Professor John FitzGerald:

We rebalanced our income stream because they cut the direct funding. Direct funding is low in the ESRI - if you look at the best in Europe, the Central Planning Bureau is wholly funded - and there are advantages and disadvantages to the funding model. The advantage is that the policy output and policy relevance of what we have done has been doubled or trebled since we were totally funded. The productivity increase in the institute over the last 20 years is dramatic. We are funded to do research on energy and it is policy-relevant, whereas if you are an ivory tower with money to spend and you decide what you are going to do, some of the time you will indulge yourself and do things which might not be of great use to policy. So the funding model has an advantage, but the disadvantage is there are areas that fall through the cracks that are not funded. The funding of macroeconomics would have been very limited and the funding of the financial research undertaken in the 1990s came from banks. They stopped funding it, however, and it would probably have been a major problem if the funding was still coming from banks in the last decade. They would not have continued to fund because you would have been saying there is a real problem and the banks would have been upset.

I think the model is too much in contract and in block grant whereas the untied funding should be substantially larger. Looking at other institutes across Europe, a 50:50 model would be a better model. It would combine incentives to be policy-relevant with the independence to pick areas that nobody else is interested in. For example, the ESRI was a leading area of research on poverty over the last 20 years but there has been very limited research funding for poverty, so staff have got to move on to other areas, and there are areas like demography that nobody wants to fund but which I think are important. There are cuts. When you are recommending cuts to the rest of the country, you cannot turn up and say: "We are special".