Osborne backs 'industrial strategy' in spending review

George Osborne is ‘backing science’ with a pledge to protect the £4.7bn science budget in real terms up to 2020/21.

This was one of a raft of measures announced in yesterday’s combined Autumn Statement and Spending Review that include a commitment to support the development and sale of ultra-low emission vehicles, the exemption of energy intensive industries from environmental tariffs, and making £61bn available for transport projects, including an £11bn investment in London’s transport infrastructure.

“In the modern world one of the best ways you can back business is by backing science,” said Osborne. “That’s why in the last Parliament, I protected the resource budget for science in cash terms. In this Parliament I’m protecting it in real terms so it rises to £4.7bn. That’s £500m more by the end of the decade. Alongside £6.9bn in the capital budget too.”

Osborne used his speech in Parliament to announce a doubling of expenditure on energy research, including a commitment to small modular nuclear reactors.  Support for renewables will more than double too, but ring-fenced funding for carbon capture and storage has been removed.

Funding for transport will see what Osborne described as the largest road investment programme since the 1970s, plus the electrification of railway lines, including the Trans-Pennine, Midland Main Line and Great Western.

“Construction of HS2 to link the so-called Northern Powerhouse to the South can begin,” added Osborne. “We’ll fund our new Transport for the North to get it up and running. And we will be spending over £5bn on roads maintenance this Parliament.

“Businesses also need an active and sustained industrial strategy,” said Osborne. “That strategy launched in the last parliament continues in this one.

“We commit to the same level of support for our aerospace and automotive industries. Not just for the next five years but for the next decade. Spending on our new catapult centres will increase.

“And we’ll protect the cash support we give through Innovate UK - something we can afford to do by offering £165m of new loans to companies instead of grants.”

Commenting on yesterday’s announcement Terry Scuoler, chief executive of EEF said: “The Chancellor’s enthusiasm for an industrial strategy for Britain is hugely welcome, as is his promise to continue to support Catapult centres, the successful incubators of new business ideas and product development.

“By moving to protect science and research spending, he will give industry confidence and encourage many innovative companies to push ahead with the next generation of business ideas. 

“Moving to an exemption of energy intensive sectors from the costs of renewables is enormously welcome and demonstrates that government is dedicated to finding a long term solution to this problem.”

Reaction round up

“This is a significant boost for enterprise and innovation in the UK. The protection of vital sources of funding for the UK’s business community will support ongoing investment in R&D to ensure this country remains in a strong global position.

“Growth in patent filings during 2014 was indicative of sustained investment in innovation over the last couple of years. Both Innovate UK and the Catapult Centre network are essential sources of support for the innovation sector. Continued investment will help maintain the entrepreneurial spirit this country is so well-known for. Alongside the further tax relief provided by the Patent Box regime, the planned cuts in corporation tax will also do much to support the future of the UK’s burgeoning business community.”

Karl Barnfather, chairman, Withers & Rogers

“I’m delighted to hear the Chancellor backing science with real investment for the next five years. This announcement is great news for the UK and provides a platform to build on for future success.

”This spending review brings some very welcome good news for UK science. It has delivered real investment in science, a decade of support for an industrial strategy, cash protection for Innovate UK, real terms protection of funding for high-cost subjects in HE, and some much needed protection for adult skills funding.

“Committing to invest in science and innovation, is investing for the future: creating high-value jobs, driving productivity, and catalysing economic growth. It will have far reaching benefits in education, security and resilience, and health. There are undoubtedly some details to unpick, but it is encouraging on many counts to see that the government has listened to the science community and made an evidence-informed decision to back science and engineering in today’s Spending Review.”

Naomi Weir, CaSE acting director

“Our world-class research is the engine that drives growth, improves health and increases quality of life in the UK and beyond. We welcome the Government’s clear recognition of this in the Comprehensive Spending Review - protecting the value of the research budget and ensuring an absolute cash increase.

“Across Government there are programmes facing significant cuts and against this background we acknowledge the value the Government has placed on research with this settlement. It means that the UK’s research base will be able to maintain its world-class research outputs, continue to partner with and attract industry, maintain its flow of trained researchers into the economy and society and continue to inspire the next generation.”

Prof Philip Nelson, chair of the Research Councils UK Executive Group

“The industry has received a number of mixed signals and we need certainty of direction. Government’s backing of nuclear and coal’s phase-out by 2025 have been welcome steps forward. Coal provides a quarter of the UK’s electricity, and the announcement that this will stop was a missed opportunity to explain in more detail how we are going to keep the lights on in 2025. The question remains whether gas alone could fill the gap. Nuclear is not a done deal and there’s still time before construction begins at Hinkley Point, Wylfa and Moorside during which there can be further delays and disruptions. The time has passed for short-term solutions, we need to start investing in energy storage technologies to support our renewable industry. Building Britain’s future must be done in a sustainable way.”

Ian Maclean, UK managing director for energy & industry at WSP Parsons Brinckerhoff 

Budget in brief

Science Budget

  • The government will protect the £4.7bn science budget in real terms up to 2020/21
  • This includes a new £1.5bn Global Challenges fund to ensure UK science takes the lead in addressing the problems faced by developing countries whilst developing our ability to deliver cutting-edge research. This is all resource funding and will come from ODA spend.
  • No mention of ring-fence

Innovate UK

  • Flat cash for Innovate UK
  • The government will also look to integrate Innovate UK into Research UK in order to strengthen collaboration between the research base and the commercialisation of discoveries in the business community. Innovate UK will retain its clear business focus and separate funding stream.
  • The Spending Review and Autumn Statement increases investment in catapult centres and protects and extends funding for the Aerospace Technology Institute (ATI) and the Advanced Propulsion Centre (APC).
  • The government will introduce new finance products to support companies to innovate following best practice in countries such as France, Finland and the Netherlands. These will replace some existing Innovate UK grants, and reach £165m per year by 2019-20, so that total Innovate UK support is maintained in cash terms.

Capital Investment

  • The government reaffirmed its long term science capital commitment of £6.9bn between 2015-2021. This includes up to £150m (total capital and resource) to launch a competition for a Dementia Institute, to build on the UK’s strengths in medical research.
  • In addition to the £6.9bn figure, the government will invest £75m in Cambridge University’s Cavendish Laboratories

General research funding

  • The government will also take forward a review of the Research Excellence Framework in order to examine how to simplify and strengthen funding on the basis of excellence, and will set out further details shortly.
  • The government commits to funding aerospace and automotive technologies for 10 years in cash terms. This will provide over £1bn additional funding for innovation in these sectors.
  • Government will double spend on energy innovation and invests £250m in an ambitious nuclear research and development programme


  • By 2019-20 government spending on apprenticeships, including income from the new apprenticeship levy, will be double the level of spending in 2010-11 in cash terms.
  • The apprenticeship levy on larger employers announced in the Summer Budget will be introduced in April 2017. It will be set at a rate of 0.5% of an employer’s paybill and will only be paid on any paybill in excess of £3m.
  • The government will establish a new employer-led body to set apprenticeship standards and ensure quality.

Source: CaSE (Campaign for Science & Engineering)