Opinion: Building a stronger economy by supporting Research and Development

As slogans go, ‘Stronger economy. Fairer society’, is a pretty good one. But I can’t help thinking that we have a bit of an imbalance in favour of the latter. Pupil premium, raising the income tax threshold to £10,000, pension triple lock – great policies for a fairer society. What are the equivalent policies for a stronger economy? You might be able to think of a few, but they’re certainly not as prominent, and some positions, reducing the deficit for example, are not exactly unique to the Liberal Democrats.

Perhaps that’s alright though, there are probably many in the party more comfortable talking about making our society fairer rather than talking about making us, collectively, richer. However, polling shows that for the average voter the state of the economy is a huge concern. Thanks to Julian Huppert’s work last year developing our science policy, we have something that can rebalance the first half of that slogan. Julian called for “a 15-year annual increase in a ringfenced Science Budget, of 3% more than inflation.” As research and development (R&D) spending as a proportion of GDP declined under the last tory government and stagnated under labour, this ambition is something we can really make our own.

Although innovation is claimed to have been ( responsible for two thirds of economic growth between 2000 and 2008, the UK is lagging behind in R&D spending. At 1.79% of GDP, R&D investment in the UK is at a level similar to that of the PIGS (Spain – 1.39%, Italy – 1.26%, Portugal – 1.59%) rather than the more dynamic economies of Germany (2.82%), Denmark (3.06%) and Sweden (3.42%), and generally not making much progress towards our target of 3% of GDP. The most recent ONS figures reported an increase in business R&D of 6% adjusted for inflation, excellent news as 60-65% of all R&D spending is private sector. In comparison, higher education R&D increased by 0.2% (adjusted for inflation). The government clearly needs to do more, not just to keep its end up, but to give confidence and attract further investment.

If my rough estimate is right, reaching the 3% of GDP target would cost around £6-7 billion, assuming the proportion of publicly funded R&D remains the same. Not a small amount of money,  but then the benefits of a stronger, more innovative economy, less reliant on the city, are self-evident. With the right presentation, this might even prove quite popular. While we’re waiting for the next manifesto, you can sign this excellent petition calling for an increase in Governmental spend on R&D to 0.8% GDP.

* Tad Jones is a Liberal Democrat member in Nottingham and a member of ALDES. He writes in a personal capacity.

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  • Frank Heaven 24th May '13 - 12:31pm

    I’m not sure UK R&D spending is quite as bad as you suggest: http://en.wikipedia.org/wiki/List_of_countries_by_research_and_development_spending

    But I agree that it could be better. Why not aspire towards German, or even Japanese and Korean levels of spending?

    A big commitment on R&D might also help rebuild bridges with students and the university sector generally.

  • Jonathan Hunt 24th May '13 - 12:52pm

    Like many non-scientists or engineers, I tend to regard R&D as a Good Thing, and the more spending the better. It should be obvious that more we spend, the more benefits we should expect.

    But what is R&D, and how is it measured. Is it purely work carried out in universities or specialist units within organisations. Do we count innovations that take place every week in most businesses? How many of those are registered — and is the high cost of obtaining patents and other intellectual proptection a relevant reason for this.

    We must certainly encourage all R&D and innovation, but would a real role for the State be to spend much more on funding techology transfer and making it cheaper and easier to obtain legal protection for their work? The experts may have views about this.

  • I would argue that raising the personal allowance to £10k is a building block for a stronger economy, bet hey ho.

    Speaking as an R&D Engineer, can I warmly endorse increases to R&D spending 🙂

  • Research can often be the cheap aspect, it is the development which costs money. Dyson had to make 5217 prototypes before he arrived at a marketable vacuum cleaner. The creation of the Technology Strategy Board as opposed to the R and D funding provided by the RDAs is step in the right direction. When SMART money for R and D was allocated by the D TI it was preferable to the RDAs.

    Part of the problem is that the good technical universities for supporting Rand D are not spread evenly around the country. Some of the larger top universities do not appear to be that keen to work with SMEs if it is not in the ultra high tech field. Dyson is an example of how R and D in an unsexy field ,vacuum cleaners, has been a major commercial success which has gone on to develop high speed motors.

    Rather than just looking at spending , I think comparing expenditure with the number of patents obtained may be useful.

    It would be useful if there was research between R and D spent and increased profits.

