2 Funding science in the UK |
7. Science funding in the UK comes from a range
of sources: public, charitable and private sector. Public funds
are directed to three principal streams. There is the Science
Budget, which we discuss in some detail below, QR funding from
HEFCE, and departmental research spend. The Science Budget is
allocated to the Research Councils which make the detailed decisions,
the QR funding is allocated to the universities according to their
performance in the Research Assessment Exercise (RAEsoon
to be the Research Excellence Framework, REF), and the departments
directly administer their own research budgets. The Science Budget,
along with some of the departmental research budgets such as the
Department of Health's, is 'ring-fenced', meaning that it is protected
from being used for other purposes. In practice, this is more
complicated than it first seems because what is inside the ring-fence
can be increased, thereby stretching it. This breaks the purpose
of having a ring-fence and is an issue that deserves further scrutiny.
1: Sources of public sector investment in science
Source: SET statistics
8. An additional complication is how changes
in research spend are tracked over time. For example, this year's
SET statistics show a large drop in some departmental R&D
spend, muchbut not allof which can be attributed
to changes in accounting and definitions of what activities count
as R&D. It is not currently possible to track accurately departmental
R&D spend over time: it should be straightforward. These
issuesthe ring fence, tracking spend on scienceare
extremely important and we regret that we have not had time to
devote a full and detailed inquiry to them. Our successor committee
mayespecially in the context of a new Parliamentconsider
exploring the full breadth of science funding in detail.
9. The Government uses a mixture of direct and
indirect methods to fund science, the biggest single component
of which is the 'Science Budget', which is worth around £3.5
billion for each year of the current CSR period. Outside of that,
science, engineering and technology spending was anticipated as
being £2.2 billion in civil government, and £2.6 billion
in the Ministry of Defence in 2008-09.
The Technology Strategy Board is a non-departmental public body
that was created in 2004 and expanded in 2007. Its budget next
year will rise to £267 million.
It works with government and industry to stimulate "technology-enabled
innovation in the areas which offer the greatest scope for boosting
UK growth and productivity".
The Strategic Investment Fund, worth £750 million between
2009 and 2011 was announced in the 2009 Budget in order to support
investments across the UK economy to support growth. Finally,
the Government provides tax credits to support private sector
investment in research and development. These were worth £790
million in 2008-09.
10. The Science Budget is administered by the
Department for Business, Innovation and Skills and allocated to
the seven Research Councils, the three national academies (the
Royal Society, the Royal Academy of Engineering, and the British
Academy) and a number of separate funds which stimulate investment
and commercialisation within higher education. The Research Councils
account for over four-fifths of the Science Budget in the current
Comprehensive Spending Review period.
1: Science Budget Allocations by Research Council, Comprehensive
Spending Review 2007
|Research Council (£,000)
|Arts and Humanities Research Council
|Biotechnology and Biological Sciences Research Council
|Economic and Social Research Council
|Engineering and Physical Sciences Research Council
|Medical Research Council
|Natural Environment Research Council
|Science and Technology Facilities Council
|Total (Research Councils)
|Total Science Budget
Source: Department for Innovation, Universities and Skills, The
Allocations of the Science Budget 2008/9 to 2010/11, December
2007, Table 2.1
11. With these funds, the Research Councils invest
in a mixture of grants for researchers, postgraduate awards and
international subscriptions. Listed below are the major areas
of expenditure for financial year 2008-09, the latest year for
which figures are available. Spending not listed falls in areas
such as administration.
a) Of the £123 million expended, the Arts
and Humanities Research Council spent £64 million on Research
Awards, £41 million on Postgraduate Awards and £10 million
on Museums and Galleries Awards.
b) Of the £465 million expended, the Biotechnology
and Biological Sciences Research Council spent £367 million
on Research and Capital Grants and £51 million on Training
Awards and Fellowships.
c) Of the £195 million expended, the Economic
and Social Research Council spent £119 million on Research
and £60 million on Postgraduate Training.
d) Of the £796 million expended, the Engineering
and Physical Sciences Research Council spent £507 million
on Research, £176 million on Postgraduate awards, and £52
million on Research fellowships.
In addition, the EPSRC is responsible for the three international
subscriptions, which amounted to £540,000 in 2008-09.
e) Of the £729 million expended, the Medical
Research Council spent £229 million on Research Grants, £36
million on other research activities and £68 million on Postgraduate/training
awards. The MRC is
responsible for the UK's subscriptions to five international programmes
(one jointly with EPSRC), which amounted to £15 million in
f) Of the £434 million expended, the Natural
Environment Research Council spent £110 million on research
grants and contracts, and £33 million on postgraduate training
awards. It is responsible
for £50 million of international subscriptions.
g) Of the £642 million expended, the Science
and Technology Facilities Council spent £108 million on research
grants, and £215 million on international subscriptions.
