The economic impact of public investment in research

During my time as an Irish university president I got used to hearing commentators – often economists – arguing that the investment of public money in academic research did not represent good value. It was suggested regularly – and indeed this was done several times in comments on this blog – that there was no evidence that such investment produced any benefits to the state or the taxpayer.

It is therefore interesting that an independent analysis commissioned by the Higher Education Authority (Ireland’s higher education funding agency) has now quantified the benefits. It has found that the investment by the state in the Programme for Research in Third Level Institutions (PRTLI) of €1.173 billion has yielded some significant results. It has produced 43 spin-out companies and has commercially assisted 113 other companies. The commercial impact to date is estimated at €753 million. Over the next five years the commercial impact is estimated at €1.108 billion. If these figures are borne out, the net financial return on the investment  will be over €700 million. However, this does not factor in the impact on foreign direct investment or start-ups that have been prompted by the availability of high value expertise or the support of graduates from funded research programmes.

It is difficult to argue that significant public investment in research is bad value for money. The opposite is true, and it is to be hoped that during difficult economic times in particular the investment will continue.

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Capital investment

I have, over recent months, from time to time expressed some concern as to whether Ireland has a clear policy on investing in higher education. I still have major concerns in that regard, not least because there is every indication that universities and colleges may suffer another significant budget cut later this year, making it almost impossible to argue that we are still providing a quality education for students. But it would be wrong not to acknowledge that, in certain areas of capital investment, the government is getting it right.

First, there was the announcement some days ago of the new investment in research through the 5th Cycle of the Programme for Research in Third Level Institutions (PRTLI), which indicated a strong national commitment to a high value economy and a knowledge society. Yesterday, the government in outlining its capital programme for the coming year endorsed the plan to move the various constituent parts of the Dublin Institute of Technology on to one campus, and more generally announced a capital programme for higher education.

In all of this there is a welcome awareness of the importance of investment in higher education. All that is missing now is a realistic plan for resourcing teaching in a way that is affordable but does not destroy the quality of Irish higher education.

The fly in the ointment? The politicians simply cannot resist making silly job creation predictions. This time the promise is that the investments overall will create 270,000 jobs. Politicians really need to be weaned off this kind of talk.

Spreading the research news

It is good to see that the UK journal Times Higher Education has given some space to a report on the most recent round of the Programme for Research in Third Level Institutions (PRTLI). Right now Ireland’s reputation for investing in research and R&D is the key factor determining our attractiveness for high value international investment. When the government decided to ‘pause’ investment in PRTLI in 2003 the impact was immediate and severe, as some global companies concluded that Ireland did not have a clear strategy on the knowledge economy and was therefore not a good place in which to invest. Being consistent now at this point, particularly against the backdrop of serious public finance problems, is vital, and both the fact of the investment and its proposed scale are important pointers to our national strategy that should make a significant difference internationally.

I am pleased that the Times Higher picked this up. And yet, this investment decision needs to be communicated much more aggressively. As far as I can tell, no major international newspaper has run this story. And even domestically, the coverage has been quite low key. All of this needs to be stepped up dramatically. There is no point doing the right thing if too few people know about it.

The PRTLI research agenda: practical or intellectual?

Funding the latest Cycle of the Programme for Research in Third Level Institutions (PRTLI) is one of the key elements in the Irish government’s plan for a ‘smart economy’, and in that context it may be that some commentators will look for direct links between the subject areas of the research and the country’s current problems and issues. Or else, it may be that the projects and plans will be analysed to see how many jobs they will create; at the launch of PRTLI the Taoiseach made references to the construction and researcher jobs that may flow from the funding (always something of a hostage to fortune).

In fact, the subject areas selected focus in particular on medical and health research, and virtually all institutions that have been successful in their bids have elements in this general area, covering well over two-thirds of the overall funding. The rest of the investment will be spread across a number of disciplines, including the arts and humanities, with environmental issues making a strong appearance also.

It has been clear for some time that the pharmaceutical industry – perhaps increasingly with a biopharmaceutical emphasis – will provide the major opportunities for foreign direct investment in the future, and the PRTLI investment will support this. This may not however be the case for indigenous start-ups, where the ICT sector is perhaps more likely to feature.

In the meantime, the humanities and social sciences will be important in the quest for social stability and the development of a self-confident culture; this too has been recognised.

It can of course be asked whether the national research culture emanating from PRTLI will give sufficient space to basic research that is not particularly tied to economic (or any other national) objectives. in fact, many of the facilities being funded will house a variety of researchers, some of whom will not work on specific industry-related programmes.

