor Rylance: The process from which that list was derived was pretty exhaustive. It was based entirely on scientific need and scientific excellence. There was a special committee convened to do that. It had independent input into it, and it arrived on a ranked basis so there clearly were far more possible candidates than eventually arrived on that list. That was about that discrimination.

All of those things are very important. That is the first thing to say. We have a sense of their rank order in terms of priority, but that may not necessarily match the fundability of any given one at any given time. We quite carefully present this list that all of these are proper and appropriate things to fund. The decision about which, if any, are to be funded is one which will be made by the people who are making the decisions about funding. We are kite-marking this list.

What happens if things are not funded? They remain on the list. This list is refreshed from time to time. It is offered to BIS, most recently on 15 July, in alphabetical order so there is no hierarchy which is derived from the rank order of the list. That is how the process goes on.

Q178 Gavin Barwell: Let me press you a little bit more on the ranking point. You say that you are clear from the advice that this Committee provided to you that there was a ranking basis. I think that was the phrase you used for it. If I were to look at the projects that the Government decided to fund-the ones that were announced-and compare that with your ranking list, did they fund the top-ranked projects or did they pick from the list?

Professor Rylance: Colleagues can help me here, but they certainly funded the top one. I am now trying to remember which ones they did.

Q179 Gavin Barwell: Do you think you can provide us with that? Is it in the public domain what the ranking was that you provided? Could you provide that information to the Committee so that we can make that comparison subsequently?

Professor Rylance: That document is for BIS, so we would certainly have to take a view from them. Certainly, from our end, we would have no problem about making that public.

Q180 Gavin Barwell: We may take that up with the witness during the next session. One more question very quickly, Chairman, if I may. You made a point at the outset that the capital budget has to cover both maintenance of existing facilities and a look forward at new facilities that may be required. One of the concerns that has been expressed to us is that the reductions that will affect laboratory equipment that is available for teaching and research at universities will impact more on middle-ranking universities. What we are going to see from this contraction is funding concentrated essentially in the elite institutions. Is that a valid concern in your view?

Professor Rylance: It is worth remembering that what we fund is research, so our money is going to those top-end institutions that are performing outstandingly. There is a separate arrangement for funding teaching-related activity. It is important to try and remember that.

What is crucial here is something that John mentioned earlier on, which are the measures we are taking to encourage sharing of facilities. There are some initiatives up and down the country which we very warmly welcome, such as the N8 amongst northern universities, for instance, to arrive at a consolidated service of what they have and what they need and how they can best use it across each other. That is something we are very keen to both encourage and work closely with. In that way, we trust that maximum use will be made of the equipment that is there and will be there in the future.

Q181 Stephen Mosley: The Research Councils have been asked to find efficiency savings of £427.85 million over the next four years, with those efficiency savings due to be reinvested into science and research. How realistic is that target? Are you facing any challenges meeting that £427 million target?

Professor Rylance: The most important component of this is the savings that come from the Wakeham Report, which recommended a number of ways in which you could achieve consistency of charging across the UK, particularly with respect to indirect costs. Some of our efficiency savings are going to come from that end and from the implementation of the Wakeham agreement.

We have done this in terms of a profile over the period. We are very confident that we can achieve that in year one, but there are issues for future years that we need to bear in mind. One of the mechanisms we are using is efficiency grouping, such that you are encouraging people to be more efficient. We do not know how efficient people are going to become but that will clearly have an impact on years two, three and so on. That is one element.

The second is that, of course, we are in fairly unknown territory here. We are looking at issues like this issue about equipment and facility sharing and so on and so forth and what impact that will have. Thirdly, of course, the method is untried so we have built in a sequence of reviews of that method to try and work out whether adjustments will have to be made for subsequent years. I do not know if colleagues want to add anything to that.

Professor Savill: It is just worth saying that, where we are making grants to universities, it is the universities that are making the efficiency savings, and not the science budget. In fact, it means money coming back into the science budget and we will be able to fund a little bit more science. The stress in the extra-mural activity is on the universities. Again, the response we have had-and I believe other Councils have had-is, "So far, so good".

Professor Rylance: Yes, both in terms of the prospects of achieving those savings and also the cultural shifts which are going to produce the longer-term benefits.

Q182 Stephen Mosley: We know the level of savings that we are going to achieve this year, but you said you are going to have to look at the models to determine the level of efficiency savings in years two, three and four.

Professor Rylance: Yes.

Q183 Stephen Mosley: Do you have any idea when that data will be available and when you will have an idea of the savings that will need to be made?

Professor Rylance: The process is due to be reviewed first of all next month, in October, and then again subsequently in the year. Adjustments will be made on that, but clearly we are going to have to set targets for next year which universities will have to understand. Therefore, the date of the receipt of information will be earlier rather than later. I do not have a specific date in mind for doing it.

Q184 Stephen Mosley: Is there any particular Research Council that feels more hard done by than any other, or has the pain been fairly equally spread amongst yourselves?

Professor Rylance: Colleagues can speak for themselves, but it is fairly distributed. There is a tried and tested formula for allocating such things. That is the one we are using in this case. The savings required in each Council are proportionate to its overall budget and activities. That is the way it is derived, so it is consistently spread.

Q185 Stephen Mosley: Are the rest of you happy with your own allocations?

Professor Delpy: I would say the process that we have developed has been developed across the Councils by our finance directors, specifically the Wakeham implementation group that we put together, and discussed quite extensively with the finance directors of the major universities. There is a difference in the way that the Wakeham efficiency savings are being implemented within universities compared to institutes. We have had to work that out, but it has been a single approach across the Councils. I do not think it is a question of one Research Council feeling less well done by than any other. It is a process that we have all agreed and has been applied in a fair way, as Rick said, in proportion to the budget that we put out either to our institutes or to the universities.

Q186 Stephen Mosley: Professor Sir John, in your response earlier, you said that these efficiency savings made by the universities and the researchers would feed back into your own budgets. Is that a process where the money is then directly available to spend by your own individual Research Council, or is there some other mechanism to spread those efficiency savings about?

Professor Savill: It is the former. The savings that accrue on MRC’s expenditure come back to MRC. We have already agreed that the savings made in our university-hosted research should go back to university-hosted research. It is a small percentage. I think it is an important point to get out in the open, but it is a small percentage of our spend. It is of the order of a couple of per cent. over the period, so these are not enormously draconian changes, but in our case they are recycled back whence they came.

Q187 Stephen Mosley: Moving on to something else, during the summer, a group of us from this Committee came and joined you in Swindon. We had the pleasure of going round the Shared Service Centre. At the time you were all up front and honest about the problems that the Shared Service Centre had had in the past, but you were fairly positive about the current and future situation. In this formal environment could you give us a quick update on the Shared Service Centre and how you feel it is going?

Professor Delpy: I should obviously do this as the last SRO on the programme. When you visited, I think we had probably just done the final transition of Research Councils into the Shared Service Centre, and so we were still bedding down. The project is now complete. In fact, there is currently, as you know, an NAO review of the programme. At the moment, we have a team across the Councils who are working on the final stabilisation. The NAO expect, in anything like this, that process to take somewhere between one and two years. We are bedding in. Every Council now has all its grants, all its HR, all its procurements, all its services being provided through the SSC Ltd. I would say that we are on track to fully stabilise the service that we have developed through the programme by the end of this financial year. Of course, we have to make sure that it is sufficiently stable to provide all the data we need for our financial closure statements. Despite the problems that there inevitably are with any large-scale programme, what we have developed is an SSC that is delivering the service to all of the Research Councils. We will hopefully have solved all of the residual problems by the end of this financial year.

