INTRODUCTION

  1.  Higher Education Institutions (HEIs) receive funding for research and research training from a variety of sources, including the Research Councils (RCs), Government departments, the EC, charities, and industrial and commercial sponsors. Grant provided by the Funding Councils is usually the largest single source of funding, but—particularly in HEIs with a substantial portfolio of research activity—this generally accounts for a minority of income. In the higher education sector in Great Britain, research related grant from the Funding Councils formed 34 per cent of the research specific income received by the sector in 1995-96, the latest year for which full data are available (total funding council income = £779m, total external income = £1,532m).

  2.  Funds provided by the Funding Councils are fundamental to the support of research undertaken in HEIs. By supporting the provision of premises, equipment and permanent staff they contribute to the infrastructure costs which underpin the dual support arrangements. More specifically, the research component of the HEFCs' block grant has three purposes:

(a)  it covers a majority of the costs of the basic research undertaken by universities, which forms the foundation for strategic and applied work, much of which is supported by other Government funds (from research councils and departments) and by charities, industrial and commercial organisations.

(b)  Since the 1992 change in the dual support arrangements between RCs and universities, the HEFC block grant has contributed to the costs of permanent academic staff and premises required for RC projects; it also contributes to the infrastructure costs of other collaborative research undertaken by universities in conjunction with RCs.

(c)  It contributes to the substantial fixed costs of training research students, in particular staff, premises, equipment, libraries and other essential facilities.

  3.  In allocating resources to institutions the Funding Councils apply a number of principles. These follow extensive consultation both within the HE sector and more widely. They are:

(a)  Plurality. The Funding Councils' allocations build on the advantages which the availability of a range of funding sources brings, and seek to complement but not duplicate the aims of other funding agents.

(b)  Selectivity. Funding Councils allocate funding selectively, according to the quality (determined through periodic Research Assessment Exercises) and (above a certain quality threshold) the volume of research carried out in each department in each institution.

(c)  Balance. The Funding Councils seek to reinforce excellence, but also consider it important that funds should be available to encourage research potential and the development of new and interdisciplinary areas of work. Maintenance of a broad base of research and training in science and technology in the UK is essential.

(d)  Competition. All HEIs are able to compete for the resources at the Funding Councils' disposal. Success, however, depends on the quality of the research undertaken and on its scale.

(e)  Accountability. The Funding Councils require evidence from institutions that research activities are well managed and have clear strategic aims.

HEFCE VIEW OF ON FUNDING FOR UNIVERSITY RESEARCH CARRIED OUT IN COLLABORATION WITH INDUSTRY

  4.  Ensuring that higher education is responsive to the needs of business and industry and contributes to wealth creation and national competitiveness is a key part of the Council's mission. In pursuit of this we promote partnerships between HEIs and industry, the transfer of knowledge and the encouragement of employment skills.

  5.  Work carried out in collaboration with industry has always been submissable to the Research Assessment Exercise and submissions can include research outputs other than publications, such new materials, devices, products and processes. We believe there is no inherent bias within the RAE to the appropriate assessment of research carried out in collaboration with industry and that where it is of high quality this is rewarded by our selective funding approach.

  6.  However, we recognise that some have felt the RAE panels lacked sufficient expertise to appropriately assess work of industrial relevance. We have therefore implemented a number of changes for the 2001 RAE to provide reassurance that this type of work is properly assessed including increasing the number of research users on the panels, developing explicit criteria for the assessment of industrially relevant work where necessary and ensuring that the assessment process itself does not discriminate against industrially relevant work. In order to ensure that we get this right we have established a joint task group with the CBI.

  7.  The HEFCE has encouraged particular types of HEI-Industry interaction through both the Generic Research (GR) funding initiative—which provides incentives for industrial collaboration where intellectual property rights are shared—and the Joint Research Equipment Initiative—which facilitates collaborative research through joint funding of equipment. In addition the Council's Continuing Vocational Education (CVE) has provided £60 million over four years for HEIs to develop CVE courses.

  8.  That extensive links between higher education and business already exist is shown in reports commissioned by the DTI from Tartan Technology in 1996 and by the HEFCE from PREST in 1998. Although there is much evidence of good practice, its distribution is somewhat patchy.