Of course it would be a mistake to invest in research solely on the basis of its capacity for immediate application. It seems to me that the mix of areas selected this time is arguably appropriate Of course the announcement also indicated a particular distribution between institutions – but my comments on that will be for another time..

PRTLI Cycle 5 – a broad outline

All credit to the government, and to the Taoiseach and the Minister for Enterprise, Trade and Innovation in particular: this is a very significant investment in the state’s R&D capacity. Details can be found here. The total investment in this cycle is going to be €358,729,000. In the context of the current economic climate, this is a courageous and entirely correct policy decision. Also to be welcomed is the fact that around €260m of that will be capital investment, which is where the most urgent needs are now to be found.

As this morning’s report in the Irish Times indicated, the biggest winners are Trinity College Dublin and University College Dublin, but most universities received strong support, including DCU: all our key proposals have been supported with significant funding. Some institutions may not have received what they were hoping for, but it seems to me that the overall balance is not distorted.

A more detailed analysis will follow later today, where I shall in particular look at the content of the successful proposals and consider how that may help Ireland’s drive to be recognized as an innovation hub.

The future of Ireland’s research effort

Later today (Friday, July 16), the Taoiseach (Ireland’s Prime Minister) will announce the results of the latest cycle of the Programme for Research in Third Level Institutions (PRTLI). It would be hard to over-state the significance of PRTLI in the development of Ireland’s research infrastructure over the past 12 years or so. Initially prompted and co-funded by philanthropist Chuck Feeney, the PRTLI investment allowed Ireland’s higher education institutions to be properly equipped with buildings and laboratories and to attract world class researchers. It was one of the key factors that led to Irish universities entering the global rankings. It turned us from provincial teaching institutions into places that would attract knowledge-intensive inward investment. Through all this it ensured Ireland’s transition from a low value manufacturing economy to a high value knowledge economy was made possible, and this is now our best hope for renewed growth.

Over the past year or so there has been some considerable anxiety in Irish higher education circles about whether PRTLI would continue and whether the government would fund a new (fifth) cycle of the programme. Today’s announcement seems to conform that PRTLI is alive and well. It will be important to see whether the amount to be invested meets current needs and allows the country’s R&D ambitions to be met. It will also be worth watching how the money will be distributed between the competing higher education institutions.

I shall comment further when the results are known later.

Sliding towards the Not-So-Smart Economy?

Earlier this year I pointed out that, notwithstanding Ireland’s commitment to spend 3 per cent of GDP on research and development, our actual performance does not measure up to that target. In fact, according to my calculations Ireland’s R&D expenditure now lies at around 1.4 per cent of GDP, and it is falling. Even assuming that the Government is still going to fund the next cycle of the Programme for Research in Third Level Institutions (PRTLI), which I believe it will, the trend will remain unsatisfactory.

A key worry right now is that funding for Science Foundation Ireland (SFI) is being affected. A report in yesterday’s Irish Independent newspaper indicated that SFI has advised the government that 950 research posts will cease to be funded over the near future due to lack of funding. There will be very few newly funded research projects, and some new research themes (including the important theme of sustainable energy) will not after all be resourced.

I am aware of the fact that in some circles the funding for research is being questioned, and it is suggested that some or all of this should be diverted to other public funding causes. What needs to be understood, however, is that low-tech employment will not be the engine of growth for Ireland; we are still too expensive for that. Research and development is the basis on which we can expect to attract foreign investment and domestic start-ups. Without that, we have very little too offer.

Right now we have rhetoric about innovation which is not reflected in actual decisions. This is a dangerous game.

PRTLI wars

In yesterday’s Irish Times we read that the Programme for Research in Third Level Institutions (PRTLI) is in trouble. There may be readers here who are not fully aware of what PRTLI is, so here’s a short explanation. In the 1990s the philanthropist Chuck Feeney persuaded the government to join him in funding a new high value research programme for Irish universities, aimed at turning what were then somewhat unambitious and under-equipped institutions into real contenders in global research. It is no exaggeration to say that PRTLI transformed the Irish university sector. It provided state of the art laboratories and facilities, and allowed individual colleges to assemble high powered research teams. It created the setting in which the state and its agencies could credibly argue that Ireland was developing a knowledge economy that would be an appropriate host for companies wishing to develop an R&D presence in Europe. It can be said that much of today’s foreign direct investment in Ireland is made possible by the changes brought about through PRTLI.

