Who’s in charge of the Big Kit ?

Its terribly important to keep bang up to date. So here are some thoughts on an announcement made by RCUK a month ago and the related announcement made by STFC the next day. This concerns allocations from the Large Facilities Capital Fund (LFCF). Cold news I know .. but I just accidentally rediscovered the file on my laptop and its rather interesting. First, because of whats in it; and second, because it highlights a political puzzle.

How much is it worth ?

More every year … If you go back to the December science budget allocations you will see that the amount allocated to the Large Facilities Capital Fund is rising rapidly :

STFC 2008-9=£624M 2010-11=£652M
MRC 2008-9=£606M 2010-11=£707M
LFCF 2008-9=£105M 2010-11=£265M
University Capital Fund 2008-9=£267M 2010-11=£214M

This is serious money…

Whats in it for STFC ?

Well there’s money for Diamond and for ISIS-2 of course, and quite right too. But its also full of things that ain’t even in the Programmatic Review – the new Gateway Centres – the Detector Centre, the Imaging Centre, the Hartree Centre. Many tens of millions. Why were Universities not given the opportunity to bid for these enterprises? We in Edinburgh are running HECToR for EPSRC because we won an open competition. The ESA space science centre is still to emerge as well. One hears that ESA centre should wash its own face .. but how does all this compare to what we just cut ?

Along with these specific allocations, DIUS has published a roadmap for large facilities. This is important for astronomy as along with SKA development, the longer term plan includes ELT and Einstein, a third generation gravitational wave system. It also includes FAIR .. and it seems the ILC is back in but “after 2020”, and no decisions will be made until 2010 or 2012.. Finally the Neutrino factory and dark matter are all in there somewhere in a woofly kind of way …

The political puzzle

Back in 2006 when STFC was invented, it all seemed a bit odd. It felt like a strong wind was blowing, so there was no point resisting, but what was it all about ?

(i) An extremely well placed source once told me that the root cause was that the Large Facilities Capital Fund was felt by Treasury to be not well spent; there ought to be a Council that managed its expenditure. That does indeed sound like a logical reason for inventing STFC …But the LFCF was not given to STFC. Its still top sliced. Think how much more wriggle room they could have had…

(ii) The same well placed source told me and several other senior astronomers a year and a half later that STFC was invented because Keith O’Nions felt it was the best way to protect big long term science like astronomy and particle physics. Yeah, right.

(iii) Another well placed source told me unequivocally that STFC was created because CLRC was in a mess and PPARC was put in to sort it out. Sounds completely plausible. But it doesn’t look like what happened ..

(iv) Various intelligent but not particularly well placed individuals have speculated that STFC was a corporate raid. Some people understood earlier than others about CLRC’s overcommitment and needed to create a larger pond to swim in.

(v) Some of my Physics chums have suggested more or less the inverse. Huge PP and astro bills were looming, with the exchange rate going the wrong way …

I dunno. Give up.

So why was STFC invented ?

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29 Responses to Who’s in charge of the Big Kit ?

  1. John Peacock says:

    Andy: we should keep firmly in mind that these major injections from the LCFC to STFC are not entirely wonderful news. It just means that STFC ends up owning more capital assets for which the Treasury will demand depreciation payments. If STFC gets £624M before the next CSR, then with depreciation over 20 years that means they need £30M per year to pay off the loan – £90M over the next CSR. This sum will come as a non-cash allocation, and will be trumpeted as “increased science funding”, when of course it is nothing of the kind. What it really means is that STFC now needs to argue its overall allocation up at the next CSR by yet another £90M in order just to stand still in terms of actually doing science. Any bets on whether they are likely to succeed?

    I’d be curious to know if this Treasury sleight of hand has always been going on, but PPARC never owned enough capital to matter (CERN, ESO & Gemini don’t count), or whether the rules changed at about the time STFC was formed. Now that would be an interesting coincidence.

    Anyway, it’s depressing that, so soon after the 2007 CSR debacle, all the elements seem to be in place for a re-run of the same show in 2010. I wouldn’t class myself as a big fan of STFC, but possibly even cuddly old PPARC might have been royally screwed by this Treasury skulduggery. These absurd accounting rules are the real villain. We ought to be able to find a way out of this mess, and ESO etc. point the way: when the ELT is built, STFC won’t own it and we won’t pay depreciation. This suggests that facilities such as Diamond that are located in the UK would be better off under the official ownership of some other organisation, to whom STFC makes a payment. Why isn’t STFC trying to move in this direction, rather than taking on yet more capital debt that it (we) can’t afford?

