rose to ask Her Majesty's Government whether current methods of funding for research infrastructure are sufficient to allow all universities to engage in basic, innovative and applied research.

My Lords, I have raised this Question on research funding because I believe that an anomaly has crept into the current system which, while all the attention has been focused on the question of metrics in the research assessment exercise, has been overlooked. If it were to persist, it would raise questions about whether the basic aims of the dual funding system, endorsed by successive Governments and seen by many as the key element underlying Britain's research excellence, are being met.

Let me start with the dual support system and the division of government funding of university research between project-based funding from the research councils, currently some £2.8 billion a year, and the research element of the Higher Education Funding Council for England grants to universities, known as quality-related funding, which amounts to £1.3 billion a year. The purpose of QR funding has long been acknowledged as providing money for universities to meet basic infrastructure requirements. It used to be called,

"providing the well-found laboratory", but that terminology now seems to have been lost. In the 2004 White Paper Science and Innovation Investment Framework 2004-2014 the Government define the purpose of QR funding as follows:

"Quality related funding ... funds the basic research infrastructure—including the salary costs of permanent academic researchers, support staff, equipment and libraries—that gives institutions the base from which to undertake research commissioned by other funding sources; the flexibility to react quickly to emerging priorities and new fields of inquiry; and the capacity to undertake blue skies research".

The key question for this debate is how that statement can be reconciled with a situation in which quite a few universities have during the past five years received little or no funding from the QR settlement. That situation has arisen because, after the 2001 research assessment exercise, so many departments had improved their research rating that HEFCE decided to fund only departments undertaking research judged excellent and of national—a 4 rating—or international—a 5 or 5* rating—significance. Under the formula, those rated 5 received three times and those rated 5* four times the amount received by a department of equivalent size with a 4 rating. The result has been, as intended, a concentration of funding on research-intensive universities. In 2005-06, 109 higher education institutions, approximately four-fifths of the total number, received some QR funding. However, the top 25 institutions received 84 per cent of the funding, some £900 million, while the top 10 institutions received over 50 per cent, around £650 million.

For research-intensive universities the result has been good and is judged fair: high-quality research has been rewarded with extra funding. But the other side of the coin has been the loss of funding for other institutions, particularly the post-1992 universities, where many departments, although showing improvement, still have a relatively low rating. This raises three important questions.

First, many of these universities have considerable research activity, often in the more applied areas, and have built up relationships with national and international companies. They also work a good deal with locally based SMEs, where personal contacts and local access are important. A recent AD Little study looking at the outcomes of research in relation to 35 post-1992 universities found that, for every £1 of public funding, over £3 worth of business-funded research was attracted, considerably more than is achieved by the older universities. Yet if QR is to,

"give institutions the base from which to undertake research commissioned by other funding sources", is it right to deny this base to so many institutions? The Minister may well reply that these funding arrangements are going to change. A letter from HEFCE sent in March this year about the new arrangements for the research assessment exercise stated that,

"the approach for science-based disciplines will be based on quantitative indicators, including bibliometric indicators of research quality and impact, external research income and postgraduate student activity".

It also said that these indicators would,

"begin to influence funding allocations from 2010-11", but not come fully into play until 2014. What about the period between now and 2010? Will the post-2001 distribution formula hold for the next five years?

The second issue relates to the emerging areas of research. The RAE provides a review of research completed in the previous five years. The 2001 RAE, which dictates the current distribution formula, reflects the pattern of research from 1995 to 2000. Under this system, new areas of growth in the economy—for example, the creative industries, in which many of the post-92 universities run courses—receive virtually no QR funding yet contribute 8 per cent to the GDP. The same is true of nursing, the professions allied to medicine and research underpinning conservation for museums and galleries, an area with which I am particularly concerned at present.

Again, the Minister may respond that in 2003 the Government introduced the Research Capability Fund aimed at supporting research in "emerging subject areas where the research base is currently not as strong as in more established areas". The problem is that that fund totalled only £22 million in 2006-07, so it is very small in relation to the £1.3 billion allocated under QR and, in any case, it is not clear whether it is to be continued. Is it envisaged that the Research Capability Fund will be continued post-2008 and, if so, will it be increased to meet the growing importance of these sectors in the economy?

The third question relates to teaching. The distinction between university and other post-18 teaching institutions used to be that the staff teaching students in universities were either themselves engaged actively in research or rubbing shoulders on a daily basis with those engaged in research, read the academic journals and were au fait with the latest developments in these areas. That distinction has gradually been eroded, with university status granted recently to former teacher training colleges and the proposal to grant FE colleges degree-awarding powers. Is this deliberate policy on the part of the Government? Do they want to create a new binary divide in higher education between research-active and teaching-only institutions? Do they recognise the difficulty that that creates for courses that involve a third-year project, where students are required to undertake research for themselves? If no staff are involved in research, it is often difficult to find suitable projects and people capable of supervising them.

