Beyond the ring fence

Focusing on about funding for basic research is not enough. Unless the academic community engages with the debate on industrial strategy, the spending review will leave research and innovation on the margins, writes Think-Lab’s Melanie Smallman in this week’s Research Fortnight.

Over the next few weeks the UK’s science community will be lobbying hard to protect the science budget, in advance of the government’s June interim spending review for 2015/16.  Already the Presidents of the four national academies have launched a statement ‘Fuelling Prosperity’, calling on the government to secure the ringfence on the science budget and provide a stable investment framework for research over the next ten years.  And rightly so. The evidence that is a driver of the economy is compelling and growing.

But while the discussions within the academies are focused on how much funding should be directed where, following the economic crisis, politicians from all parties are interested in much bigger issues – what the future of the UK economy will look like and what will be our relationship with the rest of the world. These discussions might be termed “Industrial Strategy” or “Foreign Policy”, but they are about the future of science, technology and innovation as much as they are about anything else.  These are the discussions that will determine whether the UK becomes a hi-tech innovation based economy, a low-wage manufacturing nation or a country dominated by the service industry.  And these are the decisions that will set the UK on a trajectory that will shape the nature of UK research, development and innovation for decades to come.

Take the current debate about Europe – and Britain’s place within it.  While it might appear to be about wooing UKIP voters, one half of the government is serious about withdrawing from the UK’s biggest export market and from a significant funder of UK research.  What would that mean for multinational companies looking to site their head office and attract the best talent?  Why would they choose the UK over Germany or France?  And what would happen to UK research without the 3.7bn Euros it has received from Europe’s FP7 in the last five years?

Even more interesting and challenging is the debate about industrial strategy and our future economy however. Because while this is new territory for the scientific community, it is also new territory for many politicians and economists.  And there are very few answers yet.  For the last 30 years or more both economic and innovation policy thinking has been almost exclusively dominated by free-market ideology, whereby the best role for the state (after funding expensive basic research) is to get out of the way.  The credit crunch demonstrated very painfully that markets alone aren’t the answer however.  So whether it is David Cameron talking about responsible capitalism, or Ed Miliband talking about pre-distribution, it amounts to the same – suddenly, for first time in more than a generation, active industrial strategy, and a role for the state in markets, is on the table.  This means that more than funding levels and % of GDP are up for grabs.  Research from political science into alternative economic models – such as Peter Hall and David Soskice’s work on varieties of capitalism – suggest that it is factors such as private sector financial regimes, industrial relations and models of company ownership that play the most significant roles in determining the types of industries that develop.  In Sweden, for instance, the relationship between the workforce the employers and the state is thought to have been significant in building an innovation-based economy – as the trade unions drove up wages, companies moved towards more skilled, hi-tech industry in order to justify the high wage bills and the state stepped in to provide the training necessary.  Financial systems appear to have played a similarly important role in other countries such as Germany, where access to finance that was not entirely dependent upon current profits allowed companies to invest in projects that generated returns in the longer term.   Yet despite these matters having clear and lasting implications for UK research, innovation and development, they are areas where the scientific community are entirely silent.

This is of course unsurprising – and entirely forgivable.  Such issues have been outside the scope of most science policy thinking until relatively recently. While there is some relevant research being carried out in universities and think-tanks, it is not always easy to access and there are gaps.  In the longer-term, there is lots of new research to be done.  But as a first step, the academies should set up a policy commission on science and the economy/industrial strategy, bringing together scientists, economists and science policy experts, to move the debate beyond funding and the economic contribution of science, into more fundamental issues about the innovation society. If science and innovation is such a driver of the economy, then is the best role for the state just to provide the conditions for innovation to flourish, or is there a role of the state to require it to happen? Is a real-terms freeze the best thing to be asking for or would science (and therefore the economy) benefit from government taking a counter-cyclical investment strategy, spending now to stimulate growth while interest rates are low?  Is there an innovation case for a British Investment bank? What does the government need to do to unleash the £800bn that private sector organisations are believed to be holding onto rather than investing at the moment?  What skills do the workforce need to meet such an investment?  As well as pushing science policy thinking forward, the answers to these questions could provide a very fruitful starting point for developing policy ideas for economic growth.  Armed with such ideas, the scientific community would find themselves with a place at the manifesto planning table in the run up to the 2015, rather than running behind the big boys begging to be spared the cuts.

In the next few months and years, political decisions will be made that decide whether the UK continues to see science and innovation as the icing on a service industry dominated cake, or if the UK really does become the innovation nation we hope for.  This is no time for modesty.  When politicians and economists talk about growth, they mean science and innovation.  When they say they are looking for ways of stimulating growth, they are opening the door to the scientific community’s suggestions for how to do more science in the UK. Let’s not miss this chance. Science must be THE driver of Britain’s new economy.  With so much to gain, it is time science, and science policy, steps out of the science portfolio and becomes a mainstream economic and political issue.