  2. Conor says:

    I got the impression from much of the chatter (On this blog, others, and word of mouth, so take with a budget-shortfall sized grain of salt) that it was a combination of (iii) and (iv). It seems fairly clear that (iv) happened and (iii) went spectacularly tits-up.

    Whatever the cause, I’d agree with Prof. Peacock on it looking like a repeat performance in 2010. Resole those shoes because there’s going to be more dancing for our dinner.

  3. MikeW says:

    Andy, I’m intrigued. What does “One hears that ESA centre should wash its own face” actually mean?

    (and if you can tell me that I’d love to know what the “Imaging Centre” is all about. sounds quite exciting …)

  4. andyxl says:

    John : agree 100%. Mike – anything I know about the Imaging Centre is what it says in the July 15th STFC press release – take a look. W.r.t. to the ESA centre “washing its face” I mean that the hope is that it will actually win ESA business and so get subscription return. Likewise, the gateway centres are obviously aimed at being Knowledge Exchange places, so that the commercial involvement will help to keep the lab campuses healthy, with mixed funding. This is is all very sensible, but it feels uncomfortable that this is all mixed up with project and grant funding. Finally I should note that occasional cynicism about CLRC as a political organisation is NOT a statement about the Harwell and Daresbury labs. RAL in particular is one of the world’s great labs; ISIS was a triumph, and Diamond will probably eventually be seen as a triumph too. But policy, funding and delivery should be carefully distinguished, for reasons of efficiency, fairness, and as as JAP points out, to avoid Treasury bills.

  5. Michael Merrifield says:

    STFC was created because the stakeholders with any influence all wanted it:

    * The politicians liked it because they have to justify their existence by rearranging the deckchairs on a regular basis, so they were willing to be convinced of the supposed economies of scale in the merger.

    * CCLRC senior management liked it because they knew what was coming along in their unbudgeted plans, and were very happy to share the misery across a wider budget with a nice uncommitted grant line.

    * PPARC senior management liked it because they knew they would be put in charge of a larger empire, and because they were worried that the Government’s clear strategy toward applied research would squeeze their existing portfolio.

    (And before Watcher goes into one again, these are just my views of the political landscape, and make no claim to be more objective facts than anyone else’s views. However, unlike Watcher, I am willing to sign up to my own opinions, with the additional credibility that my views are on record as being expressed a priori.)

  6. Dave Carter says:

    John, I think this kind of accounting has been coming in in the public sector from the 1990s on, first in the NHS and then in central government. The objective seems to have been to make the public sector seem more expensive than it really is, and thus bias competitive tendering exercises in favour of private sector bidders. Or am I being too cynical? Universities do it too.

  7. Dave says:

    Andy, regarding the ESA centre, quite a few things have already been said in print e.g. in Aviation Week and also in Space News. On the ESA web pages is this story:
    http://www.esa.int/esaCP/SEM4568N9JF_index_0.html
    The centre evidently has a wider agenda than space science, just as the UK space programme as a whole is about far more than astronomy.

  8. andyxl says:

    Dave – thanks for this. Yes indeed, this is much wider than astronomy, and correctly so. Of course this sort of thing sells much better with Government that straight astronomy stuff, and STFC have always believed that astronomy would benefit from the trickle down as it were. (Although there is an equal danger of squeeze-out when getting in the same bed as this elephant..) Also, negotiating this kind of international deal was one of the reasons quoted in 2006 as an advantage of an STFC like structure. But that does not require the delivery organisation and the funding-policy agency to be the same.

  9. Watcher says:

    Andy.
    I think the point to remember is that it is easier (in some respects) for the Government to increase spending on Capital. So while the good news is that the Government wants to invest in science, the “problem” for us is that it finds it easier to do so via capital investment.

    One reason for this is the Treasury’s “Golden Rule” which states that “over the economic cycle, the Government will borrow only to invest and not to fund current spending.” You can read more about control of public expenditure here: http://www.hm-treasury.gov.uk/Spending_Review/spend_plancontrol.cfm

    Now along with capital STFC gets a non-cash allocation (in a sense to pay back the loan). John is correct to note that this is added-in to our total allocation. The issue is that if you want to borrow to invest, you have to plan to pay back the loan. One way to view this is that more money IS being spent on science, but it is the non-cash and not the capital where we see this increased spending. It’s money we don’t see cos it’s being used to pay the loan.

