New test tubes or shiny buildings? The choice facing policymakers when it comes to funding research

• The King’s College Policy Institute has just published a report on Broke and broken? What TRAC [Transparent Approach to Costing] data tells us about higher education finances. These are the remarks made by Nick Hillman, HEPI Director, at the launch event.

Let me start with a vignette. Back in 2017, we published a brilliant award-winning report on TRAC written by a young intern. This looked specifically at cross-subsidies in universities from Teaching (international students) to Research.

Back then, there was no clear cross subsidy towards home students, as they (more than) paid for themselves due to £9,000 fees. But the subsidy from international students towards research was large, as it remains today.

We held a launch event at the LSE for the paper. This remains seared on my mind for, instead of being impartial, the eminent professor in the Chair attacked our young intern for having the temerity to publicise the split in resources for teaching and research.

His (widely shared) view was that, at an institution like the LSE, research informs teaching and teaching informs research, so policy makers should not look too closely under the bonnet but instead let universities spend their resources as they see fit.

The interesting part of this story is that the person who asked us to write the report was the LSE’s own Director of Research. He was frustrated that his colleagues seemed not to understand the financial flows in their own institution.

A second reason why we should shine a spotlight on how universities work is that teaching and research are now split down the middle when it comes to political oversight:

• we have one Minister for teaching and another for research;
• we have one Whitehall Department for teaching and another for research; and
• we have one regulator / funder for teaching and another for research.

We might prefer it if it were not so, but it is naïve to think substantial cross-subsidies within institutions fit as naturally with these arrangements as they did with the arrangements in place back at the turn of the millennium, when TRAC was first mooted.

In our 2017 report, we showed that, according to TRAC, only 73% of research costs were recovered. On revisiting the issue in another report three years later, we found cost recovery had fallen to 69%. Today, as the KCL report shows, the number is just 66%.

In other words, during a decade when politicians have exalted the power of R&D to transform Britain, the level of cost recovery has been falling at almost 1 percentage point a year.

However, what has changed over time is that this is now fairly well understood. For example, TRAC data were heavily used to show the sector’s challenges in both the Universities UK Blueprint and the recent Post-16 Education and Skills white paper.

Let me focus on that white paper for a second. It is a slightly odd document, where you can see the joins between the three Secretaries of State (for Education, Work and Pensions and Science, Innovation and Technology) who share responsibility for it.

In particular, the white paper recommits to improving cost recovery for research while simultaneously looking for new ways to crack down on the international students who currently provide big cross-subsidise for research.

The end result, as the white paper itself admits, is likely to be less research:

We will work with the sector and other funders to address the cost recovery of research. … We recognise that this may result in funding a lower volume of research but at a more sustainable level.

While some research-intensive institutions may celebrate this concentration, it does not feel like we have talked enough about the consequences in terms of what it could mean:

• for research capacity in each region;
• for the pipeline of new researchers; and
• for the likelihood of missing out on new discoveries that may otherwise happen.

In other words, what we have in the white paper is the perhaps inevitable result of giving the Minister for Science, Research and Innovation, Lord Vallance, the additional role of champion for the ‘Oxford-Cambridge corridor’.

So far, I have assumed the TRAC numbers are accurate, yet we all know they are rough – or worse. A 10-year old piece on TRAC in Times Higher Education quotes one university finance director as saying: ‘if you put garbage [data] in, you will get garbage out.’

In preparation for this session, I spoke to one academic at a research-intensive university, who even argued: ‘TRAC is a piece of fiction to conceal how much teaching subsidises research.’

He went on to explain that your contract might say 40% of time should be on Teaching and 40% on Research (with 20% for admin): ‘If you spend 60% on Research and 20% on Teaching, you would be in violation of contract so no one will admit to it.’

A second academic I contacted was similarly scathing:

‘I think it is a classic case of looking for a lost wedding ring under the lamppost, even when you lost it a mile away. Universities obviously have an incentive to say that teaching UK students and doing research is more expensive, because they hope to get more money from the government. That is why TRAC does not lead to better business models – the stuff is known to be suspect.’

Such criticisms may explain why I have only ever been able to find one university that has followed the logic of their own TRAC numbers by refusing to take on any major new research projects (and even they only had the ban in force temporarily).

The lesson I take from all this is that TRAC is useful, but not enough. Some sort of calculation needs to occur to inform policy makers, funders and managers. But TRAC is not the slam dunk that people sometimes like to think it is because:

1. the process is neither liked nor trusted by those it measures;
2. institutions do not respond to what the data say, so look guilty of crying wolf; and
3. every sector in search of public money does its own calculations, so the fact that TRAC exists and shows a substantial shortfall in the full economic costs of research and, increasingly, teaching home students too does not automatically give higher education institutions a leg up over other areas of when lobbying the Government.

Finally, TRAC is meant to help politicians understand the world but I think we also need to recall the motivations of political leaders. When I was in Whitehall, we struggled to persuade the Treasury to move towards full economic costing. They caricatured it as buying new test tubes when the alternative was shiny new buildings. In the end, politicians in hard hats cannot go to topping-out ceremonies for new test tubes.