Spending Review 2010 - HC 618Written evidence submitted by Prospect (SR 06)

Introduction

1. Prospect is a trade union representing 121,000 scientific, technical, managerial and specialist staff in the Civil Service and related bodies and major companies. Our members are professionals, managers and specialists across a diverse range of areas, including agriculture, defence, energy, environment, heritage, justice and transport. Around 50,000 of our members work in SET roles.

Overview

2. The Government’s decision in October 2010 to freeze the Science Budget was a better outcome than experienced in many parts of the public sector and was well received, as shown by the oral evidence to the Committee from the Heads of Research Councils. However, as discussed below, no such safeguards were provided for R&D spending undertaken directly by government departments, and the Science and Research Budget funding allocations and the HEFCE grant letter published in December 2010 give significant cause for concern.

3. Prospect’s assessment focuses mainly on the practical implications of the Government’s decisions—recognising that there is some good news but also some genuine and significant concerns.

2010 Spending Review

4. Whilst Prospect accepts that priorities can and do change, we object to the fact that the Spending Review included major decisions affecting the future of public sector science without central knowledge or understanding by Government of the range and value of work undertaken by its own scientists. The reality is that Government could not function effectively without this experience and expertise, but much of this essential work is low profile and—except in times of crisis—largely hidden from public view.

5. The Forensic Science Service is a key casualty of funding cuts. Prospect has submitted written and oral evidence to the Committee’s separate inquiry into the winding down of the Forensic Science Service, so we will not elaborate here. However, we do wish to briefly highlight the implications of the Spending Review for two other areas of research—in forestry and defence—as well as the impact of the so-called Quango cull on scientific advice.

Forest Research

6. Forest Research faces a budget cut of 25% in nominal terms over the Spending Review period, with income due to fall in cash terms from £10,128,000 in 2010–11 to £7,776,000 by 2015–16. In real terms, of course, the cuts will be even more severe. At an inflation rate of 3.5%, the real terms budget in 2015–16 would be reduced to £6,507,000 and at the current rate of inflation the value in 2015–16 would be just £6,000,0000.

7. The expectation is that, as a consequence, staff numbers will fall by at least 25% and that whole programmes of research will end, resulting in a concentration on fewer research needs. The budget for research into climate, environmental change and plant health will actually increase by 10%, but there will be a 50% cut in an already small budget for library services and a 60% reduction in research into sustainable management and benefits to society.

8. Forest Research currently generates around 30% of its income externally but, with fewer staff and their continuing need to maintain core research, it is expected that the capacity to undertake externally funded research will fall at least in proportion to the budget reduction.

9. This position is complicated by the parallel, but separate, reviews of Forestry Research, being undertaken in-house by Defra, and the wider review of the Forestry Commission in England and GB-wide functions, for which the Government has established a review panel (without employee input). It is completely unclear how these two review processes are expected to interact with each other. Further, the Spending Review cuts to Forestry Commission England are continuing in advance of reporting or recommendations by either review.

10. We have very real concerns that, in practice, staff cuts will be in excess of 25% and that, without bold and determined action, the future of Forest Research as an independent research institute will be jeopardised.

Defence

11. The defence sector provides a good example of how cuts in public expenditure impact more widely on corporate scientific and engineering capability. It also adds another dimension to concerns about regional SET capability. The Ministry of Defence is working to reduce numbers of civilian staff by 25,000, but a large number of job losses have also been announced by industry anticipating the outcome of the Strategic Defence and Security Review (SDSR).

12. For example, cuts in MOD’s research budget impact directly on jobs at companies such as QinetiQ. The SDSR the decision to scrap the Defence Technology Review (DTR) led to a further 50 redundancies and the loss of the Nimrod programme has reduced the number of radar research scientists from 60 down to a dozen. We anticipate more to follow. By the nature of the work it is difficult to quantify the loss of capability as a result of these job losses in research and development, but there can be little doubt that scientific expertise has been lost which cannot be easily replaced or regenerated at a future date. BAE announced job losses at Military Air Solutions both before and after the SDSR as part of a restructuring exercise to align with MOD contracts and on 12 April announced a further 230 job losses across UK sites in its Global Combat Systems business.

