Cross your subsidies and hope not to die

Hepi’s exposure of the degree to which teaching subsidises research should provoke a new approach to funding, says Phil Ward

November 9, 2017
spaghetti junction

Jo Johnson, the UK’s minister for universities and science, loves the figure of £4.7 billion. It’s like a technicolor dreamcoat to him, and he parades it whenever he can, admiring the way it shimmers in front of covetous fellow ministers. He’d better watch his back.

£4.7 billion is, of course, the amount of additional funding that the government has committed to spend on R&D up to 2020-21, billed by Johnson at a recent conference as “the single biggest increase in R&D expenditure in nearly 40 years. We really recognise that our economic future has to have science and innovation at its absolute core. And we’re matching our rhetoric with resources.”

Well, up to a point. In its latest report, the Higher Education Policy Institute reveals the dirty secret at the heart of publicly funded research in the UK: it is desperately underfunded and is being cross-subsidised unsustainably by student fees – particularly international fees.

The issue of underfunding has long been recognised. In 2005 the then Labour government moved to rectify this, introducing “Transparent Approach to Costing” to more clearly identify the true costs of undertaking research. It subsequently instructed the research councils to fund 80 per cent of the overall full economic costs of projects.

Five years later, the Wakeham Review tried to fill the gap by encouraging the “efficient” use of resources, including the sharing of assets. This was partly successful, but 2015’s Diamond Review still contained warnings of a looming need for cross-subsidy.

The Hepi report confirms the bad news, stating that, on average in 2014-15, research councils and industry were funded at just 72 per cent of full economic cost. As a result, the research “deficit” rose from £1.8 billion in 2010-11 to £3.3 billion in 2014-15. Teaching, on the other hand, made a £1.3 billion surplus, and, as the Diamond report predicted, this went towards funding 13 per cent of all university research. Put another way, £1 in every £7 spent on research came from surpluses on teaching.

The report points a finger at research funders’ recent shift towards “challenge-led” approaches. The Global Challenges Research Fund is a good example, seeking match-funding from universities that can’t even recover the full cost of their own research, let alone offer a subsidy to what is in effect the UK’s development budget.

Such strains come at a time when most universities can ill afford to bear them. The introduction of the teaching excellence framework has applied additional pressure to demonstrate the value of teaching, and to show exactly where students’ fees are going. Although most institutions claim that their teaching is informed by research, many students would be unimpressed at having to borrow money to subsidise it.

While a welcome contribution, Technicolor Johnson’s £4.7 billion is still too little. It equates to £2 billion a year; if the research deficit is £3.3 billion a year and rising, there is still a £1.3 billion hole in the budget.

In addition, much of the extra funding will come through the industrial strategy, which also demands match-funding. However, as the Hepi report notes, institutions have little choice but to accept the terms offered. All are scrabbling to increase their research income even if it ultimately results in a loss, particularly as research output affects their position in rankings and the research excellence framework. Yet the strain is showing: the recent Elsevier report for the government on the comparative performance of the UK research base notes that there is cause for concern on several fronts.

The authors of the Hepi report hope that it will convince the government, ahead of the next spending review, to increase unallocated block funding for research. It’s a clarion call to protect the unique position of R&D within the UK economy.

However, at a time when the public purse is being squeezed by the twin demands of austerity and Brexit, and when universities are perceived as being out of line with the public mood, it will be hard for the government to stay strong on its principles. Let’s hope that Joseph is listening and not dreaming – and that he still has the ear of the pharaoh.

Phil Ward is deputy director of research services at the University of Kent.

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Print headline: A big hole in the budget

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