Spending Review 2010

UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE    To be published as HC 618-ii

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

 SCIENCE AND TECHNOLOGY Committee

Spending Review 2010  

Wednesday 19 January 2011

Professor Alan Thorpe, Professor Keith Mason, Professor David Delpy and Professor Rick Rylance

Evidence heard in  Public Questions  70 - 166

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Oral Evidence

Taken before the  Science and Technology Committee

on  Wednesday 19 January 2011

Members present:

 

Andrew Miller (Chair)

Gavin Barwell

Stephen Metcalfe

David Morris

Stephen Mosley

Pamela Nash

Graham Stringer

Roger Williams

 

________________

 Examination of Witnesses

Witnesses:  Professor Alan Thorpe, Chair of the Research Councils UK Executive Group and Chief Executive, Natural Environment Research Council, Professor Keith Mason, Chief Executive, Science and Technology Facilities Council, Professor David Delpy, Chief Executive, Engineering and Physical Sciences Research Council, and Professor Rick Rylance, Chief Executive, Arts and Humanities Research Council, gave evidence.

Q70 Chair: May I welcome you, gentlemen? Thank you for coming in this morning. As you know, we are looking at the 2010 Spending Review and there are a series of questions that we would like to pose to you. For the record, I would be grateful if the four of you would introduce yourselves.

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

Professor Mason: I am Keith Mason from the Science and Technology Facilities Council.

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

Professor Thorpe: I am Alan Thorpe from the Natural Environment Research Council and Chair of the Executive Group of Research Councils UK.

Q71 Chair: Thank you very much. Most research councils’ resource budgets will be about 3% lower plus inflation. Depending on whose version of inflation figures you take-we have seen some new ones today-that makes a total of somewhere in the region of a 12% plus reduction in cash terms by the end of the Spending Review. Do you see that as a satisfactory position?

Professor Thorpe: Perhaps I could start. Clearly, relative to the rest of the public sector it is pretty satisfactory, particularly with respect to departmental research budgets, etcetera. Clearly, we are going to have to manage with less money, as you say. It will probably be 12% less in terms of our programme or resource budget and similarly less in capital and administration. Overall, we feel it could have been much worse. Science and research has substantial investment by the Government going forward.

Professor Rylance: Yes. I think we are still in business. That is the good news.

Professor Delpy: The answer is that it is a manageable level of resource. Some of the other changes that we are hoping to put in place may enable us to manage that.

Q72 Chair: That’s fine. Obviously, that does require some changes. How do you envisage that some of the potential problems can be offset? As an example, is it possible that we will see greater international collaboration as a means of saving money? If so, how will that work?

Professor Thorpe: Certainly from my research council in environmental research we are very much looking to the international collaboration arena, as we have for some time. We have recently been very strongly involved with the international group of funders of environmental research. I co-chair that forum with my US counterpart at NSF. We are looking to put together programmes that have similar priorities in various countries, particularly on global environmental research in our case. I think there is great opportunity there. We have been active in that field across the research councils for some time, but there is a great opportunity to increase that.

Professor Mason: We are not the only country that is suffering in these circumstances. That is also an opportunity to focus the global research effort into something that is perhaps more coherent than it might otherwise would have been. That is no substitute. Clearly, science and research is incredibly important. We could certainly use more resource in this area but, given the global circumstances, as Rick says, we are still in there fighting and we are making very strong plans for the future. Everybody recognises how important the research base is for the future of the world, not only of this country. We have to re-double our efforts to do things as effectively and as efficiently as possible.

Professor Rylance: It is important to recognise that this is not just an additional income stream, but the way research is changing, partly because of electronic communications and increased global participation anyway, it is increasing in the direction of multi-institution, multi-agency funding, cross-disciplinary work and cross-national boundary work. It is going with the flow on this.

Q73 Chair: Just taking Professor Mason’s point, do I take it that, because other countries are in the same boat, some of the issues that have been sensitive, for example, the issues of currency fluctuations, are going to be there whether we like it or not, and other countries are equally going to be facing the same dilemmas?

Professor Mason: The same or different dilemmas. We have seen evidence over the last year or so in our discussions with our partners that, yes, they have a different set of problems but a greater willingness to understand each other’s problems and work together in the most effective way.

Q74 Chair: Are there circumstances in which the research councils can effectively lend money one to another, where you could perhaps take the other’s allocation? Has it ever happened?

Professor Thorpe: Yes. One of the functions of the executive group, which brings all seven chief executives together on a monthly basis, is that we look across the whole of the science and research budget. You are right that from time to time we help each other out as cash flows vary across the councils. We have been doing that for some time to manage the total science and research allocation that we get. That would be nothing more than what we have been used to doing in recent years.

Professor Rylance: Also a great wodge of our activity is cross-council anyway, which we are jointly funding.

Q75 Chair: In those circumstances, how does money get paid back? Are there plans?

Professor Thorpe: By an agreement to pay back the following year, for example, if it is associated with one year to the next.

Q76 Chair: Can that go beyond the spending round plans?

Professor Thorpe: No.

Q77 Chair: That is just strictly within the parameters of the spending round?

Professor Thorpe: Yes.

Q78 Chair: Are you planning for the return of the good times or are you assuming that future budgets will be constrained by the current set of factors indefinitely?

Professor Mason: The world will never go back to the way it was. The world moves on. We have to adapt to new ways of thinking and working. Yes, I sincerely hope and expect that, as the economic performance of the country improves, the investment in science will continue to be seen as a high priority. We need, clearly, always to be in a position of demonstrating value for money, but the evidence shows that investment in science and research delivers a fantastic return. It is always going to be a good bet.

Professor Delpy: As reporting officers we, obviously, have to manage ourselves correctly within the budget that we are given. The evidence is that the current and previous Government believed that an investment in science and research was a major investment that the country should make. The level of settlement that we were given, bearing in mind the current financial situation of the country, is evidence of that. We are managing the systems so that if we have to, we will have achieved a stable level by 2014-15 which we could continue at if necessary, but we will be making very strong cases throughout the whole period for an increase in investment. The changes that we are putting in place will enable us to respond quickly to an additional increase in our funding should we get it.

Professor Rylance: One of the good things about the current settlement is that it is for four years. So we can plan with some confidence over that period. What is for sure, whether they are good times or bad times at the end of that four years, is that they will be different from now and partly they will be different from now from the things we have done over four years. So we will always be looking to the future.

Q79 Chair: Finally, do you see any risk, given that other countries are in the same position but some are in modes of expansion as well, of us losing ground internationally during the immediate period, or do you think we can be certain that we will still be in approximately the same position at the end of the spending round?

Professor Mason: We must always bear in mind that that is a danger. Other countries, rightly, see investment in research to their advantage as well. We have to make sure that we keep up. This is why it is so important-we have a reasonably good settlement in the circumstances-that we are able to maintain momentum and we need to continue to do that into the future. We must also take advantage of leverage with our international partners in forming robust relationships with them so that we can benefit from each other, because partnership adds value.

Professor Thorpe: There is no doubt that the capital reduction is one of the challenges that we must face. In international terms, we are often in a position, like collaboration, of contributing a national contribution to an international effort. Our ability to do that and invest in the infrastructure and facilities is tougher than it would have been given that we have had a 50% cut in capital. Our big challenge over the next four years will be to minimise the detrimental effects of that reduction.

Q80 Gavin Barwell: I have a particular question to Professor Rylance. As the Chairman was saying, with the exception of the Medical Research Council, the other research councils are broadly seeing a 3% cash reduction over the spending period. In your case I think it is a little less. One of the reasons for that seems to be to offset the STFC’s costs of operating cross-council facilities, in which presumably your council has a much lower involvement. Is that something that you are content about? Do you think that is a fair arrangement?

Professor Rylance: Yes. I am quite comfortable with that for a number of reasons. One is, as you say, that we have done marginally better in percentage terms, so that is a good thing. We are also significantly less exposed to the problem with capital. We have done, in one sense, badly on capital, that is to say we have lost all of it, but we never had very much to start with. The kind of work we do is not heavily dependent on that. If one is thinking about distribution of pain, that is quite a reasonable thing.

There are two other things I would mention. One is that we accept the argument that what you are maintaining through, for example, the STFC facilities is a national facility. There is a degree of responsibility across the research community towards that. That is important.

