Dialogue: Change to tertiary funding a step towards a true knowledge economy

The latest report of the Tertiary Education Advisory Commission deals with funding. TOM BARNES* says the proposal for a performance-based research fund is a step forward.

The fourth report of the Tertiary Education Advisory Commission recommends significant changes in the way tertiary education institutions are financed. Most reaction so far has unsurprisingly focused on sensitive issues such as the student loans scheme and merit-based entry into all degree study irrespective of institution.

However, some of the most far-reaching recommendations lie in the radical changes proposed for the way in which research is financed in our universities.

The report recommends the establishment of a performance-based research fund by which tertiary education institutions will receive research funds from a central pool, allocated according to performance. This is common in other countries and would be a most welcome change for the New Zealand research system.

In the past 10 years, research financing has been plagued by institutional game-playing as researchers jockey for position in a highly political and competitive environment. Their motivation to produce new and useful knowledge for the country has been blunted by the distractions of meeting ever-increasing political and administrative demands to obtain financing.

The proposed performance-based fund would be an excellent start to much-needed reforms.

It is an important step towards eventually achieving a true knowledge economy, with competitive and social advantage based on discoveries made in New Zealand.

As the knowledge wave conference signalled, this will be of crucial importance to lifting our country from the bottom quarter of the OECD rankings.

The performance-based fund also supports other key knowledge wave recommendations: that tertiary institutions should aspire to the highest international standards in both research and teaching, and that policy incentives should be put in place to encourage and enable this.

The proposed fund will help in several ways. First, it will provide tertiary institutions with discretionary funding which can be used to encourage research in new and promising areas.

There is a paucity of financing for this kind of basic research. The only blue-skies research fund in the country, the Marsden Fund, can support, on average, only 9 per cent of the research applications it receives. Institutions are, therefore, unable to develop new research fields to the point where they can realistically apply for other Government research funding.

Indeed, researchers applying to schemes run, for example, by the Foundation for Research, Science and Technology are almost being asked to guarantee their research outputs and to decide how their discoveries will be commercialised before money is made available for the discoveries to be made.

The University of Auckland's experience has been that the rate of commercialisation from fundamental research is far higher than from work using funds targeted strongly at applied work. It is clear that the main driver of successful commercialisation is the quality of the research.

The performance-based research fund will be a valuable new tool to improve this.

Secondly, implementing this fund will provide New Zealand with a clear picture of research quality across the tertiary sector. It will also show us how research quality here compares with international benchmarks. This will allow public financing to be concentrated in institutions where there is the highest probability of a good return on investment.

Thirdly, and perhaps most importantly, the performance-based fund at last recognises the fundamentally important role of research in the universities. It will help to alleviate the present situation where universities ride from year to year on the roller-coaster of rapidly changing research funding policy.

This is compounded by unacceptable uncertainty arising because of flow-on effects of fees freezes and from the way the equivalent full-time student funding policy is implemented.

The report proposes that at least $20 million of "new" money be combined with $120 million of funds taken from existing Government financing for the tertiary sector to form the core of the performance-based fund. The $120 million will, in principle, come from the so-called research top-ups which are purported to form part of the Government equivalent full-time student funding formula.

It should, however, be noted that such funding falls far behind that in comparable universities overseas. For example, overall revenue per student in the University of Auckland is more than $10,000 behind that in the University of Melbourne.

Over the past few years, fees freezes, combined with equivalent full-time student financing that has not kept up with inflation, have left universities financially constrained. In practice, this leaves little Government funding to support research. Removing $120 million from the equivalent full-time student subsidy to finance the new performance-based research fund is, therefore, akin to robbing Peter to pay Paul.

Rather, we should compare ourselves with international benchmarks to ascertain how much "new" money is required to finance the proposal adequately. Funding to comparable wealth-adjusted levels would allow our research-led universities to run sustainable research programmes to international standards.

For example, Auckland's research revenues would need to about double to be even close to those applying at the University of Melbourne.

If we were to do this for all universities in New Zealand, $150 million of "new" money would be required in the performance-based fund.

The advisory commission's recognition of the importance of quality research in the universities and the strategies proposed to achieve this are long overdue.

If financing levels can be set appropriately, our research-led universities have a chance of surfing on rather than drowning in the knowledge wave.

* Professor Tom Barnes is the Deputy Vice-Chancellor (Research) at the University of Auckland.

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