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Go8 Submission to the inquiry into the provisions of the ARC Amendment (Review Response) Bill 2023

 22 January 2024

Committee Secretary
Senate Education and Employment Committees

Go8 Submission to Senate Education and Employment Legislation Committee inquiry into the provisions of the Australian Research Council Amendment (Review Response) Bill 2023

The Group of Eight (Go8) welcomes the opportunity to provide this submission to the Senate Education and Employment Legislation Committee inquiry into the provisions of the Australian Research Council Amendment (Review Response) Bill 2023.

Please note that the Go8 consents for this submission to be published in full.

Introduction

The Go8 represents Australia’s leading research-intensive universities, all ranked in the top 100 universities globally [1]. Go8 members are responsible for 70 per cent of research conducted by Australian universities, investing $7.7 billion into research annually. This represents 20 per cent of the total national investment in R&D by business, governments, and the higher education sector combined. 

Go8 members have been the major recipients of ARC competitive research funding since its founding in 2001 including as lead institution in two-thirds of all competitive grant funding and as lead or collaborating partner in three quarters of funding.

Go8 members are broadly supportive of the measures in the Bill as a timely strengthening of the operation and governance of the ARC.

The ARC has a unique and significant role as the major government funder of non-medical basic research for universities in Australia through its Discovery Program.  Basic research supported by the ARC creates the knowledge, technologies and breakthroughs that underpin a productive economy in emerging fields such as quantum, artificial intelligence and green energy solutions. Without this basic research, Australia’s innovation pipeline and national sovereignty is fundamentally compromised and our national economic, social and environmental future undermined.

Estimates of private and public rates of return to basic research are significant – between 20 per cent and 50 per cent for privately funded basic research – and much higher for publicly funded research, such as through the ARC.

An overview of the importance of basic research in Australia can be found in the Go8 policy brief Basic research: The Foundation of Progress, Productivity, and a more Sovereign Nation [2]. (attached)

In Australia it is universities – specifically the Go8 – which undertake the majority of this basic research. Our universities invest more than $3 billion annually in basic research – equivalent to approximately one-third of all basic research in Australia. However, as ARC funding has declined over the past decade, universities have had to rely on new sources of external research funding. In turn this has led to the share of university research effort dedicated to basic research declining by 25 percent.

This is despite the introduction of the Medical Research Future Fund (MRFF) in 2015 which, in combination with the National Health and Medical Research Council (NHMRC) funding, has significantly increased government investment in health and medical research – further emphasising the importance of the ARC in supporting basic research.

As a result of the decrease in real terms of aggregate national spending on basic research in Australia, it is imperative that the ARC reforms safeguard non-medical basic research in Australia through secure funding and improved governance.

For further detail on the value of research see the Go8 publications Enabling Australia’s Economic Recovery through Supporting Research Excellence [3] and Priority Directions 2: Three essential for future economic success [4]. (attached)

Recommendations

Recommendation 1: The Government should legislate that a minimum of 65 percent of total ARC grant funding be allocated to basic research.

Recommendation 2: To support the establishment of an independent and effective ARC Board the Bill should ensure:

  • That the Minister be required to consult widely when making appointments to the ARC Board.
  • That membership of the ARC Board be expanded to comprise at least 7-8 members to allow for appropriate diversity of backgrounds, experience and research/research management expertise – including in a university setting.
  • That additional funding be provided to the ARC to allow for the proper operation of an independent Board rather than redirecting funding from other areas of the ARC operational budget.

Recommendation 3: In the event the Minister vetoes or terminates research funding based on security, defence or international relations concerns, the impacted university should be afforded a briefing.  If classified in nature, the university representative should have the appropriate security clearance.

Recommendation 4: The committee should acknowledge in its report the importance of ARC reform, in the context of the need for whole of system research reform being considered as part of the Universities Accord process. 

Recommendation 5: To ensure the smooth and effective transition in implementing reforms to the ARC:

  • The legislation should be reviewed after 18 months
  • An Acting CEO for the ARC should remain in place until an ARC Board is fully established and makes a substantive appointment.

Given that the Bill requires that the funding agreements contain regular independent auditor statements (49(2)(f)) consultation should be undertaken on regulatory overlap given existing certifications and annual reporting already undertaken.

Discussion

The ARC is the major government funder of non-medical basic research through the Discovery program.  It also has a crucial role in supporting research engagement between universities and industry through the Linkage Program.  Both are critical to support applied research with industry and the pipeline of quality basic research to translation and commercialisation.

While both Programs are important –– an appropriate balance between the programs – basic and applied research – is critical.

In establishing this balance, it is important to note that there are a variety of government programs that can support research engagement with industry (for example, the Research and Development Tax Incentive) while the ARC is the main funder of non-medical basic research.

