Ahead of the UK general election this week, we at Luminous Ventures thought it important to discuss and contrast the plans outlined by the three major parties relating to science and innovation and research and development, which form an integral part of the UK’s long-term economic strategy.
Science and innovation are reliable drivers of economic growth and sustainable development. As deep tech seed investors, we care deeply about the future of science and innovation in the UK. UK deep tech companies are fuelled by the nation’s strong academic institutions and high-quality talent pool and supported by a healthy grant funding system. An economic climate that is friendly to small businesses developing cutting-edge technologies will not only nurture start-ups and set them up for future success, but will also help solve the most pressing societal problems, and bring good returns to investors in the long run.
There has been political consensus that the UK should increase its investment in research and development to 2.4% of GDP (the OECD average) by 2027 (up from 1.7%). Ahead of the general election, all three major parties have pledged to make significant increases in R&D spending and invest more in the regions. Conservative Party have outlined plans to raise R&D spending to 2.4% of GDP from its current level of 1.7%. Both Labour and the Liberal Democrats have set a higher 3% target. Labour pledged to meet this target by 2030, citing increasing direct support and reforming the innovation ecosystem to better “crowd in” private investment as the main approach. The Lib Dems promised to achieve the goal via an interim target of 2.4% by no later than 2027. Reaching 2.4% of GDP requires an extra £20 billion in public funding, but both the Conservatives and Labour have mentioned attracting private investment as part of the strategy. The Tories also plan to unlock long-term capital in pension funds to invest in and commercialise scientific discoveries.
In what appears to be a nod to DARPA in the US, the Conservatives have pledged that some of the new R&D spending will go to “a new agency for high-risk, high-payoff research”, to be held at arm’s length from government. Labour have set out commitments with large numbers, proposing the creation of a National Investment Bank, backed up by a network of Regional Development Banks, to provide £250 billion in lending for enterprise, infrastructure and innovation for over 10 years. The Liberal Democrats have promised to increase the Strength in Places Fund, to boost research and development outside the “golden triangle” of Oxford-Cambridge-London.
In terms of setting the focus for R&D spending, the Tories stressed that the efforts will be dedicated to areas where the UK can generate a commanding lead in the industries of the future – life sciences, clean energy, space, design, computing, robotics and artificial intelligence. More specifically, the Tories pledged to make the UK the leading global hub for life sciences; and will also use the £1 billion Ayrton Fund to develop affordable and accessible clean energy. The Conservative Party’s plans also include investing in computing and health data systems that can aid research, such as the genetic sequencing carried out at the UK Biobank, Genomics England and the new Accelerating the Detection of Disease project, which has the potential to transform diagnosis and treatment. In comparison, both Labour and Lib Dem appear to have made the environment and climate change the clear focus. Lib Dem promised to create more “Catapult” innovation and technology centres and back private investment in particular in zero-carbon and environmental innovation. Labour outlined a Green Industrial Revolution for tackling the climate crisis and addressing other societal challenges such as an ageing population and antibiotic resistance. Labour’s plans also include establishing a Foundation Industries Sector Council to provide a clean and long-term future for the UK’s existing heavy industries like steel and glass and funding R&D into newer technologies like hydrogen and carbon capture and storage. Labour have pledged to invest in three new gigafactories and four metal reprocessing plants to support the transition of the UK’s automotive sector into the electric future.
In addition to financial support, all three parties recognised the importance of developing skills and talents. The Conservatives have promised to support international collaboration and exchange and ensure UK teams can recruit the skills and talent from abroad. The Lib Dems outlined plans for introducing a new two-year visa for students to work after graduation and a major expansion of high-quality apprenticeships. Labour plans to launch a Climate Apprenticeship programme to enable employers to develop the skills needed to lead the world in clean technology.
Of course, an area where the major parties show clear differences is tax. Conservatives have proposed very modest tax changes, suggesting a cut in corporation tax from 19% to 17%; Labour and the Liberal Democrats have both proposed tax increases, pledging to raise corporation tax rate to 26% and 20% respectively. The Tories outlined an increase rate for R&D tax credits to 13%; while Labour is proposing to phase out R&D tax credits.
Whichever party wins, assuming there is a winner, will win for other reasons (Brexit, social policy, immigration etc) but it is refreshing that all parties are committed to increasing spending in science and innovation and we look forward to seeing how things turn out on 12 December. A key question that remains is whether the UK can still attract top academic talent going forwards and that will be a central issue that the winning party will need to address in addition to the funding question.