Q188 Stephen Mosley: The Committee has recently received a complaint from a research scientist who is saying that it is taking a minimum of four weeks to settle his travel expenses and sometimes more than six weeks. Should that be happening? Is there a particular problem when it comes to settling claims?

Professor Delpy: Obviously I cannot comment on an individual case. We do have a very regular reporting of key statistics from the Shared Services back to our customer service group. I just happened to look at this last week. On payment of invoices-and I assume that these come under that-we are achieving 97% payment within 30 days, which is one of the key performance indicators. I cannot comment on whether there were delays during the transition of individual Councils into the Shared Service Centre. If there has been a problem in an individual case, if it is flagged to us we will make sure that we do follow up and find out what happened and make sure that it does not happen again.

Q189 Stephen McPartland: Professor Delpy, I understand there has been some public criticism recently about EPSRC’s Shaping Capability exercise. Could you share with us the purpose of the exercise and how you set about it?

Professor Delpy: When our Council decided to set out a new strategy, we deliberately set out our strategic plan prior to entering the whole of the CSR exercise, on the basis that the strategy that we wanted to implement should not be affected by the budget that we have available. What we can deliver against that strategy and the pace at which we can deliver may be set by the budget.

In that strategic plan, which we published in 2010, we very clearly set out three key aims. One was shaping our portfolio; one was developing individual leaders; and the other was delivering impact. The Shaping Capability element is as a result of the analysis that we have done of the way that the UK engineering and physical sciences are performing against what is an increasingly competitive international environment, both in terms of volume-obviously there are some very large volume increases of research in China and India-and also quality. On the basis of the budget that we had even in 2010 we realised that to remain internationally competitive we could not in fact fund across the board at an internationally competitive level. We were going to have to identify those areas that were both internationally excellent in terms of their academic base but also were of importance to the UK nationally.

We were also going to have to free up some cash in order to invest in new areas because there are always new areas coming along that we really do need to be able to invest in. We specifically said we would be going through an exercise of looking at the whole portfolio and identifying areas that in the end we would put increased funding into, those areas that we feel we would maintain, and those areas that, as a proportion of our portfolio, we would reduce.

Q190 Stephen McPartland: I understand there is some concern also that the Royal Society of Chemistry and Institute of Physics were made aware of it but they were not asked to input. Who did you ask to input and why did you not ask those two?

Professor Delpy: This is all to do with the process that we went through. As part of developing the strategic plan, we did a full analysis of our funded landscape, which we published on the web for comment. We followed that up with a further analysis of our balance of people, the distribution of postgraduates, Fellows and so on across our whole portfolio. On the basis of that, we then went out to the universities that we were funding and created a map, not only of all the research that we were funding but the research that-

Q191 Chair: Can I be clear there? When you say "going out to the universities", do you mean the research committees or the research groups themselves?

Professor Delpy: Within the universities, we largely went to either the research strategy committees if they had one or the research PVC would usually be our contact point.

Q192 Chair: But not the individual research groups.

Professor Delpy: We also of course have our strategic advisory teams in each of our portfolio areas. They were involved in collecting this information. The information on our whole portfolio is not just what we fund but what everybody else funds within the universities. We have other Research Councils’ data. We have some information from some of the major charities. The only people who know what is funded across the board from the EU, from industry and so on are the universities themselves. We went out and asked them to provide us with that information.

As a result of that-and that was quite an extended and iterative process-we produced a so-called knowledge map in each area which represented the totality of all of the funding that was going into an area in our major universities and also an analysis of where the universities were intending to make major investments. They provided us with information on a confidential basis as to what they were planning to do. Some of it is public, but some of it was private. We also looked at the HESA statistics and the university statistics on the demographics of the population within each of the areas and disciplines, and where we were putting our fellowship funding and PhD student funding, to see whether there was a mismatch between the size of the community that were currently active versus the size of the community going forward over a 10 to 50-year time scale.

All of that information was collected. We went out specifically asking for evidence. We explained through numerous visits with the Royal Society of Chemistry and the Institute of Physics what we were doing and seeking additional evidence that we should be using as part of that mapping of our whole portfolio. The discussions with them were to seek evidence, not to ask them to give us a prioritised list, for instance, in chemistry. I do not think that the Royal Society of Chemistry-and it would admit so-can provide us with a priority of one area of chemistry over another. It is a membership organisation and it could not provide us with that ranking of priorities. In particular, of course, it could not give us a comparative importance of chemistry against engineering or ICT or mathematics or physics.

Q193 Stephen McPartland: How would you briefly respond to the allegation that the changes to the research areas were taken by EPSRC staff alone?

Professor Delpy: On the basis of all that evidence-and there is much more than what I have gone through here, because obviously there are the reports from all of the learned societies, from the NSF, from the EU, and forward plans and strategies from our major competitors-I would say that the one expertise that the Research Councils have is in managing a portfolio and understanding a portfolio. We make no attempt, and would never make an attempt, to judge individual research projects. That is why we have peer review and peer review panels. In understanding the whole of our portfolio, matching it against the priorities of Government Departments, matching it against the priorities that we know the EU, NSF and Japanese and Singaporean Governments have, and on the basis of that, our team produced a series of priority maps which we then took to our scientific advisory teams. It was those that we then again showed to people like the RSC and the IOP, asking them to comment on those to provide additional evidence where they felt things were wrong or where we should change those priority versus excellence maps. That was the process that we went through.

Q194 Stephen Mosley: You have rated these areas as to grow, to maintain or reduce.

Professor Delpy: Yes.

Q195 Stephen Mosley: What does this mean for people who are in areas that you say you are going to reduce? What will it actually mean on the ground?

Professor Delpy: First of all, what it means is that there is not a drastic fall. We are not going to cut funding by 50% overnight. These are directions of travel. We manage a complex portfolio and we manage it in a very sensible way. We have not set individual budgets at the levels of those areas that we have identified. We hold the budgets at a higher level, so in fact there is a physical sciences budget which covers materials, physics and chemistry. Over the period of the SR, what we want to see is that as a proportion of our portfolio some areas will reduce; other areas that we have identified as new areas we want to grow will increase as a proportion of our portfolio. We will manage that in a very sensible way. We are trying to flag up to the community that there are areas we do really want to grow and that we believe are areas that are really nationally important from the UK perspective.

This is part of an open messaging to the community saying, "If you work in this area and you can see that your research may have an application in an area that we wish to grow, then do talk to us and do try to encourage your research team to look at areas in those new and expanding parts of our portfolio."

Q196 Chair: Why is it that one particular branch of chemistry has been the focus of the vast majority of letters of complaint?

Professor Delpy: That is interesting in itself. We broke our portfolio up into 111 areas. We tried to find a balance between high level and low level. We announced 29 of them. There were quite a few that we have said we would grow or reduce. A lot of attention has been drawn to the fact that we said we would be reducing the portfolio in synthetic organic chemistry. We have had far less of a response in other areas. To be honest, to an extent I think it is an over-reaction. If you look at the description that is being given of our decision to reduce, the implication from reading many of the letters is that, overnight, we are going to halve the funding in an area.

Q197 Chair: Were any of the people, whose names are in the public domain because they have written letters very publicly, who were the authors of those letters part of the consultation process or were they one step removed, going back to my previous question?

Professor Delpy: I am trying to remember the list. There were 100 on that initial letter. None of them were members of our strategic advisory team. Many of them are senior members of individual universities who were consulted and would have been present at some of the meetings that we have had where we have presented information on this process. As far as I know, my recollection is that none of them were individually approached and went through the data with us.

Q198 Stephen McPartland: Can you understand the frustration in some quarters that the town hall meeting you have planned in a couple of weeks is too little too late and that decisions already seem to have been made?

