Nick Hillman, HEPI’s Director, tries to make sense of the Government’s new plans on R&D spending up to 2029/30.
Perhaps the Speaker of the House of Commons will be unhappy the Government have pre-briefed the media on what this week’s Spending Review will mean for research spending. But what should the higher education and wider research community make of it?
- As the BBC story on the £86 billion reminds us, ‘Earlier this week, Reeves admitted that not every government department would “get everything they want” in Wednesday’s review’. We are meant to think the £86 billion is one of the rare exceptions, a surfeit of generosity (albeit with taxpayers’ money) – that is why it is being pre-briefed as a good news story a few days before the Spending Review itself. Ministers have even managed to squeeze positive endorsements from those tipped off in advance, such as the Russell Group. But let’s be honest, the Department for Science, Innovation and Technology (DSIT), which will oversee this £86 billion, is not getting what it wants. The £86 billion is thought to be a real-terms freeze; it is implausible to think DSIT Ministers have been lobbying the Treasury to stand still. If they had been, they would not have been doing their jobs. Some will wonder whether this explains why friends of the Secretary of State for Science, Innovation and Technology have been speaking up his chances of being moved to a bigger spending Department in due course.
- We have been here before. The proudest boast in the Government’s news release, apart from the total multi-year settlement of £86 billion, is of ‘a bumper funding package worth more than £22.5 billion a year in 2029/2030’. But hang on a moment; if Whitehall had more institutional memory, they might have worded this differently because it is five years since the Treasury, under a previous administration and despite being in the midst of COVID, boasted there would be public spending of £22 billion on R&D by 2024/25, just £500 million a year less and five years earlier than the new number for 2029/30. While the modesty of the new announcement might be partly excused by the sluggish economic growth seen since, it may also explain why the announcement seems not to have had the pickup in the Sunday newspapers that the Government would have been hoping for.
- A real-terms freeze is a cut in terms of the percentage of GDP spent on R&D, which is the usual way R&D spending is measured in the UK and internationally. In the past, policymakers have obsessed over whether the UK can reach 2.4% or even 3% of GDP on (public and private) R&D spending, putting such targets in many election manifestos. But by a stroke of the pen three years ago, the Office for National Statistics suggested the UK spends much more than we thought on R&D, meaning we had already hit the 2.4% target, overtaken the OECD average and even got close to the 3.0% ambition. So policymakers could claim they had already hit a target that had looked extremely stretching and shift their attention elsewhere. (The ONS’s change put red faces on those who had been lobbying for such targets, however: if the target you have been lobbying for has already been hit [even if it does not feel like it on the ground], what should your next move be? This is something no one quite seems to have worked out.) The new announcement is problematic in GDP terms because, if you assume any economic growth at all, then a real-terms freeze in research spending means a reduction in R&D spending as a proportion of GDP. The latest international data suggest the UK’s gross R&D spending has been just above the OECD average (2.8% of GDP versus 2.7%). If the OECD average remains the same or (as has been happening) goes up somewhat, today’s announcement means the UK is likely to spend less on R&D as a proportion of GDP and once more fall behind our main competitors. (This is not absolutely guaranteed because today’s announcement is on public spending and most R&D spending is private spending. However, public spending on R&D is generally [though not universally] thought to ‘crowd in’ rather than ‘crowd out’ public funding.)
- It is easy for me to be a little cynical about all this because I was there when the same conversations happened between the Business, Innovation and Skills Department and the Treasury at the time of the 2010 Spending Review, which had a similar importance to this week’s forthcoming Spending Review. However, that experience also taught me that a flat settlement in a constrained environment can indeed be a win. The settlement in 2010 was flat-cash not flat real – in other words, it ignored future inflation, so was less generous even than the one being announced today. At one point during the 2010 negotiations, however, it had looked as if there would be actual cuts to the cash spent on research and development each year; expectations in the research community were running so low that, when flat cash was instead announced, it led to my boss, the Minister for Universities, being presented with a bouquet of white roses by the founder of Research Fortnight.
- Today’s announcement is about the money but the Government’s spin doctors have also tried to focus on the uses to which the money is put. Voters are likely to find it hard to imagine what £86 billion spread over a number of years means in practice. However, as the Mirror reports, it could mean ‘In Liverpool, which has a long history in biotech, funding will be used to speed up drug discovery and in South Wales, which has Britain’s largest semiconductor cluster, on designing the microchips used to power mobile phones and electric cars.’ Those feels like things everyone can get behind, even if the focus on local spending may or may not mean a weakening of excellence as the key criterion on which to distribute research funding from central government. This focus on projects should also serve as a reminder to the research community that, whatever Ministers say now, there is likely to be more money available if they lobby smart in the months to come. After what was perceived as a good settlement for science in 2010, we still managed to secure additional funding at pretty much every subsequent spending review. There were lots of reasons for this to do with how effectively the Department lobbied (it helped having both a Lib Dem and a Tory Minister from the Department sit around the Cabinet table), George Osborne’s predilection for science (albeit generally for big new projects rather fully funding existing ones) and politicians’ ceaseless desire to have an exciting new building or two to don a hard hat for. Perhaps most importantly, the research community were ready with ideas of what additional projects should be funded whenever we went to them with the question; if we give policymakers the tools to lobby the Treasury in the years ahead, researchers could get more.
- Finally, I am left wondering what this five-year settlement means for the commitment in Labour’s 2024 election manifesto to ‘scrap short funding cycles for key R&D institutions in favour of ten-year budgets that allow meaningful partnerships with industry to keep the UK at the forefront of global innovation.’ It was always likely that this wording was a political trick to put the focus on the length of time rather than the quantum of money. But Spending Reviews are always about money and always have a fixed shorter timetable, so how this week’s announcement chimes with longer-term planning is an issue that won’t go away even if it primarily is for another week.
