Why Research Loans Should Replace Grants For Commercially-Driven Research

Two recent items in the Times Higher about UK Higher education – concerning the abolition of maintenance grants for less well-off students and whether business should contribute more to the cost of research reminded me of a post I wrote almost exactly five years ago. Was it really so long ago? Anyway, I am old so I am allowed to repeat myself even if people aren’t listening, so here’s the gist of the argument I made way back then….

Universities essentially do two things, teaching and research. However, when you think about it, there’s a fundamental inconsistency in the way these are funded. It seems to me that correcting this anomaly could significantly improve  both the main benefits  universities contribute to the UK economy.

First, research. If  research is going to pay off in the short term it should be funded by private investors, interested businesses or venture capitalists of some sort. Dragon’s Den, even. When the public purse is so heavily constrained, it should only be asked to fund those things that can’t in practice be funded any other way. This is pretty much the opposite of what the Treasury thinks. It wants to concentrate public funds in projects that  can demonstrate immediate commercial potential. Taxpayer’s money used in this way either ends up in the pockets of entrepreneurs if the research succeeds or, if it doesn’t,  the grant has effectively been wasted. It’s yet another example of the taxpayer bearing the risk that an investment might fail, but not sharing in the benefits if it succeeds. This is analogous to the way  the taxpayer bailed out the banking sector in the aftermath of the Credit Crunch in 2008, only to see the profits subsequently transferred back into private hands.  This is happening to an increasing extent elsewhere in the United Kingdom, as public services built up through state investment are being transferred to for-profit organizations. Even our beloved National Health Service seems to be on an irreversible path to privatization.

My proposal for research funding would involve phasing out research grants for groups that want to concentrate on commercially-motivated research and replace them with research loans. If the claims the researchers  make to secure the advance are justified, they should have no problem repaying it  from the profits they make from patent income, commercial sales,  or other forms of exploitation. If not, then they will have to pay back the loan from their own funds (as well as being exposed for having made over-optimistic claims). In the current economic situation the loans could be made at very low interest rates and still save a huge amount of the current research budget for higher education. Indeed after a few years – I suggest the loans should be repayable in 3-5 years –  it would be self-financing. I think a large fraction of research in the Applied Sciences and Engineering should be funded in this way.

The money saved by replacing grants  to commercially driven research with loans could be re-invested in those areas where public investment is really needed, such as pure science and medicine. Here grants are needed because the motivation for the research is different. Much of it does, in fact, lead to commercial spin-offs, but that is accidental and likely to appear only in the very long term. The real motivation of doing this kind of research is to enrich the knowledge base of the UK and the world in general. In other words, it’s for the public good. Remember that?

Most of you probably think that this is a crazy idea, but if you do I’ll ask you to now think about how the government funds teaching in universities and ask yourself why research is handled in such a  different way.

Way back in the mists of time when I was a student, I didn’t have to pay fees and even got a maintenance grant from the government that was more-or-less sufficient to live on. That system changed so that students don’t get grants any more, but may qualify for loans. They also have to pay fees. The government only pays an amount directly to the university on their behalf if they are studying an “expensive” subject, i.e. a laboratory-based science, and that amount is very small (and decreasing with time). This change of policy happened because the (then) Labour government wanted to boost the rate of participation in universities, but didn’t think the taxpayer should pay the whole cost. The logic goes that the students benefit from their education, e.g. in terms of increased earnings over their working lifetime, so they should pay a contribution to it. The policy has changed since then into one in which many students bear the full cost of their tuition.

I don’t come from a wealthy family background so it’s not clear whether I would have been able to go to University under the current system. I would have been prepared to borrow to fund tuition fees, but without a maintenance grant for day-to-day living I don’t think I could have afforded it as my parents could not have supported me financially. In my opinion the removal of maintenance grants is far more likely to deter students from poorer backgrounds from going to University than the introduction of fees.

Anyway, the problem with all these changes is that they have led to a huge increase in enrolment on degree courses in “vocational” areas such as Leisure & Tourism, Media Studies, and Business while traditional courses, such as those in STEM disciplines, providing the sort of rigorous intellectual training that is essential for many sectors of the economy, have struggled to keep up. This is partly because subjects like Mathematics and Physics are difficult, partly because they are expensive, and partly because the UK school system has ceased to provide adequate preparation for such courses. I’m by no means against universities supplying training in vocational subjects, but because these are the areas where the primary beneficiary is indeed the student, I don’t think the government should subsidise them as much as the more rigorous courses that we really need to encourage the brightest students to take up. Universities are not just for training. They have a much deeper purpose.

If it’s fair to ask students to contribute to their teaching, it’s fair to ask commercial companies to pay for the research that they exploit. Just as student grants should be re-introduced for certain disciplines, so should research loans be introduced for others. You know it makes sense.

However, if you want to tell me why it doesn’t, via the comments box, please feel free!

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