Opinion: Size does matter – UK under-investment in research and development

I welcome Julian Huppert’s important contribution towards updating our party’s science policy and, along with others, efforts in making the case for science in politics.

In his 30th January article on LDV, Julian, quite rightly, made the point that UK science and research is definitely world class, and it’s in all our interests not to be complacent about that.

As a Party, we can come up with lots of ideas and innovative policies to boost UK science, and to campaign tirelessly to get them implemented. However, the key barrier to better utilising science to drive forward the economy is our woefully low level of investment in research and development (R&D). This is surely a good opportunity to call for greater investment in our economic future.

The facts Julian used to illustrate UK success in science related to efficiency rather than any real advantage over other countries. Should we not be aware of what our economic competitors are doing with their R&D investments and better understand its future impact in a globalised marketplace over the coming decades? Why do we continually indulge in the deluded myth that we are punching above our weight? Size definitely does matter in this case, and we are clearly being left behind.

The UK spent 1.7% of GDP on R&D in 2011 ($38bn), less than the EU average and less than the OECD average. In contrast the US spent an immense $405bn on R&D, about 2.7% as a proportion of GDP. Japan, Israel, Sweden, South Korea and Sweden all invest more than 3% of GDP on research, with Israel top of the class with R&D spending of 4.2% of GDP. China, which already spends more on research than the UK ($154bn), is aiming to increase its spending from 1.5% to 2.5% of GDP by 2020.

In a 2008 report for the Medical Research Council it was estimated that for every pound spent on public funded research there was a return of 30p per year in perpetuity in GDP gains. With corporate research, there is of course a private return for the company, but also a greater social rate of return from which we all benefit. The economic impact of innovation often spills over to other firms; competitors, suppliers, and often unrelated industries. As Jason Love said “The microwave oven is the consolation prize in our struggle to understand physics”. This social rate of return for R&D is a compelling argument for regional, national government and EU support for research.

So how is the coalition doing at the moment? Although 30% of research is done with public money, the UK government spends less than all other G7 nations except Italy and CaSE (the Campaign for Science and Engineering) have argued that government rhetoric on protecting science budgets is not backed up by facts.

On the other hand R&D Tax credits have been increased for SMEs to 200% in 2011 and 225% due in April 2012. With £1.8bn of these tax credits claimed since 2000, this is a welcome, if fairly modest, bit of government support.

The current UK spend of 1.7% GDP clearly falls short of the EU target of 3% GDP towards R&D set in 2002. It is telling that little progress was made towards this target even before the credit crunch hit the economy.

We should look at R&D spending, not as just another item of public expenditure, but as investment in our future economy. As we are leaving our children with a mountain of debt, shouldn’t we be also giving them the wherewithal to pay it off?

* Issan Ghazni is Chair of the Ethnic Minority Liberal Democrats and former National Diversity Adviser for the Liberal Democrats. Issan blogs here

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  • Our financial system is hostile to long term investment. Developing a new car happens over a time scale of 5 years, taking a new technology from a concept to a sellable product, could take far longer. The City controls investment in this country, and the City expects returns this year, not in years to come. They want an 8% return this year, not a steady 3% over years. Any company that defies the will of the City risks being taken over, being used as little more than a poker chip in a fee generating deal.

    So our companies cutback R&D and investment, to increase this years return. In the long run it is a disaster, British factories end up with worn out equipment, making obsolete products. Fixing the problem is easy. The City has to be regulated, has to be made the servant of the wider economy not its master. We also need to create the mid sized regional banks that they have in Germany. It is absurd that a company that wants to raise capital in Bradford or Birmingham, has to go to London to get a decision. There should be regional banks with the power to do this.

    Alas these reforms will never happen. We talk of the City and Westminister as if they are two different enterties. In reality they are very closely linked. MPs have second jobs in the City or hope to retire to City boards. Political parties get their funding from the City and we all know about the lunches that top Civil servants have with the heads of City firms. Westminister is corrupt, bought and paid by the City. So industry in this country will continue to rot because of under investment.

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