UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 215-ii

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

INNOVATION, UNIVERSITIES AND SKILLS COmmittee

 

sCIENCE BUDGET ALLOCATIONS

 

WEDNESDAY 20 february 2008

IAN PEARSON MP and PROFESSOR SIR KEITH O'NIONS

Evidence heard in Public Questions 151 - 258

 

 

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Oral Evidence

Taken before the Innovation, Universities and Skills Committee

on Wednesday 20 February 2008

Members present

Mr Phil Willis, in the Chair

Dr Roberta Blackman-Woods

Mr Tim Boswell

Mr Ian Cawsey

Dr Ian Gibson

Dr Evan Harris

Dr Brian Iddon

Mr Gordon Marsden

Graham Stringer

Dr Desmond Turner

________________

Witnesses: Ian Pearson MP, Minister for Science and Innovation; and Professor Sir Keith O'Nions, Director General, Science and Innovation, Department for Innovation, Universities and Skills, gave evidence.

Q151 Chairman: I welcome this morning Ian Pearson MP, the Minister of State for Science and Innovation at the Department for Innovation, Universities and Skills, and Professor Sir Keith O'Nions, Director General of Science and Innovation at the Department for Innovation, Universities and Skills in this evidence session about the science budget allocations. Sir Keith, we have met you on many occasions during our previous incarnation as the Science and Technology Select Committee and this may well be your last appearance before this Committee - great sadness is expressed all round; the shorthand writer writes "sighs and cries in the gallery" - and we would like to thank you very, very much indeed for the work that you have done within the old OSI and DTI and the work you have done in terms of DIUS. Thank you very much indeed for the contributions you have made to our Select Committee over the time that you have been Director General. Thank you very, very much indeed.

Professor Sir Keith O'Nions: Thank you. That is very kind.

Q152 Chairman: I will begin with a very simple question to you, Minister. You announced in Church House a 17.4 per cent increase in the science budgets. Why has it turned into such a PR disaster?

Ian Pearson: Firstly, thank you for the opportunity to come to this Committee and to give evidence. What I want to say to begin with is that I think that 17.4 per cent overall is a good settlement for science; it builds on significant investments that we have seen since 1997 when the science budget has doubled and it will have tripled by 2010/11. If you look at the international comparisons as well, the UK does well. The US has had below inflation increases in its science budget for four years in a row.

Q153 Chairman: May we talk about this settlement.

Ian Pearson: Our settlement is higher than Germany. Denmark and Norway have had seven months below the level with inflation as well. So, overall the 17.4 per cent increase is a good one for science. Of course, in any increase, by the law of averages, there will be some that do better than average and some that do less well than average and I suspect that we are going to focus this morning on those that have got less than the average 17.4 per cent settlement, but I would like to point out that the Medical Research Council, for instance, is seeing a 30.1 per cent increase over the next three years. We have been pumping 2 billion into medical research through the Medical Research Council. The overall budget for medical research will be 1.7 billion a year by 2010/11. We have also seen significant above average increases for the BBSRC where we have potential great advances in biomedical science at the moment and it is right, I think, that we make decisions on what we think are the right priorities overall for us as a government.

Q154 Chairman: We will come back to MRC and I do not think that we would disagree with much of what you have said. When Professor Ian Diamond came before us, he basically admitted that each council has got a broadly flat cash settlement once full economic costs have been taken into consideration and that in fact the success rate of grants across the board in all research councils is likely to decrease over the next three years. Surely that was not a source for fanfares in terms of your announcement, was it? Was this not a bit of glossing that you did on it?

Ian Pearson: Well, 17.4 per cent as an increase over the CSR period is better than most Government Departments have received. It is a good settlement for science. I do not pretend that there are not some difficult decisions that some research councils have had to take as a result of the overall settlement, but that is the nature of things. Nothing stands still in this world and it is right that research councils rigorously look at what their priorities are in a changing world and it is right that Government looks at that strategic level at what their priorities are as well and that is what we have tried to do in this overall science budget settlement. May I say something on the full economic costing because this is not just a flat cash settlement. Full economic costing is helping to ensure that our universities are put on a sustainable footing when it comes to research. That has been widely welcomed by the research community and, when we have spoken with the research community about this, they have always said to keep full economic costing and that was one of the key principles behind the decisions that we took as part of CSRSM.

Q155 Chairman: We will not disagree with you. I think this Committee and indeed the former Committee is very, very supportive of the whole principle of full economic costing, that must be right. The point I am making to you is that you knew that once the full economic costing was actually put into the budget, what really was happening in all the research councils other than in MRC was a flat cash settlement when in fact there was going to be a reduction in grants. My question to you is, did you foresee that because you looked a little shell-shocked at Church House when you received such a battering that day particularly from the particle physicists, the astronomers and others who basically said that this was the sell-out of our science.

Ian Pearson: Firstly, I can assure you that I was not shell-shocked about this.

Q156 Chairman: You expected it?

Ian Pearson: Secondly, I do not think you are being entirely accurate in saying that, apart from MRC, everybody else has just got flat cash plus full economic costing. That is not the true position. I do accept that some research councils' volumes will go down overall. We should not forget the significance of full economic costing and I hope that the Committee, when it comes to write its report, will recognise the importance of full economic costing and the additional resource that is going into university research departments as a result of it which is very significant indeed.

Q157 Chairman: We can assure you that that will be the case because I think that we are incredibly supportive of that proposal. The Royal Society made a suggestion that, in terms of actually, if you like, overseeing and scrutinising the allocation of resource to the research councils, there ought to be a panel of independent experts and you rejected that. Would you tell us why.

Ian Pearson: What I do want to say on this is that I know that there is this suggestion from the Royal Society about improvements to the process and we will consider carefully what the Royal Society have to say on this matter, but we are in a situation where, once this overall science budget is decided upon, we reach a stage of negotiations with the individual research councils and there are lots of vested interests out there. I suppose the question I put back to you is, if we did have a committee of the great and the good advising the Government, would it produce a different decision overall or would it just produce a decision where the people who were not inside the room giving advice to Government were critical of those who were inside the room giving advice to Government? I think that we really need to think through whether there is strong merit in a proposal to have an advisory committee. This is something that was once recommended 20 years ago. It is not something that I would want to dismiss out of hand but I think that we need to look carefully as to whether you could construct a committee that would really significantly add value in addition to the brusque process that I believe was gone through as part of the CSR07 settlement.

Q158 Chairman: One of the fundamental concerns of this Committee - and this is my last point before I bring my colleagues in - is of course the preservation of basic science. There is a strong belief amongst the Committee - and I am sure that it is shared by Sir Keith - that, unless we maintain the highest quality blue skies research, there is very little to translate in the future, and there is a suspicion that this CSR in fact is moving in the direction of greater emphasis on translational research in terms of wealth creation and best guessing basic research and that that is being downgraded. What is your response to that?

Ian Pearson: I think that that suspicion is misplaced and, as a government, we have always believed that you have to do both: you have to have world-class basic research and you have to have research that does translate some of that basic research into potential new discoveries and inventions that are going to benefit humankind in the future. What any government will have to do is to strike the right sort of balance between those two elements of research. In many ways, these all come together.

Q159 Chairman: Are you aware of that criticism?

Ian Pearson: I am aware that there are people out there who say, "You are moving too far in the translational direction". There are others who say, "You are not moving far enough in the translational direction" as well and, when I listen to a variety of views, as I do as Science Minister, I actually think that the balance is about right. We have seen big increases in both basic research and in more translational research over the last ten years and again I hope that the Committee, when it comes to write its report, will reflect the fact that we have put huge amounts of additional resource into basic research as well as putting more money into translational research and wanting to focus more on economic impact as well.

Chairman: In terms of economic impact, I would like to bring in Graham Stringer.

Q160 Graham Stringer: The Committee visited Daresbury on Monday and one of the big surprises that I was not aware of before we went was that the scientists at Daresbury told us - I am going from memory, so I may not be exact - that only three per cent of the total basic science that was not done on universities was done in centres outside the golden triangle and most of that was at Daresbury. Do the Government have a regional policy when it comes to science expenditure? Are the Government at all interested in the spatial impact of science?

Ian Pearson: The Government very clearly are committed to Daresbury and Harwell as science and innovation campuses; we have said that and we continue to say that and we want to develop Daresbury as a world-class centre for science and innovation. When it comes to decisions about allocations of research funding, those are done on the basis of peer review through the research councils. So, there is not a particular regional focus to that, but I would say that the north-west universities do very well indeed out of that peer review process and I think that one of the biggest concentrations of research anywhere in the UK will be found in the north west.

Q161 Graham Stringer: I am not clear from that answer what you are saying about a regional policy. Are you saying that you do not have a regional policy? I understand your response that you do not want to say, "That is the driver for that accelerator's fund as opposed to that accelerator", I understand that, but surely it is reasonable to say that money should be spent on basic science in Newcastle or outside Newcastle or somewhere else. What is the Government's regional policy when it comes to science expenditure?

Ian Pearson: Let me be very clear. We do not say to individual research councils, "You must spend so much of a percentage of your budget in the north-west, so much in the north east, so much in the West Midlands or East Midlands", and I think it would be entirely wrong to do so.

Q162 Chairman: Do you think that it is wrong to have a regional policy for science expenditure? It does not matter to you whether the money on science is spent in Manchester or Camden?