  10. Dave Carter says:

    Watcher,

    Will the LFCF allocation, which the government and STFC have announced with great fanfare as demonstrating their commitment to science, then have to be accompanied in future cycles by increases to non-cash allocations to “pay back the loan”, which will no doubt be announced with great fanfare as demonstrating the commitment to science, while at the same time maintaining or reducing near-cash allocations?

  11. Michael Merrifield says:

    Or maybe the Government will announce with great fanfare future non-cash allocations that are, say, 50% of the amount needed to pay back the loan, thus simultaneously allowing them to claim that the budget has been increased by a significant amount, and reducing the amount that is actually available to do science.

    Perhaps (and you may have heard me say this once or twice before) there is something to be said for keeping the money you use to actually do science in a separate pot from the one that funds the infrastructure, to prevent this kind of sleight of hand.

  12. Watcher says:

    Dave
    You are correct. STFC would expect a non-cash allocation to reflect it’s new capital and that this will be part of it’s overall future allocation.

    Of course it wouldn’t actually matter which Research Council was allocated the capital as DIUS would still have to find the non-cash from the overall Science Budget.

  13. Michael Merrifield says:

    Of course it matters which research council is allocated the capital. Obviously it would not make any difference to DIUS’ bottom line for the science budget, but equally obviously DIUS needs to be seen to be a balanced organization that spreads is largesse across its portfolio in a responsible manner. It is no coincidence, for example, that the headline amounts in CSR2007 of percentage increases for the different research councils that faired least well are all rather comparable (12,4% for AHRC, 13,6% for STFC, up to 17.1% for NERC, 18.5% for ESRC, 18.6% for EPSRC).

    Whether or not a headline increase is all locked up in non-cash allocations resulting in a cut for actual research is a level of detail that is largely irrelevant to a minister with many other things to worry about. To meet his political agenda, he wants simply to be in a position to announce across-the-board generous headline increases. We know from experience that any hint of criticism that our funding was being cut in the last CSR was met by a repetitive stonewall barrage of “STFC has received an uplift of 13.6% in its budget” from the politicians, with, for obvious reasons, no political will to engage in discussion as to why this headline amount does not translate into a real increase in the budget. Exactly the same thing will happen next time around if an apparent increase in the budget actually comprises a sizeable non-cash allocation to double-count the LFCF allocation, and a further swingeing cut to the exploitation budget.

    So, yes it does matter rather critically whether our “useful” science budget is averaged together with this non-cash accounting exercise. And, frankly, one has to hope that anyone who does not see this basic strategic point is not in any senior position in STFC (although it might explain quite a lot if he is).

  14. andyxl says:

    Mike – not quite a yellow card for that last bit, but definitely a stern look from the referee. And I am afraid the Watcher won’t fall for that trap by blurting out “well, for your information Professor Merrifield. actually I’m …oops”

  15. Michael Merrifield says:

    Well, if you follow the line of reasoning, the final sentence is simply a corollary. Isn’t it blindingly obvious to anyone with even a modicum of political nouse that it matters whether these large capital depreciation costs are on our research council’s books? And do you really want someone running the show who hasn’t figured that out?

    And it isn’t as if I was the one to resort initially to the “Of course…” apparently-undirected condescending pseudo-superior put-down.

  16. Dave Carter says:

    Mike, of course they understand that. the question is whether we want people running the show who regard funding the capital depreciation as a central tenet of their programme, and to whom sacked postdocs as a consequence are merely minor collateral damage.

  17. Watcher says:

    Mike
    If you look at my last sentence again you will see that what I said was ” Of course it wouldn’t actually matter which Research Council was allocated the capital as DIUS would still have to find the non-cash from the overall Science Budget”. This is clearly a true statement. Whichever Council gets the capital, DIUS still have to find the non-cash.
    The point you are making is that it would be better for your science to have this top-sliced from the Science Budget rather than have it count against the Council that benefits from the Capital allocation. This is clearly also a true statement and one that I haven’t argued against.
    Mike
    You raise another interesting issue when you talk about the money “available to do science”. Apart from notable theoretical breakthroughs, the history of scientific discovery has been one of individuals and latterly teams devising, building and then using experimental aparatus. In order to “do science” you need the capital (and associated non-cash) to build the kit just as much as you need the exploitation funding to use the kit.

