The Rt Hon Philip Hammond, Chancellor of the Exchequer

The Rt Hon Philip Hammond, Chancellor of the Exchequer. Photo: Harland Quarrington/MOD.

In the Autumn Statement this week, the Chancellor announced a new £4.7 billion investment over four years to “enhance the UK’s position as a world leader in science and innovation”. This is a welcome injection of funding for UK research and innovation in a time of uncertainty, but there were few details of how it will be spent. Here, I explain what was announced and what it means for UK research.

What are the headlines?

Government will invest an additional £4.7 billion in research and development (R&D) from 2017 to 2021, meaning an extra £2 billion per year for R&D by 2020. This is a substantial increase—around 20%—in total government R&D spending, after several years of flat science budgets.

This money is part of a £23 billion ‘National Productivity Investment Fund’. Beyond the headline figures, two broad funding streams were outlined:

  • Industrial Strategy Challenge Fund – “A new cross-disciplinary fund to support collaborations between business and the UK’s science base.” This will take a challenge-led approach, modelled on the Defense Advanced Research Projects Agency (DARPA) programme in the US; and
  • “funding to increase research capacity and business innovation, to further support the UK’s world-leading research base and to unlock its full potential.”

This new money will be delivered through the Research Councils, Innovate UK and—once the Higher Education and Research Bill has made its way through the Houses of Parliament—UK Research and Innovation (UKRI). The lion’s share is not set to flow through the system until 2019/20, so UKRI will likely play a key role, once it is established.

How will this new money relate to other budgets for science and innovation?

From previous announcements, the science resource and capital budget was set to rise to £6.3 billion by 2019/20, with £492 million of this earmarked for the Global Challenges Research Fund, which must be used to tackle problems in developing countries. On top of this, around £500 million per year was set to be available for innovation through Innovate UK.

By 2020, UKRI should be overseeing all of this funding, plus the additional £2 billion from the National Productivity Investment Fund. Between them, the Research Councils, Innovate UK and UKRI will need to work out how it will be spent. With the focus on innovation and industry in the Autumn Statement, it looks likely that the scales will tip somewhat from ‘R’ to ‘D’ in future.

Of course these are not the only sources of investment for UK research and innovation. Other government departments, businesses and charities also invest in R&D, and the UK receives roughly 1.26 billion euros each year from the EU. Whether we continue to participate in EU research programmes is one of the biggest uncertainties for the future of UK research. This, along with other key issues for UK science, will be determined through the Brexit negotiations.

An upward trajectory for investment?

At present, UK public investment in R&D is 0.48% of GDP and the Society has called for this to increase to match the average for OECD countries of 0.67%. Investing an extra £2 billion per year in R&D will put us around the 0.59% mark, a significant increase but still shy of the target.

Public investment is known to attract, or ‘crowd in’, further investment from the private sector. Before the Autumn Statement, the Society, with its sister Academies, called on the Government to aim for a target of 3% of UK GDP to be invested in R&D, across the private and public sectors. Although the Chancellor did not explicitly sign up to this, the new investment is a big step towards it.

What else did the Chancellor announce?  

The £23 billion ‘National Productivity Investment Fund’ will aim to address the UK’s productivity puzzle. This issue was a key concern for the previous Chancellor, and the new one now plans to tackle it through “high-value” investments in three areas: housing; research and development (R&D); and economic infrastructure.

In an Autumn Statement focussed on innovation and infrastructure, other relevant announcements included:

  • £390m for future transport, including low emission and autonomous vehicles;
  • A review of the R&D tax credit scheme;
  • A review of ‘patient capital’ and access to long-term finance for businesses: HM Treasury will lead this review to identify the needs of growing firms. Wellcome Trust governor and businessman Sir Damon Buffini will lead the advisory panel;
  • £400m in venture capital through the British Business Bank, for scaling up innovative businesses.

What was missing?

The Government is working on an industrial strategy and we had expected a discussion paper on the topic to be published alongside the Autumn Statement, but it did not appear. Theresa May confirmed earlier this week that a green paper on Industrial Strategy will be published by the end of year, before a white paper in 2017.

UK research in 2020

The investment announced at the Autumn Statement is an opportunity for UK science and innovation to deliver real benefits for the UK. It is now crucial to ensure that this opportunity is realised. This means making sure that the funding is invested effectively. It also means ensuring that wider government policies, for example around international mobility, align to support the research base to deliver the best possible results. Decisions around Brexit will also be key. The Society is working to achieve the best outcome for UK science.