Lastly, research which is funded by the research councils is also interdependent on QR, the money which comes through the funding councils depending on the RAE, REF and so on. We in the arts and humanities are very heavily dependent on QR. About 80% of it is funded through QR. My real anxiety was not that we would lose a bit of money to support facilities-that seems to me to be quite a positive thing-but that QR would take a hit and it hasn’t. I am reassured about that. I am not overly concerned about the issue you mentioned.

Q81 Gavin Barwell: I have one supplementary to that. You may have seen the report in the Financial Times in which the Minister was addressing and trying to rebut the al legation that the Government does not care as much about arts and humanities as science s . He made the point that they care deeply about them. Looking at the issue we have just addressed but also at the decision that was taken on university teaching grants, do you share the Minister’s view that the Government’s commitment is equal in your field as in others?

Professor Rylance: I share the Government’s view that arts and humanities is critically important for the future and of great value to national research and teaching in higher education efforts. I think that is absolutely true. There is some degree of exposure in arts and humanities because of what is happening on the "T" side, on the teaching side, but it is also true that disciplines like business studies are also hit as badly on the "T" side as disciplines in the arts and humanities. You could argue that they have additional kinds of revenue sources through international students, particularly, but none the less the international student flow on the arts and humanities is very significant indeed. So I am anxious, because clearly you would be foolish to be other than anxious about it given the scale of the activity, but I am quite optimistic for the way the arts and humanities will thrive within this. There may be structural alterations but, overall, the pattern will stay pretty positive.

Q82 Pamela Nash: Professor, y ou have spoken already about the capital funding or the lack of that you have received, but, asking the rest of you present this morning, d o you feel that the settlement that you have received has provided sufficient capital funding to run and maintain the existing scientific facilities that we have in the UK to their full capacity?

Professor Mason: Yes. One can always use more, but, by and large, in the circumstances, we are still in the game and we have sufficient working capital-"capital maintenance" is the appropriate term-to run our facilities and to keep them world leading over this period. So, yes, I am happy with that.

Professor Thorpe: We have been allocated money specifically to fulfil our current contractual commitments on capital. We have a number of large projects ongoing. For example, in my council, we are rebuilding a research vessel. We have been given money to make sure that we can pay for those existing commitments. We will have all of that infrastructure that we are currently building and commissioning available to us.

Q83 Pamela Nash: In that case, do you think that it is unlikely you will have to use resource allocations to plug any gap in capital maintenance?

Professor Mason: Again, I am pretty comfortable that we are in a reasonable position going forward. You can never say never because unexpected things happen. Things might break which are major, but, by and large, as best we can plan it, we are in a reasonably good shape.

Professor Thorpe: The answer is slightly different from my research council. We have a significant number of new facilities that we have in our priority list, including carbon observing globally, contributing, as I was mentioning before, to a global network, and similarly for deep-sea observing of the ocean. With this level of reduction of capital, it is going to be a challenge to maintain those new things coming on stream. There will be difficulty and we are going to have to prioritise very carefully to minimise the damage.

Q84 Chair: I take it that that also means that some of the ambitious plans for things like deep-sea observatories will simply not go ahead?

Professor Thorpe: It is not as simple as that. This is where the international collaboration point comes in. As I said, we are in a position of influence on our part of an international network.

Q85 Chair: So you can’t say whether things like that will go ahead at this stage?

Professor Thorpe: Not yet.

Q86 Chair: When will you be in a position to answer?

Professor Thorpe: We are undergoing a planning process in my research council at the moment. It will be a few months before we know where we are.

Q87 Chair: Professor Mason, I also take it that you cannot guarantee that some of your current big capital projects will be running at full steam, so to speak?

Professor Mason: I was answering previously the question about maintenance of existing equipment. In the context of new capital facilities, clearly, we are going to be proceeding at a slower rate than we might otherwise have liked. It is probably a question for us of the rate of progress as opposed to whether large things actually get built eventually.

Q88 Chair: But that also means that existing facilities will be running?

Professor Mason: Yes. That is the question I was originally answering. I think we have enough working capital to maintain existing facilities at the peak of their operation.

Professor Thorpe: You asked about using resource to pay for capital projects. That is an option. Again, I think it is for the research councils to prioritise, to decide whether that new piece of instrumentation or facility is so important from a priority point of view that we have to use resource. I do not rule out that possibility.

Q89 Pamela Nash: But that would only be used for new projects and new facilities?

Professor Thorpe: Yes. That is right.

Q90 Pamela Nash: In the allocations document the quote we have here is, "The first year of that capital allocation is firm but the remaining years are indicative only at this stage." Does that mean that the capital budgets are in danger or does it mean that the minimum is guaranteed and hopefully could go up?

Professor Thorpe: I think it means what it says, which is that we can only guarantee the first year. There are possibilities. We have been discussing with the permanent secretary in the Department that we need to be clear about some exciting new possibilities if indeed further capital becomes available in the Spending Review so that we can make an attractive case for that. We are all pretty anxious to do that. I am reasonably optimistic that there is an opportunity, potentially, for those indicative allocations to go up in the future. Yes, you are right in that we have to wait to find out what is going to happen beyond the first year.

Q91 Pamela Nash: Professor Mason, on the STFC’s total capital allocation, we see that it is going up in 2011-12 compared to your colleagues’ research councils. Could you explain why that is?

Professor Mason: We have existing capital commitments in our international facilities and in our national facilities. Clearly, the STFC business is capital-rich. We rely on capital for a broad range of our activities. It is going up because there are existing commitments which we are required to honour.

Q92 Pamela Nash: There is one more figure that I would like to query before I pass you on. I have noticed that there are large reductions in allocations for the Large Facilities Capital Fund between 2012 and 2014. Could you give some clarification of why that is?

Professor Mason: I think it is a reflection of the overall reduction in capital. We have to manage it, as we were indicating. We already have commitments to international partners to existing facilities that we have to meet. The Large Facilities Capital Fund is intended for new projects. As we have been saying, the best way of handling the squeeze is not to start new projects as early as you might want to, which is why the Large Facilities Capital Fund goes down. The other point to stress is that we will be continuing to spend on existing approved projects through this period.

Q93 Pamela Nash: Specifically, we have figures up to 2015, and we can see that the money goes up again from 2014. Is money being held back before the projects end?

Professor Thorpe: The nature of the Large Facilities Capital Fund, of course, is that it is lumpy because it is there specifically to cope with that. There are very big expenditures that vary in time. If you take the average across the Spending Review of the Large Facilities Capital Fund and compare it with the baseline, which, of course, itself is not necessarily truly representative of recent spend-if you just did that-then it represents an average of maybe 15% less than the baseline. The Large Facilities Capital Fund in total across the four years still has significant money in it, as Keith was saying, for new facilities.

Professor Delpy: Obviously, in making the allocation, Adrian Smith has to balance a whole range of proposals that we put to him. We decided that our priority was to ensure that, first of all, we honoured all existing commitments, and that the facilities that we had in place were maintained at the forefront of international performance. Therefore, we would prefer, and we decided, that we would be making a commitment from the capital to ensure that the existing equipment is in the right state to be internationally competitive. That inevitably means within a fixed budget that you have to defer some of the newer commitments. The end weighting of the Large Facilities Capital Fund represents the compromise that has been necessary in order to meet our decision on priorities.

Q94 Chair: Can I just go back to this challenge around what happens after year one? If only the first year is firm and everything else is indicative, what planning assumptions have you made in respect of future years?

Professor Mason: Our planning assumptions are as laid out in the indicative numbers. If the indicative numbers are reduced, then we have a problem to manage.

Q95 Chair: At what point does it become serious? You do not want to negotiate in public, and I appreciate that, but-

Professor Mason: It depends on the scale.

Professor Thorpe: I suppose the trouble with capital is that it becomes serious rather quickly.

Professor Mason: Yes.

Professor Thorpe: Because it is difficult, particularly for medium to larger facilities, to rapidly spend money within year because that inevitably involves a process of procurement, etcetera. So long-term stability in capital is quite a critically important thing. You are touching on something that we are going to have to manage very carefully but, absolutely, the planning assumption we make is that those indicative budgets are what we will have.

Professor Delpy: Chairman, first of all, of course, we only got our budget on 20 December so our planning is still at an early stage. This is an area where the councils together can help ease problems from one year end to another because we can loan money between the councils to try and help solve those problems, which, as Alan says, can come up rather quickly, or when you want to make an investment suddenly you find that you have a 60-day procurement process to go through before you can even start to make commitments.