  18. Watcher says:

    Dave
    I would certainly be worried if they didn’t understand the central role of investment in experimental kit to the science programme (and the unavoidable costs of such investment). And I would be more than worried if they thought that people’s careers were minor issues.

  19. Michael Merrifield says:

    Watcher:

    Yes, the latter half of your statement, “DIUS would still have to find the non-cash from the over-all science budget,” is rather self-evident, which is why I agreed that “obviously it would not make any difference to DIUS’ bottom line for the science budget.” However, the first half of your statement that you infer from this obvious truth , “Of course it wouldn’t matter which research council was allocated the capital, as…” is blatantly ludicrous. It might not matter to DIUS’ bottom line, but it certainly matters to me (for the reasons that I expressed at 10:53AM, which you promptly dismissed at 1:12PM), and it should matter to anyone who is fighting STFC’s corner.

    As for the need for investment in hardware, I don’t believe I have ever argued against such investment. Indeed, as you may know if you do actually have some standing in STFC, I have taken some role in trying to secure STFC funding for the hardware for the E-ELT project, where the investments are potentially huge. The point I have made all along is that simplistic attempts to tension such investments against exploitation are doomed to failure, first because the only “uncomnitted” funding at any given moment is always on the exploitation side due to the very different timescales involved, and second because this approach would only stand any chance of working if *all* science areas could have their exploitation tensioned against hardware, so that PPAN science does not end up risking carrying other peoples’ cans. So, either you need an all-encompassing structure like the old SERC, or you need to take strategic decisions at a top level as to the appropriate balance between hardware and exploitation, and then ensure that this decision is acted upon by putting the two in separate administrative budgets.

  20. John Peacock says:

    Watcher: for a moment I was tempted to believe your assertion that the non-cash payment really is new money for science (if we eliminate the double counting of also boasting about the capital injection – such boasting as we see even now in STFC’s press releases). But even within STFC, it’s in practice roughly a zero-sum game. My prediction is that the next CSR will see a similar pattern to the last one: some typical overall budget rise for most councils, with the biomedics doing better than average. DIUS probably already has a rough figure in mind. Therefore, the more capital we take now, the lower our near-cash will almost certainly be in 2010. We are making a choice right now: more Diamond hardware or astronomy PDRAs. I thus agree with your earlier statement: “money to do science” could mean near-cash for grants, or capital. So which do you prefer to have? Clearly, you want the one that delivers the best science. But by taking the Diamond money now and pretending it’s free extra funding, astronomy (and other areas) have lost out without even having a chance to compete. I wonder if there was any debate at Council about whether or not we should be seeking allocations from the LCF line? There should have been: now it’s too late and we are almost certainly going to get screwed all over again as a result.

  21. Michael Merrifield says:

    See, Watcher: even people a lot smarter than me agree.

    It really is a nonsense to claim that

    Of course it wouldn’t actually matter which Research Council was allocated the capital as DIUS would still have to find the non-cash from the overall Science Budget.

    because it really does matter to STFC’s future budget, irrespective of the zero sum game within DIUS.

    And that tensioning capital costs against exploitation is a complete fiction because, as I mentioned earlier, the timescales just don’t match up sufficiently to allow it.

  22. Watcher says:

    John and Mike
    Yes but remember that the non-cash goes with the capital so that any capital that STFC gets during this CSR period should come with non-cash. This would increase the baseline on which any uplift at the next spending review would be based.
    I think the bigger issue relates to the operating costs. I believe that a major flaw in the way capital is currently handled is that Councils are expected to find operations costs from within existing budgets and as we know this never works as larger, more sophisticated kit costs more to operate than the facilities which in theory are replaced by the new kit.
    This is a problem for science in the UK. And it’s ironic because even once you take out the double counting (which you are quite right about John) the Government are putting more money into science.

  23. Ken Rice says:

    Watcher
    Although I agree that the operating costs are potentially a problem, it’s not clear that the non-cash issue is not also a concern. Even though capital should come with non-cash, presumably there is no guarantee that this will indeed be the case. As has been pointed out by a number of people, there is a possibility that some of the depreciation costs will have to be paid out of cash or near-cash. Assuming, however, that the non-cash does indeed match the capital, as you have pointed out, this non-cash has to come from the science budget. This then leaves the possibility – as essentially pointed out by Mike – that in the next CSR STFC could have what appears to be a substantial increase, but is in fact a net-reduction in spending power since a significant fraction of the budget could be non-cash. We would then have the same problem we’re having at the moment, trying to persuade the government that the budget’s been cut when they keep claiming that it has not.