This issue was raised with me by a member of the engineering staff at London Metropolitan University. He pointed out that universities such as his have many students who are the first generation in their family to go to university, who are from schools without a track record of university entrance, and who would never dream of applying to Oxford, Cambridge or most of the Russell group universities. Is it fair to deny these students the chance of understanding what research is about or moving into the world of research themselves? Are these institutions to have no postgraduate facilities or just a limited number of faculties with them? If we are to expect third-year students to undertake realistic third-year projects in science and engineering subjects, what about the "well-found" laboratory? Has that concept got completely lost?

In conclusion, as things stand there is an innate inconsistency in current policy on funding research, an inconsistency that has got lost in the debate about metrics: while preaching support for the dual-support system of funding research and defining that system as providing, through QR funding, resources to support "a base from which to undertake research", the distribution formula used to allocate QR provides little or no QR funding for many universities.

I have raised three issues. First, as many of these universities are engaged in research of immediate interest to business, are they to be denied the resources to help create and maintain this base? The second issue is about new and emerging areas of the economy and how research for such areas is to be supported. The third issue relates to teaching and the need for research-active staff and a well-found laboratory to support undergraduate and graduate teaching. These are important questions for the future of our universities. I am delighted that so many noble Lords are joining me in this short debate although sorry that it means so little time for them to make their points. I look forward to hearing what is said and to the Minister's response.

My Lords, it is a great pleasure to be able to speak in the debate of the noble Baroness, Lady Sharp, on funding for research infrastructure. It is a pleasure, once again, to see many familiar faces connected with higher education in the House today.

As many noble Lords will know, the UK is a world leader in research and is home to some of the best research universities and research institutions. University research is one of our nation's success stories. The UK represents only 1 per cent of the global population but produces 9 per cent of the world's scientific publications and 12 per cent of its scientific citations. Every day, researchers are making breakthroughs that revolutionise our health, security, the environment and our quality of life. By pushing the very frontiers of science, researchers have developed the fundamental building blocks upon which so many other discoveries are being made. It is vital that today's researchers can continue to ask those important "what if?" questions at the edges of the unknown.

Of course, research can lead to findings that were anticipated, but at times researchers aiming for one outcome stumble fortuitously across unrelated but equally valuable applications. Eureka, a recent publication by Universities UK—I declare an interest as chief executive—highlighted many diverse and serendipitous discoveries by UK universities that are regarded as commonplace today, things such as MRI scanners, DNA fingerprinting, DVD players, IVF and environmentally friendly cars.

The UK's investment in research improves the relative international and overall innovation performance of the economy. Significant innovations emerge from all research disciplines, not only in the sciences but in financial services and arts and humanities research, which underpins the UK's enormously important creative industries and contributes £11.4 billion to the UK balance of trade.

Having indicated how valuable university research can be, I should like to turn to how research funding operates within UK universities and briefly touch on some of the issues that are raised under the current funding regime. Noble Lords will be aware that in 2003-04, 75 per cent of quality-related research funding allocated via the Higher Education Funding Council and 84 per cent of Research Council funding went, as the noble Baroness said, to 25 higher education institutions. That clearly shows that the UK is highly selective in how it funds research.

Universities UK has stated that supporting excellence wherever it is found is crucial if the UK is to remain internationally competitive, but there is compelling evidence that the current concentration of research funding in the sector is about as far as it should go, and any further radical concentration would be detrimental to the health of UK research. It would have a negative impact on what we believe is the necessary integration of research and teaching, the training and career development of research personnel, the interactions between universities and business and the emergence of new and developing areas.

A key criticism of the current research assessment exercise process, the RAE, is that it focuses on only "pure" or "basic" research, excluding the applied and user-focus research, which, as I stated earlier, is so important to economic growth and the needs of business. Although simplistic distinctions about what types of research are the most important to the economy can be unhelpful—it must be remembered that the innovation process is very complex—the current reform of the research assessment exercise presents an opportunity to look at how it can better recognise all types of research activity. This would include pure and basic research through to applied research, including support for the creative industries, business and service sectors.

However, it would be dangerous to forget that the UK is the only European country with universities in the top-20 world league of universities and, whatever one thinks about league tables, it is a considerable distinction which we jeopardise at our peril. Only recently in the House, noble Lords recognised the huge economic impact of our universities right across the board. In any developed economy a range of institutions is needed, as is a range of expertise. Every university needs a strong research base as well as a strong teaching base.

I take this opportunity to remind the Minister once more that UK universities have diverse missions and drive innovation in many different ways. The challenge is to effectively recognise those strengths wherever they may lie and to reward them.