Professor Delpy: The process that we have gone through is a rigorous and extended one. At the town hall meeting, we want to make sure that we have explained exactly what the process is and how we have arrived at the decisions that we have made. As I say, this is not EPSRC arbitrarily deciding on particular areas. We come up with a first guess. Changes were made as a result of going out and consulting with the community once we had put forward an Aunt Sally. The fact that the changes that were made were relatively small is an indication that our portfolio managers really do understand their portfolio and that the information and evidence that we used in feeding into those decisions was the correct information and we have not omitted any major pieces of evidence.

Since the initial announcements, we have had very little in the way of new evidence. We have had a lot of opinion, but in terms of evidence that would influence a decision, at the moment we have seen relatively little. At the town hall meeting, we will be making sure that we point out exactly what the process is and what the evidence is that we have used. We will be asking the community to identify additional pieces of evidence that we perhaps have omitted or interdependencies that we have not been aware of. It is a very comprehensive set of data that has gone into that. In fact, as you know, there has been an FOI request to which we will be responding. There are over 400 sets of documents that provide the underpinning evidence on which we have based these decisions.

Q199 Stephen McPartland: Do the other Research Councils intend to carry out a similar mapping and prioritisation exercise, and would you do it in the same way as the EPSRC?

Professor Savill: It is different strokes for different folks. The communities are different. EPSRC is being very open when it says that some areas might reduce. If I think about the Medical Research Council over the last 20 years, inevitably some areas have reduced because funding has been focused on areas that are of high priority. The community works out, therefore, that the competition in the area that you are moving on from hots up and it is going to be more difficult to get grants in those areas. It is the nature of the beast. I would commend the EPSRC on being open about it. It is an interesting initiative that we will watch and see how it develops. Again, one of the benefits of having seven Research Councils is that we can do experiments like this across the piece and follow how this experiment goes. It is not exactly the same, but let us see how it goes with EPSRC. That would be MRC’s view.

Q200 Stephen McPartland: Do the others agree?

Professor Mason: We would all agree that circumstances in different Research Councils are very different and you have to handle them in different ways. Dave talks about 111 areas. In my Research Council there is only a handful, and so there are bigger lumps and you have to deal with them differently. We went through a major restructuring in the last spending review period in order to prepare ourselves for this one. In our case we have already done the job, we are now stable and, economy permitting, we hope for a sustainable and bright future.

Q201 Stephen McPartland: My final and very quick question very briefly is this. Are you going to adopt the EPSRC’s approach to peer review?

Professor Mason: Again, we all have a peer review system that follows the same principles, but the implementation is different in each Council because the job that requires to be done is different. The portfolio of activities, the way they are grouped, the drivers, the international connections are all different, so we have to adapt those principles to the reality of our situation.

Professor Delpy: Can I just make one other comment which I think points out a major and significant difference between the EPSRC and, shall I say, the other major STEM-based Councils? Most of the other STEM-based Councils have institutes. In terms of addressing major national priorities and major long-term goals, quite often those programmes are geared through their institutes. The funding within the university sector, while it may be complementary, does not obviously duplicate that. EPSRC does not have any institutes, so it requires the university sector that it funds actually maps its academic priorities on to what are perceived to be the national areas of excellence and the national priorities. There is a major difference, certainly in the STEM area, I would say, between EPSRC and those Councils that have institutes.

Q202 Chair: A final question to Professor Delpy. There seems to be a significant difference in the nature of the complaints coming from the mathematical sciences versus the ones from the synthetic organic chemists. One of the themes seems to suggest that there may still be a crack in the system between maths and engineering. Do you accept that that might still be a problem?

Professor Delpy: The mathematics area is one where we have not yet arrived at decisions on the grow, maintain or reduce proportions within the subsections of mathematics. That process was not in place, but what was clear from both the 2004 and 2010 international review was a unanimous highlighting of the need to grow and strengthen the statistics and applied probability area. We decided that since our shaping is being applied to the whole portfolio-so this is not just to the research but to the students we are training and to the fellowships-we would take up the one area that had been clearly identified as a priority and a continuing priority, which was statistics and applied probability. In our fellowship call, in this first call-and it is only for this one call-we have limited applications for fellowships to statistics and applied probability.

Q203 Chair: We are going to cover that part in a bit more detail later on. When you undertake your exercise governing mathematical sciences, will you give us an assurance that you will look to make sure that the system does not have a crack between mathematics and engineering, as is perceived by some people?

Professor Delpy: Absolutely. We do try to work very closely with the Council for Mathematical Sciences and the other mathematical institutes.

Q204 David Morris: In communications, what lessons have you all learned from the EPSRC’s experience and what changes, if any, do you intend to implement to the way in which you consult and communicate with your research communities? Do the Research Councils produce proactive communication strategies to deal with the potentially contentious issues? If not, why?

Professor Savill: We all have a commitment to public engagement and to working with our community. Sometimes there are complex messages that have to be got across. If I think back in medical research over the last 20 years, there have been howls of protest at various times. Do not forget that we are part of our community. We are bumping into them the whole time. They all feel free to send you e-mails advising on what you should be doing with the MRC’s budget. We do not lack engagement with the community, at least in my territory. From afar, EPSRC are making a bold change and a change that they think is important. I am not surprised that there is some upset over this. As we have already heard, EPSRC are attempting to communicate their thinking more clearly to the community. I cannot speak for others, but certainly in MRC, we have a very close relationship with the community.

Professor Rylance: That would be true of all of us. I would add this. There are two elements here. One is: what input does the community have into the formulation of strategy of one kind or another? The other is: how do you then communicate the outcomes of that once decisions have been made? On the first-I am confident this is true of all Research Councils but, but just speaking of my own-we undertake both very regular meetings with, for example, subject associations and other representative groups, and then from time to time we also engage in much more open periodic consultations on particular issues. How do we determine the themes for our current delivery plan? There was a future directions consultation and so on and so forth. That is quite characteristic.

The communications issue is quite difficult. People who are disappointed in outcomes tend to blame process. That is life. It is as true in your lives as ours.

Chair: There are a few MPs who say that about the boundary changes.

Professor Rylance: One does not have to look too hard at these kinds of things to unearth the kinds of misunderstandings that Dave and EPSRC have to deal with in this particular instance, because we have all had that kind of process. We try our best with communications through formal and informal means, but when people are feeling disappointed or aggrieved and so on, it is not entirely a rational space of course.

Q205 Chair: Before we go back to mathematics, Sir John, I was listening carefully to your answer. One of the rumours circulating in your field of interest is that there is evidence that money is being diverted from research into front-line NHS services. Inside university hospitals there must be a very woolly line there. What mechanisms do you have in place to stop that happening?

Professor Savill: First, all Research Councils engage in dipstick testing corporately, so that we have a fine, detailed audit of where our money has gone. We take steps to make sure that it is not being diverted into stuff that it should not be. The point you raise is probably more of a challenge for the NHS R and D systems. They are working hand-in-glove with the hospital trusts in England and similar organisations elsewhere. This was a criticism that was current several years ago. For example, in England, Dame Sally Davies has led a complete revision of this funding. It is now audited separately from patient care. It has been a very positive development and has helped the MRC enormously in its mission of clinical research. Those rumours may have had some currency a few years ago, but now there is a much clearer separation in the NHS between research funding and patient care funding. I think you should be reassured about that.

Q206 Stephen Metcalfe: Professor Delpy, back in July you said that your new approach to fellowships had arisen from extensive discussion carried out in 2009. However, we have heard from the Council for Mathematical Sciences-and I touch on that again-that the changes were introduced with no warning whatsoever. I understand what you are saying in that you limited your first call to statistics and applied probability, but, whichever way you look at it, it does appear that there is a communications issue between the CMC’s understanding of what is being done and what you want to put across. Why do you think that is?