Q96 Stephen Metcalfe: My understanding of what you said earlier is that the reduction in capital does not mean an end to new capital investment over the next four years, but it will mean that some projects are delayed or deferred. What do you believe the impact of that delay will be certainly in terms of the UK research base, its international competitiveness and reputation?

Professor Mason: As we were indicating earlier, clearly that is a challenge that we have to be aware of. Clearly, in principle, it will erode our international competitiveness. We have to work hard to compensate for that and to work with our partners to understand each other’s issues, as I was saying earlier. We are not alone. We might have a problem with capital. Other countries might have a problem-they account for things in a different way-in a different area. So, by maintaining a clear and open dialogue, we can often address these issues ahead of time and find our way through what would otherwise be choppy waters. We have to be vigilant and recognise that we do not have an easy job to do, but we need to stay on top of it.

Q97 Stephen Metcalfe: I understand that there have been some discussions between BIS and the research councils in drawing up a priority list of capital projects.

Professor Mason: Yes.

Q98 Stephen Metcalfe: Can you share some of that list with us or can you share the whole list with us, not necessarily here verbally?

Professor Mason: It is true that we have a cross-council process that we go through every few years to prioritise capital investments from the Large Facilities Capital Fund. We went through such a process and concluded it a few months ago. That list was passed on to BIS and they will take that into account as they allocate any capital there is available.

Professor Thorpe: The Minister has to make an agreement to sign those projects off.

Q99 Stephen Metcalfe: As far as you are concerned, is that list still intact?

Professor Mason: Yes. It is the list that we are working from. We have already had announcements, for example, in my case for investment in the Diamond Phase III Beamlines. That was on the list and it was a high priority on it.

Q100 Chair: Are you in a position to share that list with us?

Professor Mason: I am not sure of the status of that list, to be honest.

Professor Thorpe: Me neither. Could we get back to you on that?

Chair: We would like to see it at the earliest opportunity.

Q101 Stephen Mosley: Within the Spending Review the Government stated that it wanted to improve the efficiency of the science budget by £324 million by 2014-15. Of that, your share is about £131 million. Do you think that the research councils can deliver sufficiently large savings in order to deliver this £131 million?

Professor Thorpe: In relation to the £131 million you are referring to, we need to talk about the Wakeham Review of full economic costing because that is an area where we intend to set some efficiency targets on universities and institutes on their indirect costs. Those savings that are accrued from that count towards that number and in fact will make up that number. We can use that money for further investment in research, so it can be reused within the science and research ring fence.

Q102 Stephen Mosley: As to the whole of that £131 million, as you say, from the Wakeham Review, are there any other elements that you yourselves are going to have to find internally?

Professor Thorpe: Absolutely and not least because our administration budget is reduced relative to the baseline. We have, overall, a 14% reduction in cash terms by the end of four years in the administration budget. That will mean a strong drive for efficiency in the research councils; so absolutely. We made a very good start in the previous Spending Review with our Shared Services Centre for many of our back office transactional activities that we do together now in the Shared Services Centre, but, going forward in this Spending Review, that administration budget reduction will be a challenge for us to make those efficiency savings.

Q103 Stephen Mosley: It is a challenge. Is it deliverable?

Professor Thorpe: We believe the answer is yes. We are planning to look at the research base across the research councils, working together, to find where we can up our game on co-operation, collaboration and harmonisation across the research councils. Obviously, the Shared Services Centre is also an important contribution because it will be subject to finding their contribution to those savings as well because we are buying a service from them. It will be a challenge but it is do-able. We will rise to that challenge and we will have to work, as we already do, very closely together to do it.

Q104 Stephen Mosley: You have got your hat on as Chair of the Research Councils UK. Do the individual research councils agree with that as well?

Professor Delpy: I can give you a very quick answer. When we first had the indication that our admin budget would first be separated out and then also cut, I started a project within EPSRC to determine that. The project finished in December, and I know that we can meet that reduction in admin within EPSRC.

Professor Rylance: I am confident as well. From the AHRC’s point of view, in June of 2010 we moved to Swindon. The Medical Research Council is in process of doing the same. All seven organisations are now going to be co-located. So you will not only have the opportunity for intellectual, scientific and research synergies between them, but you will also have many opportunities for saving on joined-up back office functions of one kind or another. It is not simply about the Shared Services Centre, although that is a major part of it. We are looking very actively at other kinds of functions that we can share amongst ourselves.

Professor Delpy: One of the advantages of the Shared Services Centre is that it has driven harmonisation of processes within the councils, obviously, in the Shared Services Centre, but then similarly in the retained functions, the retained elements, within the councils. Because those are much more harmonised, it is easier for us to integrate activities. Some of the councils are already sharing some of those retained functions currently on a bilateral or trilateral basis, such as HR and IT activities, but others will be possible because of that increasing convergence in the way that we work.

Professor Thorpe: I know there are going to be challenges, particularly for research councils that have major institute components that are a part of this. One of the really important areas where research councils add value is in managing the overall science priorities and research budget, by making the investments work harder, if you like, often by our science delivery teams. These teams are going to have to find these efficiencies. There are challenges, but, as you have heard my colleagues say and I would say the same, we will have to rise to those challenges.

Professor Mason: If I can add to that, I agree absolutely that we can do this. Just to put some colour on this, the way you get efficiencies is by stopping doing things that are not as important as other things. One example is our grant systems. Across the councils we are simplifying them and cutting out what we conclude to be unnecessary differences and variations. It is one of the disciplines that we have had to learn in making use of the Shared Services Centre, for example. What this will mean for our communities is that perhaps they will not be able to do all the things in terms of the colour of their grant applications that they might have done in the past. It will be more vanilla. But the benefit is that we will save money that we can put back into the research base. So it is making sure that we get that trade right- that we have the minimum level of administration and efficiency that allows us to produce the product so that we can invest the maximum back into the research base.

Professor Rylance: The other thing to add is that we are looking quite carefully at processing costs and how you manage the volume and variety of different kinds of grants that you have to peer review, make decisions on, then award and so on and so forth. So we are looking very hard at all that side of it.

Q105 Gavin Barwell: You have come on to some of the issues that I was going to ask about in answering Stephen’s questions about general efficiency because I was going to focus in particular on administration budgets. You referred, Professor Delpy, to the separation out and having separate budgets now for administration costs. Have you had confirmation of what those budgets will be?

Professor Delpy: Yes.

Q106 Gavin Barwell: Are they now in the public domain?

Professor Delpy: Alan gave the number. It is 14%.

Professor Thorpe: It is 14% in cash terms and, as we pointed out, 8.9% inflation as well. So, if my maths is right, that adds up to 23% in real terms.

Q107 Gavin Barwell: You all refer quite positively to the Shared Services Centre. I know that our predecessor Committee noted in 2010 that it had received indications that there may be some issues as to cost overruns. More recently, three research councils have cited problems with the SSC as the reason for delays in publication of their annual reports and accounts. Could you tell us a little bit more about what the problems are?

Professor Delpy: Let me speak to this. I think we’d all be honest and say that the implementation of the Shared Services Centre was more difficult than we had anticipated. In particular, the complexity was caused by the fact that every council has a very unique and useful set of ways of working but they are all different. Trying to encompass all of that within the one Shared Services Centre has been difficult, so the project is running over time and it has cost more than we had originally anticipated, largely because we had not, I suspect, fully spec’d the system that we were finishing up building. We are now on track to complete the project by the end of March. April will mark the final incorporation of residual functions.

The last big step was the grants activity. Gradually, over the last year and a half, we have been transferring the HR, IT and the procurement activities. Many of the councils are already in that and the final ones will be coming through in the next two months. But the grants module, which of course is core to our business, was an activity which we spent a lot of time trying to get right. We started at the beginning of December with my council and NERC going into the grants system. We have just started-in fact earlier this week-issuing the very first grants through that completed system. It has taken us eight weeks to sort the bugs out, but the anticipation is that the other councils will then rapidly transition into that because there are so many shared grant activities that we cannot have one or two councils working on one system and the others on another. So there is a very clear end in sight.

