So long, Rishi Sunak

Farewell, then Rishi Sunak two years and five months after your appointment. A Chancellor who struggled to reconcile his instincts for fiscal restraint against the need to loosen spending to recover from COVID and grow the UK economy. A conservative by nature in every sense of the word but someone who embraced spending on research.

Now, he has not been in post long enough to see many of these proposed investments in research come to fruition but his intention was big enough, and dare we even say bold enough, in the face of his fiscally reluctant colleagues, to make a significant difference to the strength of the R&D ecosystem. It would be churlish to deny that research spending is a central part of current conservative economic thinking, and this is in part down to the former Chancellor.

It is not new for governments to promote R&D policy as the salve to slowing economic growth. It has been the policy of every Government from Wilson’s white heat of technology, to Brown’s 2004 challenge to make Britain the most attractive place for investment, to the current Government’s promise for 2.4% GDP to be spent on research.  None of these policies have (yet) moved the dial significantly on the overall level of public and private investment to match the UK’s strong underlying research base. Policies have either been too small or too short-term.

Will it stay or will it go?

There are some initiatives which have been personally championed by the Chancellor that we might expect to be carried on by his successor, Nadhim Zahawi. Freeports are now quite far along in their development in several parts of the country. Inverted tariffs on goods have almost no chance of growing the economy but there are opportunities for investment in labs, innovation campuses, and other R&D facilities through utilising the infrastructure tax-breaks. A programme to simplify and improve R&D tax credits will also likely survive. Making them more simple, wide ranging, and business friendly, is likely to have cache with the new Chancellor.

In the not so sure pile sits projects like ARIA. The Advanced Research and Invention Agency was granted royal ascent in February 2022 and so far has no funding, executive, or defined purpose beyond experimental research outside of the grasp of FOIs. It does have a budget of £800m over the next four years but it does not yet have anything to spend the funding on; or anyone to spend it. It is also likely that the various reviews into bureaucracy, UKRI, metrics, and the innovation landscape will continue into the summer. However, the fiscal framework they will now be operating under is less certain.

In the in-danger pile is the long-term investment in R&D promises. Firstly, it is widely believed that one of the reasons Sunak has left is not only a moral disagreement but owing to increasing pressure over fiscal policy. There are still significant parts of the parliamentary Conservative party wedded to low tax and a small state. Sunak has delivered some of the most significant tax increases in history and in policies like council tax rebates intervened where other conservatives would not have. If the market is left to decide R&D policies there will be no rebalancing, levelling up, or further devolution, in the innovation space.

Back to the future

If the Government returns to austerity politics it might be that the public spending for R&D is one of the victims to cuts. All of the available evidence suggests that public investment crowds in private fundings so this would both be bad economics and bad research policy. However, the Government has already pushed back its target of reaching 2.4% GDP spend on R&D from the end of the Parliament to 2027. It is the case that the nearly £40bn committed to R&D in the last budget is the single largest research commitment made by any government. This included £6.8bn for Horizon association, £25bn for UKRI over the next three years, and additional investment to Innovate UK. At the time this investment was framed as not only good for UK science but a central plank of the Government’s levelling up agenda.

If there is to be a return of a smaller state conservativism it’s fair to assume that at least some of this committed spend will be up for grabs. The negotiations on Horizon are on a knife edge with plenty of thrashing out still to be done on a domestic alternative. The innovation accelerators in Glasgow, Manchester, and the Midlands, are only in early stages and will need future funding to grow. And the whole levelling up R&D agenda is predicated on fiscal transfers to areas with latent R&D assets which could one day grow to attract employers and investment. All these policies will not benefit from the current uncertainty or a radical change of direction.  It is a cause of optimism that in a speech to the CBI then Minister for Business and Industry Zahawi identified R&D spending as a key part of the post Covid economy.

Legacy

Rishi Sunak will enjoy a mixed legacy as Chancellor. Post Covid, his star fell quickly from becoming the heir apparent to Prime Minister to the man who did not resign early enough. When it comes to R&D it may be a while before the sector has another Chancellor willing to invest such significant funding into innovation policies. The squeezing of teaching resource, recurrent and capital funds, if coupled with a freezing or reduction in research funding and opportunity, would add to a difficult financial environment to a sector which will be a primary driver of Britain’s economic future.

Call it Levelling Up, Global Britain, Making Britain a Science Superpower, and wrap them in all the roadmaps, moonshots, and strategies you want. Ultimately, successful R&D policy requires investment in places, patience in discovery, and clarity of purpose, from government.