Professor Delpy: I have to acknowledge that there has been a communications failure on our part. As I said when describing the build-up to the strategic plan, the Council spent the whole of the 2008 year looking at our research portfolio and then the whole of the 2009 year looking at our balance of people portfolio. This looked at the distribution of studentships, postgraduate researchers and fellowships in each of our areas. That information was discussed within our strategic advisory teams through specialist panels. It was taken out to the community. I have an annual meeting with the CMS as well as my team’s regular meetings with some of the other mathematical communities.

We then put the whole of our balance of people data on the web for open consultation and comment, as we did with the previous research landscape. All that information was out there. In fact, I must admit that we were disappointed at how few comments we got back from the community on that. It was on the basis of that that we identified where the distribution was and whether it was at odds with where the research was taking place, what the priorities were or what the demographics were. In the strategic plan we then set out, under developing leaders, a clear description that we would go to a different funding of fellowships; that we would be funding individuals not just in specific tranches or periods in their career but across the whole of their career; and that as a result we would be changing the fellowship mechanism. We have abolished this once-a-year deadline. We now have a more open call process. We have at least two fellowship calls a year.

In this very first round in this new process, we decided to restrict calls in specific areas or to specific periods in careers. In some areas, we have a lot of senior researchers but not enough coming in at the bottom end, or vice versa. In the case of mathematics, as I say, the maths team and the strategic advisory team have not yet come to a conclusion on other areas of priority to grow or reduce, but this area of statistics and applied probability was clearly accepted by everybody as a priority, and we decided to go for that this time round.

Q207 Stephen Metcalfe: I can understand your reasoning behind it. What I am getting at, though, is that there is still a communications issue between the EPSRC and, in this case, the mathematical community. They do not understand, or they do not feel they have been involved. The rationale may well be correct, but they do not feel involved. Is that just because they do not like the changes and so therefore they are saying, "We did not know anything about this", or is there a real problem with communicating with your community in a way that they understand? They do not have to like it but they do have to say, "Well, we didn’t even know it was coming."

Professor Delpy: I am prepared to accept that we have clearly made errors as well. It is true that they do not like the decision, but then, as John says, that is part of what having to prioritise will lead to. We are going to have to make more efforts than we have in the past to try to engage with them.

There is a particular difficulty with the mathematics community, because it is difficult to get at the whole community through a single organisation. The Institute of Physics represents the whole of physics. The Council of Mathematical Sciences represents five different mathematical bodies. It is often quite difficult. We literally do not have the resource to speak to every single member organisation in the country across our whole remit. We have to try and work through an intermediary. In this instance, we need to try and get down to some of the other bodies represented within the Council for Mathematical Sciences.

Q208 Stephen Metcalfe: The decision that has been made on the first call is limited to those two areas. How long will that regime last? When will you broaden your support for other areas? Some of the evidence we have had, certainly from, on this occasion, New York university, says that often by researching wider areas there are spin-offs and you do not know where they will lead. That leads you into new and exciting areas. By restricting it to a fairly tight area we might be damaging that.

Professor Delpy: That letter is from the Head of our International Review of Mathematics, and we pay great attention to that. I made a response to the original letter from Frank Kelly, which sets out the details of this. We will make other fellowship calls-more than once a year anyhow-so there will probably be another call towards the end of this year or early next year. If the mathematics community, working with us, have completed that prioritisation of the mathematics portfolio, then obviously we can start to try to make some calls which meet the needs of that particular outcome.

Q209 Stephen Metcalfe: So the ball is in their court to an extent.

Professor Delpy: And working with us. The reality is that we have that whole picture and they have the detailed picture of mathematics. The other reality is that within the engineering and physical sciences area we only fund about 30% of post-doc activities. There are lots of other fellowships available. If we were the only source of fellowships I would be very concerned, because obviously anything that we did would have a major effect, but there are a lot of other Fellowships. In the letter that I sent to Frank Kelly, you will see the statistics on that. There are other sources of funding.

Q210 Stephen Metcalfe: I am very aware that we are tight for time so I have just one final question to the rest of the panel. Is anyone else prioritising their funding towards certain fellowships in the same way and restricting the areas that they are willing to invest in research?

Dr Wilson: No.

Professor Rylance: We are not, no, but we have three priority areas to develop. Through things like highlight calls and so on, we are encouraging applications in that area, but we are nowhere near the issue of saying, "That lot will have that number" or anything like that.

Q211 Roger Williams: Most of the Research Councils are anticipating a modest reduction in the number of PhD studentships in their funding. The EPSRC, as I understand it, are reducing the numbers by about a third. Could you tell us why you are doing that and, if you have consulted industry, to whether there will be enough PhD students coming through to meet their needs?

Professor Delpy: If you look at the statistics, EPSRC funds more students than all the other Councils put together. We currently have some 10,900. We have been flagging up this change for a considerable time. The priority that we have decided in the funding of students is through cohort training over a four-year period through Centres for Doctoral Training. Engineering Doctorate Centres and Industrial Doctorate Centres are key parts of that. All of those have very significant industrial partnerships. In the case of Engineering Doctorates, the students spend three of their four years working in industry. Most of our CDTs have anywhere between 20 and 100 companies involved with them, so there is considerable investment and backing for this approach from industry.

We then put out a second major tranche to universities in the form of a single grant-a Doctoral Training Award-which we allow the universities very significant flexibility in using, and allow and encourage them to use it in a strategic way. That flexibility enables them to obtain significant leverage. They are currently funding almost 40% more students in principle than the money would allow them to do. Most of that additional leverage is from companies and other sources of funding. We also fund CASE studentships which are directly with companies. Currently we fund 600. Again, that is more CASE studentships than any other organisation.

The other major area of student funding which has grown enormously over the period is Project Studentships. This was a mechanism which we put in place. It started in 1996 to enable students to be put on to research grant applications. They have grown dramatically, particularly since 2004. They have doubled, and we are now at just under 3,000 project studentships. Through our Doctoral Training Grants and Centres for Doctoral Training and fellowships, we are spending 45% of our funding on training in one form or another. We are really committed to training. One of our major impacts and outputs is training, but we cannot, given a cut in our budget, sustain a further 3,000 students on project studentships. Our priority is this cohort training, the use of strategic doctoral training funding, and so we have said-and very clearly flagged this up more than a year ago-that we would in the current CSR be stopping these and they will gradually diminish over time. That will bring us down by 2013-14 to about 7,000 students. Our budget in 2013-14 will be roughly where it was in 2004, depending on the inflation rate. In 2004, we had 6,700 students. Our proportion of students as a proportion of our real budget will be back to where it was by the end of the current SR.

Q212 Graham Stringer: Can you tell us what progress you have made on retaining access to telescopes in the northern hemisphere?

Professor Mason: Yes. We have been working very hard with our partners in the Canaries, in La Palma. We are developing proposals which will allow us essentially to buy back access to telescope time on a needs basis. These negotiations are ongoing so I do not want to say too much about them, but a proposal will be going to our Science Board in October to consider. They will also look at the financial cost and tension against other demands and make a recommendation as to how we should proceed.

Q213 Graham Stringer: Similarly, we discussed the National Schools Observatory. What progress has been made with that? Have there been meetings with BIS and the Department for Education?

Professor Mason: We have been in close contact with the owners of that particular facility, which is Liverpool John Moores. There is a meeting set with the Vice Chancellor for October. Liverpool John Moores are the owners of this particular telescope. They have requested that meeting prior to any approach to the Department for Education. Once we have had that meeting and we have come to a common plan, as I said to you last time, we are very ready to support them in an approach to DfE.