ARC funding has declined over the last decade. This has contributed to a drop in the proportion of basic research conducted by universities. This continues a trend over the last two decades which has seen university research effort dedicated to basic research drop from 55 per cent of total university research effort in 2000 to 37 per cent in 2020 (latest available figures [5]). Within the Go8 universities, 40 per cent of the research effort is currently dedicated to basic research.

Business commits less than 10 per cent of its research expenditure to basic research [6] underscoring the national importance of the basic research effort undertaken by the university sector.

Under the current ARC Act, funding allocated by the ARC is capped by legislation with the Minister required to divide funding caps between different categories of research programs. The Division of Funding Caps Determination set the split between the Discovery Program and Linkage Program at 65 per cent and 35 per cent, respectively (with an allowable range of 5 per cent each way for these figures) which is reflected in the Department of Education Portfolio Budget Statements for the ARC in 2023-24 [7].

Under the current Bill there is no provision to safeguard the proportion of funding committed to support basic research through the Discovery Program. 

The Go8 recommends that the legislation explicitly include a minimum of 65 per cent of ARC funding be dedicated to support basic research – through the Discovery or equivalent program.

Recommendation 1: The Government should legislate that a minimum of 65 percent of total ARC grant funding be allocated to basic research.

The establishment of an ARC Board with responsibility for funding approvals (for non-designated programs) is a landmark achievement of the Bill and a measure the Go8 has long advocated for. However, there additional measures which will enhance the independence and effectiveness of the Board.

It is vital that the Board have sustainable and long-term independence from political processes.  For example, in making appointments to the National Health and Medical Research Council (NHMRC) the Minister is required to consult “appropriately”, and it is recommended that ARC Bill include a similar requirement [8].

The Bill has rightly emphasised the importance of diversity on the ARC Board by ensuring that one of the Board members is an Indigenous person and one Board member represents regional, rural and remote Australia.

However, with the Bill requiring between three and five members – in addition to the Chair and Deputy Chair – there is a risk that the Board may not be large enough to reflect the diversity of backgrounds and expertise required.

It is worth noting that the Australian Institute of Company Directors (AICD) indicates that it is not unusual for large charities/Not-For-Profit Boards in Australia to have between 8 to 12 members to cover the range of expertise needed.[9]

While it is critical that the principal criterion for appointment to the Board be “substantial experience or expertise in one or more fields of research or in the management of research” (as outlined in the Bill), good Board appointment practice should ensure an appropriate and extensive mix of skills. In comparison, the NHMRC Council membership is required to have expertise in health needs of Aboriginal and Torres Strait Islanders, consumer issues, business, public health, business, and ethics relating to research involving humans.

The Financial Impact Statement indicates that establishing the ARC Board and restructuring the ARC’s governance arrangements will cost approximately $1.5 million per annum. It is proposed that this be met through existing resourcing from within the ARC’s current annual departmental budget.

This is not acceptable. It will significantly impact the operation of the ARC given its current budget is already under pressure due to the scale and scope of its mission. The 2023-24 Budget figures report ARC expenses of approximately $25 million which is less than half that of the NHMRC at $57 million [10].

Enhanced governance arrangements implemented by this Bill must come with additional funding to support the operation of the ARC – not at the expense of funding which should be allocated to research.

Recommendation 2: To support the establishment of an independent and effective ARC Board the Bill should ensure:

  • That the Minister be required to consult widely when making appointments to the ARC Board.
  • That membership of the ARC Board be expanded to comprise at least 7-8 members to allow for appropriate diversity of backgrounds, experience and research/research management expertise – including in a university setting.
  • That additional funding be provided to the ARC to allow for the proper operation of an independent Board rather than redirecting funding from other areas of the ARC operational budget.

While it is extremely important that the Board has decision making powers regarding research approvals (for non-designated research programs), it is also critical that research be conducted in the national interest and in accordance with the security, defence and international relations of Australia.

In terms of safe-guarding research from foreign interference the Go8 notes the importance of the Guidelines to Counter Foreign Interference in the Australian University Sector produced by the University Foreign Interference Taskforce (UFIT), of which the Go8 is founding member [11].

The Minister – on advice from national security and other appropriate agencies/departments – should have the ability to effectively veto or terminate funding approvals on national security grounds. As recommended in the Go8 submission to the review of the ARC, the Bill includes provisions that require that if the Minister vetoes or terminates a funding approval on the basis of security, defence and international relations of Australia  they must table in each House of Parliament within 15 sitting days a statement that details the day on which the decision was made and the research program to which the decision relates.

 In addition, the Minister must also give the Parliamentary Joint Committee on Intelligence and Security (PJCIS) a written statement on the decision and (as detailed in the Explanatory Memorandum) offer to give the PJCIS a private briefing about the decision.

Additionally, it is critical that the university is also briefed.  This ensures appropriate remedial action is undertaken with regard to the specific funding approval and goes towards strengthening institutional processes.