  • Paul In Twickenham 24th May '13 - 7:59pm

    This is an excellent proposal. The UK continues to be a world-class centre for innovation and basic research. The returns that would accrue from a government investment in R&D spending would be superb. The problem, of course, is that the returns only manifest in significantly longer than the 5 year timescales that tend to control the thinking of politicians.

    I note again (as I often do both here and elsewhere) the extraordinary ingenuity and originality of thinking by Andrew Geim and Konstantin Novoselov – naturalized British citizens who are researchers at the University of Manchester – who conducted “groundbreaking experiments regarding the 2-dimensional material graphene”. That’s not just my view – that’s what it says in their Nobel Prize citation.

    And how did they achieve this groundbreaking discovery? They stuck some sellotape on the lead of a pencil and pulled the graphene off! Only in Britain 🙂

    Graphene is a truly awesome advance in condensed matter physics. The possible applications of this material are so revolutionary and extraordinary that they sound like the stuff of science fiction – http://en.wikipedia.org/wiki/Graphene#Potential_applications.

    What is concerning is that after the fundamental discovery, the primary development money is in the form of a €1 billion grant from the European Union to a Swedish institution. The return that would be made by British government investment in development could be vast if it were to happen.

    I spend a lot of time in physics departments around London and I am familiar with some of the ground-breaking basic research going on in our Universities : I would note the work at Royal Holloway to design quantum computers based on superconducting Josephson Junctions, for example.

    It’s not too late to harness the extraordinary talent and indeed (and I do not use this word lightly) genius in our midst. But I often wonder whether our political classes have the first clue of the talent around them.

  • Paul Reynolds 25th May '13 - 3:49am

    Policy on this subject matter was passed by Conference about 4 years ago. It was clumsily called ‘UK response to Globalisation’ or something similar. It made the same points and also stressec the institutional problems in UK commercial policy, which are. very su substantial. The majority of relevant economic policymakers in the UK have no understanding of what commetcial policy is in a market context and no knowledge at all of how it works in countries with greater export and technology success than the UK. In the UK we also have (perhaps as a consequence) a dysfunctional ministry, albeit headed by a LibDem, which is torn between regulatory policing of the UK economy and the promotion of economic activity – and a Cabinet Committee which puts macroeconomics and fiscal policy above commercial policy. In UK economic policy beyond ‘macro and fiscal’ flails around with bits of infrastructure spending and over bureaucratic minor subsidies, plus blind help for military manufacturing. At senior levels in the UK commercial policy is squeezed between theoretical market constructs and the general public sector & elite disdain for commercial businesses.

  • A further point I would like to add is what happens even if we do get from research to development and then a real, saleable commercial product.

    At that point, what happens in the UK is that our ever helpful financial sector then facilitates the sale of the innovative, successful but still nascent company to another much larger one in the US or Germany.

    Until we look at our business ecosystem from a holistic standpoint, investing in R&D is not going to yield long term benefits (a UK Apple or Samsung) that are hoped for.

    Furthermore, we need an overhaul of our industrial/management training to make sure our managers are the best worldwide and are able and willing to build up the next generation of ICIs, Pilkingtons and all the other industrial companies that we ran down/sold off so carelessly in the past 40 years.

  • William Jones 25th May '13 - 7:55am

    You are right to raise the subject of R&D as an important component for a stronger economy.

    It is my experience of working on R&D in private industry is if it can’t be linked to a customer order it will not happen. With those working in R&D, who are often highly skilled, being redeployed to revenue projects or even worst have their project closed down and made redundant if their it cannot be assigned to a revenue scheme. So the key to me would be make R&D projects revenue positive for private enterprises, probably through tax breaks. Or we can just hope universities do leading edge R&D, not sure this going to work. We need to encourage R&D in our private enterprises too.

    If we do not invest in R&D we will find in 5 or 10 years time with accelerated change in technologies that our economy will under go a brain drain and become an alsoran in “Global Race” with a declining economy rather than a stronger economy.

  • Alan Sugar is a very good example of how poor the UK’s industrial management skills can be. His style of management – impatient, aggressive, non-consensual, driven by short term financial goals – is culpable for many of the failures we have seen in recent years of UK companies to fulfill their initial promise. It might make good TV but it is totally the opposite of what we should be doing.

    Until we can create a new generation of industrial managers with world class skills and a totally different culture – with a new industrial management university in Manchester perhaps? – then we can put in all the R&D investment we like but it still won’t create the right environment for the UK to grow world beating industries.

  • Thanks for your comments, certainly some things to think about. I have to admit I never considered PIGS to be derogatory, but will bear it in mind.

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