Despite the clear value to Ireland of the PRTLI programme, it has had several near-death experiences. In 2002, when there was a budget blip, the government ‘paused’ PRTLI – meaning that it stopped new PRTLI proposals and preparations for the next phase of the programme (Cycle 4). The effect of this was devastating, as word spread internationally that Ireland had shown its lack of commitment to high value R&D. A little later PRTLI was reinstated, and in 2006 was given stronger government support by its inclusion in the very significant funding programme under the Strategy for Science, Technology and Innovation (SSTI). By about 2008 the government had recovered its credibility as regards research in the global business community, particularly be re-confirming its support for PRTLI at a time of significant budgetary pressures.

So it is at this point that again we hear that PRTLI is in trouble. This time the main problem is that, after the cabinet reshuffle and shifting of responsibility for PRTLI from the Department of Education to the Department of Enterprise, Trade and Innovation, a ‘turf war’ has broken out between the departments and agencies as to how PRTLI should be run, thereby delaying the announcement of the next cycle. Alongside that, according to the Irish Times article, there is some scepticism about the capacity for PRTLI funds to create jobs. It is maybe worth saying again that asking about the number of jobs created by research funding is naive: the key objective in developing university research is not to create jobs directly, but rather to establish an environment that will attract high value investment.

It has to be said that several government ministers (including the Taoiseach) have a very good record on research funding. However, all of this funding is for nothing unless there is strong consistency. The PRTLI tap cannot be turned on and off without causing severe damage to Ireland’s inward investment efforts. And even in these hard times – maybe particularly in them – we need to show strength of purpose in wanting to be amongst the global research leaders. Losing the research advantage because agencies or departments are squabbling would be ludicrous. I understand that the results of PRTLI cycle 5 were recommended to the government a few months ago. They must now be announced without delay, before irreversible damage is done to Ireland’s research reputation internationally. The time is now!

Shuffle and reshuffle

Whenever the leader of a government re-allocates ministerial responsibilities we expect to see some overall direction, purpose or strategy. To get a better sense of that, I have been looking at official government websites, and oddly enough I have been unable to find any statement, press release or other documentation setting out the cabinet changes and perhaps adding a narrative. The only website that has any information at all, if you know how to look, is this page listing cabinet ministers and their responsibilities; though while you can see that the individual ministers have been placed alongside their new portfolios, the changes in government department names and areas of responsibility have not been made here. And that is all I have been able to find at the end of the day of the reshuffle. The Government Press Office, for example, is totally unaware that anything has happened; though to be fair to them, it’s not just the reshuffle, they are unaware that anything of any kind at all has happened since 23 February.

This makes it slightly more difficult than it should be to find out what exactly the Taoiseach’s intentions are regarding this new configuration of the government. However, the Taoiseach’s speech to the Dáil (parliament) setting out the changes is available on the Oireachtas website. We also have some assistance from the media: both the Irish Times and the radio station Newstalk have reproduced the Taoiseach’s speech in full. The key passage in the speech explaining the changes is this:

‘In approaching the reconfiguration of Departments, the starting point has to be clarity about the objectives to be achieved. The changes I am making are intended to ensure that political leadership and administrative capacity are aligned with the core objectives of economic recovery, job creation and support for those who have lost their jobs. In particular, I am strengthening our approach to supporting innovation and overcoming barriers to structural change, responding better to the needs of unemployed people, supporting productivity and growth through skills development, maintaining progress in a coherent and strategic way towards important social policy goals and accelerating the pace of modernisation of the public service.’

In general terms this has involved a renaming of departments, and some shuffling of areas of responsibility between them. So for example, the new Department of Education and Skills will get much of the training agency, FÁS. But Education also loses something:

‘Within the framework of the Government’s commitment to fiscal stability and the restoration of a functioning banking system, economic recovery will require a renewed focus on supporting enterprise and driving innovation. The agenda set out in the recent report of the task force on innovation highlights some of what needs to be done, building on the very significant presence of overseas companies and the potential for a much faster rate of growth of our many high-potential indigenous companies. I propose to sharpen this focus within the Department of Enterprise, Trade and Employment, which will be renamed the Department of Enterprise, Trade and Innovation, by transferring to it funding for the programme for research in third level institutions. This will help to bring together a streamlined and focused programme of funding of research and development aligned with the objectives of enterprise policy.’