  24. Watcher says:

    Ken
    Just to be clear about what I said. If STFC get an additional capital allocation during this CSR then this should come with an increased non-cash allocation (again in this CSR). Any percentage increase in STFC’s allocation for the next Spending Review period would then normally be expected to be based on that new, higher baseline. So if the system works as it should, there shouldn’t be a penalty to accepting capital within a Spending Review period. John’s fear would be realised however in the case where a new capital allocation comes as part of a new Spending Review selttlement in which case the associated non-cash would look like a Spending Review increase.

    Note also that non-cash is calculated on the basis of the depreciation and so there is no additional cost there. What isn’t covered are decommissioning costs which need to be bid for separately or covered from operations costs.

  25. Ken Rice says:

    Watcher
    That the non-cash is based on depreciation makes sense, but is this reflected in the total science budget? If I understand things correctly, the science budget ends up being divided into cash, near-cash, and non-cash. If the non-cash is determined by depreciation, this then also sets the near-cash and cash components. A large increase in non-cash would then result in a decrease in near-cash and cash, unless the science budget is increased to take the increase in non-cash into account. The science budget is then divided up and given to the various councils with STFC presumably getting most – if not all – of the non-cash. This then introduces the possibility that STFC could have an apparent budget increase but have an actual – in real terms – decrease in spending power. You seem to be implying that this wouldn’t happen, but this would imply that a large increase in non-cash should lead to a large increase in STFC’s budget. Judging by the current CSR, it would appear that the government would be very reluctant to give STFC a larger increase than, for example, the Medical Research Council. It therefore seem reasonable to me for us to be concerned about the impact of a large increase in capital requiring a large increase in the non-cash component of STFC’s budget.

  26. Michael Merrifield says:

    Ah, now that does change the complexion. If the non-cash costs of any capital allocation are built into the baseline before the next CSR, then there is clearly a benefit to us in the next CSR, since a given percentage increase in that baseline would then translate into a larger amount of “real” money with which to do “real” science.

    Of course, if I were a politician, I would arrange for the bulk of the spend from the LFCF to occur in the last year of the current CSR, so that the non-cash depreciation only enters the books at a point where i can be announced as the new money uplifting the baseline in the next CSR!

    And let’s not forget that there is unlikely to be a next CSR in its current form, since its due date is past the next general election, so who knows how the next administration will choose to run things.

  27. Watcher says:

    Ken
    I think you are basically correct. The thing to recognise is that you can either view the capital increase as the increase in the Science Budget or the non-cash but as John points out you can’t count both. If you choose as I would to count the non-cash then it is true that for a given overall increase to the Science Budget, the more you get in non-cash the less you get in near-cash.

    Mike
    There could be a spending review before the election (remember that they usually happen a year before the end of the current period, so it could be the end of next year). It would then be a question of whether any new Government would stick to the spending plans of the curent Government. What is a real concern is that we are unlikely to see an overall increase in public spending and if we do it will be targeted towards election priorities. Science has never been one of these, but it should be and we need to make the arguments for it to be.

  28. Michael Merrifield says:

    Watcher — personally, I suspect not: the current shower in power’s only really hope is to hang on and hope for some fairly random upturn in their fortunes then call a snap election, which is not really compatible with the juggernaut process of a full CSR. Any electoral bribes are likely to come through the annual Pre-Budget Report/Budget process, and other smaller-scale “quick fixes.”

  29. D.Squat says:

    The fundamental issue of spend on SciInnovCampuses/ESA vs grants etc was actually raised in the last but one town meeting but was deflected by a response from the floor from KOM that “oh it’s a different budget so not relevant”. I suspect better senior management at STFC would have long ago realised this was a powerful lever with Government given the damage being done…IF they had really been motivated not to damage astro funding to the extent we have seen. Points well made by others re Gov sleight of hand but things could still have been much diffferent. Given this kind of double counting is apparently being used across public sector spending why has this not been picked up and pushed more by the enormous political and media establishment in the UK?

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