13. There will be further erosion in the MOD’s skills base especially in engineering skills. Another period of uncertainty surrounding the future of Defence Equipment and Support (DE&S) means that attempts to map out an engineering strategy are being hampered. The demand for nuclear skills has been rising for a number of years and, with the prospect of competition from the civil nuclear sector if the planned new build goes ahead, there will be a shortfall of 8,000 nuclear specialists across all skilled roles by 2025.

Quangos and scientific advice

14. Science advisory committees account for nearly half of all arms length bodies, but most do not have their own budgets: they simply offer a way of bringing expert advice to policy makers at a lower cost than through consultancy contracts. For example, two key pesticide advisory bodies (the Advisory Committee on Pesticides and the Pesticides Residues Committee) received just £66,000 of government funding in 2008–09. The value of their independent work is recognised by industry representatives who acknowledge that “… Ministers face tough spending decisions, but it would be a false economy to do away with the bodies that have helped make such significant progress in improving the level of public confidence in pesticide controls”. Similarly, pollution experts on the Air Quality Expert Group (ACEG) are paid a nominal fee, far below usual consultancy rates, to attend meetings and carry out a considerable amount of work between meetings at no cost to government. Without this support the cost of obtaining expert scientific advice on air quality will rise significantly. It is also likely that the nature of the advice will change as government departments under severe financial pressure will pay for specific pieces of advice, rather than being able to call on it on a continuing basis. Undoubtedly this will reduce flexibility and agility of response, as contractual arrangements will need to be put in place and advisers will not be obliged to respond beyond the terms of their contract. Prospect therefore does not share the confidence expressed by the Minister and Director General of Science and Research in their evidence to the Select Committee that independent scientific advice will continue to be available at short notice.

Science and Research Budget Allocations 2011–12 to 2014–15

Resource budgets

15. The resource budgets for research councils have held up relatively well overall, though the Medical Research Council has fared better than others and cash cuts in core programmes are front-loaded for BBSRC and STFC. Nonetheless, there will be a real adverse impact. Inflation is persisting at a higher level than expected at the time of the Spending Review, with the effect that real terms cuts estimated then at around 9% over the Spending Review period are likely in practice to be closer to 14–15%.

16. In stark contrast to the Business Secretary’s recognition as recently as September 2010 that “some of the UK’s greatest scientific advances stem from research with no obvious commercial application”, the Government’s current approach is to focus only on internationally excellent research and protecting funding leveraged from external sources. In doing so, it is out of step with the approach taken in comparable EU countries. Professor Mason’s oral evidence recognised the danger here, stating that “Other countries, rightly, see investment in research as their advantage as well. We have to make sure that we keep up”.…

17. There is a 15.8% cut in the Science and Society programme with effect from the start of the 2011–12 financial year. Part of this saving arises from a retrograde decision to cease funding for the UK Resource Centre for Women in SET. As a union we are acutely aware of the under-representation of women in SET functions and industries, and of the valuable role played by UKRC in encouraging young women to take up SET careers as well as in supporting women returners. The Government’s own analysis shows that these skills are key to delivering high-quality growth and to stimulate and sustain the green economy. Yet, despite the demand for such skills, there is no evidence to show that the SET labour market is yet able to address the challenges of women’s under-representation without support from expert practitioner bodies, such as UKRC. The Government has subsequently offered the UKRC £500,000 of transition funding for one year. However, this still represents an 80% cut in the organisation and does not resolve issues of long-term sustainability. It is not a substitute for the core funding that is required to maintain capability and key over-arching functions, including provision of labour market intelligence and raising awareness.