My Lords, I should like to focus attention on oral health, particularly the potential for QR income distribution from the current and future RAEs to impact upon our dental schools and the education of future dentists. I declare my interest as a dental surgeon.

Despite government assurances that dentistry is in good order, the embarrassing queues outside new NHS dental practices are confirmation that oral disease is the most common of human diseases and is associated with significant suffering. But how many of us appreciate that there is now convincing evidence that oral diseases such as periodontitis are causally associated with cardiovascular disease, stroke and adverse diabetic outcomes? Indeed, treatment of periodontitis improves glucose control in diabetics, thereby reducing long-term complications and associated morbidity. As our population ages and obesity statistics grow, the public expect to retain their teeth for life. This is a huge public health problem for the future for which we should be planning right now.

The latest ONS adult dental survey demonstrated that we have reduced edentulism dramatically, but the prevalence rates of severe periodontitis, while 10 per cent in adults, are as high as 85 per cent in those over 65. Dental decay, rather than decreasing, has shifted to disadvantaged groups and the elderly. The National Diet and Nutrition Survey has shown that nutritional status is better for those with their own teeth, thus tooth retention is vital to general health and well-being as well as to quality of life.

This improvement is attainable if we invest in basic and clinical research which aims, among other issues, to improve identification, diagnosis and treatment of high-risk groups. All these measures require an improved understanding of the scientific basis of oral disease, improved liaison of dental researchers with industry and the maintenance of a vibrant research culture in our dental schools. In 2001-02 the NHS cost the Treasury £60 billion, and NHS spend on oral and dental care approached 5 per cent of that figure. However, dental schools receive less than 2 per cent of the funding from research councils that medical schools receive. For funding from charities, that amount is less than 1 per cent. That is disproportionate, both to NHS spend and to public health demand. Any further reduction will have a disproportionately greater negative effect on oral health research than other, better funded disciplines.

The problem of obtaining research funding in dental schools is negatively impacting on the recruitment and retention of dental clinical academics. A further fall of 6 per cent in dental clinical academic posts occurred in 2004. That trend continues through to the present. Reductions in QR funding will impact hugely on teaching quality and retention of staff in the 13 undergraduate UK dental schools and two newer graduate-entry facilities. Exclusion of schools from basic research infrastructure funding could be catastrophic, denying them the funding for development of research portfolios and the need for the future generations of dental care professionals to be trained in an environment rich in research and academic excellence.

There is a major concern that, as a result of the current RAE, some universities may decide to designate their dental schools as teaching-only. That would signal a dumbing down of our dental training, currently among the best in the world. It is of extreme concern that the two new schools may well move in this direction. It is essential that the Government recognise that small disciplines such as dentistry would suffer irrevocably under a purely metrics-based system. It is impossible to directly compare dental and medical research in terms of publication citation indices and research income. Medical research attracts disproportionately higher levels of funding relative to the public health demand and spend on medicine. To use a purely metrics-based assessment in dentistry would simply exacerbate the research funding shortfall in oral and dental research.

The situation is so worrying that the British Society for Dental Research has recently published a position paper, a strategic review of oral and dental research in the United Kingdom. In this detailed and objective appraisal the society concludes, among other things, that oral and dental research is indeed underfunded. A dedicated national oral/dental research charity must be established. The government proposals under Best Research for Best Health and the proposed revisions to the RAE post-2008 provide a major threat to orphan disciplines such as dentistry. I urge the Minister to recognise the serious plight of research funding for UK dental research and appreciate that a concerted effort is now required at senior government level to increase funding for this critical aspect of the health of people in this country.

My Lords, I am grateful to the noble Baroness, Lady Sharp, for introducing this debate. She is well known in this House as an indefatigable supporter of British universities. I declare an interest as president of the council of the University of Chester. In my 10 years in that post the institution has evolved from a small church college of higher education into a university that is three times larger than it was and has an income four times larger. Ten years ago the college had no professors and was academically dependent on the University of Liverpool for the award of all its degrees. We now have taught degree-awarding powers and, we believe and hope, are about to be given research degree-awarding powers. The academic distinction of the staff of the university has grown, with a significant and expanding number of members of staff of professorial rank. A growth in income and student numbers has enabled us in recent years to appoint a large number of new staff, often young, the great majority of whom have doctorates and proper aspirations for further research. For "the University of Chester" you could read many other post-1992 new universities in this country, although I think we have expanded rather faster than most.