As to the complexity of completing our annual accounts and submitting them, first of all we did submit them within the required time scale by the end of last year. The complexity of finishing the accounts was caused by the fact that some councils had some of their functions going through SSC and others had none going through SSC or only part of their functions going through SSC. We did find it difficult to get the data out in the form that would be required for seven different councils and seven different audit committees, together with the audit committee for SSC Limited. We did manage it. It was difficult first time round. We have learnt a lot of lessons in collaboration with the NAO. We are confident that we will be much better next year because, of course, all councils will then be in the SSC, but some of them will only have been in SSC for part of the year. So this coming year, 2011-12, will still be slightly complicated. From then on, everybody will be in the SSC and we are then expecting a much simpler transition.

So, yes, it has not been as easy as we anticipated. I would suggest that all large IT projects could probably say the same, but we now have working systems all the way through, and including grants, so all aspects of the system have been tested in one way or another.

Professor Mason: In summary, it is not perfect but it is saving us money and that money is going back to research. So it is something well worth having.

Q108 Gavin Barwell: Just to wrap that up, and thank you for a very thorough and detailed answer, in terms of reassurance to the Committee going forward, to précis what you are saying, you were saying that it had been overrunning time-wise but you are now back on the original schedule.

Professor Delpy: We are now sticking to the end date that we set last year, so we are expecting to complete everything by March. Technically, it will be April by the time the project actually closes down, but the final councils will be transitioned by the end of March, yes.

Q109 Gavin Barwell: And you are all getting the management information that you need to manage your budgets in terms of the systems working properly now?

Professor Delpy: Well-

Q110 Gavin Barwell: That seemed like an equivocal response.

Professor Delpy: We have a management information system provided through SSC. Technically, it is a piece of software called OBIEE. It provides a set of management information which, I would argue, is adequate for us to run our functions. It is management information provided in a different form from the way that each of the councils previously obtained their information through their own bespoke systems. So it is different information. The difficulty that people have, of course, is that the information is there, but it is presented or accessed in a different way. Part of the process is learning how to operate the system, but we have a management system that is specified and is part of the SSC deliverable. If it is delivered on time and to the specification that we expect, then we will get the required information to enable us to run our operations properly.

Professor Rylance: Part of this is a confidence issue of course. You have to feel confident not only that you have the data but confident that it is reliable and you can use it. That, of course, is a learning curve, but it is one that is getting better. Even in my year in the organisation, it significantly improved over that year.

Q111 Chair: Can you clarify for me how much extra the delay and work involved in the creation of the Shared Services Centre system has cost us?

Professor Delpy: The total cost of the project is £135 million. In terms of the additional time, I think it is about an 18-month delay. I took over as SRO in June last year and I was not at EPSRC when the project started.

Q112 Chair: How does that £135 million compare with the original budget?

Professor Delpy: The budget when I came in was estimated at £75 million.

Q113 Chair: £75 million?

Professor Delpy: Yes.

Q114 Chair: And it has cost £135 million?

Professor Delpy: Yes.

Q115 Chair: That’s a big difference.

Professor Delpy: It is. There are two reasons for that additional cost. One is delay. Time just costs money when you have a large project team of expensive IT professionals working to develop a system. The other reason for the change in cost is that I would say that the original system was not accurately specified. I do not think we appreciated the differences in the way that each of the councils managed some of their activities and, therefore, the additional complexity of the system that would become properly put in place.

Professor Mason: So, in other words, the system we have now is more capable than the one we specified for £75 million.

Q116 Gavin Barwell: Are you confident today that you will deliver the project within the £135 million budget? Obviously, what you do not want is any further cost overrun now you are in the current climate.

Professor Delpy: As SRO my answer is yes. I am making sure that we complete on time.

Professor Mason: And we are holding him to that.

Professor Delpy: Yes, I’m being held. My toes are being held to the fire on that.

Q117 Graham Stringer: I have two quick questions. Do you want to revisit the answer you gave to this Committee previously that there is no point in amalgamating the councils? From memory, the answer you gave was that if we followed the American system you would end up re-creating in smaller groups the different councils underneath. It seems to me, in amalgamating the administration, that there might be further savings if you brought the councils together, even if you had to have sub-committees or sub-councils.

Professor Thorpe: We work very closely together.

Q118 Graham Stringer: That, really, is the point, isn’t it?

Professor Thorpe: Yes.

Q119 Graham Stringer: Could it be even closer and save more money?

Professor Thorpe: We believe we are getting very close to complete working together on things that make sense, but we also need the disciplinary specialism and expertise across the research base. Again, if you look at other countries, like the United States, for example, yes, there is a National Science Foundation, but there are clearly disciplined specialists within that. It is not as complete as our system in that it doesn’t cover health and medical, which is separate, for example. We have the benefit of having all the research areas under the umbrella of Research Councils UK. We have increasingly our back office transactional activities together in the Shared Services Centre and we are increasingly collaborating where there are common things administratively that we can do together. To all intents and purposes, we are incredibly integrated and we continue to make progress in that direction. Certainly over my time in Research Councils UK, for the last six years, there has been tremendous progress in that direction. It becomes somewhat, if I dare say it, of an academic question-

Graham Stringer: That is very appropriate.

Professor Thorpe:-about whether one calls it a single research council or seven research councils. We have legitimate and important research expertise to plan research in the different disciplines, but wherever we do things in common, which is across a vast range of what we do, we are working together. I believe that we have found all the benefits of that coming through already.

Q120 Graham Stringer: Thanks. Professor Mason, in your previous answer when you were describing what "efficiency" meant-I don’t know if you would want to revisit it or if I misunderstood it-it seemed to me that you were talking about priorities because you said that efficiency meant doing one thing and not doing another. That seems to me to be the language of priorities or substitution, whereas a normal definition of "efficiency" would be doing the same thing for less cost. Can you clarify that?

Professor Mason: There is a mix of ways in which we address the need for what people call efficiency. You are absolutely right. We are exploring all possible ways of doing the same thing with less effort, which involves getting clarity as to why you are doing it, what you are doing and who it is serving. Integrated into that is also, as you describe it correctly, a prioritisation. Do you need to do it? What is the cost benefit of adding a particular bell and whistle to the grant system, for example? Can we do without it?

We have gone through this exercise, particularly on grants, as David was describing, where we started off with a situation where each council had a bespoke grant system which was finely tuned to the nuances of this, that and the other of their particular business. We have come together not only for efficiency reasons, but, as Rick was saying, increasingly we need to run cross-council programmes and a bespoke per council grant system is not appropriate for that. So then we have to really prioritise and say: what is essential in a common grant system and what can we do without? That is a matter of prioritisation, but that is absolutely an appropriate process to go through. You get into a system of doing things for historical reasons and it is important sometimes just to sit back and say, "Do we still need to do that?" If you don’t, you have saved some money.

Professor Delpy: I could give you a specific. It also helps to know the numbers. Obviously, all the councils are doing this, but EPSRC has looked at its grant system, particularly as we were one of the early councils to transition into grants. When we looked at it, we had 34 different types of grant award. When you looked at it, you could see the reason why every single one had at one time or another been put in place to drive a particular programme that we wanted or whatever, but is it the most efficient way of actually awarding grants across the UK? The answer is no. I can give you the specific example for EPSRC. I suspect my other CEOs would have similar numbers that they could quote for their councils.

Q121 Graham Stringer: Local government is going through a much more severe financial test than the science councils. Ministers have asked senior officers in local councils to take salary cuts. Have Ministers made similar representations to your councils?

Professor Delpy: No.

Professor Thorpe: We have a pay freeze, so, effectively, yes.

Professor Rylance: Bonuses are no longer paid.

Q122 David Morris: Professor Mason, the STFC will be exposed to some risk in relation to exchange rate fluctuations. Will any additional costs incurred come from within the STFC’s own budget? What would happen if subscription costs go down due to exchange rate fluctuations? Will the STFC gain from this particular situation?

Professor Mason: We are now operating a different system to deal with what has been a difficult problem for a number of years but was highlighted particularly by the rapid change in the value of the pound about 18 months ago. We now have permission from the Treasury to buy forward our foreign exchange requirements. So we have bought forward 90% of our requirements for the next two years and 60% of our requirements for the years after, and that eliminates a large fraction of the risk. There is a residual risk on the part that we have not yet bought, and the agreement is that we will deal with that across the research councils. This will be one of the issues that our finance directors’ group will track. As we have described earlier, there is a very active management of resources across the research councils in order to make sure that we spend in the most effective way. This will be part of the activities that the finance directors’ group will be looking at.