Departmental budgets

18. It is also important to consider the Science and Research Budget allocations in the context of broader spending by government departments. The 2009 Science, Engineering and Technology Statistics show that whilst Science Budget expenditure has grown significantly over the last 10 years, SET expenditure by civil departments has fared much worse. For example, Defra’s expenditure fell by 17.5% over the 10 years 1997–98 to 2007–08 and very sharply—by 51.2% - between 2006–07 and 2007–08. A 28% overall cut in MOD SET expenditure over the same 10-year period includes a cut of 12.4% in research expenditure and a cut of 33.1% in development activities. The Department for Transport suffered a 53.6% cut in SET expenditure between 1997–98 and 2001–02, which has not been restored.

19. Prospect is very concerned that, in the context of the very severe cuts that are taking place, departmental SET expenditure will not be prioritised and, unlike the Science and Research Budget, departmental allocations are not ring-fenced. Sustained pressure in this area could have a significant impact both on departments’ own research and on co-funded and commissioned programmes, which will also affect research council institutes and the wider science base.

20. For example, the Government has indicated that it gives priority to “maintaining national capability to support other government departments that deal with crises such as foot and mouth disease and extreme weather events”. However, whilst this aim is to be welcomed, it is not clear how it will be realised through the Science and Research Budget allocations since the two examples given are responsibility of departments whose SET expenditure is not covered by this funding stream. Unfortunately, early indications based on Defra’s spending allocations to its arms length bodies provide no reassurance at all. By the end of the Spending Review period in 2014–15, Defra parented bodies with a strong science component to their work face cuts in the order of 20–30% compared with their current funding level - including the Environment Agency, Forestry Commission, Joint Nature Conservation Committee, Marine Management Organisation, Natural England and the Royal Botanic Gardens.

21. So, whilst it is all very well for the Minister to agree that “this is an understandable concern”, what is actually needed is action at the highest level to ensure that this concern does not become a reality. We are aware that the Select Committee has already raised this matter with the Government’s Chief Scientific Adviser and hope that it will be rigorously pursued.

Efficiency savings

22. The Government has made clear that it intends to apply the approach recommended in the Wakeham Review “across the spectrum of research funding, as the core driver for efficiency savings in SR10”. It is expected that, together with pay restraint, this will deliver £324 million of efficiency savings in 2014–15. According to the Government “Research councils will bear down on the indirect and estate costs of their institutes and achieve savings from the public sector pay restraint that will apply to researchers working in their institutes”. In reality, the evidence to the Select Committee from the Heads of Research Councils shows that they have found it difficult to deliver savings in the anticipated timescales from initiatives such as the Shared Services Centre. It is both unfair and counter-productive to assume that investment in science should be at a cost to the pay and pensions of the specialist staff that are critical to delivering the scientific mission. Prospect has produced evidence elsewhere to show that neither pay nor pensions are excessive. We also know from previous experience that faced with a combination of squeezed living standards and lack of career progression opportunities, scientists will choose to take their talents elsewhere and that, once lost, this expertise is not easy to recover.

Capital expenditure

23. Cuts in capital budgets are a major cause for concern. Research council budgets will fall to 46% of the 2010–11 baseline by 2014–15, and there are cuts of a similar order to the capital budgets for HEI research. There will be immediate reductions for BBSRC (42.83%) and EPSRC (37.06%), a cut in NERC’s capital budget of 44.72% in the next financial year, and a cut of 35.23% in STFC’s core programme in 2013. The exception to this picture is MRC which, although facing an exceptionally severe cut in capital spending funded by BIS, will receive £220 million from the Department of Health for the new UK Centre for Medical Research Innovation (UKCMRI).

24. As commentators have pointed out, some of this capital spending is actually required for maintenance and other long-term commitments, which can’t simply be stopped—so the money will have to come from other sources instead. This appears to be confirmed by the evidence from the Heads of Research Councils, which does not rule out using resource budgets to meet gaps. Professor Thorpe noted that “Our biggest challenge over the next four years will be to minimise the detrimental effects of that reduction” (in capital). As Sir Paul Nurse, President of the Royal Society, has pointed out this is a sticking plaster approach, not a sustainable way forward: “ … the axe has fallen in the ‘capital’ side of the budget. Allowing some of our labs and other facilities to go without further investment is only a short-term solution and cannot be considered as a sensible long term strategy”.