The research funding methodology that has applied in recent years has limited our ability to develop the culture of research in the university, although we have done quite a lot within the limited resources we have had available through various partnerships, particularly in applied research. We have also expanded our research by concentrating on certain clusters of excellence within the overall university estate. We need to honour the perfectly proper aspirations of—especially, but not exclusively—the new staff we have appointed in recent years. Our anxiety is that in the highly selective research funding methodology of recent years the ability of staff to conduct research has been constrained, and that those constraints are in danger of being even sharper if the research funding is applied even more selectively in future. There is a case for such concentration and selectivity in relation to basic research in the sciences, where the capital cost of equipment is high, but the arguments are much less compelling in the arts and humanities.

In addition, in relation to the whole area of knowledge, there is an increasing need for applied research to enable the huge range of human knowledge we now have to be used effectively for the benefit of an increasingly complex society, and not only for economic benefits. For example, the University of Chester has a growing involvement in improving healthcare delivery, with seven practice development units in partnership with NHS trusts focusing on different aspects of improvements in the nursing profession. Such applied and often interdisciplinary research can easily fall outside the traditional categories by which research has been recognised and assessed and the research infrastructure resourced. Research councils in particular can be rather conservative in their approaches, but university research is intrinsically concerned with innovation and crossing previous boundaries, so it needs a good deal of freedom to be given to the universities along with the funding provided to them.

Many of the post-1992 universities will inevitably remain teaching-led institutions, and I expect that this will be the case with Chester as well. Any institution worthy of being called a university, however, must also be informed by a broad research ethos. Any university teacher who has no opportunity to develop research interests, even if they are necessarily limited and constrained, is unlikely to sparkle and inspire as a teacher. That is true at all levels, but not least in the third-year undergraduate case to which reference has been made.

I am continually amazed by the dedication of the university staff, despite burgeoning bureaucracy and the fact that a considerable increase in teaching loads as a declining unit of resource has pushed up student-staff ratios. The comparative salaries of university staff have also suffered, and in some local areas near me it is difficult to recruit and retain staff in IT, law and education. Yet on professional contracts which encourage research, many work very hard indeed to contribute to the research culture to which any university must surely aspire. We cannot make do with a university in the dumbed-down mode to which the noble Lord just referred.

The Government have a stated and admirable goal of a 50 per cent participation rate in higher education. There is still some way to go to achieve this, and a key route will surely be through seeking a widespread culture of research, pure but also applied, across the whole HE sector, including in teaching-led universities. Will the Minister confirm that this is indeed the Government's aim?

My Lords, it was right in 1992 to abolish the binary line which had so arbitrarily and invidiously divided polytechnics and universities. What we made clear, however, at that time—I was Higher Education Minister—was that this policy was not a green light for institutions to drift from their previous missions. We expected the post-1992 universities to be funded to continue to concentrate on what they were best at: vocational higher education and applied research. I asked every polytechnic, before the legislation reached the statute book, to write a mission statement as an anchor.

We made it crystal clear that while post-1992 universities should be free to make their individual cases for research funding, they should not expect public funding to be available to convert every institution in the system into a research university. Basic research would continue to be relatively concentrated, though we were enthusiastic that ties between business and all universities should be strengthened to generate more applied research. The RAE had already achieved important benefits in identifying research quality and promoting more businesslike management of research, and that drive would continue. With the imperative to expand undergraduate numbers and their teaching, the resources would not be available from the public purse to provide substantial QR funding across the enlarged and enlarging sector.

The harsh reality is that there has not been enough money available through public expenditure at any time since 1992, notwithstanding the very large increases that this Government have provided for research, to pay for the QR funding that post-1992 institutions so eloquently demand. Research gets more expensive, while the leading research universities across the world—the league in which a small number of ours must remain—develop more resources, new endeavours and new achievements. The Government and HEFCE have had no option but increasingly to concentrate resources for research. This process has been compounded—and it had to happen—by full economic costing, which means more money for no more volume. The result has of course been that not only has there been precious little left for the modern universities, but the squeezed middle, where a number of universities that once seemed secure as research universities, are is sliding down the research funding slope. These are painful and difficult circumstances. The RAE methodology in prospect after 2008, metrics, will not offer a reprieve.

I shall make two observations which, though not quite upbeat, are positive. First, it is valid and honourable for a university to be a teaching university. Resources of money and time in universities publicly funded for teaching but not research should permit scholarship, keeping abreast of significant developments in an academic field. In that way, the teaching of students will be informed indirectly by research. In America, this has been accepted for a long time. Secondly, there can be scope in every modern university to develop at least one or two centres in which there is research excellence, funded perhaps by concentration of a continuing small ration of QR and by private resources. In these areas, students can experience teaching informed and inspired at first hand by new research.

Ministers should be candid in the run-up to the 2008 RAE, as perhaps they were not sufficiently before the 2001 RAE, that while they will do all they can in the face of valid competing demands for education funding to preserve funding for university research, there will be no cornucopia from which to reward all those whose research peer review has recognised as good but not the very best. I am sorry to speak so starkly, but I cannot criticise the judgment of Ministers that research funding should be concentrated and that universities should embrace very different roles.

