Funding for research and development must be protected from cuts


3 minutes of reading

When you’re looking to save £ 50 billion, it’s good to keep all your options on the table. Over the next two weeks, the Chancellor will be pouring out spreadsheets and reviewing departmental plans in an effort to restore fiscal discipline.

Reasonable savings will emerge. The sacred vessels will be protected. But in the midst of the frenzy, a budget must remain intact: our investment in research and development.

We have spent the past few decades setting and missing targets for investment in innovation. Theresa May and Boris Johnson never met David Cameron’s initial commitment to invest 2.4 percent of GDP, which in turn was downgraded from Gordon Brown’s 2.5 percent target. And that unattainable target was only equivalent to the previous OECD average, which has now risen to 2.7%. We haven’t even gotten to the center of the group.

The UK has been a decidedly mediocre R&D for too long Clarke Kent

But a few months ago, a statistical oddity made the picture brighter. The Office for National Statistics (ONS) revealed that they systematically underestimated corporate research and development and retroactively raised their estimates by more than 60%. The increased figures from the ONS suggest that we have indeed met our target of 2.4% in 2019 – representing a staggering £ 15bn hidden economic value.

Many are doubtful about the reality of this sudden methodological improvement. But even if the numbers are correct and we have been more innovative than we thought, we cannot rest on our laurels. We are still investing in research and development only the same amount that an average OECD nation invested in 2018. The 2.4 percent target always lacked ambition: whether we want to be a scientific superpower, or simply reach our peers , we need a more ambitious goal. Advanced nations like Germany and the United States spend over 3% of GDP, while tech pioneers South Korea and Israel spend over 4% and 5% respectively.

The Chancellor, eager to close the fiscal black hole, may still see reaching the 2.4% target as a political victory, a rare commodity in these troubled times. If he does, the 2020 budget commitment to increase government R&D investment to £ 22 billion by 2026-27 could be on the table and for the cut. This could be a mistake.

The new data suggests that policies to support innovation are working. Government regimes such as the Small Business Research Initiative (SBRI), which promote procurement-led research, and public support through R&D tax credits are increasing private spending, a key driver of productivity. This is very necessary. The latest figures show that UK labor productivity has fallen by 1.8% while growing among many of our global competitors. If the Chancellor pulls the plug now, we will threaten the benefits of our modest progress so far.

Brown, Cameron, May and Johnson realized that investing in innovation was vital to the future of our economy. But like most investments, they take time to mature, with some academics suggesting a ten-year lag from R&D spending to productivity rebound.

So when you assess the £ 22 billion target for public R&D investment by 2024, the Treasury must not be a penny rich but a pound poor. The UK has been a decidedly mediocre R&D for too long Clarke Kent. We need to aim higher to become a science superman.

Matt Burnett, Onward’s head of science and technology.

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