  9.  It is in part to support the spread of this good practice that we have launched our most recent initiative, to which you specifically refer, the Higher Education Reach Out to Business and Community fund. This targeted funding for institutions, provided over a 4 year period (but renewable), will provide an incentive to build a sustainable and broadly based capability to respond to the needs of industry and commerce. Thus, we expect this new fund to change institutional and academic cultures in order to attach greater value to activities which are relevant to the needs of employers and industry and thereby enable them to put into practice their strategic aims in this area. In building capability it should be noted that the Reach Out Fund will not support any particular sector or discipline. Notwithstanding this, those areas where there is most actual, or desire for, interaction would be expected to benefit most from the enhanced capability of HEIs to respond to industrial needs and this might be expected to include the physical and engineering sciences.

  10.  We will provide £10 million in 1999-2000, and £20 million each year thereafter, with the expectation that this will become a permanent new funding stream with allocations of grant made for four years in the first instance. The DTI has provided £6 million additional funds towards the programme. HEROIC will be bid based, although we will not define closely what is funded, institutions will set their targets and the outcomes will be monitored and evaluated.

  11.  Examples of activities that might be funded by the HEROIC fund include: developing IPR expertise; developing a centre of expertise in business links; training and development for staff, including staff exchanges; mechanisms and materials to promote and explain HE products, processes and services; one-stop shops to enable business to access advice from HEIs more readily; business incubator units; or improving CVE programmes to meet local and regional needs.

  12.  The emphasis on building general capability, the primary aim of the Business and Community Fund will distinguish our approach from that of many other specific funding initiatives. There is a parallel here with the dual support system for research where the Funding Councils provide academic staff, and basic infrastructure (principally buildings, major equipment and libraries) to enable institutions to respond to mission driven programme and project funding provided by research councils, charities and industry. Funding provided to HEIs under the proposed programme would lead to improvement not only in their delivery of knowledge and services to industry but also in their capacity to respond to related initiatives mounted by other agencies.

  13.  Although one of the benefits of the Business and Community Fund would be more widespread, systematic and rapid transfer to businesses of new ideas, products and processes generated within HEIs, we recognise that working with industry is not simply about transfer of ideas but just as important is improved access to and use by businesses of graduates and diplomates, products, resources and services produced in HEIs; improved relationships between HEIs and businesses at the personal level, using staff transfers, postgraduate student placements and other mechanisms to encourage mutual understanding and activity, especially at the level where the knowledge transfer takes place; and enhanced institutional capacity to respond in a concerted and effective manner to other initiatives promoting employability, enterprise and self-employment skills, particularly where knowledge transfer is concerned. We are framing the new fund so that it will facilitate these activities.

  14.  In recognising that much transfer takes place by the flow of people, that institutions have diverse missions and the need to embed changes in institutions, we propose two additional measures to make up a three-pronged approach to promote knowledge transfer and employment skills:

(a)  To encourage measures to promote employability through our learning and teaching strategy.

(b)  To encourage and provide improved information and dissemination through the work of our Business and Community Committee, which has made employment issues its top priority, and is seeking ways in which the two way flow of information between the HE sector and industry can be improved.

INDUSTRIAL APPLICATION OF GOVERNMENT FUNDED RESEARCH, INTELLECTUAL PROPERTY RIGHTS AND THE PROVISIONS OF FINANCE TO SUPPORT ENTERPRISES INVOLVED IN THE APPLICATION OF RESEARCH AND INNOVATION

  15.  The GR funding scheme is evidence of the HEFCE's wish to facilitate the commercialisation of publicly funded research and further support has recently been provided with the launch of the Business and Community Fund; the HEFCE welcomed the launch of the University Challenge fund which it sees as complementary to the capability building fund which it is financing.

  16.  GR and Business and Community funding both underpin the principle that HEIs should have access to sufficient expertise and advice to ensure they benefit appropriately from the commercialisation of their research by maintaining an interest when their IPR is exploited by others.

THE RESPECTIVE ROLES OF GOVERNMENT LABORATORIES AND INDEPENDENT RESEARCH AND TECHNOLOGY ORGANISATIONS

  17.  We see the role of Government funded science as providing support for curiosity led research that is publicly available for the general good. The importance of this type of funding is that it ensures the vitality of the research base in the short, medium and long-term.

THE OPERATION OF GOVERNMENT SCHEMES DESIGNED TO PROMOTE COLLABORATION IN, AND INDUSTRIAL APPLICATION OF, RESEARCH AND THE ROLE OF FORESIGHT IN FOSTERING NETWORKS AND IDENTIFYING PRIORITIES

  18.  We welcome the diversity of schemes available to meet the particular needs of different organisations, people and sectors and for different types of knowledge production. It is of course important that these are synergistic and do not duplicate one another, but we believe that this is the case with current policies.

28 January 1999