My Lords, the noble Baroness, Lady Sharp, has raised some timely concerns in this debate, but it is only fair to acknowledge that these are partly the consequence of this country's success in raising the proportion of young people participating in higher education. We are fortunate to be the only country outside the US to have several research universities near the top of the international league.

As a scientist and university professor, I gladly acknowledge two of this Government's achievements. The first is the introduction of top-up fees, despite the political capital that had to be expended by the key Ministers involved. Without these fees, the issues that we are addressing would be even more acute. The second achievement is the substantial and continuing real-terms growth in the budget for the research councils.

However, other countries are not standing still. The standing of our universities depends on their remaining attractive to versatile talent from overseas as well as the UK. Students will expect higher quality in return for their higher fees. We need to ensure that our graduates meet the Bologna criteria.

If we want to retain research excellence within a diverse university system that depends on public funds, some system like the RAE is a necessary evil as a discriminatory tool for distributing scarce resources that underpin research. It is then crucial to decide how steep the differentials should be. How much more should a really strong department receive than a fairly strong department? How must we diverge from the uniformity of universities on mainland Europe if we want to nurture peaks of international excellence? What should be the floor level of support for any university? These are difficult issues, but what motivates this debate is concern that the concentration must not go too far.

There are obviously a few universities, each with many strong departments, which receive the lion's share under any funding formula. However, despite the trend towards concentration, there is at least one top-rated department in more than 50 of our universities. These strong departments were not all planned for. Many stem from exceptional individuals who were able in the 1960s and 1970s to build up strong groups. It is important for the country that these opportunities are not choked off. Recruitment into the less well funded universities would be handicapped if prospective faculty perceived that, however enterprising they were, they had no chance of emulating the careers of those who built up, for instance, space research in Leicester and archaeology in Bradford.

Good researchers should be nurtured in all universities, but that is not enough. All our students should be taught by faculties whose expertise extends well beyond the standard curriculum and whose teaching is nourished by research, scholarship and reflective inquiry. That is what distinguishes a university from further education. This does not require that all universities should offer PhD programmes in all subjects. Some of the best undergraduate education in the United States is offered by liberal arts colleges that teach undergraduates only, but professors in those institutions none the less pursue individual research and scholarship. That is just one benign example of the benefits of diversity in American higher education. We need to foster such diversity here—diversity of funding and admission—with not just one league table but many, measuring excellence of different kinds.

Surely a prerequisite of anything that merits the title of university is that the academic staff should be scholars and researchers and a resource of expertise to the nation. This requires that they have enough support and time to pursue projects outside their narrow teaching duties. If that does not come via QR allocations, we need some other route—and that is why we should welcome this debate.

My Lords, I, too, thank my noble friend Lady Sharp for introducing this important debate and for her clear and passionate analysis of the inconsistencies in the funding of research. It has been a most interesting debate.

I come to this from the point of view of the students. I believe that students in all universities are entitled to expect research-informed teaching, to be informed by the latest thinking in their field of study and taught to develop for themselves skills of critical inquiry and reflection as part of their higher education study. To me that is the crucial difference between teaching in universities and schools—and in that I agree with the right reverend Prelate the Bishop of Chester. But they will not get this unless all institutions providing higher education courses leading to degrees get funding from somewhere to do research. We have heard this evening about the various problems with the funding for that.

We should also value and reward high-quality teaching. That is one of the very important areas of excellence that all universities and colleges should develop. I think that we are all agreed that research underpins all that—even the noble Lord, Lord Howarth of Newport, in a contribution that he himself described as "stark". It is significant that the inflationary uplift for research funding has been greater than that provided for teaching. Is that an indication of the relative importance attributed to each or recognition of the fact that we must have research if we are to have good teaching? As we have heard, quality-related funding is supposed to be for supporting research infrastructure and postgraduate teaching in all universities, but actually it ends up boosting facilities in the few top research-intensive universities, leaving many without anything. We have also heard from academics how the peer-review part of the RAE is a time-consuming mammoth which needs urgent review and refinement and the role that metrics, or measurable outcomes, should have.

While we wait for this review—I believe until 2014 for its full implementation—the Government's two sticking-plaster responses have not solved the problem. The Research Capability Fund introduced in 2003 was, at £22.1 million last year, pretty small in relation to the total £1.3 billion allocated under QR. It was aimed at supporting research in emerging subject areas where research is scarce and there are few existing projects for assessment, such as art and design, communication, media, dancing, drama, nursing, social work and sports studies. That is not a lot of money to go round all those subject areas.