Q123 David Morris: Could you provide figures for the total cost of the individual international subscriptions for each of the next four years? I know of cases where they have been negotiated down, for example, in CERN and the European Southern Observatory.

Professor Mason: Yes, I can. I can send you a table that has all the detail in, but just let me give you a headline. Let me describe the CERN budget, which is the largest budget that we have. The total value of expenditure for CERN as a whole-this is not our contribution of it but the whole thing-for 2010 was 1,054 million Swiss francs. It is done in Swiss francs. On their plans, prior to our negotiations on that, that contribution would rise by the end of the Spending Review, by 2015, to 1,121 million Swiss francs. We negotiated that down to a value of 1,038 million Swiss francs. So it is an 8% reduction in cash terms compared with what they had planned to spend.

Q124 David Morris: Other than the European Synchrotron Radiation Facility, will any reductions in international subscriptions have any impact on the UK’s involvement in such facilities?

Professor Mason: No.

Q125 Stephen Metcalfe: Can I just pick up on one point following on from that? When you said you bought forward the currency, is that so you can fix your cost or because you are taking advice about when the best time to buy that currency is?

Professor Mason: It is to eliminate the risk of fluctuation so you can have planning stability.

Q126 Graham Stringer: Can you tell us, over the next four years, what will be the shape of optical astronomy both domestic and international?

Professor Mason: We made a strategic decision based on input from the scientific community about 10 years ago to join the European Southern Observatory. We clearly aspire to be the best in the world and so we could see at that time that we needed access to the best facilities in the world. It was clear that the direction astronomy was moving was that no one nation could afford world-leading facilities, so collaborating through an entity like ESO is the way to do it. Our priorities for the future will be through the facilities operated and developed by ESO, and that includes, although it’s not optical astronomy, the ALMA Millimetre-wave Array, which has been constructed in Chile, which we are very heavily involved in. We are hopeful that we will find a way of building the European Extremely Large Telescope, which is a 30 metre-class telescope and much bigger than anything else that currently exists. It is a major technical challenge. It is very expensive but it’s the way to stay at the forefront of the subject. That is our priority in terms of optical ground-based astronomy. As I said, that is based on advice we have received from the e-Science communities.

Q127 Graham Stringer: Will we still be involved in Gemini in Hawaii?

Professor Mason: No. Our current plan is to withdraw from Gemini in 2012 so that we can concentrate our resources on staying at the cutting edge of optical astronomy through ESO.

Q128 Graham Stringer: Can you just explain the basis for that decision?

Professor Mason: It’s really a scientific dilemma, if you like. Do you concentrate your resources in producing the very best facilities that might be in a single location, or do you spread those resources in order to cover a broader set of activities? As I said, the strategic decision that was made a decade ago was to recognise that we do need to concentrate and stay at the forefront of activities. We had a choice to make. Do we do that through ESO or by some other means? I think the right decision is to do it through ESO.

Q129 Graham Stringer: That sounds very positive, but when you look at the budgets there is an 11% cut in astronomy according to the figures we have. As you say, we want to be the best in the world. It is exciting. Over Christmas 4 million people watched the programme that was based at Jodrell Bank. Why is there a cut of 11%? I am pleased to see there is an increase in particle physics, given the discussions we have had previously, but why that cut?

Professor Mason: The numbers don’t tell the whole story.

Q130 Graham Stringer: Is it the interaction between the capital and revenue budgets?

Professor Mason: No. It is a real cut in the astronomy budget. It is the consequence of decisions that have been made over the last few years to restructure our involvement. To give you an example-this is not the whole story either-when we joined ESO in 2002-03 we still had commitments to a range of other ground-based observatories. So we recognised that in joining ESO we would be over-investing in astronomy for a period of a decade because we had to stay in these other facilities. As we withdraw from those facilities, the astronomy budget will go back down to what it ought to have been if we had been able to make that transition suddenly. The fluctuations that you see in the year by year spend do not really tell the whole story. Programmes come and go, and we try and balance the investment across the whole of our portfolio. Likewise, the apparent increase in the particle physics budget is just a consequence of the ebb and flow of programmes and the need to invest at particular times in particular projects.

Q131 Graham Stringer: Can you send us details? That would be helpful.

Professor Mason: Yes.

Q132 Chair: May I just push you a bit further on this, Professor Mason? Effectively, you are saying that we are pulling out of optical astronomy in the Northern Hemisphere. You still believe, quite rightly, that we have a big role to play in astronomy in the future. If we recognise, as I think we all do in this room, the need to excite the next generation of astronomers and, indeed, scientists in all disciplines, what is the sense in pulling out of projects that would, for example, jeopardise the National Schools Observatory?

Professor Mason: The National Schools Observatory is a different animal.

Q133 Chair: Will it survive?

Professor Mason: That is not really an issue for the research councils because it is an education issue. It would not have existed had we not put the resources into developing the capabilities, but there is a point at which it has to stand or fall on its own devices.

Q134 Chair: But it stands or falls on our having a presence in La Palma, surely.

Professor Mason: No, I don’t think it does. There are other partnerships and arrangements that one could make. To illustrate the central point that you are making, it is a question of scientific prioritisation. Irrespective of how much resource you have, it is a fixed resource. Do you concentrate that resource in producing the best facilities at a given site or do you split that resource, inevitably doing a less good job in the two hemispheres?

Q135 Chair: What discussions have you had with the Department for Education about the risks to that project?

Professor Mason: The honest answer is I don’t know. Education is the responsibility, as you have just said, of the Department for Education. Our responsibility is to keep the cutting-edge research. That is an important component for exciting the next generation. If we are not at the forefront of world astronomy, it is much more difficult to inspire people.

Q136 Chair: You do not see that as being part of the research councils’ remit-to be part of the team in the public sector that excites the next generation of scientists?

Professor Mason: No, quite the contrary. The whole of our work does excite the next generation, but we are a research council, not an education council. At some point we have to hand over and say, okay, we’ve developed a set of capabilities. It has a role in research. We support, and continue to support, access to research facilities and the output of those research facilities to inspire teachers, to make material available to them. On the other hand, our function is research. In determining a strategy-

Q137 Chair: But we have a ship in the south Atlantic that is crossing departmental boundaries. Surely, you can cross a few departmental boundaries.

Professor Mason: I am very happy to cross departmental boundaries. The decision as to whether we concentrate our resources in the Southern Hemisphere or the Northern Hemisphere is a scientific decision and it is a question of how you get the facilities that research astronomers need in order to stay at the forefront. Actually, I think the National Schools Observatory on La Palma is totally independent of that. There is no reason why we have to maintain a research presence on La Palma in order for that telescope to continue to function. We are very happy to work with whatever department in order to make that happen, but it is not something that can and must drive our research strategy. It would not be appropriate.

Q138 Chair: But you would see the merits of it continuing?

Professor Mason: Absolutely. I very much support it and have done over the course of its lifetime. In fact, I was very instrumental in getting it up and running in the first place.

Q139 Graham Stringer: The Government has re-classed the Haldane Principle. What difference has that made to your work?

Professor Thorpe: The restatement of the Haldane Principle very much supports the way it has operated in recent times. We are very pleased that that restatement has happened. It underlines the importance that society and Government places on science priorities being determined by scientists. The restatement is very helpful from that point of view.

Q140 Graham Stringer: I understand what you are saying, but does that answer mean that, as far as you are concerned, the restatement or the rewording of it has made no difference?

Professor Thorpe: There are not substantial differences, no. It has restated and underlined areas that the research councils would support by providing a set of general principles but also some examples of how it’s applied.

Q141 Graham Stringer: One of the examples given is that the Government makes it very clear that, where you have large capital projects, then it’s going to get more involved than it would do in a smaller research programme.

Professor Thorpe: Yes.

Q142 Graham Stringer: Does this blur the boundaries between scientists taking decisions on science matters and Governments poking their nose in?

Professor Mason: To take the instance of the Large Facilities Capital Fund, it is the scientists who have conceived of the projects that are going forward for the Large Facilities Capital Fund allocation. It is the research councils that have prioritised those. Then it’s the Government’s job to figure out whether it has the money to be able to support them. It’s actually quite a comfortable relationship which both sides respect.