Chair: Gentlemen, thank you very much. The Minister is hanging about outside so we have to move on fairly quickly. Thank you very much for your attendance.

Examination of Witness

Witness: Rt Hon David Willetts MP, Minister of State for Universities and Science, gave evidence.

Q214 Chair: Good morning, Minister. We apologise first of all for keeping you hanging on for a few minutes. As you can imagine, we were probing away at some of the issues about which you have had letters during the summer, and it took a little longer than we anticipated. First of all, have you had the opportunity to see the document published this morning by CaSE and have you any initial observations?

Mr Willetts: I have seen the document produced this morning by CaSE. My view is that they use one measure of science spending. We have a rather different measure that we use for the ring fence. I am not saying that there is one that is perfect and everything else is wrong, but I do think there is a powerful logic behind the measure that we use. We use programmed spending-the resource you need to deliver the activity day-by-day, month-by-month. Our measure-the ring fence-with a cash-protected budget of £4.6 billion does include all the QR funding that universities have for research which was not included in the previous ring fence. There is a good logic to focusing on current spend and protecting that in the ring fence, but I fully recognise-and obviously I have had many conversations about this-that there are issues about capital. We are doing our best for capital in tough times.

Q215 Chair: Whatever you say about the figures, the reality is that in real terms there are significant reductions. How has the Government taken into account the fact that inflation in science and engineering may be higher than the CPI, for example?

Mr Willetts: An awful long time ago, 30 years ago, I was the official in the Treasury on public expenditure control when we moved from what were then called survey prices to cash prices for public expenditure planning. I might even devote an entire chapter of my memoires to that fascinating incident. I can tell you that Ministers decided in 1980 or 81 that they were completely exasperated with fake, concocted prices called survey prices which tried to measure the different rates of inflation in the different goods and services that Government provided. There was a deliberate decision taken by the then Government to move to cash. That has remained ever since and I do think that planning in cash-so you link what your public spending is to the money that people can understand-is a very sensible way of proceeding. If everybody started arguing about their own private little rate of inflation, taking us back to the model of the 1970s and early 1980s, I think that would be a backward step.

Q216 Chair: Is there perhaps an argument in favour of having a UK equivalent of the Biomedical Research and Development Price Index?

Mr Willetts: As I say, I realise there are different price indices that one could construct. For overall public spending planning purposes, I think it is right to focus on cash. That is what we can all recognise. It would be the wrong approach to treat these specific price indices as fixed external things. Part of the challenge which we put to the sector in the friendliest possible way-and I think I put it when I was first before your Committee-was that, if efficiency savings can be delivered and if people can use the resource better, I very much hope that the cash-protected budget becomes a real protected budget. If people can be smarter, more agile and achieve efficiency savings, they will know that every pound they save, because of the ring fence, will be money for extra science activity.

Q217 Chair: In 2004, the last Government published a 10-year strategy for science: Science & innovation investment framework 2004-2014. Are you intending to follow that model?

Mr Willetts: If we look at the turbulence in the world’s finances at the moment, to have a solid bankable four-year ring-fenced budget of £4.6 billion when there are a large number of western Governments that are reviewing their finances, going through emergency cuts and exercises or whatever, does promise much greater stability for our scientists and researchers than in many other countries. I can understand how people want to see things go further but as I say, from what I observe around the world, sometimes even in some of the countries that were cited to us as investing more in science, there is sometimes boom and bust. I can quote no better authority than Ben Bernanke, who said, "Governments that choose to provide support for R and D are likely to get better results if that support is stable avoiding a pattern of feast and famine." I think at least a four-year stability is a considerable improvement on the uncertainty that is facing scientists in many other countries.

Q218 Chair: Wouldn’t you like to have a better planned target for the proportion of GDP spent on R and D?

Mr Willetts: It is an odd measure because it combines public and private spend. Governments do not have direct control over private spend. We have tried in tough times to do our bit on the public side, for which we are held directly accountable by your Committee. On the private side, where it makes sense for them, doing more R and D. It would be a use of the cash that some of them are sitting on, but they will need to be confident that the money can be well spent. I do not wish to have a target that involves our trying to tell businesses what they should individually decide on commercial matters that are for them.

Q219 Chair: I will put it slightly differently. Would you like to see it a little higher than it is now?

Mr Willetts: I am the Minister responsible for a lot of this activity and for innovation. I am a believer in R and D budgets, as I know you are. I think R and D is an incredibly valuable activity. I can see clearly the links between R and D and economic performance, but even R and D has to be subject to careful scrutiny. You can waste money on an ill-conceived R and D project just as you can in other ways. That is where these decisions have to be taken under commercial pressures.

Q220 Gavin Barwell: You said in answer to the Chairman that you fully recognise that there are issues about capital and I would like to take you on to those issues. I am going to start with a very simple factual question. When do you think the Government is going to be in a position to provide firm figures for Research Council capital budget allocations over the next three years?

Mr Willetts: We are working through that a year at a time. There have been some discretionary adjustments that have been positive, like the £100 million we had in the Budget. It is very hard for us to go firm on a capital budget looking out into the future. The amount we have for capital will depend on a lot of issues: for example, the Spectrum licence sale. People do not know what the proceeds will be and there will be some judgments about how it is allocated.

I do not think at the moment that we can produce a three-year plan for capital. I am not sure it would be in anyone’s interest to produce a three-year plan for capital, because it might ossify things which are best left open for further negotiation.

Q221 Gavin Barwell: 2012-13 is six months away now. When are they likely to get the figures for the next financial year?

Mr Willetts: We have announced some specific decisions on capital that is going to be spent over the next few years, with which you will be familiar, Mr Barwell, but I do not have an immediate date for any further capital announcements. We will just have to keep that under review.

Q222 Gavin Barwell: You referred to the extra £100 million that the Government provided in the Budget. We heard in evidence from the Research Councils before this session that they provided you with a list of projects. They said that those projects were ranked. Can you tell us if you chose the top-ranked projects or were there some other criteria by which the Government chose which projects it was going to fund?

Mr Willetts: There is this exercise of the RCUK Large Facilities roadmap in which they go through an exercise where they identify capital bids. There is a list of eight projects that were submitted to BIS last year, some of which we have been able to find the capital for like the Birth Cohort Facility and Diamond. Others we have not been able to find the capital for, like the development of the Institute for Animal Health at Compton or the Rothera Antarctic station.

As you have this list of eight capital projects, I do not think it is helpful to think of it as an absolute score of top to bottom. The academic community quite rightly identifies the facilities that are most needed in their communities. How you would weight the Rothera Antarctic station against the development of the Institute for Animal Health at Compton is not completely straightforward. It will depend on a whole host of criteria. There is the importance of the work we do on climate change in the Antarctic as against your assessment of the risks of Avian Flu and the need to maintain a capacity there. I do not think there is one perfect correlated one to eight list that can be the final judgment. There has to be exercise of discretion as circumstances change and given the priorities of Government. I do not see it as an ambiguous top-of-the-class to bottom-of-the-class list.

Q223 Gavin Barwell: Can I press you a little bit on that? You were not here to hear the evidence that was given to us before, but we were told that the list was supplied to you on a ranked basis. I entirely take your point. I would not like to be the person that had to rank these from one to eight, but the impression was given to us that they were ranked from one to eight. Can I press you again on whether the Government chose the top four as supplied to you or whether you took other views into account in deciding which four were going to be funded in the Budget?