Secondly, the £75 million time-limited core funding which came from HEFCE in January to support physics, chemistry, engineering and metallurgy departments that were in danger of closing down was also not very much when spread around to those who needed it—not even enough per student to keep a "well-found laboratory" going. These departments will have to survive on this until the various initiatives about which we heard in our debate last week on science teaching have the desired effect in creating more demand from new students from schools.

There are many problems with the QR. Naturally, vice-chancellors of research-intensive universities rated five and five starred like it because they benefit from massive influxes of funds. However, it now provides nothing for those universities rated lower than four, even though some of their research may be of national significance, and it has a very strong effect on their teaching. Many universities finding themselves in this situation manage to raise large amounts of research funding from the private sector, but as my noble friend Lady Sharp said there is no doubt that winning QR money actually levers in more from the private sector, so those that do not get it feel a double whammy.

I come back to the importance of the quality of teaching. Is the whole notion of the "well-found laboratory" to be ditched? Does the Minister agree about the importance of having undergraduates as well as graduates taught by research-active staff? Is the infrastructure support for teaching now to be subsumed under the Science Research Investment Fund? SRIF has made a big difference but cannot be fully replaced by the "endangered species" funding. As my noble friend said, we do not even know whether that is to be continued anyway after the initial announcement.

Much of the debate about the future of the RAE has been about the pros and cons of metrics but the issue of fair distribution across the universities has been neglected. That can be disastrous, as the noble Lord, Lord Colwyn, mentioned in relation to dental schools.

My Lords, I echo other words of gratitude to the noble Baroness, Lady Sharp of Guildford, for introducing this debate with the weight of the very great experience she brings. I enjoyed the knowledgeable contributions of all who spoke in it.

We welcome the decision to look further into research funding for universities. The RAE, for all its initial success in raising standards, had become far too demanding. In replacing it the Government must be very careful not to perpetuate the same problems. Universities must now be allowed to concentrate on serious research rather than navigating time-consuming bureaucracy.

We have always strongly supported higher education, which unquestionably benefits the economy as a whole. The Government must help sustain a level of innovative research that will protect Britain's continued status as a world leader. Government proposals have not been universally welcomed. The Coalition of Modern Universities expressed deep disappointment that nothing will be done to promote greater research capacity. This compares unfavourably with other countries with rapidly expanding research programmes. Is the Minister confident that the RAE replacement will allow British universities to compete more effectively with countries such as China and other emerging economies?

The proposals are certainly not without their flaws. We understand the background but is it not extraordinary that the RAE 2008 and the introduction of the new funding will both take place in the very same timeframe? What incentive is there to go through the RAE if it will not affect the funding level? Surely this openly contradicts the Government's own ambition to reduce the administrative burden on universities. The Government's recent record on funding has come under widespread attack. What impact does the Minister believe the changes will have on those university departments currently facing closure due to claimed funding shortfalls?

Although the RAE 2001 results were excellent, the sector was extremely disappointed with the Government's underwhelming response. Successful departments were not able to build on their success and roughly a fifth of institutions will now be hit with a real-terms cut in HEFCE funding. What additional sources of support, if any, will the Government make available to these institutions?

There are other ways our research programmes might be more dynamic. What incentives are given to British industry, for example, to become a more active partner in the higher education system, which would greatly benefit the university process?

We seek several reassurances from the Minister. For all the valid criticism of the RAE, it was invaluable in rewarding excellence, improving research planning and providing accountability for the allocation of public funds. Are the Government confident that the new proposals will do the same? We strongly urge that peer review should continue at some level, though clearly it should be light touch and with fewer panels. The sector recognises expert assessment as the most significant and reliable litmus test.

Government proposals for income-based metrics lead naturally to the concerns so forcefully expressed by my noble friend Lord Colwyn. Most critically, they do not appear to correlate funding with quality. We would be deeply suspicious of any system that did not reward quality at all. Some form of quality measurement must continue, which should not be discrete from the allocation of funds. Exclusive use of income metrics could easily breed mediocrity, particularly in the arts.

If universities know that they are being judged other than on quality, they may gear their research to the mechanics of this assessment process. It would be seriously detrimental to research standards if universities attempted to second-guess criteria to secure funding. The new system must encourage genuine research rather than expertise in ticking boxes.

We also require reassurance on the system's scope. It should continue to serve the whole country's interests and, crucially, to promote all disciplines. We have previously expressed concerns that the arts, humanities and social sciences may get left behind, with the focus on science and technology. All those disciplines are important in the education and development of our workforce. Can the Minister confirm that there will not be undue funding bias towards particular disciplines?