Professor Thorpe: To give a concrete example, in the replacement of NERC’s research vessel, the scientific priorities that drove us to suggest that investment were fully respected by the Minister at the time, Lord Drayson. The conversations that I had with him about the business case and how we were procuring the ship were very helpful because they improved the process by which we procured it, but it wasn’t a challenge on the scientific priorities of why that ship was important for the science base.

Q143 Graham Stringer: It states, and I will just read out a sentence: "Similarly, Ministers have a legitimate role in decisions that involve long-term and large scale commitments of national significance." Isn’t that stepping beyond the line that previous Governments have done by saying that they have a legitimate role in decisions?

Professor Mason: No, I do not believe it is. In fact, to look at it from the other side, I welcome the Government’s interest in our programme. If they were not interested in our programme, I would be much more worried.

Q144 Graham Stringer: We have talked before about the Haldane Principle and regional investment. Professor Mason, you mentioned the European Extremely Large Telescope Project.

Professor Mason: The EELT. It’s in Chile.

Q145 Graham Stringer: Where is that going to go?

Professor Mason: It is in south America, in Chile.

Q146 Graham Stringer: Is there a new project in this country that’s looking for a location?

Professor Mason: In generic terms?

Q147 Graham Stringer: Yes.

Professor Mason: We do not have any new projects at the current time. As we have described, the scope for building large new facilities is just not there at the present time.

Q148 Graham Stringer: I was just clarifying that. That is helpful. Finally, after the abolition of the RDAs, what impact is that going to have on the funding of regional science? What will take their place, because they had science budgets that were dedicated to their region?

Professor Mason: They were primarily budgets for innovation. Some of those responsibilities will be taken over by the Technology Strategy Board. We have yet to see how this change will roll out in practice. I am sure we are all keeping a very careful eye on that.

Q149 Graham Stringer: But it is a much smaller budget, isn’t it, when you add it all up?

Professor Mason: Yes, I think that is correct.

Professor Delpy: I think we are all aware, as Keith said, that it was largely for innovation. It is small compared with the overall Research Councils UK budget. We each have certain universities that are large players in our space and which may have been dependent on funding coming in through RDAs and through other sources that matched or partnered with the funding that was coming from the research councils. So we are talking to our individual key universities and key research groups as well as the TSB to see if there is any significant consequence of the dissolution of the RDAs on the research base. We are very aware of it. We are talking to the universities. We work very closely with the TSB. They are four minutes away in the next building. We are not aware of any major effect, but we are keeping an eye on it because there may be local hotspots where significant investment has enabled a piece of research to take place that now may be put in doubt.

Q150 Pamela Nash: The allocations document indicates that the focus of funding will move increasingly towards providing funds for proven centres of excellence. Practically, how will that affect the way that each research council allocates its funding?

Professor Delpy: Should I start, because I suspect that my council, as the one without an institute, is an example of where concentration has already happened? Some 80% of EPSRC’s funding actually goes to 20 universities. So there is already a significant degree of concentration. That is probably very appropriate in the engineering and physical sciences. Critical mass and concentration is relevant in a large part of our remit but not in every subject. In fact that concentration does not apply in every subject but in the majority of them. I do not see that there would be a major shift within the EPSRC remit because we are already significantly concentrated.

What will happen is that we will be seeing a greater degree of collaboration between those centres of excellence and of critical mass being required by ourselves as part of our way of working. We will require them to work together obviously in sharing expensive facilities, but also in coming together to pull niche expertise together with core groups which have the ability to run large-scale projects.

Professor Mason: Just to extend what David was saying to STFC, it is also true of STFC that the nature of the work that we sponsor in universities, for example, in particle physics, requires critical mass so we are already pretty concentrated. We have similar figures to David’s. In terms of collaboration, if you take the example of particle physics, of necessity there is already a huge amount of collaboration between the various particle physics groups and universities because they are all working on the same large projects. Certainly for STFC I do not see any significant difference moving forward compared with the recent past.

Professor Rylance: From another part of the disciplinary spectrum, what Dave and Keith have outlined is truer than you might imagine for the arts and humanities. Already, if I recall, about 65% of the funding is going to 20 institutions, so there is a bit of a myth that it is equally distributed over the whole community.

What will happen in the arts and humanities is that we will maintain that degree of concentration. Why is it concentrated? Because those are the places that are good. We will maintain that, but we will put a renewed emphasis on collaboration, consortia arrangements and bringing in all sorts of institutions, particularly the institutions that are smaller in scale but with very specific specialisms. You can think about the Royal Northern College of Music or a number of the art and design areas where you can build critical mass by linking that degree of expertise. The change in our area will not be the dramatic one of saying, "We were funding a lot of places but now we are only going to fund a few", but we will be making sure that those places work together in a much more co-operative way.

Professor Thorpe: It is exactly the same for environmental science. We are not making a significant change in this in the Spending Review.

Q151 Pamela Nash: You have all spoken about building critical mass. The language you are using is that this is most definitely a positive move and that you have already been working in this manner. As a lay person, I am looking at it and wondering whether we are in danger of putting all of our eggs in relatively few baskets and that we will miss some innovation that could be entirely beneficial to our economy. Could each of you from your own areas just explain to the people and students watching this why it is so essential that you do build that critical mass and concentrate the funding in relatively small areas of excellence?

Professor Thorpe: If I can start, it is important to realise that the concentration that we have been talking about arises because we use excellence of proposals and plans of researchers as the key criterion for funding. We do not design it that way. What we have been describing in terms of how many universities get the bulk of the funding is associated with the quality of the proposal. So it is driven by the scientific excellence. In my area there are a number of smaller groups and smaller universities in environmental science which are extremely good and have excellent proposals that get funded. There is no exclusion from that point of view. It is just that, inevitably, by the nature of the science that we do, particularly in environmental science, you need to bring different disciplines together, whether it be physics, chemistry or biology, to look at environmental problems. That is why, as Rick was saying, we are increasingly encouraging collaboration not just within one institution but between universities and between institutes because we need to bring the specialists together. In NERC’s case, we have specific consortium grants where there are multi-partners, multi- institutions coming together to solve multidisciplinary problems. That is because they are the scientific problems we need to crack, like climate change, for example.

Q152 Pamela Nash: Just to be clear, an excellent proposal would not be discriminated against because of the history of the facility that it was using or the individual.

Professor Thorpe: Not in any I have seen, no.

Professor Rylance: I would just observe three very specific things. The move towards building consortia is designed explicitly to capture that talent wherever it occurs and provide it with an opportunity, and also to enhance it by contact with other people who are doing and generating different things. That is the first thing.

The second thing is that a third of our money goes on postgraduates so you have got to think about the degree of training and critical mass you have in relation to them. That may not necessarily be based on single institutions, particularly for disciplines which are low overall in distributing critical mass. So it is about trying to get consortia arrangements between specialists in one area or another.

The third observation is that we are, of course, in dual support, so it is not as if we are the sole funders of this kind of work. I said earlier on that in the arts and humanities 80% of the research is funded through QR, and that is much more broadly distributed.

Professor Mason: I think the essence of your question is: does concentration lead to a loss of diversity, because it is diversity which is where the gains come from? In all of our areas, but certainly in my area, there is no lack of diversity, not least because virtually everything we do is done in the international context so we are working not only within the nation but talking to our international colleagues in a very close dialogue. So there are plenty of ideas around.

The advantage of critical mass, as Rick was suggesting, is that when people have ideas they have the means actually to bring them to fruition and have a big impact. If you are isolated, you might have the best ideas in the world, but if you do not have the infrastructure around you to develop them and make that impact then you might as well not bother. I think the whole tenor of what we are trying to do, and have been trying to do, is to assemble our strengths in the best possible way so that we have the biggest possible impact in the world in the research that we do.

Professor Delpy: I would echo what everybody else has said. The prime criterion is excellence. We will fund excellence. We hope, where it is appropriate through critical mass, to strengthen the groups that have come forward with those ideas and enabled that research to have a greater impact because, in the end, we want the research not just to be excellent and to be done here but we want it to pull through for the benefit of all society and the UK economy. Quite often a small group, as Keith said, may have a great idea but they do not have the resources and the infrastructure that enables that pull through to maximise the impact. That is what we are trying to make sure we do.

Q153 Stephen Mosley: Our predecessor Committee in the previous Parliament heard that there was a concern amongst the academic community that areas of research without immediate technological applications were being undervalued. Professor Delpy, I have heard a quote of yours which says: "Researchers would be asked to think about impact at every stage of the research process." I have also heard from a chemist at the University of York, Paul Clarke, who said: "Obviously this is sheer lunacy…if I knew what the impact of the research would be, I wouldn’t have to do the research." How would you respond to such comments?

