Image caption The news has received a cautious welcome, but observers say the cuts will still impact the economy

The Chancellor George Osborne has announced that the UK's science budget will be frozen in cash terms - a cut of less than 10% over four years.

The news has been welcomed by those speaking for the research community who had feared deeper cuts.

Mr Osborne said that the effective cut could be managed through efficiency savings.

But there is still concern that the cuts will damage the country's economic competitiveness.

Mr Osborne outlined the settlement in his Spending Review on Wednesday.

"The Secretary of State (for business) and I have decided to protect the science budget. Britain is a world leader in scientific research and that is vital to our future economic success," said Mr Osborne.

"That is why I am proposing that we do not cut the cash going to the science budget. It will be protected at £4.6bn per year."

The news has generally been welcomed by the research community, who had feared deeper cuts.

But there is concern over the community's budget for new buildings, equipment and involvement in international programmes, which was not announced today.

This so-called "capital budget" accounts for 20% of the research budget and may be cut in cash terms.

And some fear that that even these limited cuts will damage the country's economic competitiveness.

Areas of concern

Lord Rees, President of the UK's Royal Society, welcomed the settlement but added: "There remain areas of concern, especially with regard to capital spending, and the funding of universities."

Imran Khan, director of the Campaign for Science and Engineering (Case), said the cuts would still hurt the UK's competitiveness.

SPENDING REVIEW - SCIENCE AND THE ENVIRONMENT UK science budget frozen in cash terms - cut of less than 10% over four years

From this budget of £4.6bn, efficiency savings of £324m will be found

The energy and climate change department (Decc) will receive a cut of 5% per year

Department of the Environment, Food and Rural Affairs to make savings of an average 8% per year

Up to £1bn to be set aside for a green investment bank

Up to £1bn to be invested in carbon capture and storage technology

Up to £200m set aside for offshore wind technology and manufacturing at port sites

"A 10% cut is a significant real-terms cut for UK science when nations like the US and Germany are having real-terms increases," he said.

"The comparison (of how good the science settlement is) should not be with what is happening across Whitehall - but how UK science is going to fare internationally because we are in a really competitive global market."

An initial assessment by Case reveals that there will be limited scope for any capital expenditure by research funding organisations.

It also suggests there are going to be significant decreases in new research staff entering science and engineering. Mr Khan speculated that PhD places could fall by up to a tenth next year.

The government's chief scientific adviser, Professor Sir John Beddington, said that he was "delighted by the government's decision to protect the science and research budget.

Driving growth

"This is a genuine signal that the government recognises that science and research are vital in driving growth and securing a strong economic recovery."

There had been indications of much deeper cuts to the science budget. But the Business Secretary Vince Cable, the science minister David Willetts, the director-general of science and research, Professor Adrian Smith, along with Professor Beddington argued strongly within government that a stable science base was key to the UK's economic future.

The next step will be to distribute the new budget among the UK's seven research councils.

This will be determined over the next few weeks in a series of meetings between each research council head and Professor Smith.

Professor Smith will follow a strategic guide issued by the Treasury which sets out in broad terms the government's priority areas for research spending.

These are likely to include wealth creation and the delivery of a low carbon economy. The Treasury has already said in its spending review that the Medical Research Council's (MRC) funding will be maintained in real terms.

One research council that is particularly vulnerable, however, is the Science and Technology Facilities Council (STFC), which has the largest proportion of capital expenditure of all of them.

Until the level of capital spending is agreed many of its international programmes - such as its participation in the Large Hadron Collider (LHC) project or the European Southern Observatory (Eso) remain uncertain.

Funding for the Department for Energy and Climate Change (Decc) will fall by an average 5% a year.

But the Chancellor has set aside up to £1bn in carbon, capture and storage, up to £1bn in a green investment bank and some 200m for offshore wind projects.

He said that the Department of the Environment, Food and Rural Affairs (Defra) would deliver resource savings of an average 8% a year.

But he added: "We will fund a major improvement in our flood defences and coastal erosion management that will provide better protection for 145,000 homes."