Image: HM Treasury [CC BY-NC-ND 2.0], via Flickr
With inflation eroding spending pledges, the government has privatised its science-superpower plans, says Richard Jones
This government’s rhetoric has always emphasised the centrality of science and innovation in its plans for the nation. The emphasis has changed through three different prime ministers, but it continued in last week’s autumn statement.
For example, chancellor Jeremy Hunt devoted a whole section to ‘supporting the UK’s scientists and innovators’. This builds on the UK Science and Technology Framework published this March, which recommitted to increasing total public spending on research to £20 billion in fiscal year 2024-25.
But before going into detail on the chancellor’s science-related announcements, let’s step back and look at the economic context in which innovation strategy is being made.
The statement appeared against a backdrop of two giant economic clouds. One is inflation, the other is economic growth—or, rather, the lack of it.
Inflation, in some senses, is good for governments. It allows them to raise taxes without any embarrassing announcements, as cost of living wage rises take people into higher tax brackets. And simply failing to raise budgets in line with inflation allows public spending to be cut by default.
But if it’s good for governments, it’s bad for politicians, because people notice rising prices. And the real effects of stealth spending cuts do materialise.
Since 2021, inflation has driven UK prices up by around 20 per cent. The rate has surely peaked, but prices will continue to rise.
The effect on the science budget is already visible. Back in 2021, the comprehensive spending review announced a significant increase in the total government research budget, from £15bn to £20bn in 2024-25.
As that fiscal year approaches, though, inflation has eroded the increase in real terms, from £5bn to less than £2bn in 2021 money. The effect on the core research budget administered by UK Research and Innovation and the national academies is even more dramatic, with inflation almost wiping out the promised increase.
Slow economic growth
The UK’s other problem is persistent slow economic growth. The cause of this is the dramatic slowing of productivity growth since the financial crisis of 2008. The consequence is the prospect of two decades without any real growth in wages, and, for the government, the need to simultaneously increase taxes and squeeze public services to try to stabilise public debt.
The causes of the productivity slowdown are much debated, but at its root seems to be a lack of investment, both public and private. Relatively low levels of R&D are part of this.
The autumn statement’s most significant policy change recognises this—it is a tax break allowing companies to set the full cost of new plant and machinery against corporation tax. Government capital spending, however, is set to remain essentially flat; taking inflation into account, this amounts to a real-terms cut. This is likely to put public R&D spending under pressure.
Private hopes
The government is putting its hopes on the private sector stepping up to fill the gap, with a continuing emphasis on measures such as R&D tax credits to incentivise private investment and reforms to the pension system—including the Long-term Investment for Technology and Science initiative—to bring more private money into the research system.
The ambition for the UK to be a science superpower remains, but the government would prefer not to have to pay for it.
One significant set of announcements, on the advanced manufacturing plan, marks the latest phase of the Conservatives’ on-off relationship with industrial strategy. Commitments to support sectors such as aerospace, automobiles and pharmaceuticals, as well as the Made Smarter programme to support the take-up of innovation, are very welcome.
The sums themselves perhaps shouldn’t be taken too seriously; the current government can’t bind its successor, whatever its colour, and this money will have to be found within the overall spending envelope produced by the next comprehensive spending review. But it is welcome that the successor to the Department for Business, Energy and Industrial Strategy, Department for Business and Trade, is still interested in research and innovation, rather than assuming this is now the job of the Department for Science, Innovation and Technology.
For all the efforts to create a tax-cutting headline, the autumn statement’s economic backdrop is truly grim. There is no rosy scenario for the research community; the question is how to fulfil the promises we have been making that R&D can boost productivity and the economy.
Richard Jones is vice-president for regional innovation and civic engagement and professor of materials physics and innovation policy at the University of Manchester.
This article also appeared in Research Fortnight