Finally, the cost and administrative burden of the system are critical. We warmly support the Government's stated aim to reduce the burden of research assessment, but it is essential that any new model actually achieves this. I finish by agreeing with my honourable friend in another place, Boris Johnson—this time not in a toga—who said:

"The current RAE is driving academics to distraction and it is high time it was reformed. Its demands were continually cited as a reason why lecturers had no time to teach students properly. Whatever the Government put in its place must allow universities to get on with serious research without pointless form filling and the production of mountains of academically worthless papers".

My Lords, the House is indebted to the noble Baroness, Lady Sharp, for raising this issue of research funding, and I am very grateful for the other contributions that have been made this evening.

The Government's short answer to the Question is: yes, we do believe that,

" the current methods of funding for research infrastructure are sufficient", for the needs of all universities, when distributional factors—the noble Baroness raised many distributional factors—are set against the substantial and sustained increases in total funding that have taken place across the sector in the past 10 years. Some of the contributions presupposed that there were cuts or threats to funding. I stress that in all the main areas of funding we have seen very substantial real-terms increases in the past 10 years. The QR funding has risen in the past 10 years from £769 million to £1.4 billion. The Research Council funding that she also referred to has risen in the past 10 years from £1.28 billion to £2.63 billion.

The Science Research Investment Fund—SRIF—which has been a significant source of funding, particularly for science laboratories in the recent past and which set in place an area where there was no sustained significant funding before, provided in the first SRIF round, which was 2002-04, £600 million. In the second SRIF round, from 2004-06, it provided £845 million, and in the third SRIF round, which is taking place at the moment for 2006-08, it provided £903 million for universities in England. That is a new source of funding that does not succeed any substantial source of funding that went before. In terms of distribution of that £2.35 billion that has gone through SRIF funding since 2002, yes, it is true that 64 per cent of it has gone to Russell group universities, but 12 per cent has gone to 1994 group universities, 6 per cent to post-1992 institutions and 18 per cent to other institutions. If you mapped the actual funding, leaving the distributional issues aside, institution by institution, virtually all of them will have had a good to excellent deal and will have seen real increases over the past 10 years. That is a very significant factor that needs to be set against the distributional issues that the noble Baroness was right to raise.

Elaborating further, the Question raises three distinct issues: first, whether we should expect all universities and all types of university to carry out expensive basic research. My noble friend Lord Howarth gave a characteristically forthright view on that. The second issue is whether the levels of public funding available to universities are sufficient to maintain the infrastructure necessary to allow research to take place. The third issue is about the current state of the research infrastructure and how we will continue to improve it. Let me address each of those issues in turn.

To hear some of the rhetoric used about university funding, the House might be forgiven for thinking that academics at half the universities in the country did not engage in research at all, but in teaching alone. That of course is not the case; as the noble Lord, Lord Rees of Ludlow, so rightly said, all academics should be scholars whether or not they have the ability to participate in substantial pure research. In many areas of research, the overhead costs of what might be called pure research are not great, and in the age of the internet and the personal computer—and the mobile phone and the BlackBerry—the barriers to effective research in many areas are lower than ever before. In the humanities and social sciences, physical proximity to a copyright library, for example, is nothing like the requirement it used to be for the researcher. The issue, rather, is the extent to which, in areas where research is expensive and requires an additional infrastructure, we should seek to concentrate funding on institutions with a critical mass of highly rated researchers for the purpose.

Before 1992, as my noble friend Lord Howarth noted, a large part of our present university sector was not funded additionally to carry out research at all, but that did not stop some such institutions from enjoying high research reputations. The former Portsmouth and Oxford polytechnics are two examples of that, but there are others. If we fast-forward a decade, we found in the most recent research assessment exercise that 96 universities, new and old, representing more than three-quarters of the sector, possessed at least one world-class research unit and that 55 per cent of all researchers were working in a department with a five or five-star rating. That compares with just 31 per cent in the previous exercise. Although it is true that the decisions that were taken after the RAE were to concentrate funding more in terms of ratings, a far larger proportion of departments received those high ratings. We would be surprised if the next and final such exercise, which will take place next year, did not show further progress in that respect.

It is not the case that newer universities carry out as much additionally funded researchas Russell Group universities across as wide a range of subjects or at such a uniform level of excellence. As noble Lords have noted, five Russell Group universities each receive more quality-related funding than all of the new universities combined. There are many reasons for that. Some new universities have been developing research strengths for less than 15 years, which is a short time in which to build an institution-wide research ethos. More importantly, as my noble friends Lady Warwick and Lord Howarth stressed, many other universities rightly see their main mission as lying elsewhere—teaching undergraduates or engaging with business and the community, including universities at the applied end of the research spectrum. Most do not have the legacy of infrastructural development that is needed to pursue cutting-edge research in high-cost scientific and technological fields.

