I wrote an article in last week’s Research Fortnight, arguing that today’s ‘Budget for Growth’ needs more than warm words about science if it’s to truly deliver economic growth. Here it is for those who aren’t RF subscribers:
Research Fortnight 16 March 2011
View of the Budget
The ‘safeguarded’ science budget provides no safety at all
British Chancellor George Osborne has promised that next week’s budget announcement will be “the most pro-growth in a generation”. With GDP dropping by 0.6% in the last 3 months of 2010 and the British Retail Consortium revising their growth predictions for 2011 downwards, this promise couldn’t come at a better time. Given the Government’s current focus on deficit reduction, it will be tempting to talk about low-cost measures to remove barriers and red tape. But returning to growth has to be part of reducing the deficit and takes more than a government in low gear. Next week’s budget needs to reveal a turbo-charged strategy for growth, pointing all aspects of government policy towards growth for years to come. Vitally, that must include R&D and higher education policy.
The essential role of R&D and the UK’s world leading universities in driving growth has been well argued over the past few years – not least by the government in explaining why ‘safeguarding’ the science budget in last year’s comprehensive spending review was important. Although a very rosy picture has been painted of the ‘safeguarded’ science budget, it looks increasingly less pro-growth as details of the total science spend across government emerge. At standstill, with no inflationary increases, the safeguarded science budget is subject to real-term cuts. Applying the Office for Budget Responsibility’s inflation forecasts, this means a loss of £1.15bn by 2014/15. But public science spend also includes departmental R&D, capital, R&D tax credits, Regional Development Agency R&D funding and the Technology Strategy Board. These amount to an additional 50% of science spend in UK, none of which have been safeguarded. On capital alone, applying inflation to the figures announced late last year, by 2014-15, investment in infrastructure will be about 46% less than this year. Taking all of this into account, the final outcome is likely to be between 14% and 25% cuts to UK science funding. Unless the forthcoming budget announcement reverses this and delivers at least a genuinely standstill budget for science in the UK, far from being a budget for growth, or even a safeguarded budget, this level of support will be pushing the UK science back to the dark days of investment starved facilities we last saw in the 1980s and early 1990s.
This will have far-reaching and long-term impacts on growth here in the UK. Significantly it will also hold back any plans the government may have to encourage growth of the private sector. Because while there’s wide agreement that the new jobs we need must come from the private sector, there is no evidence showing that the less the state does the more businesses will do. On the contrary in fact – wwithdrawing public funding is likely to result in a similar shrinking of private investment. Research Councils UK (RCUK) have calculated that every £1 cut annually from science spending will result in a £10 drop in GDP, because of the economic contribution and private sector leverage made by publicly funded science in the UK.
But creating the right conditions for private investment and growth isn’t just about public finances. Academic thinking around models of knowledge production and science systems is also showing how the sources of knowledge production – the basis of profit making companies in the future – is becoming more dispersed and networked. Whereas knowledge used to be produced primarily in Universities and industrial labs, it is now just as likely to take place in hi-tech spin-offs, think tanks and small consultancies. The old pipeline model of technology transfer, where knowledge is pushed from university labs to be applied in industry, is being replaced with a network picture. Tom Blundell touched on this in his recent article explaining why Pfizer left Sandwich, where he talks about industry moving towards ‘open innovation’ and ‘open sourcing’ and outsourcing much of their work to small companies and university departments. This more integrated model means that yet-to-be-made government decisions around the future of R&D tax credits and the funding that used to be available through the Regional Development Agencies are all the more vital in any plans for growth. It also points out how important other non-financial policy levers become: ensuring the right IP regime exists to make the most of this knowledge production wherever it arises; creating certainty around the future powers of Local Enterprise Partnerships and Enterprise Zones, so that valuable micro businesses can make smart decisions about location; ensuring these businesses can access funding through schemes such as the promised Green Investment Bank; and using strategic decisions on infrastructure, transport and energy policy to help develop a further technology pull. Delivering that within a competitive world economy means more than a series of budgetary measures – next week, the UK needs to see a serious and coherent strategy for growth.
Melanie Smallman is Director of science policy and communication consultancy Think-Lab and an honorary research fellow in science and technology studies at University College London.