Mr Willetts: We do have to take a range of views into account, including everything from immediate operational necessity through to how it ties in with the Government’s overall strategic priorities. My experience by and large in science is that Ministers have very little discretion, and a good thing too. My view is that even the science community themselves recognise that when it comes to these different capital projects, which often have a very different rationale in a completely different area of science or research activity, at that point it is a legitimate area for the exercise of judgment by a Department and Ministers.

Q224 Gavin Barwell: Thank you for that. It would be quite helpful in the interests of transparency, but not now, to set out what the judgments were that informed those four being chosen. I have two other very quick questions.

In their supplementary written evidence , Research Councils UK said to us, "We understand that the capital allocations made by BIS so far do not include potential additional capital that may become available to BIS from asset sales." Could you comment on what the prospect is of such asset sales and whether the Research Councils would be a priority in receiving funding from those asset sales?

Mr Willetts: The one that is most relevant to us in BIS is the Spectrum licence sale. There is a set of commercial issues there that have not been resolved, both on the exact amount that is raised by that sale and exactly when the proceeds come in. We do hope then to use those proceeds for capital across BIS as a whole, not just the science and research budget. That would be possible. That is the main thing that we are looking at.

Q225 Gavin Barwell: Finally, can I press you a little bit on an issue of principle? I would not say that anyone who has given evidence to us is overjoyed at the cash flows, but I think people do recognise that, relative to other large parts of the BIS budget and indeed of the general Government budget, science has fared fairly well on the revenue side. What was the reason that the Government chose to provide that cash ring fence on revenue but not to do that in relation to capital funding?

Mr Willetts: There are two points on that. First, in terms of keeping activity going through tough times-and, as one looks around the world and looks at public finances, these clearly are tough times-it was correct to give priority to current spend. With some of the capital projects there will be some scope for delay, as I said. That is one of the criteria we looked at: how many were immediately an operational necessity?

The second point-I hope you will forgive me, Chairman, and it is not too vulgar a political point-is that we did inherit overall across Government on capital spend plans from the previous Government that involved a reduction in capital from £50 billion to £23 billion over four years. Those aggregate figures were in our inherited documents. In all the discussions we had round the cabinet table, the Chancellor made it clear that he was not looking for any further capital reductions in aggregate beyond the ones that were provided for in the financial plans that had been inherited from the previous Government. Those were divvied up across Departments, but that was the inherited macro total within which the newly elected coalition then had to work.

Q226 Chair: But the Deputy Prime Minister today is arguing for a reversal and an increase in capital expenditure. Is BIS making its case for some of that to come back into the science community?

Mr Willetts: When I heard on the radio the summary of his speech I was egging him on to include, "Don’t forget those research facilities and that science infrastructure." You are absolutely right. In any understanding of infrastructure, it calls for a strong approach. I completely understand roads and transport and suchlike but, yes, science and science facilities are a key part of the national infrastructure.

Chair: I feel a written question coming to the Deputy Prime Minister.

Q227 Roger Williams: Can we move on to the Technology Strategy Board and its funding? Minister, you have given an indication that the core funding would be around £300 million a year, but that now includes £20 million for research and development grants that were administered by the RDAs, plus £45 million in funding for the Technology and Innovation Centres. Do you agree that this now represents a cut in the core of the TSB budget back to 2009-10 levels?

Mr Willetts: The TSB is outside the ring fence. We have had to make reductions in the TSB budget, but we have also found extra funding in the order of £250 million for our programme of investment in the new Technology and Innovation Centres. Yes, I accept it is a tight settlement for the TSB.

Q228 Roger Williams: That £200 million is over how many years?

Mr Willetts: It is over four years.

Q229 Roger Williams: What effect do you think this reduction will have on the core activities of the TSB?

Mr Willetts: I know the TSB have to take very tough decisions. They have to focus on their strategic priorities, but this is part of what is going on quite rightly across Government. We have had to take some very tough decisions on public spending. I realise it is tough for the TSB. I have great admiration for the way that Iain Gray and the team at the TSB are continuing to deliver imaginative ways of supporting R and D in British business even when money is tight.

Q230 Roger Williams: Following on from what the Deputy Prime Minister has said today-and I know that is about capital but this is about growth as well-is there an opportunity to reconsider this? It does seem to be fundamental to encouraging growth in the economy.

Mr Willetts: I certainly do recognise the value of what the TSB does. The reason why I hesitated when you said it was a cut from what was done before is because, although the RDAs did do a lot before, there was occasionally duplication. The classic example that I have probably cited to this Committee before is 22 different nanotechnology centres and, through shifting some of the RDA’s responsibilities up to the TSB and well as some down to the LEPs, we can get more bang for our buck and ensure that we do not have unnecessary duplication when money is tight. Even in this area there are genuine efficiency savings.

Q231 Roger Williams: Having said that the core budget for the TSB will be around £300 million, is that now ring-fenced? What certainty do we have of that?

Mr Willetts: We have set out our departmental spending plans. We do not envisage any changes, but the science ring fence is something rather special and not everything can be ring-fenced all the time. As I say, we are on track. One of the reasons why the Government took those very tough decisions early on was because the Chancellor did not want to keep on coming with further cuts exercises and other reviews to make further reductions. Our view is that we have taken all the tough decisions. Of course, we have to implement them. We do not want to come back with a second exercise and there is no sign of that.

Q232 Roger Williams: The CBI have indicated to us that their assessment is that the expenditure of the TSB is only about one twentieth of the amount that is spent on research in universities. Would you accept that and do you think that that is a fair balance between research and spending on innovation?

Mr Willetts: Of course, some of the money that is spent in universities is itself quite downstream nowadays, and a good thing too. When I go round universities and see the posters of the particular projects people have been working on, you can often see a clear link to an industrial application. I do not think we should regard university research as all blue-skies research. Some of it is, and a great thing too, but a lot of it is within that science ring-fenced research budget. It is pretty applied nowadays.

Q233 Roger Williams: So you think it is a fair balance.

Mr Willetts: I do think we have got it broadly right, but I understand that the TSB outside the ring fence is facing very tough decisions. I get businesses that come to me with what they thought was an excellent programme or bid, which I know the TSB would have liked to fund, but there is a cash constraint.

Q234 Roger Williams: Turning to a very important matter, this Committee indicated its preference for a brand name for the technology and innovation centres as the Turing Centres. When are you going to make the announcement and are you going to go ahead with it?

Mr Willetts: We are reflecting on this. I realise that unless we are careful these are going to become TICs. The challenge is to come up with a name. There are discussions under way. I know absolutely that the Select Committee’s proposal is one of the options that has been put forward. We have not quite reached a decision yet. I will certainly share it with this Committee.

Of course, the Committee has a track record, because the Crick Institute was launched as the Crick Institute through these Committee hearings in a way that I am not sure was completely intended, but in your ceaseless pursuit of news you managed to extract that before it was announced. I will keep you in close touch on this as well.

Q235 Roger Williams: And that was a very good choice as well.

Mr Willetts: It was.

Q236 Graham Stringer: We have had correspondence from leading scientists about the way the EPSRC are going about the setting of their new priorities on spending in different areas. You have had time to think about this. What is your view of how the EPSRC are setting up their stall and changing their priorities?

Mr Willetts: You are right. I have indeed had the letter, the Prime Minister has, and of course the EPSRC has the letter, most notably the letter from Anthony Barrett and many others, of 1 September. This is where the whole end principle does get tested. One would have to be very careful. I do not wish to get into a situation where the Minister has to pronounce on the relative significance of organic chemistry against other disciplines for which the EPSRC-

Q237 Graham Stringer: I am really asking about the process, not what you think about synthetic organic chemistry.

