The comprehensive spending review (CSR) brought about significant announcements on innovation funding, including a commitment to maintain support for Innovate UK (IUK) in cash terms and under a separate funding stream over the next 5 years. Ongoing support for innovation – alongside a real terms protection of the science budget, which also covers knowledge exchange – has to be welcome. Yet, these announcements generate more questions than answers regarding the innovation funding landscape confronting universities in the future.
As noted in UUK’s post-CSR analysis blog, one of the key absences from the CSR document (and earlier, the Higher Education Green paper) was the Higher Education Innovation Fund (HEIF). HEIF provides essential support to university-led innovation and engagement with business, charities and the wider society, delivering £9.70 (for every £1 invested) in private investment and wider economic and societal benefits. While it’s a good sign that the science budget – which includes £113 million of the £160 million current annual HEIF pot – has come out unscathed from the CSR (bar any fine-print surprises), we don’t know whether this will continue to include an earmarked pot for HEIF, or what will become of the £47 million matching contribution provided by HEFCE from its teaching grant. University involvement in innovation is essential for delivering on the government’s plans for boosting productivity in our economy, so there needs to be a clear commitment to continue supporting HEIF as a separate, flexible funding stream in the future.
Alongside HEIF, there are other funding instruments supported from the IUK budget (eg knowledge transfer partnerships, collaborative R&D grants) that massively helped boost business-university collaboration in recent years – and what will happen to these also remains to be seen. Cash terms protection of the IUK budget over the next 5 years comes with a significant ‘health warning’: that up to £165m per year of existing grants have to be converted into loans. As mentioned in the CSR document, innovation loan schemes have been used effectively in other countries; yet, it would be a mistake to treat grants and loans as substitutes, because the two are designed to address different types of market and system failures, and entail significantly different ways of sharing risks and rewards. It will be essential to identify all those areas of IUK support where conversion of grants to loans may raise the risk of unintended consequences: for instance, our internal analysis suggests that loans are not well suited to support collaborative R&D.
A further key uncertainty is around how the CSR announcements will be translated into a new budgetary and governance interface for research and innovation, given the significant reforms put forward by Sir Paul Nurse’s recommendations (which we know will be adopted) and, potentially, also Dame Anne Dowling’s review (which the government has yet to respond to).
Whilst the much-feared ‘tucking in’ of the IUK budget into the science budget hasn’t materialised, the government’s intention to examine the Nurse review’s proposals to integrate IUK within the future Research UK structure will need a careful consideration of how we can ensure a budgetary and governance separation between the two. As pointed out in the STC committee’s inquiry on the science budget, the two budgets have different but highly complementary roles: that’s why we need to ensure this doesn’t turn into a zero-sum game in which funding constraints or blurred organisational and accountability lines may result in the science budget being raided to support innovation priorities (and vice versa).
We don’t yet know what the innovation funding landscape will look like in a year’s time. Yet, with the government expressing big ambitions for innovation-led productivity growth and university-business collaboration – including raising the knowledge exchange income universities earn from other sectors to £5 billion per annum by 2025 – it’s clear that universities can only deliver on those plans if they can continue to count on a sound, responsive innovation policy environment and continued public investment in third mission activities.
These issues were explored at the Universities UK conference on ‘Universities, communities and business: Collaborating to drive growth and power innovation‘ on 27 April.