Ian Pearson: Clearly, we want to see a situation where we have world-class science being conducted in very different parts of the country and we want to see centres of expertise in all parts of the country as well, but what I do not think you can do, Graham, is get to a situation where you are actually dictating to research councils that a certain percentage of their budget has to be spent in a certain region. What we do have to do is to allow the research councils to make the best decisions based on peer review evidence.

Q163 Graham Stringer: I come back to the same point that you are saying that you would like science to be dispersed throughout the UK but you have no levers whatsoever nor do you want any levers which would enable you to focus money elsewhere within the United Kingdom.

Ian Pearson: If you look at how the science budget is allocated, you will find that the Government overall sets some strategic priorities. For instance, we actually say full economic costing was a strategic priority for us going into discussions on resource allocations. We say that we are committed to developing Harwell and Daresbury as science and innovation campuses. We are saying that we want to see cross-council programmes which address some of the Government's bigger strategic priorities such as ageing, such as living with environmental health, global threats to security and energy. We say all that as a government. We do not specifically say then, "You have to spend a certain proportion of your budget in a particular area" and I do not think that it would be right to do so.

Q164 Chairman: Minister, in some ways, the point that Graham Stringer is making here is that you have gone on record, as has the Secretary of State, saying that you want to have world-class - world-class - science and innovation campuses at Harwell and Daresbury.

Ian Pearson: Yes.

Q165 Chairman: That is regional policy by default, is it not? It just so happens that Daresbury is in the north-west, but that is regional policy by default. How on earth can you move from that to saying, "We have no interest in having world-class facilities on the Daresbury site" and that you are prepared to allow it to just disappear?

Ian Pearson: I am not saying that at all and in fact, as a government, we have said very strongly that we want Daresbury to be developed as a world-class science and innovation campus.

Q166 Chairman: Without world-class science.

Ian Pearson: With world-class science.

Q167 Chairman: What does that mean? What does world-class science mean at Daresbury?

Ian Pearson: Firstly, if you look at the STFC's delivery plan and if you look at their published statements about Daresbury as a science and innovation campus, they talk about developing the Cockcroft Institute which will have world-class accelerator science; they talk about the Hartree Centre which we anticipate will have world-class computational science and they talk about setting up a centre for detector systems as well. As you will be aware, Daresbury has been working on SRS and the next generation light source.

Q168 Chairman: They are all going, Minister. They are all going. You are not making a guarantee for any of those. All that science is disappearing. It is just hot air.

Ian Pearson: It is not true to say that all that science is disappearing. The fact that SRS was going to close has been known for a considerable period of time.

Q169 Chairman: I agree.

Ian Pearson: And there are redundancies associated with that which have already been announced. As you will see from the STFC's press release on this matter, apart from the SRS closures, there are not intended to be any compulsory redundancies certainly before the McKilloch Review reports and one of the things that the Government have done, as I am sure you will appreciate, is that we have asked Sir Tom McKilloch to conduct a review about the future of Daresbury. I actually believe that Daresbury has a very bright future indeed and I expect that, over the next few months, we will be able to see some positive announcements about Daresbury, but it is undoubtedly a fact that, as a result of the decisions on Diamond which were taken a number of years ago and the decision that was taken last year on 4GLS, there are problems in the interim and I cannot deny that.

Dr Iddon: I am sure you are aware that the formation of Cockcroft Institute on the Daresbury site was a combination pulling together Liverpool University, Manchester and Lancaster Universities. They were attracted to come on to that site because of the world-class accelerator and work that was going on there, some of which has moved now and some of which is uncertain. The Director told us on Monday when we visited the site that he was attracted to come to Daresbury all the way from the United States of America and indeed three other people came on the reverse brain drain because of the creation of Cockcroft on that site and because of the facilities there: the computational facilities, the fact that there were engineers there who could build advance instruments that the world has not seen before, because there was a world-class library on the site which we hear is going to close or it has potential to close. He told us frankly on Monday that he is clearing off and other people who were attracted on the reverse brain drain will also clear off unless some definite decisions are taken about the future of Daresbury. The general feeling on the Daresbury site on Monday was that a decision has been taken behind the scenes by the TFC to concentrate basic science at the Harwell site and to develop Daresbury as a technology park and we heard also that three major new companies were coming on to the site to join the others. I put it to you: do you believe that world-class companies will be attracted to the Daresbury site if the basic science there is being run down as it clearly is at the moment?

Q170 Chairman: That is the key point, Minister.

Ian Pearson: Clearly, there are decisions that follow from the closure of SRS which has been known, as I say, for some considerable period of time and following the review on the next generation light source where it was decided that neither 4GLS nor Sapphire were likely to be appropriate. Let me very clear on this. Let me quote from the press release that the STFC issued. It says, "At its meeting on 29 January 2008, the Science and Technologies Facilities Council confirmed its commitment to the development of the Daresbury science and innovation campus as one of two national science and innovation campuses that it will develop". It goes on to say, "The Council is committed to retaining key scientific and technology expertise at Daresbury in high performance computing, accelerator and detector research development for next generation facilities and underpinning technologies and is looking to expand expertise on this site as its plans develop". There is undoubtedly a period of change going through which is very difficult for those who are working at Daresbury, but the STFC have stated on the record and through their Council that they are committed to developing Daresbury and that is exactly what we want to see as a government.

Q171 Dr Harris: You do not believe everything that is in a press release even your own, do you? It is not a statement of fact, it is an aspiration and, if that aspiration comes to fruition ---

Ian Pearson: This is a decision that has been taken by the STFC Council and it is confirming its commitment to this which is exactly what the Government have said they want to see because, as a government matter of policy, we want to see the development of Daresbury and Harwell as campuses.

Q172 Dr Harris: Let me tell you what the Cockcroft Centre actually said to us. "Are the plans to make Daresbury a Science and Innovation campus?" and that is a term you used. "We fear the answer is 'no'. Lack of support of the STFC leadership for scientific flagship facilities on the Daresbury campus by design read as such a plan incredulous. The Cockcroft Centre by itself without applying(?) Daresbury Laboratory will have no reason to be on the site and will retreat to the universities failing the lofty diastoles". Does that not give you pause to think that maybe the STFC are not going to be able to deliver for you your policy objectives?

Ian Pearson: What it says to me is that there is low morale at Daresbury at the moment and I understand that and it is a difficult time and, when you are seeing a situation where work is finishing on SRS, then undoubtedly there is going to be a period of uncertainty. I want to assure people at Daresbury that the Government remain resolutely committed to developing Daresbury as a world-class science and innovation campus.

Q173 Dr Harris: That is not enough in itself and it is not just SRS. 4GLS has been delayed for two years and no-one we met at Daresbury was confident that that would eventually come to Daresbury. ETRLP, the Alice Programme, is under threat - and Dr Iddon may have something to say about this - and that undermines the potential for another project for (?). They do not think and I am concerned that you are not aware that it is not just morale but its intentions to not stay at that site for the basic science.

Ian Pearson: Again, let me be as clear as I can be on this. It is government policy that we will develop Harwell and Daresbury as world-class science and innovation campuses and we will do that. The STFC understands that that is a firm commitment to the Government and the STFC's published statements and its delivery plan say that they will develop Daresbury as a world-class science and innovation campus.

Q174 Dr Harris: If STFC thought it was not viable, would you let them not do that or are they forced to try and try to implement your policy objective?

Ian Pearson: This is the policy of the Government and it will remain the policy of the Government. Obviously in areas like next generation light source, we have to be guided by what the science says and when the science looked at 4GLS and looked at Sapphire, the conclusions of an international peer review suggested that neither was likely to be appropriate and we have to accept that, but the strategic commitment to Daresbury by the Government remains.

Q175 Chairman: Minister, there is a fundamental flaw in what you are saying and what STFC are saying. I do not think that any member of this Committee doubts your commitment and I say that really quite openly and honestly.

Ian Pearson: What you are suggesting is, can we deliver on it?

Q176 Chairman: Yes.

Ian Pearson: I am saying to you that I believe that we can deliver on this, that we will see the developments of the three centres that I talked about - the Cockcroft Institute, the Hartree Centre and the Detector Systems Centre - and we will maintain strategic capability to do work on the next generation light source.

Q177 Chairman: Minister, genuinely we are not doubting your commitment and intention, but the Deputy Chief Executive Officer at Daresbury, the Deputy Chief for STFC, believes that you can have a striving Cockcroft without having the new basic large facilities on that site. Everybody else feels that that is incredulous. I do not think that you have fully understood the connection - I am perhaps doing you a disservice - between having Amis(?) or having some major facility and in fact retaining this as a world-class science site and not just simply any other science business park.

Ian Pearson: I think that you are doing me a disservice, to be fair.

Q178 Chairman: Well, I do not mean to.

Ian Pearson: It would be great if a decision could be taken on what is the next generation light source and then a decision was taken on location. We are not at that stage though because, as you know very well, it has not been fully determined what the next generation light source should look like, let alone a decision on what its location should be. I personally very strongly believe that, if we get to the stage where we can make a decision that it is right to have a next generation light source project and we know what that project is, then its location should be at Daresbury, but we are not in that situation at the moment.