We therefore learn that the Programme for Research in Third Level Institutions (PRTLI) will move to the Department of Enterprise, Trade and Innovation. This raises at least two questions. First, as PRTLI is administered by the Higher Education Authority, and as the HEA is an agency of the Department of Education, how will this work in future? Secondly, PRTLI is now largely a research capital infrastructure programme, and its remit goes beyond science and technology and those areas that fall naturally under the Department of Enterprise, Trade and Innovation; therefore, will research support for the humanities and social sciences continue to be covered by PRTLI, and will it be effectively supported? I might add that there is no reason why it should not be, but the question is worth raising.

As a result of the reshuffle and the departmental reconfigurations, we now have a system where, even more than before, higher education is the responsibility of two separate government departments. Given the record of each department, it is possible that higher education in its teaching role will continue to loose out to schools when funding is distributed, while in its research role it will potentially enjoy greater resources and a higher level of commitment. This separation of functions may not work well in practice, particularly (which is not at all unlikely) if different monitoring and control mechanisms are used by each department. This could perhaps be helped if a junior minister with higher education responsibilities were appointed to straddle the departments.

It will be interesting to see how the two ministers explain their strategies for their departments, and in particular whether we will be able to see how the higher education piece can be kept strategically coherent across the departmental boundaries. This is something to watch over the coming days.

PS on the morning of March 24. Oddly enough the Government Press Office now has an item on the appointment of junior ministers, but still nothing on the cabinet reshuffle itself.

Our country’s future: the fate of PRTLI

The publication of the report last week by ‘An Bord Snip Nua’ – the Report of Special Group on Public Service Numbers and Expenditure Programmes – has raised many issues and questions about the future of public expenditure in Ireland. Broadly speaking the report’s recommendations can be sub-divided into those that address bad value for money, or waste; those that identify expenditure that simply cannot be afforded in present circumstances; and those that claim to identify expenditure under policy principles that may simply be wrong, or at least no longer appropriate.

It appears that expenditure on research was seen by the Group as, at least in part, falling under the latter heading. A key claim in the report is that, as far as the Group is concerned, they could not find enough evidence that expenditure on science, technology and innovation had yielded sufficient economic activity (volume 1, p. 14). On that basis, the Group proposed savings of €27 million per annum on research programmes funded under the Department of Education and Science, and the termination of the Programme for Research in Third Level Institutions (PRTLI). Ironically perhaps, the latter recommendation was published on the exact day that higher education institutions had been asked to submit their detailed proposals under Cycle 5 of PRTLI, and shortly after the tenth anniversary of the initiation of the programme.

In fact, it would be difficult to over-state the historical and current significance of PRTLI. The whole programme would not have got under way at all in the late 1990s but for the financial support and the energetic prompting of Chuck Feeney and Atlantic Philanthropies. Before the first cycle of the programme, Irish universities were largely teaching-only institutions, without either the capacity or the expertise to provide backing for the development of R&D in Ireland. With the first cycle, a small but important number of key research groups were given the means to become internationally competitive and attract world class scientists and researchers. The impact of this was huge, as it allowed Ireland to be presented as a place where some cutting edge research was being undertaken, and this led directly to a new wave of inward investment. Many of the blue chip companies that subsequently invested in Irish R&D did so because of the changed circumstances of Irish research institutions. Furthermore, this R&D investment in many cases helped to secure the retention in Ireland of more general operations by those companies, with thousands of workers benefiting. This has continued right through the present decade. Even high value manufacturing jobs in the pharma sector have often owed their arrival to the backing made available through university research teams.

When the government announced in 2002 that it was suspending PRTLI due to temporary budget problems, the effect was immediate. I was at a gathering in the United States during that period at which American companies were being courted to locate knowledge-intensive operations in various countries. A spokesman for an Asian country suggested publicly at that event that US companies should now focus on Asia, and that Ireland in particular had now been shown not to be serious about R&D. The effect of this statement (and others like it elsewhere) prompted the government to re-start PRTLI, thankfully before the damage had become irrecoverable.

Right now we are looking down into the same abyss, and again we may be doing so because of our own actions. No matter what some may argue, a key element in future economic growth will be knowledge-intensive investment, whether by multinational companies or through indigenous firms. At this point countries in other parts of the world, including big ones like China and India, and smaller ones like Singapore, are competing aggressively for such investment. To shut ourselves out of this would be madness.

It may well be that we need to look closely at how research investment is determined and how well the money is spent. But to argue that such investment does not produce economic benefits is staggeringly ignorant. Not only must this particular recommendation be repudiated, it must be done so quickly and audibly. Our future is at stake.