Volume 2: Science
Part 2: Commissioning and funding of research, 1986-96
Funding - the PES system

6.39 As explained in volume 15, the Treasury was guardian of the public finances and therefore had to agree all departmental spending plans. The annual Public Expenditure Survey (PES) was the mechanism by which the Government planned its expenditure (including on research) for the forthcoming financial year and the two years following (which was known as 'the PES period'). The Government's financial year ran from 1 April to 31 March.

6.40 In the spring of each calendar year, Departments sent the Treasury their expenditure bids for the next PES period. These bids were based on the expenditure levels agreed during earlier PES rounds and, where deemed necessary, proposed additional expenditure on top of these. So bids put forward in, for example, the spring of 1986 would have been for proposed expenditure during the financial years 1987/88, 1988/89 and 1989/90.

6.41 During the following months, these bids were discussed in detail with the Treasury at official level. Next came bilateral discussions between each spending Minister and the Chief Secretary to the Treasury. The bids had to be consistent with the overall figures for public expenditure during the PES period agreed earlier by the Cabinet, and were themselves put to the Cabinet for final agreement in the autumn. When this agreement had been obtained, Departments' budgets were fixed for the following three years. Detailed expenditure 'Estimates' were then presented to Parliament, which voted funds accordingly. ¹ Expenditure programmes were funded from specified Votes (in the case of science and technology, the 'Science Vote'), and transfers between these required approval by Parliament, and thus by the Treasury.

6.42 PES bids had to identify, as far as possible, any additional expenditure items (including research) foreseen by Departments as being necessary during the PES period. The Treasury also required Departments to indicate whether and how they could make percentage reductions in their overall spending plans for the PES period - for example, of 2 per cent in the next financial year and 5 per cent in each of the other two years. In putting forward their research funding bids, Departments recognised that, assuming success, such additional funds would not be available until the beginning of the following financial year at the earliest (ie, up to 12 months after the bid was submitted).

6.43 If further spending needs arose during the financial year, the Treasury expected Departments to assess whether these could be met by switching resources from their other budgets. ² Within Departments, the expectation was that a unit that needed more funds would find them from within its other budgets. For example, departmental directors of research and development would be expected to seek to fund new research from their existing budgets. Only if this was shown to be impossible could the search be widened to other policy or programme budgets. If these avenues were exhausted, the Treasury could be approached for extra resources from the Contingency Reserve, but such a course was regarded as a last resort. ³ This process could lead to delays in allocating funds for new projects.

6.44 Hence, if a Department needed to respond quickly to new research priorities that emerged too late during the year to be included in the PES bid, it would reappraise its existing projects and programmes and reallocate resources accordingly. This was how MAFF identified funds for research into BSE when the disease was initially identified. If the new priorities required funding over a long timescale, the Department would seek additional resources in the next PES round. However, even if its bid was successful, the new funding would not be available until the start of the following financial year at the earliest, up to 12 months after the bid. MAFF's attempts to secure extra funds for research from the Treasury Reserve are described in Part 3 of this Chapter.