Mr Willetts: The EPSRC tell me that the decision procedure-how they should allocate their limited funding-was something on which they did consult throughout the sector. Of course, I realise that the Research Councils’ decisions need to be legitimate and people need to understand the criteria that were used and how they were used. The EPSRC assure me that the sector was consulted. When it comes to applying the criteria, at that point a group who believe, and I understand their arguments, that they have done relatively less well than some others will say, "Ah, but we never signed up to it. We don’t like the process." My understanding is that the process itself was widely consulted on and accepted before the substantive decisions were taken.

Q238 Graham Stringer: The EPSRC are doing their consultations, if that is the right word, in a different way from the other Research Councils. I would be interested in any comments on that. They told us, just before you arrived, that they did not really think that the Royal Society of Chemistry was the right body to advise them on these things because it is a membership body. That strikes me as odd, to say the least, and probably in conflict with the Haldane Principle if they are saying this major group of excellent chemists are not to be consulted because they have all got together. What is your view on that?

Mr Willetts: My understanding is that there was a two-stage process. There was the agreement on the process and how the priorities should be decided, and then there was the actual substantive decision. Perhaps what the EPSRC were saying to you was that at that point, on deciding the actual priorities, they did not think that the Royal Society of Chemistry would be able to contribute at that stage. As I say, they assure me that the overall process was subject to widespread consultation, including, I thought, with the Royal Society of Chemistry.

Q239 Graham Stringer: The chemists say that they were informed, but the actual decisions were taken entirely by staff at the EPSRC, so they do not really accept that, do they?

Mr Willetts: It is clear from their letter that there is a group of organic chemists who are very unhappy about what has happened. The application of the criteria and the decisions about the relative weighting of different priorities was taken by the Research Council, but having consulted widely on the process that would be used for reaching those decisions.

Q240 Graham Stringer: You have had the correspondence. Have you had any meetings with any of these concerned people?

Mr Willetts: I haven’t. I do owe Professor Barrett a reply, and I will be replying to him in the next day or two. Of course, I always enjoy meeting scientists, I have a good dialogue with them and always appreciate it. What I am wary of is setting myself up as a kind of Court of Appeal against Research Council decisions which-and this Committee has interrogated me quite rightly about the Haldane Principle-would undermine it. These are decisions that Research Councils have to take.

Q241 Graham Stringer: I think everybody would accept that, but if there is a flawed process, which is the accusation that is being made, is that not something that is worth the Science Minister sitting down with people and talking about the process rather than setting yourself up as a Court of Appeal? There is a great deal of money involved in this and initially it is the Government’s decision to spend that money.

Mr Willetts: Yes, within the constraints that we have set under the Haldane Principle. As I say, I am not sure that I can add anything. The EPSRC, in David Delpy’s very full letter to the organic chemists, has described the process that he went through. That letter is a very clear account of how he has tried to carry the research community with him whilst complying with the Haldane Principle. I am not sure there is much I can add to that.

Q242 Chair: In his evidence to us today, he accepted that there is a gap in the communications systems down to the actual research groups, although he did not accept that it was necessarily the fault of the EPSRC. Don’t you think that is a weakness in a system? Don’t you think there should be a degree more transparency in processes like this to ensure that everyone should be able to put their two-penn’orth in?

Mr Willetts: I do agree that Research Councils are institutions which emerge from research communities. They are servants of the research community in the same way as I see myself as a servant of the science and research community. I would not like us to get into a position where it was thought that there was a kind of bureaucracy in Swindon detached from the concerns of the mainstream science community. I do ask about that. When I look at what happens, because I do raise that question, Mr Miller, I am assured that, when you look at the way in which staff have revolved in and out of Swindon and when you look at the number of people active in research who are also on various consultation bodies that advise Research Councils, they do everything possible to stay in contact and not to become detached. If there is more that needs to be done, it should be done.

Q243 David Morris: How concerned are you about the large reduction in the estimated number of PhD students in science or engineering over the next three years? What impact will the reduction have on British industry in the years to come?

Mr Willetts: Of course, PhD students are funded in several different ways. Several of the flows of funding to PhD students are being maintained. There is a particular issue about the EPSRC’s project students funded through individual research grants. The centres for doctoral training are, if anything, expanding. We have doctoral training accounts at universities. We have the industry Collaborative Awards in Science and Engineering, so there are other ways in which they can be funded. But I am aware that the EPSRC have taken a view in the light of the financial constraints they are under that the number of PhDs that they can fund through individual research grants is going to have to be reduced, yes.

Q244 David Morris: Have you had any discussions within the Department, with industry representatives, about the skill requirements?

Mr Willetts: Are you asking about businesses and industries and their requirements?

David Morris: Yes.

Mr Willetts: When it comes to industry, and of course I have to keep on saying this is very important, there are people who are absolutely fascinated by a problem and want to research it in a doctorate and need to be able to do so. In my conversations with business, they do find these centres for doctoral training very valuable. These industrial doctorate centres, where students spend up to 75% of their time in the industrial environment, are one way of bridging that gap between academic research and practical application. The EPSRC itself has funded centres for doctoral training in plastic electronics, wind energy systems and nuclear engineering which we know are absolutely what industry was asking for.

Q245 David Morris: My final question is this. Do you think that British students preferentially seeking research opportunities will go abroad, and what can be done to prevent this "brain drain"?

Mr Willetts: There is a flow in two directions, and that is healthy. It is not a bad thing, as science is global, for people to get experience of a lab and do a project elsewhere. My view is that I want activity in Britain, but we welcome people abroad to study here. If British people as part of their career want to go and work in a research lab overseas better to enrich their experience, we completely understand that. Whenever we look at the net flows, we seem to do quite well at attracting postgraduates and doctoral students from around the world. That is a good thing too.

Q246 Stephen Mosley: On 1 September, Times Higher Education reported that "high-cost subjects such as chemistry, physics and chemical engineering will be hardest hit" by higher education funding reform. Do you consider that lab-based courses will be disproportionately affected by proposed changes to teacher funding at universities?

Mr Willetts: This is an interesting change from the other line of argument that is sometimes put to me that I am a complete philistine that does not value arts and humanities and that they are particularly badly hit. My proposal is that we lock up in the room the people in the arts and humanities who think they are being particularly picked on and the people from the physical sciences who think they are being picked on and ask them to resolve it. I hear both arguments.

We have kept the broad framework of the four bands of our education teaching funding, then removed a basic amount of about £4,000 but kept the extra costs that you see in bands A and B, the lab-based subjects. I realise it is a subject of lively controversy, but at each stage, both on the teaching decisions and on the research decisions, I have not tried to tilt the playing-field one way or the other. The crucial thing is the decisions that young people make as well-informed prospective students thinking about the course they want to study. The funding should go with that.

Q247 Stephen Mosley: The 1994 Group is saying that those subjects will receive about £1,246 less per student by 2012-13 than they do currently. The calculation is for a university that is charging the full £9,000 fees a year but does not take inflation into account. It warns, as a result, that universities could be forced to cut places on those cuts. What measures are you taking to ensure that universities do not respond by cutting places on high-cost subjects such as the sciences?

Mr Willetts: As I say, the crucial issue is the decisions that prospective students themselves make. When we look at the throughput of people doing GCSEs and particularly A-levels in those subjects, the news in the A-level results this summer was cautiously encouraging. We do have, and are maintaining, the funding in HEFCE for strategically important and vulnerable subjects. There will be some reviews about exactly how it operates, but that idea that we need to support strategically important funding for subjects through distinct funding carries on into the new arrangements and that is available for use.

Q248 Stephen Mosley: In the evidence that the 1994 Group gave to HEFCE, they suggest that part of the reason why there is a shortfall in high-cost subjects is the extra spending they have to spend on schemes to attract and retain poorer students. Is that a fair assessment?

