CoResearch, CSIRO's staff newsletter, in May 1989, contained the following report: "Dispute about the CSIRO appropriation budget is continuing. Chief of the Division of Entomology, Dr Max Whitten, who has been at the forefront of comment on the budget, is questioning the 'official line', saying we are worse off than we are led to believe by figures announced by Government. In conjunction with his administrative staff, he has prepared figures which indicate that, even with the science and technology package unveiled this month, CSIRO is many millions of dollars behind the 1987/8 budget. Dr Whitten has shown figures to CSIRO management, who question the inclusion of the four percent second tier wage increase and the 1.25 per cent efficiency dividend. However, Dr Whitten says these elements result in reduced budget capacity at the divisional level. He has offered his calculations to CoResearch to give a divisional perspective on the budget." Etc etc.

So what has changed in the past 15 years? First, the government - from Labor to Coalition. Second, CoResearch, which had a history of encouraging debate, was quietly put to rest some months ago.

What hasn't changed? Ironically, 1989 saw the introduction of triennial funding which was restored this year after CEO, Dr Geoff Garrett foolishly let it lapse two years ago. And this coming financial year sees an pay hike for all staff of 5.5% not allowed for in the Government's appropriation. No mention of this imposte in the current hype by the CEO. Similarly, the Government of the day is putting spin on budget decisions; but this time Geoff Garrett has embellished the spin in various advices to staff, creating a near hysterical climate of uncritical support in some quarters of CSIRO.

Certainly, enthusiasm in senior quarters of CSIRO about the budget outcome for 2004/5 is high. I suppose all things are relative; and if some were thinking that CSIRO's appropriation might be fully withdrawn, then it is a great outcome. And, if some thought that the one-off in 2003/4 of $20m for Flagships was just a one-off, then again there are grounds for enthusiasm re continued funding for Flagships.

But if anyone is seriously looking at the impact of the budget on the capacity of any of the 20 Divisions to do research - especially outside the Flagships - then it is hard to find grounds for rejoicing. Presumably there are research managers inside CSIRO that have done an objective analysis of the budget and assessed its true implications for doing 'great science'. This histogram prepared by CSIRO is a good starting point.

Bureaucrats in Canberra had warned privately that the Government was not going to put new money into R&D, but that all the packaging would be presented to create that illusion. A good example is Backing Australia's Ability 2 (BAA2) that does not increase the overall funding but includes programs previously funded separately from BAA1 (eg Flagships) which would be at the expense of activities within BAA1 (such as the Cooperative Research Centres or CRCs).

First, a return to triennium funding is in itself a good thing. But it is only a restoration of something introduced in 1989, and dropped at CSIRO's request two years ago. While it provides a measure of certainty, it should not be compared with some notion that annual appropriations are uncertain or may even be terminated fully. What really counts is variation on the margins. Annual appropriations traditionally start with the previous year's base appropriation and then add or subtract according to the various issues on the table.

With the new triennium, the core appropriation is projected to increase from the current year over the triennium by only 1.6% in 2004-05 (to $547m), by 1.5% in 2005-06 (to $555m) and by 1.5% in 2006-07 (to $564M). These increases are less than inflation, and when you allow for CPI, CSIRO is going backwards in terms of capacity to do research. Include the scheduled 5.5% pay hike for all salaried staff in July, and then the reduced capacity to do research really bites in.

Is CSIRO able to go back to the Department of Education, Science and Training (DEST) within the triennium to correct this, using a standard, negotiated deflator? In other words, annual negotiations are still needed and are critical for CSIRO's getting a fair deal. The CSIRO executive is putting an "illusion" of certainty above a fair deal as its measure of success.

Now take the six Flagships that are being carved out of the Divisions and shaping to dominate the organisation. Last year, CSIRO secured a non-recurrent allocation of $20m for Flagships. Given that the Flagships were not a one-year phenomenon, one would assume that much of the $20m was allocated to continuing functions (recruiting staff, etc). Such inescapable decisions entail a commitment that goes beyond a single year. Thus, Government's failure to provide further funding, not less than $20m, would have spelt disaster for CSIRO. The reality is that CSIRO has secured an additional discretionary $10m, rising to $15m and $20m, for each year of the triennium which is a positive outcome for Flagships¹.