Q179 Dr Iddon: I think that the problem is the Haldane principle. As the Chairman said, we do not deny that the Government's intention is to have world-class science on the Daresbury site, but can you break the Haldane principle? Can you tell the STFC what they should be doing on the site when indeed they do not have the money to reach some of the commitments? I think that the two words which are important are "critical mass". We had critical mass on the Daresbury site but from what we were hearing on Monday from all the scientists from all the divisions at Daresbury - we saw an awful lot of people on Monday - the message was coming over clear: the future here is so unsure that we are clearing off now. The critical mass is crumbling. Cockcroft is crumbling. It does not look as if Hartree will even arrive on the site because, the way we are going, they will be lucky to complete. Can you break the Haldane principle of what the STFC do on the site? I can tell you that there are clear rumours behind the scenes that the STFC have been considering closing down basic science on that site.

Ian Pearson: I hope that the Committee is very careful in terms of its conclusions in this matter because the last thing that I think we ought to be doing is talking down the prospects of Daresbury as a science and innovation campus. We will not do that as a government. We are fully committed to developing Daresbury as a science and innovation campus and the STFC know that. They know that it is a strategic priority for us as a government and that is why it is reflected in their delivery plan. We would not have approved the delivery plan for the STFC if we thought that it did not have in it the development of Harwell and Daresbury as science and innovation campuses. I know that there is a great desire to have what you might colloquially call a big piece of kit and that, as 4GLS has not been proceeded with, that piece of equipment, that major issue, is not there. There is certainly the commitment from the Government however to develop Daresbury and to ensure that world-class science is conducted there. We need to look at this and it is one of the reasons why Sir Tom McKilloch is producing his report which will set out a vision for Daresbury. There is a vision of Daresbury being developed with those three centres that will conduct world-class science and, I believe, will make it an extremely attractive location for scientists who want to do world-class research and produce the additional benefits of having companies that want to be associated with that. I think that Daresbury has a very bright future, but it is obviously going through a difficult time at the moment and I think that the last thing we ought to be doing is saying that we are gloomy about the prospects for Daresbury because I just think that is reading the long-term situation completely wrong.

Q180 Mr Marsden: Minister, you know that the history of government decisions is littered with a list of unintended consequences and I think that what this Committee is trying to say is that if you will the end to Daresbury without fundamentally breaching the Haldane principle, you have at some point to will the means before the (inaudible). I want to address you further on the relationship between the Government and the STFC's delivery plan because, when the Secretary of State came before this Committee on 16 January, he said very straightforwardly that the Government had responded to concerns over STFC funding in the areas of physics and astronomy by commissioning a review from Professor Bill Wakeham. However, when Professors Diamond and Keith Mason came before the Committee, they told the Committee quite straightforwardly that the Wakeham Review had no impact on the delivery plan at all. I have to ask you therefore, is this not another example of the STFC cutting across clear departmental steer and actually undermining the points that were made originally?

Ian Pearson: No, I do not think that is a question of that at all. The Wakeham Review is a major piece of work. It is the first of a number of views looking at the health of the disciplines, in this case physics. The simple fact is that we have a science budget and it has been already allocated, so there is no new money, but we will obviously want to pay full attention to what Bill Wakeham says in his report about the health of physics and I do not think it is right to speculate on what is going to be in the McKilloch Review. Bill, as I understand it, is in the process of taking evidence and will produce a report in due course. I think that what the Secretary of State has said is completely right, that we have set up this review and we will want, as a government, to consider its conclusions.

Q181 Mr Marsden: Minister, I am not asking you to prejudge the Wakeham report. The point I am making is a rather different one. Here we have the Secretary of State commissioning a report after some very strong concerns in the physics and astronomy community and we have no idea as to whether that report's outcome, whatever it is, will have any impact on some of the basic fundamental decisions that are being made in that community by STFC. When Professor Mason came before the Committee, he said that it was not an option to delay any of the existing cuts. If it is not an option, then what is the point of having a review which may suggest a fundamentally different approach?

Ian Pearson: I think that there is every point in having a review that looks at the health of physics overall and that is exactly what the Wakeham Review will do and, as a government, we will consider carefully its findings because we have a responsibility overall to ensure the health of physics for the future. It is not the responsibility of government, respecting the Haldane principles, to make detailed decisions in terms of how a research council should allocate its budget. That is up to the STFC and its decision-making processes which involve the scientific community.

Q182 Dr Blackman-Woods: Minister, I would not want you to gain the impression that we are talking Daresbury down. We went to see it to find out the information. The information that we got on Monday was very much that the scientists there do not feel that their future is being invested in properly. They have gone to great lengths to recruit excellent scientists from a global market and they are losing those scientists at the moment. What the Committee is trying to press you on is, are you aware of that and can anything be done in the short term so that we do not lose the excellent scientists there?

Ian Pearson: I am certainly very aware of the situation at Daresbury. I have, as you know, regular contact with north-western MPs. Officials have been to Daresbury. I have been due to go twice, once yesterday when we were required to vote on other things, but I hope to visit there myself to talk to people there about the situation. Daresbury is going through a transition - there is no doubt about that - and that is a difficult situation and any process of change creates uncertainty. What we do not want to do is to damage the strategic capability of Daresbury as a science and innovation campus. I fully understand the concerns of the Committee which are obviously relaying the views of people who currently work at Daresbury. I just want to assure the Committee that we are very well aware of that and we want to maintain that strategic capability, we want to see it develop and we want to work with the STFC that has the operational decisions to make in these matters to ensure that Daresbury is developed as a world-class science and innovation campus.

Chairman: Graham, we side-tracked you and I am very sorry!

Q183 Graham Stringer: I would like to finish with one point. It is not a question of being propagandist for or against Daresbury, it is trying to look at the objective facts and they look pretty sad at the moment when we talked to people there. What I am interested in is democratic accountability. If basic science at Daresbury goes to the wall, if, as is happening, solar-terrestrial physics is decimated, astronomy is decimated and particle physics are decimated, whose head do I ask for? Who is responsible for those policies? That is the basis of democratic society. I do not want those things to happen. Who is responsible for them happening?

Ian Pearson: May I say first of all that I do not accept any of the "ifs" and let me say something about that in a moment. In terms of accountability, it is the Government that decides at a high level overall strategic priorities at the start of a budget allocation process and it is the Government that will make the final decisions on allocations according to those broad decisions and based on our understanding of delivery plans for the research councils. It is not our responsibility to make a decision about how many telescopes we should have, where they should be located, what the priority is between research on an international linear collidor or subscription to the European Southern Observatory or subscription to the European Space Agency or to CERN. Those are decisions that have to be taken by science.

Q184 Graham Stringer: What I am trying to get at is that there is a fundamental change taking place in the fundamental science that is being undertaken at the moment. Is that or is that not government policy? Do the Government support those huge changes in basic science and in physics that are taking place? Is it ministers who are pursuing that policy? Is it an accident or should we be asking for the head of the STFC?

Ian Pearson: May I put some facts on record. Firstly, if we look at the issue of research grants where there has been a lot of press coverage over the last few weeks and there has been an impression out there that swingeing cuts are taking place, the fact is that when you include the impact of full economic costing, overall funding for astronomy exploitation grants will have risen by 67 per cent in this coming financial year compared to 2005/06 and again, for particle physics, when you include full economic costing, the amount of funding in this area will be 43 per cent higher in 2008/09 than it was in 2005/06. So, there is significant extra funding going in to university research departments for these activities. The STFC have confirmed that this year, which has seen a big increase in astronomy grants from 278 to 329, will, in the coming financial year, see 323 grants awarded, so a broadly flat position. I also asked officials to compare the three years of the SR04 period with the three years of this CSR07 period and, from the figures that I have had, 854 astronomy research grants were awarded through the SR04 period and it is anticipated that there will be 855 during this CSR period. So, no net decrease in astronomy research grants at all.

Q185 Dr Gibson: How many were turned down?

Ian Pearson: I do not have the ---

Q186 Dr Gibson: That is what counts, is it not, because that means 800 turned down, 800 grants, 800 laboratories ...

Ian Pearson: I do not have the figures for how many were turned down under the SR04 period over the last three years and obviously I do not know how many applications there will be for research grants in this coming financial year. If you look at the volumes for astronomy grants, the volumes over the next three years will be exactly the same, according to the latest figures that I have, as they were in the previous three years and, as we have heard elsewhere which we discussed at the start of this meeting, the situation is that, in other research councils, there will be some reductions in volume because of full economic costing.

Q187 Dr Turner: A much more representative measure is percentage success rate of alpha plus rated projects. Are you able to give those figures?

Ian Pearson: I do not have those figures to hand for previous financial years and obviously they are not available for the future as well. If the Committee would like that, I would be happy to write to them with details.

Q188 Chairman: I think that would be useful.

Ian Pearson: Again, to emphasise the basic points including full economic costing, a 67 per cent increase in funding and, for astronomy grants, the same number of astronomy grants in the next three years as there were in the last three years. This is not a crisis.

Chairman: This is not a crisis, okay. I have a crisis of time now and I ask the Committee to be fairly speedy.

Q189 Dr Turner: Sir Keith, you told our late-lamented predecessor Committee and gave them an undertaking that Swindon Town Football Club would not inherit any financial difficulties from the merger with the CCLRC. How does this square with the actual fact that STFC have had to make 80 million worth of cuts in their grant-awarding budgets?

Professor Sir Keith O'Nions: Let me put a few facts on record.

Q190 Chairman: Can you do that as fast as you can, Sir Keith.

Professor Sir Keith O'Nions: I will try and go as fast as I can but I would like to get the facts on record. When CCLRC and PPARC were merged, we did have the NAO undertake due diligence and it was clear that there were no deficits in either council upon merger. Previously, we had had an independent review of finance and planning in ---

Q191 Dr Turner: May I clarify that. There may not have been any actual existing deficits, but were there future funding gaps implied by strategic decisions that had been taken but which were not funded?

