NESTA was the intellectual fulcrum of Gordon Brown’s attempts to use government spending on science to strengthen the British economy. Endowed with a generous £200 million of National Lottery money, it is the think tank that thinks about “innovation”, often for the Department of Business Innovation and Skills.
br />Yet the new coalition ministers at BIS have made clear that innovation is now an un-word. It is thought too woolly. At a stroke, it seems that NESTA has become irrelevant. But within a month of the election, it has today produced a thick report on the new government’s buzzword of choice – “rebalancing” the economy. Will this be enough to win the hearts of a sceptical coalition, already “auditing” Labour’s NESTA-friendly schemes for cuts?
The NESTA report considers four scenarios of future growth patterns – business as usual, manufacturing renaissance, hi-tech growth and general support for innovation across the economy, even in lo-tech firms.
The report delivers one concrete and useful insight – that manufacturing is incapable of leading Britain out of its current malaise. To do that, the rates of growth in manufacturing would be higher than anything the UK has achieved since 1945, and we lack the skills to do it.
But beyond that, “woolly” is precisely the word that come to mind. There’s a lengthy chapter devoted to the unanswerable question of whether Britain’s economy is unbalanced, which seems a naively literal take on the current debate. And the report repeats the huge claims NESTA makes for the economic benefits of innovation, skipping over the unresolved questions of what innovation is and how it’s impact can be measured.
Equally damaging is the failure to consider what we might call the George Osborne scenario – slashing business support to pay for sharp cuts in Corporation Tax. The key question at this point for BIS is for any given £1 under the government’s control, what is the best use of it – eg tax cuts, deficit reduction or business support? And yet this too is unconsidered.
Indeed, it’s hard even to see what the difference is in government policy between the different options. For example, business as usual suggests the government carries on doing what it is now, presumably including its existing range of support for innovation, currently running at maybe £1.5 billion a year. But the hi-tech option only advocates maintaining support at current levels. So what actually is the difference? Are we really looking at four meaningful scenarios, or four different fantasies?
These fogs of reasoning are wrapped up in massively complex economic modelling, which is not intrinsically bad but which involves so many assumptions and such long lines of reasoning that the validity of each scenario is at best tentative. This is just how things were under Labour, but it doesn’t stop it being a massively complex source of woolliness.
This is not a piece of work, as NESTA acknowledges, that should be relied upon; it’s a stimulus to thinking. But even that small role is further undermined by the woolliness (again) of the ultimate recommendations for policy.
Besides business as usual, our options quickly narrow. The manufacturing option NESTA says is not economically viable. The innovation option is not politically viable. The hi-tech option, with a focus on a small number of hi-tech, hi-growth businesses is all that is left. This is labelled “Targeted policies for high-potential sectors” which sounds attractively like the kind of thing advocated by James Dyson. But we are given only glimpses of what the government needs to do to follow this road, and no explanation of how such a policy would avoid falling into the trap of picking winners.
I’m not convinced, and I don’t see how the coalition can be. This is a report that seems predicated on far too many assumptions that Labour bought into but which are now being questioned by Vince Cable and David Willetts. In this way, it fails to make NESTA relevant to the current debate. If NESTA needed to rebalance itself for the new government, then with this report it has surely fallen off the tightrope. Indeed, the question Cable and Willetts are probably asking themselves is, is there any way we can retrieve the £200m that Browns Lottery gave to NESTA?
More seriously, all that spending on hi-tech support that Labour ushered in is still waiting for someone -anyone – to make a coherent case for it, let alone a compelling one. And if NESTA cant, who can?
[I revised this on 8 June to clarify the National Lotterys role. Thanks to http://twitter.com/xmalik.]