For research and development there is a lot to celebrate in the spending review

There is more good news than bad for research and development spending in the Budget but as ever it will come down to the detail, says James Coe

James Coe is Senior Policy Advisor at the University of Liverpool and a Contributing Editor at Wonkhe

It was only as recently as 2019 that public sector funding for R&D amounted to £10.5bn.

If the higher education sector had been told then that government would commit to raising public R&D spending to £20bn by 2024-25 it would have been greeted by a mix of elation and possibly with some doubt.  The confirmation of such a large uplift is only tinged by disappointment that it falls short of the initial £22bn ambition.

This is of course not trivial difference.  The Campaign for Science and Engineering estimates that this delay will mean the UK will lose out on £11bn of private R&D investment.  This is also predicated on existing growth models whereas in reality private R&D investment tends to fall during recessions.  This is particular crucial in achieving the long-term goal of 3 per cent of GDP spend on R&D (not mentioned in the spending review) as business funds well over half of all R&D carried out in the UK.

However, it should be celebrated that within the spending review there is an explicit acknowledgement that public spending crowds in private investment.  Long-term R&D growth requires certainty on investment and the spending review delivers both multi-year financial increases, rather than back loading it, and budgets for Horizon association.  The additional £1bn for UKRI and national academies by 2024-25 is also welcome.

Laying the foundations

It is fair to say that there was scepticism on whether the R&D agenda would last beyond Dominic Cummings’ tenure but among the funding increases there are some perfectly sensible measures which most of the higher education sector will find agreeable.  There is an expansion for R&D tax credits which demonstrably stimulate additional R&D expenditure.  There are more overtures to attracting “highly skilled people” through a Global Business Mobility; presumably this will link up with the announced but not yet widely seen Office for Talent.

Given the history of false dawns of growing research funding there is little time to waste in grabbing the opportunity ahead of the higher education sector.  As the R&D Roadmap made clear this funding will likely be channelled toward decentralising funds more efficiently (while facing internationally), building better cultures in research, and positioning universities as pivots from which business and the public can engage in research and development activities. All of this while improving conditions for workers in R&D, growing a more intensive R&D business base, cutting bureaucracy and more long-term funding to “expand horizons” of what is possible.

Universities may not be the biggest contributors to R&D spend but only their work can make the whole ecosystem viable.  Harnessing the uplift depends on a range of complementary strategies. The first is whether the furtive levelling up strategy is properly attuned to place based R&D. It is unlikely that we will see a devolution of R&D spending to local or combined authorities but it would be a mistake if there were not more place-based incentives.

The government ruled out specific R&D tax credits around the Freeport but if this is the government’s flagship devolution measure then it would be a missed opportunity to not encourage R&D growth. Equally, government has much to do to incentivise partnerships between business and universities so there is enough absorptive capacity to capture the R&D funding increase.

End goals

The wider challenge is what policy objective this uplift will achieve.  Depending where you read the R&D uplift is about; regional rebalancing, making Britain a global superpower, moon shots, or building a greener safer future. All of these things are possible but there are implicit trades offs within them. For example, regional rebalancing may mean investment where there is the most latent capacity for growth not always where there is the strongest constellation of R&D assets. Equally, as we have seen in the Covid response, achieving the ambitions of net zero might require concentrated long-term investment into fewer areas.

The higher education sector has winds blowing in its favour but only if we can unfurl our sails to catch them will the uplift in spending propel a more R&D intensive economy. Partially, this is about finding the advocates in the business community for the work of universities as central to economic growth and levelling up. And partially it is about the hard grind of continually demonstrating how university research leverages social benefits which make a difference to local and global communities.

 

 

 

 

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