Professor Sir Keith O'Nions: Let met stick with the facts and then I will try and answer that question. The NAO due diligence that was carried out did not reveal any deficits and in fact, in the year 2006/07, both research councils underspent by a total of 31 million. EYF of some 66 million was taken forward into STFC from the combined councils. We had previously had an independent audit of CCLRC because we were concerned about whether planning was suitably strategic in financial terms and whether they had a management capability to deal with costs that are very easy to get out of control in these very big science and big physics facilities, and basically they got a clean bill of health in planning capability, so there was no particular reason to assume that this was going to carry an impossible situation. Were they carrying difficulties at that time? In some ways, yes. That is one of the reasons why STFC was formed. In big physics and big science, these are complicated things to manage, they are very long term, there are international subscriptions, they are often pro-rata to GDP and so on. So, it does require a level of long-term strategic planning and decisions which may be quite different to what would take place, for example, in EPSCRC where they do not own big facilities. We were quite aware that there was the potential for these areas running out of control without very close management and that was our aspiration of STFC, having a very good management control on areas that are difficult to manage in all countries.

Q192 Dr Turner: Where has the management control failed?

Professor Sir Keith O'Nions: I have not said that the management control has failed.

Q193 Dr Turner: The evidence speaks for itself in the cuts that STFC ---

Professor Sir Keith O'Nions: Wait a minute, let us talk about cuts. You have fallen into the same statement. It is an 80 million cut on what a research council would have liked to have done. It is not necessarily an 80 per cent cut on what it is able to do. May I put one other fact on record because I am rather troubled by some of the comments around here particularly language like "decimation" because, frankly, if you trot out that sort of language, it is sure to hell going to get us there when there may not be the justification for doing so. Let me put on record some numbers - and I want to get them correct - which may well show you how perplexing it is in what is a budget settlement for science and a problem that most other countries would like to have rather than call it a crisis. Putting the Medical Research Council to one side as the Chairman suggests - and we know that this is a big priority for the Government, a big opportunity with the NHS and translational research - there are six other research councils. They are all allowed by the Treasury to plan ahead a flat cash. So, every research council, by definition, must have a plan going ahead for flat cash because that is their planning envelope. In this spending review, they were able to plan ahead a flat cash plus FEC and remember, in this spending review, there is going to be more than 700 million worth of FEC go into the research universities. These are huge numbers: 700 million and 400 million in the last time. So, they were able to plan ahead at both when we look at FEC plus flat cash, the planning assumption for all research councils, and then the settlement. Relative to that, STFC had the best increase percentage settlement of any of the other six research councils: it got a 3.2 per cent increase of the flat cash plus FEC. My advice to ministers was that that is actually as strong a place as we can be in. Just for reference, EPSRC was minus one per cent, NERC is less than two per cent, AHRC is also minus one per cent. That is the reality. It is therefore perplexing, with numbers like that, that you might have out there a crisis - it is the end of the world as we knew it; the universe is over - when actually physics expenditure is increasing overall across this CSR from the five research councils.

Q194 Dr Turner: Does this not bring into focus the fundamental difficulty of combining these two research councils and STFC where you are putting very large, very expensive big kit facilities with all sorts of imponderables together with a council working primarily in response mode and they make some inevitably uncomfortable bed fellows? Was this in retrospect a wise decision?

Professor Sir Keith O'Nions: I think it is a fair comment and I think it is a fair comment as to what the challenge is and it is fair to say that if you are in the Department of Energy in the United States, actually running these enormous facilities is a big problem. International linear collidor has gone there. These are very difficult management problems. I think it is right that, where you have research grants that must be very closely tied to the existence of a big facility - we spent 700 million on the collidor at CERN; it would be dumb to spend 700 million on it and then not have grants to go with it. I think it is right to have them alongside, but I would agree with you, this not a trivial management challenge and, when we put STFC together, we were very impressed at some aspects in both research councils where they could manage these very big and difficult projects successfully. So, it is a very big management challenge, however you put this together.

Q195 Dr Turner: Following the precise point that you have been making there, does it worry you that STFC, in making the hard decisions they have had to make, have focused on the large facilities at the expense of precisely the response mode grants which you rightly say need to be associated with them and what deleterious effect has it had on our science reputation in innovation?

Professor Sir Keith O'Nions: Myself, colleagues, ministers, everybody took very seriously the depth of concern that was present in the astronomy and particle physics community. To remove some of the more shrill remarks that have been made, there are a lot of very sensible people who have expressed very considerable concerns and numbers like 25 per cent reduction in physics across the nation are things that took hold and took root. Now that we have the benefit of Sir Peter Knight's science advisory input to STFC which I think has now been published by STFC, the facts are now on the ground and there are two sets of facts. One is that there are some facility reductions that their independent advisory group have proposed. Astronomy grants, which grew rapidly through the last CSR, are maintained with no more than about a one per cent change during this year. Remember that FEC universities have much more flexibility to manage these, it is not purely a grant issue. There are no changes in particle physics grants this year. The Wakeham Review will add valuable information as to how STFC and indeed the other four research councils that support physics respond. So, we are certainly not in a crisis situation for this year and those grants are well maintained, at least as well as other research councils are able to do it. Just remember that physics overall will be 500 million a year at the end of this spending review.

Ian Pearson: I want to reinforce the point that Keith made about the myth of the 80 million. The 80 million was based on the sort of budget that the STFC might have wanted to have, it was not based on its baseline. I do not know how you do budgets but I tend to base them on what my baseline is, what I am spending at the moment, and the facts which I would encourage you to look at when you come to write your report is that there is 30.6 per cent increase from the STFC's baseline, so we are not talking about cuts in that sense of the word and I would reject that as a characterisation, and the STFC will have an additional 185 million over the spending review period compared with its baseline.

Q196 Dr Gibson: What did you ask for in terms of money? What did you ask the Government to pay to keep the science base where it is and to move it on? You are enjoying the 17 per cent increase but did you ask for a 30 per cent increase?

Ian Pearson: The decisions on the science budget were actually confirmed in March before DIUS started as a government ---

Professor Sir Keith O'Nions: I am happy to make a comment on that because this is the agreement that the Secretary of State in DTI, Alistair Darling, made with the Treasury at that time. I think what is absolutely clear is that everybody pushed very hard to maintain the commitment that was set out in the much lauded 10-year framework for science innovation published in 1984 and I think we have agreed at previous sessions that the best reading of that carefully crafted language is to grow the science budget over that decade at about the rate of GDP growth. That was the commitment that we were looking for. Obviously we would always ask for more than that. I think that, at the time, it was considered to be quite a success to receive an award for these three years that was in the commitment set in that 10-year framework.

Q197 Dr Gibson: But you did ask for more.

Professor Sir Keith O'Nions: I always ask for more and sometimes I am successful.

Q198 Mr Boswell: I want to come on to the issue about reputation briefly. I am troubled - and we had evidence on this matter - about the implications of this for the wider community, the international community. We have had representations, for example, from the Institute of Physics in Australia. Is it your view that these consequences which are clearly concerning are simply a matter of, as it were, professional persons scratching each other's back and backing up their own position or is there something that we should be worried about both in terms of the withdrawal of subscriptions to international organisations and also the implications for the personnel science workforce?

Ian Pearson: Let me begin and, Keith, who has obviously been immersed in the science community for many years, will obviously have additional insights. I want to begin by saying that I appreciate that the way that this science budget settlement has been portrayed in the wider community has been unfortunate. I do not think that it has been realistic. I think that some of the facts that I have put out today, which I hope will be reflected in the Committee's report, demonstrate that there are overall increases in funding and that physics overall will actually see an increase in funding over the next three years which ---

Q199 Chairman: May I bring you back to the question that Tim asked.

Ian Pearson: What I am saying is that there should not be reputational damage because internationally the UK is seeing increases in funding across the science base over the next three years. When people look at the figures, I think they will understand that. Obviously, a couple of the decisions that the STFC have taken in terms of large facilities can cause problems in some quarters. I happen to believe that when you look at the detail of the decision on the International Linear Collider for instance, it seems to me as a lay person to be a sensible thing.

Q200 Chairman: Gemini?

Ian Pearson: When I see reported that Ray Albuck(?) from the United States has called for the International Linear Collider to be delayed until the results come in from a Large Hadron Collider then I listen to people who say that. I think Congress when it made its decisions recently on the International Linear Collider reflects this scientific opinion, so I do not think in that area there is reputational damage. I know there has certainly been some criticism of the decision to withdraw from Gemini. The STFC, as I understand it and I know you are going to be meeting with them again next week, has not yet withdrawn from Gemini; it is paying its subscription to July this year; and it has been looking through its peer review process as to how Gemini stacks up. One of the reasons it made its decision on Gemini, and Keith Mason told you this in his appearance, was that on the peer review process Gemini was a lower priority than the European Southern Observatory. Again I think it is recognised in the scientific community that the European Southern Observatory ought to take priority. Just on Gemini, the STFC still do want to ensure that researchers can have access to facilities in the Northern Hemisphere and I hope they can be successful in concluding negotiations on that. I know that a negotiating team from the STFC will be meeting with the Gemini Board next week.

Professor Sir Keith O'Nions: Can I make a quick comment on reputation.