Recommendation 3: In the event the Minister vetoes or terminates research funding based on security, defence or international relations concerns, the impacted university should be afforded a briefing. If classified in nature, the university representative should have the appropriate security clearance.

The Go8 notes the significant improvement in governance and independence of the ARC represented in the current Bill – particularly through the establishment of an ARC Board. This will ensure that the ARC is in alignment with current practice for research funding agencies globally.

However, as outlined in the Go8 submissions to the Universities Accord process, there remain significant structural issues with the national research system – for which the university sector is the “engine room” – that must also be the subject of long-term reform [12],[13].

This includes addressing sustainable research funding for universities.

Currently, in receiving grants from government funding agencies such as the ARC and NHMRC, universities are required to fund approximately half of the costs of the research activity from discretionary university revenue sources – primarily international student fees.

 Australia’s future depends on a well-funded, sustainable and coordinated national research and innovation sector.

Central to this is increasing Australia’s research intensity (GERD) from the current level of 1.68 per cent of GDP – near the bottom of the OECD – to a national target of 3 per cent of GDP.

Australia’s top 100 world leading research universities will be at the centre of this effort which will require a national strategy and coordination at a whole-of-government level. In particular, there needs to be a national effort to assist industry to increase business investment in research which currently sits at 0.9 per cent of GDP – less than half of the OECD average.

While this broader mission does not fall under the purview of the current Bill, it should be central to the work of the Universities Accord process into which the reform of the ARC feeds into.

It is important for the committee to note in its report that while the Universities Accord Terms of Reference specify that the ARC Review (and consequently the current Bill) should “synchronise” with the Universities Accord process, it is important that this ‘synchronisation’ includes broader research reform.

Recommendation 4: The committee should acknowledge in its report the importance of ARC reform, in the context of the need for whole of system research reform being considered as part of the Universities Accord process. 

The Go8 notes that the amendments to the ARC Act contained in the Bill are both substantial and technical in nature. While it is appropriate for this Bill to be subject to a Senate Committee review, when passed there must be ongoing and detailed consultation with the sector during the transition period.  Additionally, a review of the legislation after this period will be important.

The ARC is currently operating under the direction of an Acting CEO. Given that one of the primary duties of the ARC Board is the appointment of the CEO, it is recommended that interim arrangements remain in place until the Board is established to appoint a substantive CEO.

While not a legislative matter, it is important in supporting the operation of the new ARC Board and the CEO that the ARC secures and retains academic expertise. This is currently achieved through the employment of Executive Directors who are senior and well-credentialled academics. The Go8 has previously recommended increasing the number and breadth of expertise in Executive Director positions and adopting employment arrangements to increase the pool of senior candidates. This expertise will be key to bedding down the governance and operational reforms in the current Bill and the Go8 will continue to engage with the ARC on these matters.

Recommendation 5: To ensure the smooth and effective transition in implementing reforms to the ARC contained in the Bill:

  • Given the detailed and technical nature of the proposed ARC reforms
    • The legislation should be reviewed after 18 months, and
    • The Department of Education and the ARC continue detailed engagement with the sector to ensure robust and effective implementation of the reforms.
  • An Acting CEO for the ARC remains in place until an ARC Board is fully established and makes a substantive appointment.
  • Given that the Bill requires the funding agreements contain regular independent auditor statements (49(2)(f)) that consultation be undertaken on regulatory overlap given existing certifications and annual reporting already undertaken.

[1] QS World University Rankings 2024
[2] https://go8.edu.au/policy-brief-the-foundation-of-progress-productivity-and-a-more-sovereign-nation
[3] https://go8.edu.au/publication-enabling-australias-economic-recovery-through-supporting-research-excellence
[4] https://go8.edu.au/go8-publication-priority-directions-2
[5] See ABS Research and Experimental Development, Higher Education Organisations, Australia
[6] See ABS Research and Experimental Development, Businesses, Australia
[7] See https://www.legislation.gov.au/F2017L00987/asmade/text
[8] See 41(1) of the National Health and Medical Research Council Act 1992
[9] See, for instance, https://www.aicd.com.au/board-of-directors/performance/structure/number-of-directors-board-size.html
[10] Noting the more extensive responsibilities and remit of the NHMRC.
[11] See https://www.education.gov.au/guidelines-counter-foreign-interference-australian-university-sector/resources/guidelines-counter-foreign-interference-australian-university-sector
[12] 15 ideas to deliver a seamless tertiary education system Group of Eight Submission in response to the Universities Accord Panel Discussion Paper: https://go8.edu.au/submission-australian-universities-accord-panel-discussion-paper-consultation-15-ideas-to-deliver-a-seamless-tertiary-education-system
[13] Go8 Response to Australian Universities Accord Interim Report: https://go8.edu.au/go8-response-to-australian-universities-accord-interim-report