The UK’s science minister, Lord Drayson, has announced a big shake-up at the Science and Technology Facilities Council, the agency responsible for funding much of the country’s physics and space science.

The agency was formed in 2007 by merging the Particle Physics and Astronomy Research Council (PPARC) with the Council for the Central Laboratory of the Research Councils (CCLRC).

But it was always an unhappy marriage. The STFC has to juggle Britain’s international subscriptions to big projects like CERN, Europe’s particle physics centre in Geneva, with national facilities such as the Diamond synchrotron, whose beams are used by a wide range of scientists to probe the structure of materials. It also manages the grants that fund high-energy physics and astronomy.

But shortly after the STFC was created, it was already dealing with big budget shortfalls by pulling out of international projects. First to fall was British contribution to the International Linear Collider project. Then they pulled out of the Gemini Observatory, before ditching a project to hunt for gravitational waves.

Despite efforts to appease British physicists, it was clear that this was a deeply troubled agency.

As our very own Geoff Brumfiel explained in November 2009:

The origins of the shortfall are complex. In 2007, the STFC proposed deep cuts to deal with its financial problems. The UK government responded by allowing the council to borrow money from future years and by providing some support to compensate for currency fluctuations.

Since then, the weakened pound has made it increasingly difficult for the STFC to pay its overseas subscription fees to international facilities. In addition, repayment of the money borrowed from future years is now due. A 2008 prioritization cut grant renewing by a quarter, but that was not enough to make up the shortfall.

So how is Drayson going to fix the mess?

First, from April 2011 the national facilities such as Diamond will have funding allocated and managed separately from the rest of the agency’s grant-giving budget. That funding will be planned on a six-year timescale, and should therefore be less likely to suffer from annual budget fluctuations. In other words, it should stop Peter being robbed to pay Paul.

Second, the government will enlist the help of the Bank of England to help reduce the risks posed by currency fluctuations. The details are yet to be worked out, but in broad terms, the bank would agree to cover any extra costs incurred by currency fluctuations over the course of the spending period, according to spokesperson from the government’s department for Business, Innovation and Skills.

Finally, as the statement says:

It is anticipated that the UK’s subscription to the European Space Agency will in future be managed by a UK Space Agency. This would bring together in one body those representing the UK at ESA and those footing the bill for it.

Details of the proposed space agency – something of a hobby-horse for Drayson – are expected later this month.

The Royal Astronomical Society (RAS) and the Institute of Physics (IOP) seemed pleased with the changes. In a joint statement, they said:

Today’s announcement demonstrates that the problem has now been recognised and we look forward to seeing how it will be addressed. IOP and RAS trust that the Treasury will recognise the importance of science by taking responsibility for currency fluctuations.

The longer-term commitment to planning for our superb national facilities is really welcomed. Only through sustained investment and planning can researchers using national facilities like the Diamond Light Source, the Central Laser Facility and ISIS maximise the return on the investment which the UK has already made.

Update: We’re told the Bank of England will not “cover the cost” as we originally wrote. It will “improve management of the exchange rate risk to provide greater certainty for each spending review period,” according to a spokesperson from the government’s department for Business, Innovation and Skills.