Q201 Mr Boswell: May I just press the Minister on one point. Just for the record, I think from some earlier exchanges that you had with my colleague, you indicated that as part of your general responsibility for science policy that issues of reputation and, as it were, international relations would be within your remit and I would like you to comment that whatever the means or the outcome, in that sense, you are regard yourself as responsible for safeguarding the reputation of British science and its international credibility.

Ian Pearson: I want the UK to be seen as a place where we conduct world-class science and innovation, and so our ability to conduct world-class science, and our reputation internationally to do that is something that is very important. That is why we need to ensure that all the scientific disciplines are in a healthy condition. It is one of the reasons why we have set up the Wakeham Review. Your comments about back-scratching I will leave to Keith because Keith will understand this situation very well.

Professor Sir Keith O'Nions: Thank you for that endorsement. Can I say I think you are absolutely right to bring to attention reputation and reputational damage, and I think it is a proper and sensible point to focus on. The UK is really quite pre-eminent in science; we must not forget that. We are second only to the United States and our position globally is still improving in basic science and basic science output and we are getting better at translation. We have been extremely attractive to other scientists around the world with our universities which have proper infrastructure, so reputation is immensely important. On this settlement, we all know no matter how much money you have got you will never have every bunny happy at the same time and you expect some criticism. What was totally unexpected to me was that we would have such an uproar in this particular part of physics. That is a problem because there are a lot sensible people that have expressed these concerns. I have no doubt that there is a very significant degree of orchestration and that also is unsurprising given the depth of concern that a lot of sensible people have. It is also my belief that now we have got all the facts on the table about the overall increase in physics, the real state of astronomy and research grants in STFC, and the fact that the Wakeham review - reviews tend to be inflationary in my experience - is likely to be making sensible and supportive recommendations about physics in general is a situation, that very few other countries could identify that as a crisis but, instead, rather a nice problem to have. I suspect that it is going to take some time in those particular areas, I suspect, to repair that reputation. It is unfortunate but I do not think ultimately the facts justify the damage that has been done. It is very fair of you to identify it.

Q202 Mr Boswell: Very briefly on this, if there is an issue for the future it may well be lessons learned in terms of the handling and presentation of this issue as well as the substance.

Professor Sir Keith O'Nions: I think there are lessons to be learned from here and there are always lessons to be learned after every allocation. When I was given this job until March by Brian Bender two years ago, I said, "One year until Christmas," he said, "No, you have got to stay to March and take any flack that you might get from the allocations," and here we are!

Chairman: This is a polite discussion, Sir Keith.

Q203 Dr Harris: Would you agree with Sir Keith that there has been damage (f I got you right Sir Keith) to the UK's international reputation in respect of being a partner for international collaborations?

Professor Sir Keith O'Nions: I hope I used the word "potential"; if I did not I will correct the manuscript immediately.

Q204 Dr Harris: Has there been damage, is my question to you, Minister?

Ian Pearson: I agree that there has been potential damage in the short term as a result of the way the science settlement in the particle physics and astronomy community has been perceived. When you get the facts on the table, as Keith has said, then I do not believe that we should be in a situation whereby we are challenging the extremely strong reputation that the UK has for conducting world-class science.

Q205 Dr Harris: Let me tell you what Professor van Eyken, who is the Director of the Scientific Association of EISCAT, said in a letter to you: "I would like to emphasise the implications of the UK withdrawal from all ground-based Solar Terrestrial Physics which was announced - seemingly with no warning or consultation whatsoever - in the first Delivery Plan to be issued by the FTSC last week." (The letter is dated 21 December) He says: "... I would like to make some comment on the reputation of the UK scientific community, and their trustworthiness in international collaborations. The prospect of the UK belonging, for several more years, to an international association, namely EISCAT, which it does not then exploit, is very damaging to its credibility as a competent research nation. That the UK would not honour its commitment, thus also destroying its reputation as a trustworthy partner for international collaboration, is presumably quite unthinkable." That does not sound like potential damage to the UK's reputation; it sounds like damage. I have to take the car into the garage when there is damage, not potential damage; it is damage.

Ian Pearson: You talk and quote about the issue of solar terrestrial physics. My understanding of the situation is that the STFC's predecessor took the decision to withdraw from ground-based solar terrestrial physics in the last Spending Review SR04. My understanding also is that that was taken as a result of peer review which said that ground-based solar terrestrial physics was a low priority activity. I understand that since then there has been a subsequent peer review process conducted which also confirmed that ground-based solar terrestrial physics was a low priority activity ---

Q206 Dr Harris: --- That is not my question; I just want to ask you about the reputation.

Ian Pearson: --- And said that we should continue to withdraw from it. For a number of years the STFC has announced its intention to withdraw from ground-based solar terrestrial physics. I would also point out that ground-based solar terrestrial physics is actually funded through the EPSRC as well as through the STFC. As far as the STFC is concerned, and it makes decisions on its priorities based on peer-reviewed research ---

Q207 Dr Harris: That is not my question. My question was about has there been an actual dent in the UK's reputation. If there has, how is it that they think there has been no warning if you are saying this was a decision that was made or presaged four years ago?

Ian Pearson: You are quoting from a letter from an eminent Professor, and he has not drawn attention his letter to you the fact that the STFC have looked at ground-based solar terrestrial physics and whether they should fund it over a considerable period of time. He has not drawn to your attention the fact that for a long period it has been known that the STFC was withdrawing from that activity. You should not necessarily believe as gospel the pleadings of one individual in a letter.

Q208 Dr Harris: That is not my point. My point is that our reputation is the view of people like that. You cannot say his view is not that view because it is up to him to say that is his view. I think you are a great guy; you cannot say that I do not think you are a great guy because it is for me to say. Is that not evidence that the UK's reputation is damaged?

Professor Sir Keith O'Nions: Can I just point out that there are representations from many other areas of physics that come to DIUS and come to ministers that do not reflect that these decisions are damaging, and what ministers have to balance is views from some other physicists that are really rather indifferent to this plight. I think the overall damage to physics in reputation terms is not great. There is a serious point in this particular area but not every physicist would agree with the letter.

Chairman: I am going to stop you there because my reputation will be damaged irreparably we do not move on. I would ask the Committee to be as succinct at possible.

Q209 Dr Iddon: I just want to clear up some confusion that I am detecting this morning about Wakeham. I thought you said earlier, Ian, to Gordon Marsden that we had to wait until Wakeham reported until some decisions were made, but I thought I also heard, and I think I read in the press, that the decision on Gemini is to suspend, and I think you have confirmed that this morning, but you have also indicated I think that the International Linear Collider decision has been made. These are two important aspects of Wakeham and therefore I ask you if the Gemini and ILC announcements this morning are correct, why can we not wait until Wakeham has reported on everything?

Ian Pearson: As Sir Keith Mason actually said in his evidence to you, the STFC's delivery plan has made two and a half decisions. One was on the International Linear Collider; the second one was on our intention to withdraw from Gemini; and the half a decision was the withdrawal from ground-based solar terrestrial physics. He says it was only half a decision because it had been taken a long time before, which I was pointing out to Evan a few moments ago. Those decisions have been taken. The Wakeham review has had clear terms of reference and you have seen as a Committee the terms of reference and the membership of the Committee. What is very clear is that where the issue of the health of the disciplines is concerned, the primary concern has been on post-doctoral research grants, and the situation with regard to particle physics will be unchanged, apart from the International Linear Collider research, because none of these positions is up for review in this coming financial year. As we have said, the situation with astronomy is broadly flat as well, having gone up significantly this year, so there is time for Bill Wakeham and his Committee to do their work and for us to consider what their findings are.

Q210 Dr Iddon: Let me just go back to solar terrestrial physics for a minute. It may be dropping in the priorities of the STFC but this Committee has heard from scientists that are funded by NERC that solar terrestrial physics is quite critical to some of their work. Therefore my question to you is: have you investigated or do you intend to investigate escape routes, for example, for solar terrestrial physics? Could NERC, for example, not take on board that part of the work at least, if not all of the work of solar terrestrial physics so that their scientists' interests are preserved?

Ian Pearson: I do not think it is for me to get involved in individual detailed decisions about research grants. We have to go through a peer review process and it is the responsibility of the research councils to do that. You are absolutely right to point out that as far as the Natural Environment Research Council is concerned, some of the observations and research that can provide important information come from ground-based solar terrestrial physics, which is one of the reasons why it has funded that sort of research in the past. It will depend on NERC's view of its priorities and the quality of applications (which will be peer reviewed) as to how much ground-based solar terrestrial physics it will support. It could quite easily be the case that some of the people who are currently working on projects that have been funded by the STFC will migrate to projects that will be funded by NERC in the future. That can only be done on the basis of an assessment of the excellence of the research, which NERC will have to make.

Q211 Dr Iddon: Could I turn to another aspect which we have not considered this morning that has made life difficult for the STFC and that is in previous years the international subscriptions (which are susceptible of course to exchange rate fluctuations) the exchange rate fluctuations have always been carried by the main science budget, but this year of course that responsibility has been transferred to the STFC.

Professor Sir Keith O'Nions: We made some of those transitions in SR04 actually and, up to a limit, the fluctuations are carried by STFC, beyond which they are not. This is quite a tricky area. Our judgment is that the burden and uncertainty that is put on the 1.9 billion budget, which is what STFC have across the SR, can go plus or minus and is not great, and that is the judgment we have reached.