Its research grants are split into £61 million on Astronomy,
£38 million on Particle Physics, £6 million on Nuclear
Physics and £1 million on Neutron and Light Sources.
The £215 million spent on international subscriptions increased
by £30 million on 2007-08 on account of exchange rate fluctuations,
and has been the source of considerable difficulties, which we
consider in detail below.
12. Higher education institutions in England
are funded by the Higher Education Funding Council for England
(HEFCE). During our oral evidence session on 10 February, Professor
Adrian Smith, Director General for Science and Research, noted
that there was a "slight danger in thinking of the higher
education pot and the science and research pot under [...] separate
significant proportionhalf by Professor Smith's estimationof
the monies disbursed to the research councils ends up in the universities,
so when considering cuts to science and higher education, the
two are not necessarily competing against each other. In its Accounts
for 2008-09, the BBSRC noted that £260 million of its expenditure
of £465 million went into universities.
13. That science and higher education may not
be competing with each other is not, however, necessarily good
news. There are several reasons why efficiency savings to higher
education might very well take a disproportionate toll on science
in the UK. The relationship may not be interdependent, but since
much science takes place within higher education, any cuts to
higher education funding have the potential to impact upon science
as well. Science departments are comparatively expensive to run
and, in times of economic stringency, are attractive targets for
Vice-Chancellors looking to cut costs.
14. The current comprehensive spending review
(CSR 2007) expires in the financial year 2010-11. Funding beyond
March 2011 is therefore contingent upon a new Budget and CSR,
both of which will involve political judgments regarding the importance
of science to the UK. The combination of £600 million-worth
of as-yet unallocated cuts, the current economic climate, and
the anticipated next CSR, there is considerable uncertainty amongst
scientists regarding future funding.
The Minister for Science and Innovation (Rt Hon Lord Drayson)
confirmed that "I recognise that that uncertainty is real".
On the same day as our first evidence session on 3 February, the
Institute for Fiscal Studies (IFS) published its 'Green Budget'
for 2010. It estimated
that cuts to public spending in the region of 10.9% would be needed
in the four years from 2011, if the Government kept its commitment
to protecting the NHS, education and overseas aid. The IFS predicts
Cuts in spending on science and universities are
likely to have important long-term consequences. They would lead
not only to direct falls in innovative outputs, but also to indirect
falls to the extent that the UK would become a less desirable
place for firms to conduct research. If the government's aim is
'to strengthen the incentives to invest in innovative industries
and ensure the UK remains an attractive location for innovation',
as was stated in the PBR, then the revenue loss expected from
the patent box£1.3 billion a yearwould be better
spent protecting the spending in this area. This would go a long
way to shoring up the science budget, which for 2010-11 is £3.2
15. That same day, Professor Alan Thorpe, Chair
of Research Councils UK (RCUK), told us that at present the Research
Councils were basing their forward planning "on the basis
of flat cash" allocations.
This was further to the evidence we took from him on 2 December
2009, when he told us that the Research Councils were making plans
on flat cash and "other scenarios".
According to Professor Thorpe, the consequences of flat cash allocations
or a reduction would be:
[...] extremely serious [...] it is an investment,
the research budget, so it has a huge gearing in terms of the
economy. If we reduce funding, it is not just a matter of reining
back a few research grants; it has a huge knock-on impact right
through the economy in terms of the number of highly skilled people
we are training in universities. University income levels will
go down so universities will find they are less sustainable. Our
ability to be world-leading in terms of the excellence of the
research will be threatened and, of course, we get a lot of inward
investment in the UK because we are seen as having that excellent
base of researchers. In terms of facilities [...] negotiations
depend on the UK having a significantly strong base. If that is
reduced [...] the ability to partner countries that are actually
undergoing some stimulus packages in terms of science will be
The Government's ambition and
16. The Government has taken significant steps
to increase investment in science in real terms over the past
six years, and it is against a background of rising investment
and an increased science budget that this inquiry takes place.
The Government's strategy for science in the UK was set out in
the Science and Innovation Investment Framework 2004-2014.
In that document, it was stated that:
The Government's long-term objective for the UK economy
is to increase the level of knowledge intensity in the UK (as
measured by the ratio of R&D across the economy to national
gross domestic product), from its current level of around 1.9%
to 2.5% by around 2014. If achieved, this would put the UK in
a position to secure a leading place among the major European
countries, and substantially close the gap between the UK and
the USA, the best performing innovation-driven major economy.
17. The relevant econometric measure is known
as gross expenditure on research and development (GERD), expressed
as a proportion of gross domestic product (GDP). As the passage
above notes, GERD over GDP indicates the "level of knowledge
intensity", and is a measure better suited to international
comparisons than any comparison of direct funding.
18. On 17 February 2009, President Obama signed
the American Recovery and Investment Act into law, which made
provision for $17 billion worth of investment in scientific research.
On 27 April 2009, in a speech to the National Academy of Sciences,
he committed the United States to spending 3% of GDP on GERD.
