Labour tipped to ‘lean on’ research budget to boost growth

Labour’s prioritising of higher productivity in the regions signals there could be “more pressure” on the R&D budget to deliver economic return – potentially “uncomfortable” for some in the sector – while its aims could be supported by devolving parts of that budget or by new kinds of universities, according to experts.

With opinion polls suggesting Labour is poised to form the next UK government, shadow chancellor Rachel Reeves used her recent Mais lecture to argue that a “collapse in our productivity growth which explains our wage stagnation” – in particular, lagging regional productivity – means a “fundamental course correction” is needed to boost living standards and “the health of our democracy”. Meanwhile, she also said the UK’s position at the forefront of global innovation is “thanks in no small part to our universities, which, despite the immense challenges facing the sector, stand among the best in the world”.

Amid a bleak outlook for public finances, Labour could demand more from an obvious potential source of economic growth in the swelling R&D budget, increased by the Conservative government from roughly £9 billion in 2017 to about £20 billion now.

“I think it’s fair to say that there is likely to be more pressure on the science budget to demonstrate its relationship to productivity growth, including regional economic growth,” said Richard Jones, the University of Manchester’s vice-president for regional innovation and civic engagement and a leading voice on how R&D investment could help drive regional productivity growth. “I think universities are potentially in a good position to respond to that, but that may need changes of emphasis, and that’s going to be difficult for some in the light of the very difficult financial circumstances many HEIs find themselves in.”

Ms Reeves repeated Labour’s commitment to switch to 10-year R&D budgets, giving institutions stability “to allow for meaningful partnerships with industry”.

Andy Westwood, professor of government practice at the University of Manchester and former adviser on universities, innovation and skills in the previous Labour government, said that was in the context of a Labour agenda where there would be “likely more emphasis on R&D that better crowds in private investment including more applied and translational activity, rather than just spending more on basic [or] blue skies research”.

Labour’s vision, he continued, is for “an active state, pushing specific R&D funding and expecting economic outcomes – all things that some in the science, research, academic world won’t be that comfortable with”.

Neil Lee, professor of economic geography at the London School of Economics and author of the recent book Innovation for the Masses: How to Share the Benefits of the High-Tech Economy, said an “obvious step” towards Labour’s aim to spread growth to more places “would be to devolve more funding to the combined authorities [in city regions], either through specific projects such as the Innovation Accelerators or, better, by devolving part of R&D spending”. But that would “need to be done carefully, as areas would need to build capacity, and without jeopardising existing strengths in London and the south east”.

More generally, Professor Lee said he would “push for more focus on diffusion and adaptation” of innovation into and by industry “rather than frontier innovation”. There are some models from other countries, “such as Swiss Universities of Applied Sciences, which could be explored as options in some regional economies”, he added.

Jonathan Simons, a partner at the Public First political consultancy and head of its education practice, said showing their potential contribution to Labour’s growth agenda is “clearly the only way universities will get a hearing at the moment” on their wider funding problems.

Mr Simons also highlighted how universities could be seen as contributing to Ms Reeves’ “Secureonomics” vision of reducing the UK’s reliance on key supply chains from nations that are its ideological opponents. He pointed to the University of Exeter having the UK’s only mining school, the Camborne School of Mines, in Cornwall – the county with the UK’s major supply of lithium, critical to UK battery manufacturing and to its net zero transition.

“I can 100 per cent see a case for universities being part of protecting national assets,” said Mr Simons.

But, he continued, “my nervousness is that if we move away, even accidentally, from pushing universities to being global for research…then we’ll really lose out in the long run”.

Professor Lee, whose book looks at international models of innovation that create good jobs across society rather than just for a tech elite, said there should be an appetite to learn from examples such as Austria, “which had one of the largest increases in R&D spending of the advanced world”, helping it innovate in traditionally low-tech industries.

He added: “Some parts of how Austria achieved this – through partnership with business, long-term funding settlements, and political commitment – seem to be there in Labour’s policy. But other parts – such as locally tailored research institutions and some applied research centres – are missing.”

john.morgan@timeshighereducation.com