Mr Willetts: It is true that one of the things that we are expecting universities to do with the increase in their fee income is to put more money into access arrangements. I think that is the right thing to do from the shared objective over all parties of improving social mobility. I have to say also for the science community, it is a great way of broadening out and making sure that budding scientists, including in schools that maybe do not send many people to research-intensive universities, are identified and encouraged. This money will fund a summer programme of going into the labs at the local university when you have finished your GCSEs or have done your first year of A-levels and seeing what it is like and getting an idea of the excitement and what happens in universities. I see this as absolutely contributing to the commitment to ensuring that we have a flow-through of students, including the sciences.

Q249 Stephen Mosley: The issue they are coming up with is that because they are putting this money aside to do that, which is all welcome and all good, it then means that when they get to university there is not enough money to fund the places to have the students on those courses.

Mr Willetts: When we do the arithmetic, what we find is that at the end of the day, you end up, as a minimum, with broadly even funding. You can pay for the access arrangements and then the money that is left in your fees income will broadly compensate for the loss of the teaching grant. It is not perfect in every case, but that is broadly what you achieve. What I say to universities is, "Look, these are tough times. There are public expenditure cuts going on in many departments and in many countries. The fact that we have a combination of this protected cash research budget and, on most of these calculations, protected cash, if not better, going into teaching in universities over the next four years is evidence that this coalition believes in high-quality research and education in higher education."

Q250 Gavin Barwell: I bring you back to the issue of capital because you said something in answer to my last question which I have been reflecting on. To remind you, I was asking you why the Government had cash-frozen revenue and not capital. You made the point that in these tough times what you wanted to see essentially was existing work protected. When you look at the capital budget for the Research Councils, they are spending that both on maintaining existing facilities, existing work, and on new facilities. I wonder, in the light of your answer, whether the message that you are sending to the Research Councils is that you would like them to focus that capital budget on maintaining our existing excellence and not be spending, as they are, significant sums of money on developing new infrastructure.

Mr Willetts: The big new infrastructure decisions are outside the ring fence. Those come to us through decisions to be taken on capital, and we were discussing that earlier. There are smaller items which fall within the ring fence where there are decisions by Research Councils. I very much respect their expertise in deciding between new equipment and other uses. I would say that what I am keen on there, and it is an example of how when money is tight you can sometimes drive efficiency and innovation, is that wherever possible equipment is shared and being used to its maximum. This is a crude caricature, but if you have two separate departments in a university, each with their own electron microscope and each being used 50% of the time, can you not have one and have an agreement on how you share it? That kind of stuff is going on. I know the Research Councils are keen on it. Providing it does not compromise the quality of scientific research, that is something else we can expect to see. That is a way by which you can get more output even when money is tight.

Q251 Graham Stringer: Just weighing up your answers to Gavin about capital expenditure, in the areas where you have either given yourself discretion or you have discretion outside the Haldane Principle, in your letter of last December you listed ageing, global warming and energy as areas where you had given yourself discretion. Can you explain to the Committee how you have used that discretion to increase funding in those areas?

Mr Willetts: Even there, the discretion is quite limited. What we are talking about is broad priorities, which in many ways are the priorities of most advanced western countries. They are the global challenges. We say to the Research Councils that alongside the curiosity-driven research, when they are thinking of programmes of research that they particularly want to push forward, these big challenges take centre stage. At that point, I leave it to the Research Councils. I do ask sometimes about the output. I have a longstanding interest in demography, pensions and ageing. I say, "Tell me what the output is from your research programme", but I would not dream of trying to tell them exactly how much money should go into ageing research or exactly which projects should be commissioned.

Q252 Graham Stringer: So, in spite of you giving yourself those discretionary areas, you have not said we will put an extra £50 million into energy research or into global warming or ageing. Is what you are saying to the Committee that you have not used such discretion, apart from just saying, "These are good ideas and areas to research"?

Mr Willetts: What happened was that, informed by these broad priorities, Sir Adrian Smith, not a Minister, consulted the scientific and research community before the announcements that I made in December of last year about their view of priorities. I suppose one could have imagined that a view had come back that social science research had suffered grievously in the past decade relative to other disciplines and there was a very strong mood and we needed to rebalance because there were big social science issues. In fact ,the message that Adrian Smith brought back from consulting the Science Committee, and I think this is something the Select Committee has already pursued, was very much to keep the balance broadly as it was.

Another reason, incidentally, why I remain baffled by the belief in the arts and humanities committee that they were somehow picked on is, as I say, if you look at the composition it has very much been preserved, including the arts and humanities. That was what he provided as feedback from the science community. I suppose I and colleagues could have said in November or December 2010-it would have been within our scope for decision-"OK, that is what you say, but actually I would like a big increase in the budget for X Research Council and a big reduction in the budget for Y Research Council."

That would not have been a breach of the Haldane Principle. Ministers could have had that scope for decision, but Ministers decided-I decided-I think correctly, that it is a tough time. The last thing you want is to create unnecessary turbulence. There was a very clear view in the community about what they wanted. I thought it would have been irresponsible to overturn that view, and so we have broadly kept the balance that we had. I think that was the right decision.

Q253 Chair: I want to go back finally to where I started from with the CaSE paper. The thrust of the paper was the principle that the Government must develop a long-term investment plan to secure the future of UK research and innovation drives. You would not disagree with that. You have different issues about how solid those figures could be. CaSE believes that a higher priority needs to be given to science and engineering spending. I know you agree with that.

There are differences between them and you about interpretation. If I had written the paper I might not have used the phrase, putting Government rhetoric to test, but trying to work in an environment of smoke and mirrors or something like that. Let me give you an example. The very first question I asked the Research Councils today was to explain some of the seemingly odd figures in the BIS Annual Report and Accounts that show that AHRC, BBSRC and STFC spent less than was estimated. We pressed them on the column headed "Net Total compared with Estimate" with AHRC at £3 million, BBSRC at £30 million and STFC at £26.9 million. These are big numbers but it turns out that that column represents two entirely different sets of figures. AHRC explained it one way and BBSRC and STFC another. Don’t you think there is a better way of doing it-putting your old Treasury hat on-and not following the normal practices of the Treasury to confuse?

Mr Willetts: Shocking.

Q254 Chair: Surely there is a clearer way to describe these figures so that the assertion that you made in response to my very first question would not prove to be the case: that you and CaSE would be singing off the same hymn sheets because you are using the same sets of figures.

Mr Willetts: I do not have the specific table you are referring to in front of me. I am happy to send you a note on that. In general, my view is that we can make sense of the CaSE figures in the terms that we understand them. My regret about the CaSE approach is that I think it ignores the achievement of getting QR into the ring fence. That is why the ring fence is bigger. There is more total science and research spend in this ring fence than in the previous ring fences. It is a more extensive ring fence. As I say, as you saw in the Budget, I recognise it is a tough decision on capital. We have tried to do our best to help capital, but I remain of the view-and this is the feedback we got from the sector-that in tough times, regrettably, some of the capital projects might have to wait rather than the current expenditure.

I will happily study your point further, Mr Chairman. If there are ways in which we can improve yet further the already transparent and lucid and full account of our data, we will do so. Remember of course, if I may just say so, I hope the Committee will appreciate the fact that we have provided you with more information. We have sent you the allocation letters that were not previously available. We do try to share data when we can.

Chair: Thank you very much for your frank answers. We look forward to seeing the responses on some of those details and seeing you again no doubt later in the year. Thank you very much.

[1] Note by witness: Professor Rylance understood the ‘their’ in this question to refer to BIS, but can now see it now might refer to AHRC. His response therefore refers to BIS.

Prepared 7th November 2011