The huge investment as part of an economic stimulus package was
welcomed by the scientific community in the United States.
19. At the meeting of the Liaison Committee on
2 February 2010, the Chairman asked the Prime Minister why he
had not made such a commitment to using science as a route to
economic recovery. In answering, the Prime Minister claimed that
"What America has not done is what we have done over the
last ten years which is to double the science budget and America
is trying to catch up in a way that we have been investing consistently
in science over these last few years".
This assertion was disputed the next day by Nick Dusic, Director
of the Campaign for Science and Engineering (CaSE).
He said that whilst the UK Government has invested heavily in
science, particularly during a period when the science in the
United States was not seen as a priority, the figures relating
to GERD indicate that any "catching up" by the USA was
hardly necessary. The latest year for which the Organisation for
Economic Co-operation and Development (OECD) has produced figures
for GERD is 2008. As the figures show, there was no significant
difference in the proportion of GERD financed by government between
the UK and USA in the period 2000-2008, but the USA had a well-established
higher ratio of GERD to GDP. The UK's GERD to GDP ratio increased
by 11% in the four years from 2004, an annual rate of 2.75% per
year. For the Government's target of 2.5% of GDP being spent on
GERD by 2014, the rate of increase would have to be 33% over six
years, or 5.5% per annum. From the Prime Minister's remarks at
the Liaison Committee, we do not anticipate that such an increase
or Obama-style stimulus package is being contemplated.
2: Gross Expenditure on Research and Development as a proportion
of GDP 2000-2008, UK and USA
|% of which financed by government
|United States of America
|% of which financed by government
Source: OECD Main Science and Technology Indicators 2009/2
20. Iain Gray, Chief Executive of the Technology
Strategy Board, agreed that uncertainty in terms of future funding
could also damage private sector investment.
Far from the private sector 'picking up the slack', Professor
Thorpe said that the two were correlated.
In the Royal Society's report on The scientific century,
the relationship between public and private sector investment
in science is illustrated very effectively.
2: The relationship between public and private sector investment
Source: The Royal Society, The
scientific century, p53
21. Although gross expenditure
on research and development has increased since 2004, the Government
is some way off its target of 2.5% of GDP being spent on R&D
by 2014. Indeed, the annual rate of change would have to double
between 2009 and 2014 compared to 2004 and 2008 if the target
were to be met. Such a doubling could only be met if public sector
investment were to increase dramatically. Any cuts to the rate
of increase, with the attendant decline in private sector investment,
would be seriously damaging.
22. In the next chapters, we consider the roles
of demonstrating impact, setting priorities and higher education
in the funding of science and scientific research.
9 Department for Business, Innovation and Skills, SET
Statistics: Science, Engineering and Technology Statistics,
November 2009, www.dius.gov.uk/science/science_funding/set_stats,
Table 2.1 Back
HM Treasury, Comprehensive Spending Review 2007, D4.7 Back
Technology Strategy Board, About us, www.innovateuk.org/ab`outus
Department for Business, Innovation and Skills, About R&D
tax credits, www.dius.gov.uk/innovation/business_support/randd_tax_credits/about
The money that research councils receive each year are not exactly
the same as they money they spend. Back
Arts and Humanities Research Council, Annual Report and Accounts
2008-09, HC 780, p 62 Back
Biotechnology and Biological Sciences Research Council, Annual
Report and Accounts 2008-09, HC 587, p 53 Back
Economic and Social Research Council, Annual Report and Accounts
2008-09, HC 710, p 102 Back
Engineering and Physical Sciences Research Council, Annual
Report and Accounts 2008-09, HC 801, p 70 Back
As above, p 77 Back
Medical Research Council, Annual Report and Accounts 2008-09,
HC 914, p 69 Back
As above, p 81 Back
Natural Environment Research Council, Annual report and Accounts
2008-09, HC 594, pp 66-67 Back
As above, p 67 Back
Science and Technology Facilities Council, Annual Report and
Accounts 2008-09, HC 776, p 89 Back
As above, p 98 Back
As above, p 99 Back
Q 241 Back
Biotechnology and Biosciences Research Council, Annual Report
and Accounts 2008-09, HC 587, p 59 Back
Q 115 [Professor Thorpe] Back
Q 246 Back
Institute for Fiscal Studies, The IFS Green Budget: February
2010, 3 February 2010 Back
As above, section 10.3 Back
Q 121 Back
Science and Technology Committee, The work of the UK research
councils, 2 December 2009, HC 102, Q 14 Back
As above, Q 15 Back
HM Treasury, Science and Innovation Investment Framework,
July 2004, para 1.4 Back
American Recovery and Reinvestment Act of 2009 Back
The White House, Remarks by the President at the National Academy
of Sciences Annual Meeting, 27 April 2009 Back
Liaison Committee, HC 346-i, Q 22 Back
Q 26 Back
Q 123 Back
As above Back