Professor Delpy: That latter quote, of course, comes from someone whose website says that the research they do may have an impact in the development of cancer drugs. My answer is, as I have always said right from the outset, that, in terms of EPSRC, we are handing out £800 million of taxpayers’ money. We would expect researchers, who are coming forward with good ideas-and we are peer reviewing them, so it is on the basis of excellence that we make the choice-at the outset, to think, "If this works, how can I ensure that the UK, in the broadest sense, gets the maximum benefit from it?" They should be doing that right at the outset and in fact all the way through. Historically, most people thought about it at the end of the project. The problem then is that if, at the end of the project, your idea works, what do you then do? You have not got the resources to go out and quickly make the contacts that are necessary or do the extra bit of work that takes an idea through to a proof of concept stage. You do that by applying for another grant after going through the peer review process and, after another nine months to 15 months’ delay, you can actually then do something about it.

If you think, right at the outset, "If this works, what resource would I need in order to maximise that impact?", then you can ask for that resource now right at the start of the grant. It would only be paid, obviously, if it is required, but we are asking academics to think about not just their great idea but, if it works, "How could I make sure that the UK gets the maximum benefit from this?" I do not think that is unreasonable.

Professor Thorpe: This is why we call this part of our proposal forms, "Pathways to Impact". It is actually opening up the opportunity for impact to flow. Just to be clear, impact for us is not narrowly focused on technology. It is focused on the benefits of research wherever they may lie, whether it be with the public, in policy or commerce.

Professor Mason: The other point that you have woven into your question is that this is not a bias against fundamental research. Quite the contrary. We are recognising that what some people call "blue skies research" actually has probably the biggest impact of all. It might take a little while to bring out but it is the stuff that really changes the world. All we are doing is saying, "Let’s recognise that and let’s value it for what it is." It is not some ivory tower activity that is of interest to one particular group of scientists but not of interest to the whole of our society. It is something of which the taxpayer should be proud and want to invest in because it has a major impact. If we recognise that from the outset and fly the flag for impact from the outset, then everybody benefits, and particularly those who are engaged in so-called fundamental as opposed to applied research.

Professor Rylance: There are two kinds of questions here. There is a sensible question and there is, to use that term, a "lunatic" question. The lunatic question is that you will only fund those things for which you can foresee the outcome at the beginning and which have determined benefits of one kind or another. Clearly, research does not happen like that and nobody believes it does. The sensible question is that you should articulate and realise the benefits, wherever they fall, however widely distributed, at the beginning of a project, and conflating those two issues is not helpful.

Stephen Mosley: I think you have predicted my supplementary questions.

Q154 Chair: Nevertheless, it is important that the way applications are assessed is not too narrow. One needs to recognise that in some of the areas-

Professor Mason: But that has never been the intention, it has never been what we do and, in a sense, we are doing quite the opposite, which is that we are recognising the value across the whole of the impact spectrum. It is not just economic or commercial. It is the bigger impact that doing research has for the country.

Q155 Chair: It is very important that that is properly understood within the research communities and also by the public. As an example, I saw an extremely good leaflet recently from the Royal Astronomical Society that had in it a number of things that we take for granted in everyday life today, like charge-coupled devices, that would not have evolved had it not been for the fundamental research that seemed extremely remote from modern cameras or whatever. I want to be sure that we are all talking the same language, because sometimes when we read documents from the research councils we get a different spin on the same them e.

Professor Mason: Surely not.

Q156 Chair: BBSRC has stated that it no longer sees itself as a science "funder" but rather as an "investor" of public funding in science. Arts and humanities states that it is a "strategic investor in research", while the EPSRC has announced that it will "move from being a funder to a sponsor of research". These do not quite seem the same thing to me. What do these shifts actually mean?

Professor Delpy: Should I start with EPSRC? First of all, this is a continuation of a direction of travel, anyhow. It means that EPSRC will no longer be just a passive funder of research. We have a budget that cannot fund everything that we wish to do. We have always been in that position, so we have, in our delivery plan, set out specific priorities. We have set out major themes that we are going to put additional resources into. In order to ensure that we get the best value for money from the investment we make and that we can help the academic community understand what it is that we are trying to do, we have to interact with the community in a much more active way rather than putting out a passive call saying, "We would like to fund work in nanotechnology or solar photovoltaics." So we will be working much more closely with the community in describing what it is we want funded. This is "we" on the basis of the advice that we have received from all of our consultations with the community itself. So it is the community that has said these are priorities. We are now implementing that. We will be working closely with them. We will be helping them identify steps along the way at which we can intervene, perhaps in collaboration with our partner, like the TSB, so that where we have large-scale projects there are some long-term goals, but along the way there are also outcomes that can be picked up early or at other stages within the programme.

Rather than sitting back and waiting for the academics to come back to us saying, "Oh, by the way, this worked but it worked two years ago and we are now five years down the line", we will be working with them, where appropriate, as an active participant in helping to reinforce the work that they are doing, particularly the impact agenda, and where possible trying to ensure that we bring in additional resource through the contacts we have with organisations such as the Wellcome Trust, Cancer Research UK, with whom we both have big partnerships, the TSB, ETI and so on.

Professor Rylance: I would like to add that you have to understand statements like that in the context of dual support. We are not the sole funder. What is the QR part of dual support doing? It is funding the infrastructure, broadly. What we are funding are areas of research which otherwise are more difficult to achieve through the QR, so projects of scale or importance which it is difficult to do through a routine thing. We are looking to fund breaking-edge research. We are looking to fund cross-institutional or cross-national collaborations of the kind we were describing earlier on. Those are things that are quite difficult to do for researchers based in individual departments or individual institutions. So it is a whole portrait here which is quite important to understand.

Professor Thorpe: The language change that you have talked about really underlines what a number of councils have already been doing. We have been using the terminology of "investment" for quite a long time because, indeed, it is an investment. The case made for the science and research projects is on the basis that it is an investment in the economy and society. It pays back much more than the taxpayer puts in. So, genuinely, for a long time we have been using that terminology. Many councils, including my own, have been strongly driven by our strategy, our scientific priorities, and we have directed programmes of research where we have a whole outline of the areas of priority against which we want people to bid. This idea of strategic focusing of research into particular areas has been present in the Natural Environment Research Council for some considerable time.

Q157 Chair: This seems to represent a move towards more centralised planning of research.

Professor Thorpe: In the case of NERC we pride ourselves on having a balance. We have always had a portfolio where we have a focus on areas of priority within our strategy, but also we have responsive mode funding which is open to any ideas across any area of environmental science. It is actually maintaining that very healthy balance between those two by NERC that has made the environmental science community very successful in the UK. I think both are important. NERC being able to focus on programmes, for example, on climate change or biodiversity has enabled a directed research to deliver rapidly but new ideas across the whole portfolio come through responsive mode funding.

Q158 Chair: Has all of this been driven by you, the research councils?

Professor Thorpe: Absolutely.

Q159 Chair: So there is no political interference in that process?

Professor Thorpe: Not in my view.

Professor Mason: It is an inevitable consequence of wanting to do large projects that have a big impact such as cross-council projects, which must have a management component. To illustrate that, we have not changed our language because we have always been doing it, but probably the largest managed scientific project in the history of the world is the Large Hadron Collider. We have been managing that in a directed way for the last 15 to 20 years. Of course, if we did not do that and if other countries did not do that, it would never happen because it would never come together.

Professor Delpy: It is pretty clear, if you look at our other major competitor and collaborator nations, that we play in an international arena. If you look at the priority themes that the American Government, the Germans, the French, the Swedes and the Japanese have come up with, they are very similar to ours. We play in an international market. Our academics are extremely successful in playing and working with international teams. We need to make sure that we strengthen the unique, the USP, of the UK academics within that international priority theme.

Q160 Stephen Metcalfe: The allocations document states that research councils will increase their collaboration with the Technology Strategy Board and the private sector, both through the TICs and more strategic partnerships with major companies. That obviously begs the question: how?

