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What the Autumn Statement means for universities

23 November 2016
Julie Tam

Julie Tam

Deputy Director of Policy
Universities UK

Today the Chancellor delivered his much anticipated Autumn Statement. Amid changes to economic forecasts and modifications to fiscal rules, one overarching message was clear: that the research performance of the UK is one of its key strengths.

Capitalising on that strength, through innovation, will be crucial to the government's industrial strategy to raise living standards for people across the UK. This is a welcome recognition of the contribution of UK universities, which carry out 76% of publicly-funded research in the UK.

The additional £2 billion of government funding per year (by 2020) for research and development (R&D) was announced on Monday by the prime minister, in her speech to the CBI. The Autumn Statement shows this new spending is part of a broader National Productivity Investment Fund (NPIF) of £23 billion. New spending on R&D will amount to a total of £4.7 billion over four years, up to 2020–21. 

The additional funding for R&D is new money, representing a real terms increase in the research budget – which is what Universities UK asked for in our submission to the Autumn Statement. This new funding is excellent news. Particularly given a projected deterioration in the public finances due to a weaker economic outlook, arising from the UK voting to leave the EU.

An additional £400 million will be invested by the British Business Bank in venture capital funds, alongside a review of barriers to long-term finance for growing firms. There will also be a review of the tax environment for R&D, which could help enhance incentives for investment.

How will the extra £4.7 billion for R&D be spent? 

The Autumn Statement indicates this will be through two methods: a new Industrial Strategy Challenge Fund (managed by Innovate UK and research councils), and through UK Research and Innovation awarding funding on the basis of national excellence, with a 'substantial' increase in grant funding via Innovate UK. 

The Autumn Statement does not refer to existing mechanisms like quality-related (QR) funding, other research council channels and the Higher Education Innovation Fund (HEIF) in England. How will the new Industrial Strategy Challenge Fund work together with existing mechanisms? Will any new funds be targeted to international research collaboration?

Universities are keen to work with government to ensure the new funding is spent as effectively as possible, to achieve the greatest impact over the longer term. Recognising R&D's longer-term impact, R&D is now treated as capital in the Autumn Statement, rather than resource spending. This change could have implications for future spending decisions, and how spending is allocated across departments.    

The importance of skills and more balanced growth across UK cities and regions are foreshadowed in the Autumn Statement as key to the government's industrial strategy. The Autumn Statement says that the strategy will 'address key economic challenges such as building the skills base the economy needs and turning great ideas into commercial success.' 

In his speech, the Chancellor pointed out that no other major developed economy has such a gap between the productivity of its capital city and its second and third cities. 

This presents immense opportunities for universities, who already play a significant role in working with their local businesses and employers. Universities could help build stronger links across local businesses to facilitate access to overseas markets and spur local growth. Universities could extend their reach to local employers, ensuring every employer that wishes to recruit locally can do so. And there may be scope for more coordinated partnership working to support under-represented groups, as set out in the recent report of the Social Mobility Advisory Group.     

The government's forthcoming consultation on the industrial strategy gives universities scope to put forward practical proposals that will have a real impact on local growth, enterprise and opportunity. Universities are ready to play a prominent role in the development of the industrial strategy, collaborating closely with local partners, communities and businesses.     

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