Q212 Dr Iddon: Can you put a figure on it for this year?

Professor Sir Keith O'Nions: I can put the figure on it but it is not in my mind. I am very happy to let you have it precisely and the arrangements and what was organised with those councils back in 2004.

Q213 Chairman: Minister, you say that so far as solar terrestrial physics is concerned that in principle, provided the research councils sorted it out, you would have no difficulty with some of the solar terrestrial physics going to NERC and in fact being supported by NERC, but that that is their decision?

Ian Pearson: Let us be clear, we are talking about ground-based solar terrestrial physics rather than solar terrestrial physics.

Q214 Chairman: You have no objection in principle for ground-based solar terrestrial physics going to NERC?

Ian Pearson: What I am saying is it is not a matter for me; it is a matter for researchers to apply to research councils with proposals and for those to be peer reviewed through the normal process.

Professor Sir Keith O'Nions: If I might just add, Chairman, the advice that we have to give ministers is whether research councils have an adequate peer review process to come to what may sometimes be unpopular but rational judgments about priorities. The detail of whether the British Antarctic Survey, which is the wonderful viewing place for solar terrestrial physics, is a high priority within the British Antarctic Survey and NERC programmes vis--vis others has to be left for peer review processes, and I think ministers have to be assured that a proper process exists. I do not think it is the position of government to ask the minister whether he thinks NERC should be running a solar terrestrial physics programme.

Q215 Chairman: I was just asking in principle was there an objection and clearly there is not. In terms of the ATC in Edinburgh, would again there be any objection in principle for the ATC to be subsumed within Edinburgh University and the excellent department it has in terms of astronomy?

Ian Pearson: My understanding of the situation with regard to the ATC in Edinburgh is that the STFC are at early stages of discussions with the ATC about their future. One of the options that they are discussing is whether there should be closer links and a tie-in with the University of Edinburgh. There is the example from BBSRC of the Roslin Institute which has moved into the University. It is my understanding that people working at the ATC have different views about what their future might be. I am keen that the STFC listens to those views and comes up with a satisfactory outcome.

Q216 Mr Boswell: A very small point, I wonder if Sir Keith can help. Particularly within STFC is there any attempt to lay off any of the exchange rate risks of subscription?

Professor Sir Keith O'Nions: You mean do they hedge?

Q217 Mr Boswell: Hedge might be rather ---

Professor Sir Keith O'Nions: Can I add that to the note because I do not know.

Ian Pearson: It would be too small to do that.

Q218 Dr Blackman-Woods: Is there anything that you think the Government could have done differently in terms of setting up the STFC to have avoided this situation?

Ian Pearson: In terms of setting up the STFC, I probably ought to hand over to Keith because it was set up before I arrived as a DIUS Minister, but from my reading of all the paperwork around the setting up of the STFC, it was clear that due diligence was undertaken as part of that process. Keith referred to the NAO Report, so I think proper steps were taken to ensure that the STFC was not created with a deficit which would create future problems. I do not know whether you want to add to that, Keith?

Professor Sir Keith O'Nions: I would agree entirely with what the Minister says. I do not think there is anything in the setting up of the STFC that we would have done differently, even with hindsight. Returning to an obvious point, however, given the difficulty that we have had prior to all the facts being properly on the table and well understood in the community and fEC, there will be lessons to be learned from that and other allocations by other research councils.

Q219 Dr Blackman-Woods: Was it given enough time to adequately consult with the community about where the cuts would be or indeed about priorities for the budget?

Professor Sir Keith O'Nions: Looking at it from the DIUS point of view and looking across research councils, we do not see very much difference in process. This process kicked off in 2006 with the predecessor councils, but with a vengeance in 2007, so delivery plans have been discussed at all stages through the last year. My understanding from STFC is that their Science Advisory Council, which is quite independent, have seen these at all times and our expectation is that councils and advisory committees will be consulting and inputting information from the community, so in terms of process I see at the moment no evidence for intervening or advising Ian that the processes that were set up were wholly inadequate for getting advice. I do know that there are people in the community that feel that consultation was inadequate, but in terms of the process that STFC and other research councils carried out, I think they are broadly comparable.

Q220 Dr Gibson: Can I come in briefly just to try and get some excitement into the proceedings; this is a bit boring! What has the STFC done in terms of initiatives and new things? What ideas has it got? Something that is challenging and helpful to the nation; what is it doing? It is getting attacked a little but what is it doing really?

Ian Pearson: There are lots of very positive things but I think the hugely exciting thing will be the Large Hadron Collider coming on-stream in in July. That is a huge bit of kit.

Professor Sir Keith O'Nions: 700 million UK investment.

Q221 Dr Gibson: So when will we see the result? Will you be around?

Ian Pearson: It will be starting its full operation in July this year, is my understanding.

Professor Sir Keith O'Nions: For a bit of excitement, it is the biggest international physics experiment ever; and the questions that are addressed, if you are interested in fundamental particle physics and cosmology, are amongst the profound questions in field theory that exist, so boy is that exciting!

Chairman: Right, we have had our bit of excitement, we cannot cope with any more.

Dr Turner: The answer is 42!

Q222 Dr Blackman-Woods: Sorry to bring you back to the mundane but I think this issue of consultation is quite important. How do you account for the fact that so many people in the physics community feel that they were not consulted at all about these cuts or the priorities, if you are saying that the process was fine and was the same as every other research council?

Professor Sir Keith O'Nions: From where we sit - and that is having personally sat through all the meetings on delivery plans and PowerPoints and we have people attending councils of STFC - although we do not participate in this - we understand that the Science Advisory Council at each stage has been involved, and the normal process with councils and the preparation of their strategic plans is to be feeding information into this. Whether or not we decide to have a closer look at that as we learn the lessons from this, I think is a separate issue, but answering your point, as we were going along, were there massive alarm bells that this council was completely out of order and out of line? I do not think there were, but that does not mean to say we are not obviously going to think quite carefully and see what lessons can be learned from this. I think the rest of that question will have to be addressed to STFC, frankly.

Q223 Dr Blackman-Woods: Do you intend to look at all at the structure of the STFC Board? It is constructed in a slightly different way from some of the other research councils. It has got ten members, three of them are executive members of the STFC, so there is quite a small representation from the wider academic community compared to some of the other research councils. Is that the sort of thing that you might consider looking at?

Professor Sir Keith O'Nions: Obviously we looked at the board quite closely and discussed it at length with Keith Mason when he set it up. The structure that he set up was a rational structure. The sub-board committees and the Independent Advisory Board seem absolutely right. I believe an announcement was made on Monday and Keith Mason is making very significant structural changes in his management of the STFC. Of course we will take a close interest in that and, as I say, there are lessons to be learned here in slower time. I think when you talk to Keith Mason you will discover that he really is responding and getting a grip on some of these issues.

Chairman: You will be delighted to know that we are going to move off STFC for a short time and I am going to bring in Gordon Marsden.

Q224 Mr Marsden: Thank you Chairman. Whether the delight will been unmeasured remains to be seen! Can I ask specifically about the situation with the funding award to the Arts and Humanities Research Council resulting from the overall settlement. Our information tells us that out of the seven research councils, AHRC received the smallest increase, and that was a 12.4 per cent increase, and its share of the science budget fell from 2.8 per cent in 2007-08 to 2.6 per cent in 2010-11. The implications of that, at least initially, are quite severe: they are cutting the post-grad awards from 1,500 to 1,000 in 2008 and over the whole period the fall in awards amounts to a reduction of 19 per cent. I just wonder what sort of message you think that is sending out to the arts and humanities in terms of the overall budget and particularly in terms of inter-disciplinary co-operation?

Ian Pearson: I will start on this and then Keith may want to say a few words. You are right to say that the Arts and Humanities Research Council received an increase in funding, in actual fact 26.3 million more over the CSR period. I would also point out that the Arts and Humanities Research Council did well in the last Spending Review where its budget increased by 20.5 per cent over the previous three years of SR04. The situation, as Keith outlined earlier, is that AHRC will have received its full economic costing increase and then its budget is probably minus one per cent, so it is somewhat of a surprise to me to learn that it is planning to see such a major reduction in the first year in terms of its number of research grants. I will want to enquire why that is the case. When you look at the numbers with the budget going up maybe not as much as it would have liked of course, as with the other research councils, but still a rising budget, you would not necessarily expect to see such a significant reduction.

Q225 Chairman: What will you do about it if in fact that is confirmed?

Professor Sir Keith O'Nions: I am similarly perplexed really to the Minister, and we do not know the detail between us. However, when you look at the figures there is an increase in the budget, fEC paid for, otherwise a pretty much flat cap and perhaps a one per cent reduction, you would say that overall there will be a small reduction in volume but you would not ---

Q226 Chairman: 500 less PhDs?

Professor Sir Keith O'Nions: I am looking at the cash. Overall you would expect some small reduction in volume in as much as inflation is not paid for. Would you expect swingeing cuts? No, frankly and I think we do need to understand more. I just hope that this and other research councils are not being so conservative that they are going to underspend, because the biggest single risk that all research councils carry is not overspending, it is underspending. We do not know the details but reductions from 1,500 to 1,000 are not the sort of numbers that we would expect. That is as much explanation as we can offer you; we will take a close interest in it.

Q227 Mr Marsden: Can I pursue this point, and in fairness to the overall figures, as I say, in the overall figures the reduction is about 20 per cent, but I would agree with you that it does seem rather curious. It would be useful for the Committee to know what the implications of the cuts in these post-graduate awards are going to be particularly for collaborative and inter-disciplinary work across the piece because that is surely something that we ought to be promoting.

