CaSE responds to 2018 Budget

CaSE has today responded to the 2018 Autumn Budget.

Commenting on the Budget, CaSE Executive Director Dr Sarah Main said:

“The Chancellor, like his predecessor, ‘believes passionately’ in investing in research and innovation to drive productivity. This budget hints at a welcome approach of deploying Government to stimulate and make best use of research and innovation itself, for example in a new £50m per year fund to ‘stimulate use of cutting-edge science and innovation in government’. Such innovation will drive the ‘better front-line services’ in the NHS promised by the Chancellor, and can be extended across Government departments. Using the Government’s commitment to increase spending on R&D across the economy to drive productivity and to produce better outcomes for people from public and private sector R&D will surely be a big win.”

CaSE has welcomed the Government’s target to increase investment in R&D across the economy to 2.4% of GDP by 2027 and 3% in the long term. Achieving this target will require coordinated effort and investment by the whole of Government. CaSE analysis indicates that Government will need to increase public investment in R&D by an additional £9bn a year by 2027 to reach the target.

Elsewhere, CaSE has taken a closer look at how science and engineering fared in the Budget.

Notes

You can read our one page briefing setting out the scale of public and private funding needed to reach the Government’s target of 2.4% of GDP on R&D by 2027 and 3% in the long-term. The Government have pledged £2bn more R&D funding in 2020/21 and £2.3bn more in 2021/22. CaSE modelling indicates that the Government needs to invest an additional £500m in 2020/21 and an extra £1.7bn in 2021/22 in order to be on track to meet the 2.4% target by 2027. This will take public R&D spending to £11.2bn in 2020/21 and £12.7bn in 2021/22. In that scenario, public R&D expenditure will reach 0.55% of GDP, from a level of 0.44% in 2016/17.

You can also read our submission to the 2018 Autumn Budget.

CaSE has provided a full breakdown of how science and engineering fared in the 2018 Autumn Budget below:

Research and Innovation

Science and innovation at the heart of government – The Budget announces a new £50 million per year fund designed to address the most pressing challenges in areas such as public health and cyber security. The fund will focus on joint programmes between government and industry, and will begin in 2021-22.

Announcements on the Industrial Strategy Challenge Fund:

• Up to £121 million for Made Smarter to support the transformation of manufacturing through digitally-enabled technologies, such as the Internet of Things and virtual reality.
• Up to £78 million for the Stephenson Challenge, supporting innovation in electric motor technology
• As part of the Industrial Strategy, the government will also establish an Industrial Energy Transformation Fund, backed by up to £315 million of investment, to support businesses with high energy use to transition to a low carbon future and to cut their bills through increased energy efficiency.

Quantum technologies – £235 million to support the development and commercialisation of quantum technologies, including up to £70 million from the Industrial Strategy Challenge Fund, and £35 million to support a new national quantum computing centre. This investment is in addition to the government’s recent £80 million extension of the Quantum Technology Hubs

Nuclear fusion – Additional £20 million in 2019-20 for the UK Atomic Energy Agency on the development and commercialisation of fusion technologies.

Artificial Intelligence and data-driven innovation – The government already announced an AI sector deal of £950 million has already taken action to ensure the UK is at the forefront of emerging digital technologies. The Budget sets out the following next steps:

• the Office for AI and Government Digital Service (GDS) will review how government can use AI, automation and data in new ways to drive public sector productivity and wider economic benefits. This will feed into the innovation strategy being led by the Cabinet Office
• the Data Science Campus at the ONS and the GDS will conduct an audit of data science capability across the public sector
• the UK’s new Centre for Data Ethics and Innovation has been commissioned to study the use of data in shaping people’s online experiences, and the potential for bias in decisions made using algorithms

Global AI and future talent fellowships – The government will invest up to £50 million in new Turing AI Fellowships to bring the best global researchers in AI to the UK, and £100 million in an international fellowship scheme.

Transforming Cities Fund: Future Mobility Zones – To support the Industrial Strategy Future of Mobility Grand Challenge, £90 million from the NPIF will be allocated to the Transforming Cities Fund to create Future Mobility Zones. This will trial new transport modes, services, and digital payments and ticketing. £20 million of this will be allocated to the West Midlands.

The government will invest an additional £120 million through the Strength in Places Fund to support clusters of science and innovation across the UK. This funding extends the existing programme until 2021-22.

Catapults – The government is confirming £115 million to extend funding for the Digital Catapult, which has centres in the North East, South East and Northern Ireland, and the Medicines Discovery Catapult in Cheshire.

The West Midlands Combined Authority will receive up to £20 million, subject to approval of a satisfactory business case, to create the UK Mobility Data Institute, a research centre to collect, process and analyse transport data generated by new mobility technologies

R&D Tax Credits

Preventing abuse of R&D tax relief for small and medium-sized enterprises (SMEs) – To help prevent abuse of the payable credit, from 1 April 2020, the amount of payable R&D tax credit that a qualifying loss-making company can receive in any tax year will be restricted to three times the company’s total PAYE and NICs liability for that year. This will ensure the relief is robust against identified abuse, including fraud, following the prevention by HMRC of fraudulent claims worth £300 million.

Patient fund investment in patient capital

Following The Pensions Regulator’s updated guidance for pension schemes considering patient capital investment, the 2018 Budget announces that:

• through the British Business Bank, the government will support pension funds to invest in growing UK businesses.
• the FCA will publish a discussion paper by the end of 2018 to explore how effectively the UK’s existing fund regime enables investment in patient capital. This will accompany the ongoing work of HM Treasury’s Asset Management Taskforce to explore the feasibility of a new long-term asset fund.
• the Department for Work and Pensions will consult in 2019 on the function of the pensions charge cap to ensure that it does not unduly restrict the use of performance fees within default pension schemes, while maintaining member protections
• the FCA will consult by the end of 2018 on updating the permitted links framework to allow unit-linked pension funds to invest in an appropriate range of patient capital assets.

Enterprise and Business Support

• Invest up to £25 million to boost business productivity through the Knowledge Transfer Partnerships scheme, placing over 200 additional graduates and academics with relevant

skills into firms to translate their research insights into business growth .

• Invest £20 million in 2019-20 to support local peer-to-peer networks focused on business

improvement so that thousands of business leaders can share expertise on leadership, business development and technology adoption.

Education and Skills

T levels

The government will provide £38 million of capital funding to support implementation of the first three T levels in 2020 across 52 providers.

Skills pilots – The government will fund £20 million of skills pilots including:

• A new £3 million pilot to help employers in Greater Manchester and surrounding areas to address local digital skills gaps through short training courses  

Post-18 education and funding – As part of the government’s review into the post-18 education and funding system in England, the government will receive advice from an independent panel, chaired by Philip Augar. The panel will report to ministers at an interim stage before the government concludes the overall review.

National Retraining Scheme – The Budget allocates £100 million for the first phase of the National Retraining Scheme (NRS). The National Retraining Partnership between the government, the Confederation of British Industry and the Trades Union Congress will focus on job-specific retraining in phase two.

Higher education and VAT

The government will amend VAT law to ensure continuity of VAT treatment for English higher education providers under the Higher Education and Research Act by enabling bodies registered with the Office for Students in the Approved (fee cap) category to exempt supplies of education.