25. To be fair, the Science and Research Budget allocations did confirm the good news that key investment projects, including at the Institute for Animal Health, will go ahead. Prospect also welcomes the additional £100 million for capital spending and science and engineering facilities announced in the March 2011 Budget. For example, the £44 million investment in the Babraham Research Campus will fund further developments including incubator buildings and support for start-up companies and the translation agenda, rather than directly boosting the Institute’s own budget. Nonetheless, there is optimism that these developments will support interactions between the academic and commercial scientists on site. The investment in campus facilities is also expected to strengthen funding submissions.

26. Similarly the £10 million for the Daresbury Laboratory is a crucial investment at a very difficult time. However there is real concern that it will not be sufficient given the number of programme proposals under review within the Accelerator Science and Technology Centre (ASTeC). The R&D phase for the New Light Source (NLS) alone was supposed to carry £25 million of capital over five years. It also needs to be viewed against the background of a 50% cut in ASTeC’s capital allocation in 2010–11 and an expectation of similar cuts for the remainder of the Spending Review period.

27. Prospect members are also seriously concerned that actually spending £10 million in the 2011–12 will lead to real difficulties given the requirement for adequate design of components and systems, followed by lead time in manufacture. It is understood that the requirements are to:

Create a business case to draw down the £10 million allocated from BIS.

Work on designs for the equipment to be purchased with that money, proving their efficacy through theoretical models.

Place orders in line with the EU competitive tendering process, which itself takes three months to complete.

Have the equipment manufactured, tested and delivered.

This is a serious challenge to get right, with significant risks if design and procurement are rushed. Arguably it would have been more sensible to stage the £10 million allocation over several years, focusing in the first year on design.

28. In summary, the funding provided in the March Budget announcements is small—but welcome—compensation for the substantial cuts that were previously announced. It replenishes one third of the cut from research councils’ capital budgets in 2011–12 (though with the benefit from this restricted to the four research centres selected in the South East) and it is just a fraction of the £1.4 billion cut planned by 2014–15. Research Councils UK has admitted that cuts to capital budgets will “present significant challenges”.

29. It would be helpful to have a clearer understanding of the allocation criteria. If the investment areas have been selected on the basis of a judgement that they are most likely to develop commercial benefits, there should be a transparent assessment process and also a clear understanding of what commercial benefits are expected. Similarly, commitments made by anchor tenants should be transparent and open to scrutiny. This would be consistent with Prospect’s wider support for all decisions to cut or reprioritise expenditure to be subject to an open and evidence-based assessment of the implications for UK capacity and capability.

Conclusions

30. Prospect believes that sustained investment in the science and engineering base must be integral to the UK’s growth strategy, and that it is also essential for the public good. The Government’s “Strategy for Growth” does appear to recognise this, but it will be crucial to hold them to account throughout the Spending Review period. We do not yet have a complete picture, for example on departmental SET expenditure, but we do know that government funded research makes a significant (and, until 2009, growing) contribution to the UK’s overall R&D expenditure. It is also evident that the cuts heralded by the Spending Review are in contrast to the approach in other key countries, including China, Germany, France, Australia and the USA, all of which are increasing their expenditure on science.

31. The Government’s position on the importance of science for the public good is not clearly defined, though there are some worrying indications that the Government thinks that some public good science can either be privatised or in some way transferred to “Big Society” volunteers. There is no evidence to suggest that either of these approaches will work. Though Ministers may not be aware of it, and the Minister’s oral evidence was ambiguous in this regard, in practice government does depend on the specialist expertise of the staff it employs and relies upon for advice. They are also a crucial part of the investment pipeline, and failure to recognise this will exact a heavy and long-term price.

15 April 2011

Prepared 7th November 2011