Professor Sir Keith O'Nions: Or even if those are included.

Q228 Mr Marsden: Or indeed if those are included.

Ian Pearson: Yes and it may well be the case that because the AHRC is participating in a number of collaborative cross-council programmes and that it is not factoring the awards that are going to be made in those areas into its calculations, so the reduction in volume might not be as much as it seems to be saying in its report to you. I do think that one of the things that we will need to do is to talk to the Arts and Humanities Research Council to understand better their assessment of their priorities and why they are making these decisions.

Mr Marsden: Through you Chairman, could I therefore ask that when you have been able to do that you might be able to write further to the Committee on this matter. I know my colleague Tim wants to come in on something.

Q229 Mr Boswell: I have really got two points. I would group the first under flexibility and the second under autonomy, if I may. As I understand it, some of these cuts go back to the reduction in end-of-year flexibility resulting from the science budget cut-back that happened a year ago, the 68 million. Can we have an assurance from the Minister that the CSR07 budget will be honoured so that the councils can plan their budgets properly and they are not going to find themselves caught short by further cutbacks?

Ian Pearson: I do not feel the need particularly to go back over the old ground of the 68 million. The Committee is very well aware of the situation and the Government's view on this. I can confirm that the AHRC's share of this was 5.3 million and, like other research councils, the AHRC had to make some adjustments to its budget for 2007-08 to reflect that. There still is the situation however where its overall budget has gone up, not as much as I accept it would have liked, but it has seen an increase in budget allocation for the next three years. As far as a guarantee on the ring-fence of the science budget, I cannot bind the hands of people who might make decisions in the future, but the Government has always remained committed to a ring-fenced science budget and it is certainly the Government's intention that we will keep committed to that.

Q230 Mr Boswell: That is helpful. My second is perhaps smaller in that context but it is about flexibility for research councils in their recurrent activities and particularly CSR overlaps, and the more they have a degree of flexibility, particular in relation to their larger programmes even if those are not typically so large in the humanities, it is going to be easier for them to manage these difficult interfaces. How do you feel about that? Would you be inclined to give them as much flexibility as you can?

Ian Pearson: We certainly look to use all the flexibilities that exist within the system to make sure that we get maximum benefit, so for instance if there are underspends in particular areas often they can be balanced by overspends in others, and that is part of what you would expect of good financial management of a department. Keith will have operational responsibility for this.

Professor Sir Keith O'Nions: Good financial management of these budgets is very important. If you actually look at the figures, you can see that you often do not get a smooth chain over a three-year spending period. It maybe very flat in one year and typically they often have quite large rises towards the end of the Spending Review. In order to manage the sort of profile of a research council spend over that period, which is a much smoother curve, you are obviously going to have to accumulate some underspends and EYF and spend it somewhere else. Our job is to try and manage that. Good financial management will involve end year flexibility and cross-CSR transfers, but we have to be persuaded not to be so conservative that you carry enormous amounts of EYF which ultimately there is no prospect of spending, and that is part of my job.

Q231 Mr Boswell: My final question is simply about the management side. It slightly concerned me, and my eyebrow metaphorically lifted, given that the announced impact on AHRC has been known for some little time, that it is only now that you appear to be, as it were, undertaking to call them in to talk about it. Everybody, from whatever previous experience they have, understands that there are Haldane principles and you should not be digging up research councils by the root every few minutes. It does slightly concern me that apparently the information links are not, as it were, immediate and readily operating in both directions so it appears almost to have caught you by surprise.

Ian Pearson: Can I say that it does slightly concern me as well because when I read the AHRC's delivery plan it did not come screaming out at me that there was going to be a major reduction in research grants. I expected some small decrease in volume over the CSR period as with some of the other research councils, but I did not expect to see that, which is why I said I was surprised. That is one of the reasons why I would want to take this away.

Q232 Dr Harris: Some straightforward questions just on this point, is it fair to say that for the EPSRC that significant funds that would have been allocated to it were instead directed to the new Technology Strategy Board and the Energy Technologies Institute, around three per cent of its annual budget?

Ian Pearson: It is fair to say that the Government believes that the Energy Technologies Institute is a strategic priority and it is fair to say as well that the Government agreed with the research councils as part of our response to the Sainsbury Review recommendations that the research councils combined would commit a total of 120 million over the CSR period to collaborative work with the Technology Strategy Board. Overall, when you add both of those, that is a relatively small and modest proportion of EPSRC's budget.

Q233 Dr Evans: It is not the volume. You will not be aware that myself and the Chairman were at an SI committee that set up the Technology Strategy Board and I asked: "Will the new research council's funds come from the DTI in the normal way, or is there any likelihood of money that had been allocated to other research councils through RCUK being transferred to the new body". And Malcolm Wicks said that funds would be allocated to the board in the normal way depending on the Comprehensive Spending Review. "We hope that adequate funding will be provided, given the priority that we give to the matter." And I confirmed to the Liberal Democrat spokesman "that money will not be taken from other research councils to fund the new board; the money will be allocated in the normal way by the DTI." Is what you have just described not a contradiction?

Professor Sir Keith O'Nions: That is a wonderful gizmo you have there, I must say, it is a very impressive piece of high technology.

Q234 Dr Harris: That is all to the purpose of asking these questions.

Professor Sir Keith O'Nions: The undertaking that was given has been adhered to. There is no transfer of money from research councils to the Technology Strategy Board. The arrangement is actually quite welcome by the research councils. It is an alignment of spend. The strength of the proposal is that there is a clear line between where the TSB spends its money in collaborative arrangements with business according to state aid rules and where the research councils spend their money is on aligned programmes, funding what is appropriate for their priorities in their councils in universities. They are not transferring money to industry and to the TSB. We have discussed this before. It is not a subtle point, but actually the undertaking has not been reversed at all. Just remember that EPSRC has a very large proportion of its budget behind missions that logically underpin some of the challenges that face the TSB.

Q235 Dr Harris: Time prevents me from exploring the subtleties.

Professor Sir Keith O'Nions: It is not subtle.

Q236 Dr Harris: Would you agree with what Mr Watmore told us when he and John Denham came to see us that the financial side of the settlement was previewed before we turned up, so the science budget had been announced in the Budget of 2007?

Ian Pearson: Yes it was and it is a matter of record, is it not?

Professor Sir Keith O'Nions: The broad structure was determined in the Budget. There was a commitment in the Budget settlement to the national challenges issue, to the implementation of Cooksey, to support of the Energy Technologies Institute and, most importantly, to full economic costing, so the broad structure was there.

Q237 Dr Harris: I will come to my point. The Treasury claw-back from the MRC of 92 million was decided, I think, in the summer of 2007 by the Treasury. Is that correct?

Professor Sir Keith O'Nions: We can give you the precise date but it might have been a bit earlier.

Q238 Dr Harris: A bit earlier? May?

Professor Sir Keith O'Nions: Can we send you the precise date. It was June apparently.

Q239 Dr Harris: So that was after the science budget had been announced in the Budget. I do not understand how it could be said that that clawback was known about before the science budget was set and was compensated for in an enhancement in the science budget. If you get the timings correct it does look as if the science budget was set, then the Treasury intervened - that is not your fault and I am not blaming either of you - and took away 92 million from the commercial fund of the MRC. The figure 92 million is not unadjacent to the 80 million that the FTSC is down on and so it is fair to say that there was no compensation in the science budget for that clawback.

Ian Pearson: Again you are wrong to quote the figure of 80 million when it comes to the STFC. The simple fact is that there has been an increase in the STFC's budget, not as much as it would have liked. In fact, all research councils would have liked more money.

Q240 Dr Harris: All I am saying is 92 is close to 80.

Ian Pearson: Even the MRC would have liked more money, but the fact is that it is getting a 30.1 per cent increase in its budget over the next three years, and I think that is widely welcomed in the medical research community. To get back to your original point about the MRC's commercial fund, the situation has been that the MRC's commercial fund has been producing an income stream but without any authority to spend that. The normal way in which organisations produce income streams are accounted for by the Treasury is that they will factor those into their normal budgetary allocation processes. That was not taken into account at the time of the CSR settlement, and I think you will find Treasury argue that if you would have taken that figure into account, we would not have given so much to the science budget in terms of its headline allocations.

Q241 Dr Harris: I am not with you, so what you are saying is that the budget was set and then this 92 million was taken out and that is just because of Treasury rules? Is that what you are saying?

Ian Pearson: The MRC's commercial fund did not have authority to spend the money in the MRC commercial fund and the agreement reached with the Treasury was that 92 million would transfer to the Treasury but 106.9 million would be available to spend by the MRC over the next three years.

Q242 Dr Harris: That was money it already had; it was not in exchange for the 92. The point I am making ---

Ian Pearson: Can I just carry on and try and explain a bit more. That was a process of regularising the position so that the MRC commercial fund could operate like other parts of government that generate income because it had not been operating on that basis before. The agreement is that post this CSR period that the MRC commercial fund will produce information indicating its income levels. Those will be part of the budgetary process during the next CSR period and the general rule that applies all across government is that you will forecast your income, you are allowed to keep that income, and you are allowed to keep 20 per cent above that income, and again the agreement with the MRC is that that will hold for the next CSR period.

Q243 Dr Harris: Do you think that is a disincentive?

