The next government must make sure innovation funding reaches the wider economy, says Harry Farmer
Late last month, the Lib Dem leader Jo Swinson announced her party’s policy to double UK investment in research and innovation, bringing the total to slightly over 3 per cent of GDP. This was the most recent move in a bidding war between the major parties on R&D spending, the Conservatives having doubled down on their pledge to get spending up to 2.4 per cent and Labour having proposed to raise it to 3 per cent.
In a general election characterised by unusually stark differences between the major parties’ proposals and worldviews, agreement on the need to increase R&D spending stands out as a rare point of consensus.
It’s easy to see why. The UK spends comparatively little on R&D compared with its northern European counterparts and has the low productivity and uneven, weak economic growth to match. Likewise, faced with the climate crisis and an ageing population, governments are understandably keen to have as many technological options at their disposal as possible.
These commitments represent a growing and welcome recognition of both the importance of innovation and the fact that it doesn’t happen of its own accord, but needs to be fuelled. But while extra fuel is desperately needed, the state of the engine is every bit as important.
In its current form, the UK’s research funding ecosystem is very good at supporting a small group of high-tech industries, but poorly configured to stimulate productivity gains and wage rises in the wider economy. Without significant changes to the ways and means by which R&D money is allocated, additional investment is unlikely to produce the broad and balanced economic growth that politicians are seeking.
Perhaps the most obvious failing of the current funding system is its tendency to direct money towards existing success stories. This favours maximum return on investment over the need to redress regional and sectoral inequalities.
One means of ameliorating this problem would be to hand control of a significant proportion of the R&D budget to the nations and regions, thereby ensuring a more even geographical distribution of funding.
A deeper problem with current funding is the disproportionate focus on innovation at the high-tech frontier at the expense of the wider economy. Even the most successful attempts to cultivate highly innovative businesses in a broader variety of places and sectors would affect relatively few firms and workers. To make a real difference to living standards, a far larger proportion of investment needs to be directed towards the wider economy, rather than to this small vanguard.
A worthwhile first step would be to address the relative lack of money and support for firms in the wider economy looking to adopt technologies and business practices developed at the frontier. A lack of funding to support adoption limits the value of public investment in innovation, as well as systematically disadvantaging smaller firms.
The Business Basics Fund, which exists to address just such a problem, has potential, but it has just £9.2 million to spend over four years. It should be vastly expanded and made permanent.
Another factor that hampers the current system’s ability to foster innovation in the wider economy is its bias towards technological and scientific innovation at the expense of social and institutional experimentation. This is a particular problem for many of the UK’s least-productive and worst-paid sectors,
which need new ways of organising work and providing services just as much as they need new technologies.
The care sector is a vivid example of this. While advances in robotics and artificial intelligence could transform how developed societies care for their ageing populations, the aim should not be to simply incorporate these technologies into the dysfunctional existing system. Rather than using robots to patch up problems, technology needs to be combined with the social and institutional experimentation required to find a better model for caring for the elderly.
One way to promote this sort of experimentation would be through mission-oriented R&D spending. As well as directing a significant proportion of R&D money towards specific societal problems, the government should stipulate that at least one such mission should be focused on finding new ways to organise work in low-pay sectors, particularly in the light of new technologies such as automation and augmented reality.
If future governments want the public to see returns on their investment in R&D, then they’ll have to be willing to create a system that prioritises improvements to the wider economy. If they don’t, all this extra money may prove difficult to justify.
This article also appeared in Research Fortnight