Research and innovation asks for the Budget
The run-up to the Westminster Budget sees tens of thousands of submissions to the Treasury from groups wanting to influence the government’s direction of travel. There’s a broader question about how successful this proves to be, but as a spectacle for surfacing different stakeholders’ asks and concerns, it’s hard to beat.
While in theory the Budget is a fiscal event, in practice it’s accompanied by investment choices and policy pronouncements criss-crossing all government departments, and therefore what gets sent in to the Treasury goes far beyond suggestions on tax and spend.
These pitches are generally, if not always, released publicly as well, allowing those making them to signal to their wider communities about their priorities, in an attempt to generate critical mass and develop consensus about what’s most urgent in any given sector. Research Agenda has already covered various submissions from the research sector, including Universities UK’s call for a national campaign to promote investment in start-ups to the Russell Group’s reflections on making the devolution of innovation funding work.
Two other substantive submissions from the higher education and research space are those of the British Academy – which among other asks seeks an early commitment to the next Horizon Europe programme “with no detriment to the spending review settlement” – and the National Centre for Universities and Business, with recommendations ranging from continued work on research cost recovery to a UK-wide research-intensive foreign direct investment strategy.
But arguably what the research sector has less sight of in the run-up to this kind of policy moment is what business groups and other advocacy organisations are pushing for – from outside the traditional research space, in many cases, but still of great relevance to the UK’s R&D system.
This article aims to address that knowledge gap by going over business association asks of the Treasury ahead of the Budget which are relevant to research and innovation. Whether these suggestions find a receptive audience within government is another question – one we may see indications of later this week. However, much of what’s being proposed goes beyond the immediate fiscal event, seeking equally to influence the Prime Minister’s upcoming 10-year plan and next year’s spending review. So don’t write it off if it doesn’t happen on Wednesday.
Business groups
First, TechUK – a membership organisation representing around 1,100 UK tech companies. Its submission calls the creation of the Department for Business, Innovation, Science and Trade an “opportunity for a thorough stock-take of the UK innovation funding landscape, identifying where collaboration can be enhanced and duplication minimised.” It wants to see better coordination between public bodies with an innovation remit – specifically, through the convening of a ministerial-level taskforce bringing together UKRI/Innovate UK, ARIA, the British Business Bank, and the National Wealth Fund.
It also calls for a reduction in the costs of the skilled worker visa, for which the general salary threshold is currently set at £41,700 – TechUK argues that this is penalising businesses outside of London and the South East. Higher education groups have raised issues about salary thresholds in the past as well.
Next, Startup Coalition, an influential advocacy body for technology start-ups. Its Budget submission focuses on various changes to tax policy which it believes could better promote a “self-sustaining” tech economy, by way of encouraging founders to reinvest in new companies (the flywheel effect, as it’s termed). It appears likely that some action on the tax regime for entrepreneurs will indeed feature in John Healey's speech.
Other asks include the expansion of full expensing to intellectual property – tax deductions for investment, which are currently “narrowly focused on physical assets” – as well as progress with the Mansion House pension reforms which will see UK pension funds invest more in private markets, and an acceleration in setting up AI Growth Zones.
The Bioindustry Association (BIA) represents more than 600 members in biotech and life sciences – companies as well as research-performing organisations – and would like the government to bring forward UKRI and Innovate UK funding from financial year 2028–29 to financial year 2027–28. It adds that it is “critical” for this funding to be “deployed at pace and with industry guidance.”
BIA also wants the National Wealth Fund to be targeted towards life sciences, and for companies working in industrial strategy areas to be given some additional R&D tax credit advantages. Its diagnosis of the UK’s innovation problems, in commons with many other submissions, is a lack of domestic scale-up capital.
UK Private Capital, another membership body representing UK-based private equity and venture capital firms as well as advisers and investors, comes to a similar conclusion. It urges the government to keep on pushing forward with Mansion House and the analogous “scale-up fund” which was first announced over the summer.
A substantial part of its submission is directed at recent speculation (covered in more detail here) about the creation of some new clawback mechanism for funding provided to spinouts by UKRI or other government institutions, which are labelled “very concerning”:
“This would risk weakening an innovation ecosystem that has been a significant UK success story over the past decade. Importantly, only a small proportion of university spinouts currently leave the UK, reportedly around 4%. The policy therefore risks imposing a broad cost on the entire spinout ecosystem in response to a relatively limited problem. We urge the Government to consider very carefully any potential changes in this area.”
The Association of the British Pharmaceutical Industry (ABPI) has lots of positive things to say about the recently announced establishment of a Health Data Research Service, a joint UK government-Wellcome data service. But it still worries about the ecosystem of “competing data structures” within the UK, each with their own funding line:
“Successive rounds of project-based government funding have rewarded building something new and self-contained rather than something integrated that can unlock the potential of health data for research and, ultimately, investment.”
It wants the Treasury to require UKRI and NIHR to “distinguish between what should be funded as a project and what should be funded as infrastructure.” It also expresses concern about the model for the commercial use of UK data services, arguing that it must be “internationally competitive on both price and service.”
ABPI’s submission also has lots to say about the Medicines and Healthcare products Regulatory Agency (MHRA), suggesting that its funding model of charging fees to industry is growing less appropriate as it increasingly has “public good” responsibilities: regulatory science, horizon scanning, international regulatory leadership, and the delivery of innovation-enabling reforms commissioned by government. It wants the Treasury to establish a funding settlement for MHRA, to bring down or at least limit increases in fees charged to industry.
A final submission worth highlighting is that of the Association for Innovation, Research and Technology Organisations (AIRTO), which very much is a research sector-specific organisation rather than broader business lobby – it represents around 60 independent research organisations, Catapults, PSREs, and even a small number of universities
Some of its bigger asks include a £100m recapitalisation fund for research and technology organisations to offset their lack of access to private finance, in particular to sustain “nationally important and commercially independent innovation infrastructure,” and a separate venturing fund for the independent research sector to support entrepreneurship. This might include extending access to HEIF funding to independent research and technology organisations, or the establishment of an equivalent mechanism.
AIRTO wants public R&D funding indexed to inflation, and action on cost-recovery issues that can particularly affect those organisations with less block grant funding available. And, in a twist on a common ask from higher education sector representative organisations, it wants to see UKRI funding for supporting innovative firms (“bucket three”) ringfenced to ensure that it is not “not consumed by curiosity-driven or mission-driven activities.”