FEC scrutinised as deficit lingers

BIS asks why £2bn gap between research costs and income persists. Melanie Newman reports

November 12, 2009

Universities' funding for research infrastructure is coming under increasing scrutiny as questions are asked about how the money has been spent to date.

The Department for Business, Innovation and Skills is commissioning a new review into the full economic costing (FEC) system, which provides universities with extra money to pay for infrastructure and other costs that are not covered by research grants.

A BIS spokesman said it was setting up the review, which will be chaired by Bill Wakeham, former vice-chancellor of the University of Southampton, in response to a recommendation in a research council-commissioned study, which concluded in April.

He said Professor Wakeham's review would aim to devise "a mechanism to provide reassurance about how FEC funding is used and how it contributes to sustainability".

Concerns have been raised in the sector that the review could pose a threat to FEC, as ministers seek to cut costs while maintaining science budgets.

However, BIS denied that this was the case.

FEC was introduced by the Government in 2006 because about a third of the costs universities attributed to research were not covered by research income, leaving a £2 billion "research deficit" in the sector.

In 2008-09 the sector received an FEC "uplift" of £387 million from the research councils.

Despite this, the deficit has remained at £2 billion over the past three years and ministers are believed to be asking where the money has gone.

There is also growing concern that institutions could be plugging the research gap with cash meant for teaching.

In a letter to vice-chancellors in June, Steve Smith, then chair of the Higher Education Funding Council for England's Financial Sustainability Strategy Group, questioned whether institutions could sustain research with such a large deficit.

Professor Smith, who is vice-chancellor of the University of Exeter, added: "I am equally concerned about the message it gives to the Government, and to staff and students.

"It represents £2 billion of sector income (10 per cent) not being invested in other activities because they are subsidising loss-making research."

There are several possible explanations for the deficit.

Some organisations, such as charities, European Union bodies and businesses, do not pay the full costs of research; even the research councils pay only 80 per cent of the costs of new research contracts and less on old ones.

Questions have also been raised about the methodology for calculating institutions' costs, known as the transparent approach to costing (Trac). It has been suggested that academics frequently overstate the amount of time they spend on research, which then inflates research costs and deflates teaching costs.

In a presentation to Trac experts at a conference last month, Jim Port, of JM Consulting, who has been advising on Trac for ten years, said the sector was in a "risky position" because it appeared that university research was not sustainable.

He told Times Higher Education that the Government had been expecting the research deficit figure to fall considerably below £2 billion after FEC was introduced. "There is disappointment that the deficit is so large," he said.

Parts of the sector are arguing that it would be more cost-effective to fund research in fewer institutions, he added.

"There are difficult policy choices to make. Funding is part of the answer. But there are things that universities could do to understand and manage their whole portfolios more sustainably, like managing the volume and cost recovery on all the work they do."


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