Further, a careful reading of the conditions for Flagships funding indicates that secure funding for Flagships is only for three years, ie $105m, the remaining $200m (for the out-years 2007/8 - 2010/11) is subject to review. Presumably, this will have to happen in the second year when negotiations for the next triennium take place. For reasons argued above, the Flagships will flounder if the promised support is not provided in the out years. These arguments may take place in an unfavourable environment -- if the Review of Collaboration between Universities and Public Research Agencies chaired by Donald McGauchie remains relevant. That review has already argued that CSIRO's funding enjoys a security that is less than optimal.

However, it is the other conditions for Flagship funding that really should be worrying. Investing $400m over the coming four years by way of transfer of funds from CSIRO's base appropriation will be difficult to achieve - unless that shift is achieved by transferring/re-badging existing projects. On my estimation some $40m will have to transferred recurrently for each of the next four years to meet the $400m re-direction as articulated by Garrett recently. How much of that will come from activities that are not research activities, eg from the $41m pa now allocated to commercial activities in CSIRO? My estimation is little or zero!

In all probability, diverting appropriation funding to Flagships, on the required scale, will have a debilitating effect on core activities such as the Australian National Insect Collection (ANIC), the Stored Grain Research Laboratory (SGRL), the National Herbarium, etc.

A further worrying condition for continued Flagship funding is the need to raise external revenue by 11.1%, 13.1% and 6.7% over this triennium (To date, CSIRO under Geoff Garrett has achieved 3.6%, 8.1% and 1.8%). External funds are usually not recurrent, certainly not long-term recurrent. So, maintaining external earnings at a high level is a very, very big challenge. The notification of a Flagship review after $105m expenditure is no accident; the roadblock is well and truly in place and conditions for its removal are substantial.

And now to one serious sleeper with the Flagships: Some 15% of the Flagship funding (ie around $40m of the $305m) appears destined for universities on a competitive basis for collaboration - what some have labelled a "Clayton's CRC program". Does this mean that, of the $10m 'discretionary' funding in 2004/5 for Flagships (as argued above), some $4.5m won't even go to CSIRO? If so, that leaves around $5.5m uncommitted funding for allocation to six Flagships in 2003/4 - less than 1% of CSIRO's budget. This effectively means that the survival and growth of Flagships will largely be at the expense of those core research activities on which CSIRO's reputation has been built.

And there could be looming a PR issue for CSIRO over the Flagship funding. The significant reduction in the CRC program budget will be seen by many as a direct consequence of CSIRO's Flagships, even to the extent of establishing a "Clayton's CRC" around the Flagship program. For every winner in BAA2 there is a loser. All the new activities now included in BAA2 have been at the expense of existing activities.

And for all its troubles, CSIRO now has copped the principle of contestability of its funding base. Garrett doesn't seem to realise this shift in policy to implement a key finding of the McGauchie review - or he is conveniently ignoring it when he so quickly publishes the positive reaction to the budget outcome - including anonymous  adulatory comments that Garrett felt compelled to circulate to all staff.

Some of these comments are revealing coming from mature professionals in a premier research organization. But the fact that Garrett felt compelled to redistribute them to all staff is extraordinary. Here are two of the supporting comments.
"The participants of our seven Habits course jumped up and down for minutes yesterday and we had problems getting them focused again on the course. Thanks for working so hard for all of us."

"Your unmitigated enthusiasm and tireless efforts, unmatched previously, have paid off. Now it is up to us (I mean other staff like myself) to rise to the occasion and do what is needed."

Finance and Treasury, at the direction of Prime Minister and Cabinet, saw to it that there would be no new money in R&D. Howard's men have concluded that there are no votes in R&D. It was left to the spin doctors in the Department of Education, Science and Training and the Department of Industry, Tourism and Resources to make it look good.

^1. The government can reasonably claim that any flagship money beyond 2003-2004 is new money. However, given that the prime minister launched the flagships as continuing concerns, one could argue that it was inconceivable that support not less than $20m per year would not be forthcoming - any more than the base appropriation for 2004-2005 would not be forthcoming. Certainly, CSIRO management would have to have acted on the presumption of continuing support at this level. Thus, it is not unreasonable for research managers in the flagship program to regard the allocation of $30m for flagships as representing an additional $10m to expand activities. In other words the incremental jump is $10m rather than $30m. Similarly, we can treat the increases in the following two years as $15m and $20m - which certainly would be welcome increases above inflation.

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Dr Whitten is a former Chief of CSIRO's Entomology Division and is the Commonwealth Visitor for two Cooperative Research Centres - Weeds Management and Sustainable Production Forestry.