The new Government has recently set out its legislative agenda and priorities for the coming years. One of their commitments is to establish 10-year funding cycles for ‘key R&D activities’, a policy the R&D sector has long called for. CaSE, alongside partners in the sector, has begun thinking about some of the principles that these should adhere to. However, it has not yet been decided how these long-term funding cycles will work in practice.
The discussion considered how long-term funding for R&D could work in practice given the UK’s existing framework for approving Government spending and any underlying policy that is needed.
The roundtable was attended by senior subject specialists across the R&D and innovation sector, including funders, universities, businesses, research institutes, and senior civil servants from Treasury and DSIT. This unattributed summary does not represent policy positions of CaSE but will form part of CaSE’s ongoing programme of work to inform the Government’s priorities as part of the Spending Review.
The existing Government framework
The framework to implement long term R&D budgets already exists in part
Annularity of budgets (i.e. that authorised spending must take place during the related year and cannot be carried forward to the next financial year) is a central feature of the Government’s system of accounting. However, in practice Government departments have some flexibility to adjust and move budgets between years. Guidance on how this flexibility can be used will be vital to ensuring the success of longer-term budgets.
Long-term budgeting is already done in Government to some extent, for example, Catapults have 5 year budgets, ARIA was given a 5 year settlement, and Horizon Europe runs over 7 years, with Government committing to association on those timeframes rather than spending review periods. Many research programmes are also committed into future spending review periods, for example PhDs that run for 3 or more years are still started in the last year of a spending review period.
A shift to longer term funding will require changing attitudes to risk
However, the extent to which budgets are pre-committed depends on accounting officer [1] risk appetite. Providing longer term certainty could require a shift, to a culture of greater risk appetite by accounting officers. As a result of their duties to Parliament, accounting officers may be reluctant to pre-commit a high proportion of their budgets to make sure they keep sufficient budget non-committed to service new priorities and afford new financial pressures. It is therefore important to consider what reassurance accounting officers at different levels (departmental; funding body; research institution) need and can provide.
[1] Accounting officers are central to how government spending is controlled. Always the most senior official in a department – the permanent secretary – accounting officers are personally accountable to Parliament for the use of public money. They must sign the department’s accounts, but accounting officers have more extensive responsibilities beyond the department’s financial health. They are accountable to Parliament for how every penny of public money is spent. – from IfG report: Following the pound – accounting officers in central government (instituteforgovernment.org.uk)
Considerations for long term R&D funding
For long-term R&D funding to deliver the best outcomes, there are a set of considerations that need to be looked at in terms of their design and implementation. These include the parameters for long term funding, the criteria for who gets long term funding, as well as mapping and learning lessons from existing examples.
Parameters for implementing long term funding
Consider the remit and level at which investment is set:
There is an outstanding question about whether the level of investment concerns the R&D or UKRI budget as a whole or whether it should focus on specific levels, such as people, projects or organisations.
Strike the right balance between stability versus flexibility:
While too much policy dynamism has had a harmful effect on institutions’ ability to function well and provide good value for money, there needs to be enough flexibility within budgets and programmes to be able to change focus and direction in response to developments in the R&D and innovation landscape. As an example, 10 years ago the Government would not be funding AI as a priority compared to now. In addition, political and ministerial priorities have an influence on setting the direction for R&D spending, and so the budget has to be directable to new political priorities.
Introduce an exit point and strategy:
A longer term R&D programme requires a clear exit point and strategy. There should be a requirement to stop things that are not working or not generating benefits.
Be mindful of reducing bureaucracy:
It is important to avoid adding significant additional requirements as part of longer term budgets. This could be by considering existing routes or mechanisms to draw on.
Criteria for who receives long term funding
Consider the added value and benefit:
When deciding where to direct long term R&D funding, consideration should be given to the additional value and demonstrable benefit from a long-term funding settlement, as well as which areas or sectors stand to benefit the most. For example, this could be considering conditionality of return and the ability to leverage private R&D investment.
Consider the realistic timeframe on returns:
The length of the R&D cycle is different in different sectors. For example, the digital sector is typically more rapid and agile in contrast to the aerospace, nuclear or pharmaceutical sectors that have longer term R&D cycles. The example was given of the Aerospace Technology Institute (ATI), which needed to align and invest alongside private aerospace companies that invest in 10-15 year programmes. There was the recognition that this may not be possible or appropriate for all sectors.
Ensure transparency and clear communication around parameters:
There needs to be a rational and transparent process when deciding which establishments / institutions / activities warrant long term investment over others. There will need to be greater transparency and accountability around departmental R&D budgets and how they are spent. This includes appropriate monitoring and scrutiny around what counts as R&D. Communication will be crucial so as not to be seen as ‘deprioritising’ sectors that do not get long term investment plans, and risk segmenting the R&D sector further. It will be important to consider what other measures such sectors would be best suited to benefit from or whether long term budgets will need to be allocated differently.
Geographical distribution of long-term R&D funding:
There are trade-offs in the distribution of funding that will need to be considered. For example, between distributing funding across the UK to ensure more areas benefit, versus targeting areas that are already best placed to benefit from such funding (for example, that already feature significant investment from industry).
The existing landscape of R&D institutions and programmes
Learn from existing examples:
Good examples of longer term timelines exist in the R&D and innovation landscape. These can provide lessons on what has worked well or less well. Examples that were given include: the Aerospace Technology Institute and the non-hypothecated side of the dual support system in Higher Education. Evidence suggests that it has broadly worked well for the ATI, but one challenge has been a lack of flexibility in moving things around within years.
Map the existing landscape of R&D institutions in the UK:
It is currently difficult to map institutions including around the definition of what counts as an R&D institution. There is a need to take stock of what the UK has before we can define who gets what and how much.