Ian Pearson: And if there need to be negotiations in the future as well because there are one-off windfall gains that that can come from, then we will have a separate negotiation with the Treasury on this.

Q244 Dr Harris: You are very keen on knowledge transfer and translation and the entrepreneurial stuff shown by the research councils. Do you not think it is a bit of a negative message to send to research councils that if you do better than you plan, and we all hope to do better than we plan in everything - you will get 20 per cent of it but 80 per cent of it is for the Treasury when it is entrepreneurial work of the research councils?

Ian Pearson: I think it is a good point to raise and certainly we want to encourage organisations to be entrepreneurial and to raise income where it is appropriate.

Q245 Dr Harris: So why not give the Treasury 20 per cent and given the research councils 80?

Ian Pearson: Where I have sympathy with the Treasury - and I think you need to think carefully with this - is what incentives do you provide for people to correctly forecast their income. I think there is a point there and if you have a system whereby you are saying whatever money you generate you can keep, I do not think that provides any real incentive to get accurate information of what is likely to be raised as income as part of this.

Chairman: I must bring this to an end.

Q246 Dr Harris: If they get it wrong and if they underperform according to their budget they lose 100 per cent. The Treasury does not come into the rescue with 80 per cent, so they only lose 20 per cent on that side, so it is not really fair, is it, that if they do their best guess and fall short they lose 100 per cent of that funding, because it is indicative, as you say, in their spending plans, and if they overperform they only get 20 per cent; it is not fair.

Ian Pearson: I think the system at the moment, which has been a system that has applied right across government for quite a while, has tried to strike a balance between providing incentives and getting proper information so that the Treasury can be aware of the financial position.

Q247 Chairman: I think the big concern we have here, Minister, is that this 92 million was in fact not unallocated, it was very much earmarked for the St Pancras development and that was built in, and even the Chairman of the MRC knew nothing about it until after the settlement. That seems to be a totally inappropriate way of managing the affairs of what is going to be a major project.

Ian Pearson: I certainly am aware that the MRC very strongly felt that these monies were legitimately theirs and that they had indeed earmarked them for projects. What I can say though is, subject to the business case, that the Government has confirmed that it is very strongly supportive of the UK MCR and other big, exciting projects such as the Laboratory for Molecular Biology at Cambridge, and we do believe that there is sufficient resource in budgets that can be available to make sure those projects come to fruition.

Q248 Chairman: So "Minister guarantees project" is the statement from this morning?

Ian Pearson: I can definitely confirm, subject to all the caveats about it being good value for money and a proper business case that the proposed St Pancras development is extremely exciting and offers a prospect of really world-class science and international leadership and we want to see it continue.

Q249 Mr Cawsey: Having joined this Committee knowing nothing about how science funding works, and heard all the evidence, I now definitely know nothing about how science funding works, but at least I am certain about it now! I want to move on to the relationship between the Department and research councils. You have been going for a few months now with the new department. I wondered how you feel the relationship between yourselves and research councils is developing. Is it just business as usual with you having a different name or is it all very different from the old OSI?

Ian Pearson: I only saw the OSI from the outside of course because I took an interest in these matters and have done for a number of years, but just as an interested MP rather than as a minister with responsibility. What I can say is this: like any new job I have made it my business to get to know the senior staff in research councils and to personally build up a relationship. I have started a programme where I will see a chief executive of a research council once every fortnight, so there will be a regular period of communication, and I would like to think that is what you would have expected of an active minister that wants to be involved and engaged. The basis of the relationship is still very much one of accepting the Haldane principles when it comes to making decisions. It is not my job, and frankly it would be irresponsible of me, to try and second guess decisions that research councils take on the basis of peer review.

Q250 Mr Cawsey: So are you confident that these lines of independence that the Haldane principles hold up and they are still in place and the relationship is not being tested in that way in any respect?

Ian Pearson: What I can say is that as a Government we clearly need to take a view on what the strategic research priorities are for our future. I think there is a debate that we will continue to have about to what extent we want to focus research spending on some of the big challenges facing society and our economy today. That is why we have talked about the grand challenges such as environmental and climate change, energy, global threats to security, aging, and it is why those are reflected in the programmes of the research councils. However, if you look in that broad area you would say that it is right for government to say we want research done in this these areas because they are strategically important; it is right for the government to say things like the digital economy and nanotechnology are areas where we want to see research being done. It would not be right for us to say that that particular nanotechnology research project should be funded and that one should not. That is where the Haldane principles and the peer review process need to strongly come in. I think we have got the right sort of balance but we need to continually review this.

Q251 Mr Cawsey: It is interesting you say that because is it not true that politicians do not spend years and years climbing up the ladder to give it all away when they finally get there. If you look at what has been happening and you see the fEC and cross-council programmes and other pre-determined expenditure being set before things get through to the research councils, it could look like the Department and the Treasury are setting most of it. What would you say to give a degree of reassurance that you are not micromanaging the research councils specifically about how they spend the money that has been allocated to them?

Ian Pearson: I would say look at the facts and I think the facts demonstrate that we are not looking to micromanage. The facts are that we have some overall strategic priorities as a government, but we make broad funding decisions in allocating money to research councils, and we agree at a relatively high level their delivery plans and then we let them get on with it, and that is what we do. There is a question when you look at the cross-council programmes that I was talking about such as Living with Environmental Change and the others as to whether we should be encouraging research councils to spend more money in those areas. There is an argument that says, yes we should because these are important to our future and that we ought to encourage greater funding. At the moment when you look at it we are putting through the research councils some significant money in these areas, but there are still tremendous opportunities across all the research councils for response-mode funding for blue-skies research, and there will always be a peer review process, I believe, because that is the best way to allocate resources.

Q252 Dr Iddon: Finally we are looking for some clarification on how full economic costs have worked. I assumed, rightly or wrongly, that this has been a three-year phased programme and in the next financial year we are going from 70 per cent full economic costs to 80 per cent full economic costs. I may be wrong.

Professor Sir Keith O'Nions: Can I just correct you. We have been 80 per cent since September 2005. Next year with the restructuring of the capital funding it will effectively be 90.

Q253 Dr Iddon: So we are going from 80 to 90, so the figure of 700 million to universities that you mentioned earlier, Sir Keith, represents that extra ten per cent?

Professor Sir Keith O'Nions: We spent something in excess of 400 million on full economic costs in the last Spending Review. Obviously we started with zero so we ramped up to 400. It is our estimate that it will be in excess of 700.

Q254 Dr Iddon: That ramping up has been over a three-year period?

Professor Sir Keith O'Nions: It started in September 2005 but of course it was a trickle fund and it still building up, but it will be more than 700 million in this next Spending Review.

Q255 Dr Iddon: My question is one that I put down as a parliamentary question three weeks ago to this Department, DIUS, but for some mysterious reason the parliamentary question has been transferred to the Cabinet Office. I put it to the Minister straight this morning: if all seven of the research councils had been responsible to meet full economic costs, of which we have all approved on this Committee, some of those economic costs for running research came from other budgets previously, so what has happened to the money in those other budgets, perhaps QR money, perhaps the universities themselves were funding the cost of that research? Have those budgets been transferred in any way whatsoever to the research councils to help them meet the full economic costs of 90 per cent next year?

Ian Pearson: Firstly, I do not understand why your question should have been transferred to the Cabinet Office ---

Q256 Dr Iddon: --- Neither do I.

Ian Pearson: --- So I will make enquiries. Secondly, just to confirm, full economic costing is part of the science budget. There is a well-established ring-fenced science budget. There was in SRO4 and full economic costs were part of that and similarly with SR07 the science budget settlement contains money for full economic costing, and as Keith says, that will be 700 million-plus over the next three years.

Q257 Dr Iddon: Before we had full economic costs somebody was funding the research.

Professor Sir Keith O'Nions: What was happening before full economic costs, as all the analysis has shown - and by the way there has been no shift from QR; QR from HEFCE and the other funding councils has also increased apace over the this same period, so there is something of a golden age here - and then one gets beyond analysis into anecdote, that, in effect, the volume of research had expanded in universities through the 1990s into the early part of this decade and the expansion was actually unfunded, and in some universities it was probably taking money out of teaching and the teaching infrastructure, in others it may just not have been fixing the roof of the laboratories and so on, but in effect it was on a trajectory that was absolutely unsustainable into the future. What we are seeing is how much money it costs to get back into a sustainable situation where our universities in the UK, I believe, are as competitive and as attractive as anything in the world and you can see that in terms of the ability of our major universities to appoint global talent, and you are working now and competing for global talent, which costs a lot of money over a long period of time, but it has not raided other budgets; it just was not funded.

Dr Iddon: That is what we wanted to clarify, thank you.

Q258 Chairman: Could I ask either the Minister or Sir Keith to drop us a note because we have run out of time. It really goes back to this question of the MRC's commercial fund and the fact that all the research councils and indeed the universities also will be making significant income from intellectual property in the future. You gave a hint that the Treasury was going to re-visit that relationship between those commercial funds into actually pocketing the profits thereof. Could you give us a note to say what discussions you have had with the Treasury about that and if there is a timescale for actually developing a new proposal?

Ian Pearson: The MRC situation has been regularised. There is not a new proposal, but I am happy to write to explain the detail in terms of what is going on.

Chairman: On that note, could I thank you very much indeed, Minister, for giving us a very, very frank exchange this morning and again thank you, Professor Sir Keith O'Nions.