Productivity, R&D investment and apprenticeships

CaSE takes a look at the House of Commons BIS Committee’s report on the Government’s Productivity Plan.

February begins with the publication of the Commons BIS select committee’s report on the Government’s Productivity plan.

For the full benefits of UK science and engineering to be realised, policies across all departments must be coordinated to support the overarching mission of nurturing and growing the UK’s science and engineering capabilities. Nowhere is this more obvious than in solving the Productivity Puzzle.

CaSE’s submission to the Committee’s inquiry before Christmas made two major points:

• The Plan provides only headline policies without the detail that will be essential to its success. Synergy between Government departments and their policies will also be essential.
• Science and engineering are integral to productivity. The Plan could do more to tackle the Productivity Puzzle by supporting science and engineering through the following means:
  • Providing confidence to researchers, businesses and investors by setting a clear, ambitious, long-term R&D investment strategy that exceeds predicted growth.
  • Investing in education to tackle the STEM skills shortage.
  • Aligning immigration and VAT policies to complement other areas of Government policy to support science and engineering.

The BIS Committee’s report picks up on a number of these points, upfront echoing our overarching point that the Government must articulate the detail of how they propose to meet the objectives laid out in the Productivity Plan and set clear milestones for implementation and success.

R&D investment

In particular, the BIS committee is now the second Committee to recommend that the Government produces a long-term roadmap to increase UK investment in R&D to 3% of GDP. The report states:

“We have heard strong evidence throughout our inquiry into the Productivity Plan that public spending on R&D draws in private spending on R&D. This is a model operated around the world by the UK’s major competitors.

We fully agree with the Science and Technology Committee’s recommendations on maintaining good R&D investment in the UK and echo that, if the Government is serious about productivity and competitiveness, it needs to commit to a total level of public and private R&D investment in the United Kingdom of three per cent of Gross Domestic Product.

We therefore recommend that the Government produces a ‘roadmap’ for increasing the total level of public and private R&D investment in the United Kingdom to three per cent of Gross Domestic Product”.

The budget for the majority of government spending on R&D up to the end of the decade has only just been announced, so although we will continue to make the case throughout this parliament that further investment should be made, it is unlikely that we’ll see a seismic shift in funding levels through the science budget in the next couple of years. However, the budgets for R&D investment outside of BIS are yet to be confirmed.

With 40% of public R&D investment sits outside BIS, we certainly want to see departments across government recognising the value of their investment in R&D as they make budget decisions in the coming weeks. As the Science Minister said in the Q&A time at our Annual Lecture last week, any cuts to departmental R&D budgets should be discussed with the Chief Scientific Adviser and with Treasury. This doesn’t seem to have been the case in recent years, so we hope the Minister, and indeed Treasury will be keeping a close eye on budget decisions.

Short term budget decisions aside, both the BIS Committee and the Science and Technology Committee recommend that the Government produces a ‘roadmap’ for increasing the total level of R&D investment. This is about more than short-term funding decisions but about setting out a long-term plan. This Government continually reminds us of another long-term plan, and along with the Committees, we’d love to hear them set out their long-term R&D plan.

Apprenticeships

The report also makes recommendations about the Government’s 3m apprenticeship target. On quantity they recommend the government set out the rationale – and evidence base – for the 3m target. On level, the report states:

“Within the three million new apprenticeships there are no numerical targets for apprenticeships at particular levels but only on the total quantity. Much of the evidence that we received suggested that there remained a skills gap in the UK, which advanced and higher (level 3 and 4) apprenticeships could contribute to fill.

We recommend that the Government works with businesses and individual sectors to make a preliminary assessment of how the three million apprenticeships will be broken down by level and publishes the result of this work.

While we accept that the Secretary of State did not want to be too prescriptive, the lack of this analysis reinforces the view that Ministers have not given enough thought to how different types of apprenticeships can best fill the skills gaps that exist.”

The majority of STEM apprenticeships fall within engineering and yesterday also saw the publication of Engineering UK’s annual ‘State of Engineering 2016′ report which, amongst other things, notes the challenge of addressing an annual shortfall of around 27,000 engineers trained to advanced apprenticeship level.

Both reports, therefore, make recommendations that seek to ensure the Government’s 3m apprenticeship target results in sufficient higher level apprenticeships, particularly in STEM. The BIS committee report says “We recommend that the Government works with businesses and individual sectors to make a preliminary assessment of how the three million apprenticeships will be broken down by level and publishes the result of this work. While we accept that the Secretary of State did not want to be too prescriptive, the lack of this analysis reinforces the view that ministers have not given enough thought to how different types of apprenticeships can best fill the skills gaps that exist.”

The Engineering UK report calls for “A two-fold increase in the number of Advanced Apprenticeship achievements in engineering and manufacturing technology, construction planning and the built environment, and information and communications technologies – with particular emphasis on 18- to 24-year-olds.”

Both reports also link increasing the number of higher level apprenticeships through to raising productivity, with Engineering UK stating:

“…the aggregate productive contribution to the UK economy from the 49,500 engineering, manufacturing and technology (EMT) apprentices that completed in 2013/14 amounted to £1.6 billion in 2014 prices. In actuality, the 10 year productive contribution of the 371,000 level 3 and 4 EMT apprentices that completed during 2005 and 2014 amounted to £12 billion (2014 prices), equivalent to 8% of UK GVA growth during the period 2005 and 2014.”

There are many other areas to note, not least the BIS committee joining the ranks of committees that have called on the Government to relax the post-study work visa route. But, along with the Committee, we look forward to hearing some more details on implementation and milestones to raise productivity from the Government in their response.

Read CaSE’s submission to the BIS Committee’s inquiry here.