That does not mean that newer universities are or should be research-free institutions. A university may decide that its strengths lie in a particular direction, but support from public funds to deliver a valuable research mission is, and will continue to be, available to all. That is why, in answer to the Question of the noble Baroness, Lady Sharp, the next and final RAE in 2008 will generate not the stepped rating system of five, five-star, and so on, that featured in previous exercises, but a more subtle institutional research profile that should make it easier for pockets of research excellence to be recognised more fairly in funding terms.

Instead of grading a whole department as, say, a four, a five or a five-star, as happened in the previous RAE, the new profile will show what percentage of a department's research activities is excellent, what percentage is moderate and so on. This will help better to reward relatively research-inactive departments that, nevertheless, have a small number of active researchers. Many of those departments are in the newer universities and I was glad to hear a welcome for that approach from the noble Lord, Lord Rees of Ludlow, who, as master of Trinity College, Cambridge, might have been expected to have a more narrow and self-interested view. We are glad that he very much has the interests of other institutions at heart.

When an institution without much of a track record wishes to build a stronger research mission, financial help to build a research infrastructure will continue to be provided through the Research Capability Fund that we created in 2003. In response to the noble Baronesses, Lady Walmsley and Lady Sharp, I accept that the total sum of money in the fund is comparatively small. However, its effect is big, especially on smaller, less research-intensive universities. The right reverend Prelate the Bishop of Chester might wish to know, for example, that this year less than one-twentieth of the University of Chester's core funding for research has come from quality-related grants. The whole of the rest is coming from the Research Capability Fund. So, for many institutions which are new to the research arena, this is making a substantial difference.

The director-general of the Russell Group, speaking at a recent conference, described the higher education system that we inherited in 1997 as "regressive and underfunded". One consequence of that underfunding was an enormous backlog in research facilities, especially in science. That is why, in 2001, an independent study estimated that £2.7 billion of remedial investment was required in science research facilities alone—a testament to decades of underfunding. Most of the backlog was obviously to be found in pre-1992 universities, whose research infrastructure was decaying alarmingly, but that position has now changed.

Research capacity takes years, or even decades, to develop and in the sciences, above all, it takes money. In 2002, the noble Baroness, Lady Sharp, told the House that under the Labour Government,

"we have seen a considerable amount put into the science budget, largely for infrastructure and capital and equipment spending".—[Official Report, 27/11/02, col. 842].

As I said earlier, a considerable amount more has been put in since then, and the progress that we have made in addressing the backlog has continued. The Joint Infrastructure Fund and its successor, the Science Research Investment Fund, have together allowed remedial capital investment worth almost £3 billion to be put to good use, and the investment backlog is being reduced to a manageable size. Given the figures that I have set out, I think I can say in response to the noble Baroness that the concept of the well-found laboratory is alive and well. Indeed, there are now many more such laboratories than there were in our universities 10 years ago.

Research infrastructure is not just about the bricks and mortar; it is also about universities' ability to pay researchers' salaries. The view that the country can afford only to fund fewer, but better, researchers, as was very much the view 10 years ago, has now been replaced by an acceptance that the national interest demands that we fund more and better research. During the past three years of the previous Government, quality-related research funding for universities in England rose by a total of only 1.8 per cent. During the first three years of the current Government, it rose by 29 per cent, and it has continued to rise year on year ever since.

I can confirm to the House that universities will continue to enjoy full discretion on how they spend these grants. The grants not only provide a basic structure within which research funded by the research councils, charities and the private sector can take place but they also underwrite a very large amount of the research that universities carry out, particularly in the arts, humanities and social sciences.

However, these funds have not been the only source of support for the research infrastructure. As we discussed in detail during the debate opened by my noble friend Lady Warwick on 27 April, since 2004, the Higher Education Innovation Fund has provided more than £100 million a year to help institutions to develop their capacity to engage with business and the community. This is an initiative from which newer universities, in particular, have benefited. Indeed, 41 per cent of the £110 million a year available under the current phase of the Higher Education Innovation Fund is going to the newer universities, compared with 28 per cent to the Russell Group and 31 per cent to the pre-1992 universities. So there has been an extremely welcome distribution of funding in the direction of newer universities from that fund.

Those facts need to be considered alongside the large-scale increases that we have seen in Research Council budgets over recent years—including the budget of the Arts and Humanities Research Council, whose funding has risen from £68 million in 2004-05 to £97 million in 2007-08—the massive expansion of student numbers that we have accomplished while maintaining the real value of the unit of resource, and, above all, the vital cash injection that variable fees, mentioned by the noble Lord, Lord Rees, are now bringing to our universities. Together, these policies are underpinning growth in every part of the sector. We believe that in the decisions that we take after the RAE next year, we will be able to sustain that growth and ensure that universities with all types of missions continue to thrive in both research and teaching.