Professor Delpy: Let me start. There are some figures in each of the councils’ delivery plans for their collaborations. One of the real successes of the last spending round is the way in which the collaboration between the individual research councils and the TSB has grown. In many ways it was easier for my council because the element of the DTI that became the TSB largely worked in our space-telecoms, aerospace, defence and so on-but one of the real strengths of this last CSR is, if you look at where TSB now collaborates, it’s broadened its range of collaborative activities to encompass all of the research councils. None of us, I think, sees this as a problem at all. We were all happy to put figures into the delivery plan for collaboration.

If I had a concern, the difficulty would be with whether the TSB has sufficient resource to match the commitments that we would like to make. I do not think any of us saw this growth as either difficult or something that we would not wish to continue because of the success of the first three years.

Professor Thorpe: You asked particularly about mechanisms for enabling it to happen. We are exploring a wide range of mechanisms. In my area, for example, we have a big multi-organisational programme called Living with Environmental Change. Recently, about a year ago, we created a business advisory board for that programme. That board is composed of very senior executives, even at chief executive level, of some really important big companies in the UK, who are understanding, because of that board, the possible benefits of the research that is being done in environmental change, but also, and more importantly, probably, articulating up front where they think research is needed to enable their activities to manage the environmental change. That mechanism, which is a very specific one of creating a board of business leaders associated with a particular programme, is just an example of a whole range of ways in which we try and form those partnerships. We have to recognise that there is a wide range. TSB has a number of instruments. We actually invest more across the research councils by a long way than the TSB does in direct connections to business in the UK. It is a very wide range. The point I am trying to make is that we are using a range of instruments.

Q161 Stephen Metcalfe: The Government, obviously, is very keen on that sort of work at the moment. It has stated that it wants to protect funding that particularly is getting leverage from collaboration with charities, businesses and other private sector funders. Can you elaborate on how you think the Government wants to see that work?

Professor Delpy: I am not sure if I can elaborate on that. I can state the evidence that the research councils have always done this anyhow. Every one of us has specific collaborations both with major industries. We try now to co-ordinate that to a much greater extent across the research councils through, essentially, our knowledge transfer directors, who come together as a single group. I do not think I could say that the way we work with partner industries or partner charities or local governments has been specifically driven and influenced by explicit instructions from Ministers.

Professor Thorpe: I think we are trying to seek opportunities in all areas, right across the research base, and often, we would say, on this occasion, even in arts and humanities, which is very strong in this area. We are really trying to look at it across the whole of the research base. What the Government’s priorities are for the economy of the future and the growth areas is a matter for the Government, but we want to try and exploit the opportunities right across the research base to enable them to flourish where research is being done.

Professor Rylance: The particular field of operations which is important for us concerns the creative industries. That is this growing part of the UK economy and so on. Government asks us quite sensible questions such as, "How are you going to relate to these developments?" It does not tend to say, "And how are you going to team up with company X or body Y?" That is not the form of the question and it would not be a helpful form of the question because you are trying to generate something which is much more broadly based and, therefore, much more sustainable. I could describe how we are going to do it but I suspect that is more detail than you need.

Q162 Stephen Metcalfe: Then why do you think the Government is putting more emphasis on protecting projects that attract external funding so there is more collaborative working? Why has it made that statement, do you think?

Professor Mason: I do not think we can answer for the Government, but bringing in additional resources for, particularly, the research that we are doing has to be a good thing. By partnering with other organisations, there are two elements. First, raising awareness of the value of the research base in the industrial community is a good thing, as indeed is raising that awareness throughout society. That is what we have been doing. Secondly, getting industry to work in harness with the research community benefits both sides. If you can leverage resources and requirements from industry, charities or whatever, then you do more with what you have. You add value. That is the real driver of why we are interested in doing it.

Professor Thorpe: If you replace the words "protecting areas", I think we would just use the word "opportunities". We are trying to seek for the opportunities and we find them right across the research base. So it is not a matter of protecting certain areas but a matter of seeking the opportunities.

Q163 Stephen Metcalfe: Do you envisage the private sector picking up some of the research activity where funding has become less available, perhaps where you are no longer able to offer that long-term funding? Do you think the private sector has a role to pick up on that?

Professor Thorpe: Again, we looked at this area of whether there is a substitution effect between the public funding of research and private before this Spending Review. The studies that have been published show that there is a strong correlation between the two. There is not a substitution between the two. The private sector research and development and innovation is often driven off the back of investment on the public sector side. So they march forward hand in hand. My answer would be that there is not strong evidence of that kind of substitution, so that really says we need to keep it linked very closely and collaboratively.

Professor Rylance: It is quite important to frame the issue slightly differently. I do not think it is a question of saying, even if this were true, "Here’s a bunch of stuff. We can’t do any more. Now you lot do it", because it would not happen. Instead, you have to see that the whole research field is moving all the time. One of the ways it is moving is increasing collaboration between universities that are the primary instruments of these things and other sorts of bodies. So how can you fund, stimulate, generate and capitalise on that kind of synergy over the next four years and beyond? That seems to me the crucial question.

Q164 Stephen Metcalfe: Do you think we are geared up to do that, to make the most of that option?

Professor Rylance: Yes, I think we are getting there. There is a real changing culture and mindset on both sides of that divide. I do not like talking in terms of divides because I do not think they are divides, but I think on both sides of that there is a real change in opportunity.

Q165 Stephen Metcalfe: One of the other inquiries that this Committee has been looking at is the role of the Technology Innovation Centres. Do you see them having a role in this or where do you see them fitting in, in terms of your work potentially with them as research councils, and their role within the wider research base across the UK?

Professor Delpy: I will start off by answering this question. The TICs as defined, largely by Hermann Hauser in his review but also in the documents that have come from TSB, are very clearly in TSB space. They are a national facility that will be driven by the needs and interests of industry. Their remit will be defined by industry. They will, therefore, reflect the criteria that Hermann set for areas where the UK has strength and has the potential to gain a large proportion of the market in its broadest sense and where the potential size of that market is multi-billion.

The role of the research councils is, first of all, to help the TSB in defining where those areas of strength lie. We know our research base and what the UK strengths are, and we have been feeding that information into TSB. It is a matter of helping to advise the choice of areas for TICs. The second one is to make sure that the TICs, when the specific TIC choices are made, although they are driven by industry and are tackling industry-based questions and are not making use of research council resources, are linked in as strongly as possible with the very best groups in the UK.

As you know, novel manufacturing is going to be the first which falls very much into the EPSRC space because we have significant investments already in innovative manufacturing research centres. We have some new investment in centres for manufacturing. We will be making sure that those centres that are playing in that space that is defined by the TIC, by TSB, are strongly linked in. The drive for the TIC is an industry-based one that focuses on solving problems in the Technology Readiness Level 3-6 space. We play in the long-term TRL 1-2 space, with a little bit of 3 overlap.

Q166 Stephen Metcalfe: So you don’t see the TICs influencing particularly what the research councils might fund in the future, but rather the other way round?

Professor Delpy: In the first instance, in the choice of the TICs, it would be the other way round. If you look at the definition of what is going to be a successful TIC, it has to build on UK strengths, and those UK strengths are the ones that have been established on the research side by the research councils.

Professor Mason: We have been talking in generic terms about how to improve the links between the research base and the exploitation of that research, but, if we get those links correct, there will be a feedback loop. Again, that is to our benefit. It is a mistake to think of this as a linear process, from the research out to products. Developing a product also gives you new scientific ideas that you can then build on and produce new products. It is a positive feedback loop. It has to be a two-way connection. So, while David is absolutely right that in the initial stages TICs will grow from the knowledge that is in the research base to solve industry problems, if we get this right, in the long term, this will be a very beneficial two-way process.

Professor Delpy: One of the things that I specifically said in the very early FST debate just after the election was that, apart from the choice being based upon research strengths, one of the really strong benefits that we could get from this is in linking our training-in the case of EPSRC it would be our doctoral training centres-with the TICs, because I think the TICs are going to have a very strong role to play in skills training. We play in the postgraduate highly specialised training, but you get a much greater benefit from people who have been skills trained and have postgraduate training if you can bring them together. I would love to see, if it is appropriate, some of the doctoral training centres that we have in the manufacturing space being linked to these TICs, because there is a real benefit in bringing together the sharing of training right across the spectrum from the high quality PhD research through to the necessary technical skills. At the moment the universities are great at doing one but they do not do the other, or the universities that we fund do one area and not the other.

Chair: Gentlemen, thank you very much for your time this morning.