Signals matter. When UK chancellor Philip Hammond pledged an extra £2 billion of public money a year for research and development by 2020, he was indicating a significant shift in R&D tactics, not just ramping up spending amid fears of a £59 billion Brexit hit.
The pledge, along with the balance of the , was intended to signal an overhaul of the UK’s poor productivity – the amount each worker produces per hour, which lags behind many rival nations. The sum may seem trivial compared with government spending of £4.2 trillion over the same period. But it is the down payment by prime minister Theresa May’s government on her commitment to use an industrial strategy to shape growth.
After years of at best being “protected” in the budget and thus experiencing a “real” (inflation adjusted) cut of close to 15 per cent, UK science seems like it’s potentially on a new path.
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Spin-off projects
The way part of that extra R&D money will be used is also significant. A share will go into a new . Instead of developing new technologies as an end in themselves, the fund will encourage purposeful, collaborative innovation by setting “identifiable challenges for UK researchers to tackle”.
This is promising. The US defence agency DARPA is the model. It has specialised in this kind of problem-solving since 1958, often with huge civilian spin-off applications – such as the internet and GPS. It has also attracted many of the best minds.
Done well, and linked with procurement policy that can allow initiatives to scale up, this approach has great potential to spur private investment and generate higher productivity and innovation-led growth across many sectors.
In , I detailed the role played by public agencies like DARPA in developing breakthrough technologies, and indeed entire new sectors as they strove to meet public missions such as putting people on the moon. can have a catalytic affect across many economic sectors.
Shaping markets
Growth has a rate, but it also has a direction. Missions – guided by today’s great challenges such as climate change, inequality or ageing – can help set that direction and in so doing get business to invest more in R&D. At present, the level in the UK is below the average for OECD countries. But meeting these missions will require going beyond the dogma that government just enables, while business chooses the direction.
In nations where this approach has been a success, policy-makers have created and shaped new markets, they didn’t only “fix them”.
Hammond must ensure that the entire innovation chain is lined up and provide a clear sense of direction of where the future opportunities lie.
