Government invests £200m in science and engineering

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National Infrastructure Plan 2011 - .PDF file.

The chancellor has unveiled £200m of investment in science and engineering, alongside a £5bn infrastructure plan, in today’s Autumn Statement.

George Osborne told the House of Commons that investment in roads, railways, broadband and mobile-phone coverage would be financed by leveraging £20bn of private investment from British pension funds.

Other measures announced included a £20bn national loan-guarantee scheme to lower the cost of loans to small business, £250m to support energy-intensive industries and a tax scheme to encourage more investment in new firms.

The extra spending will be paid for by capping public-sector pay rises at one per cent and limiting increases in child and working tax credits.

Science investment

The new science spending, which is subject to business-case and regulatory approvals, includes:

  • £25m for large-scale demonstrators on technologies such as low-carbon vehicles and integrated transport, smart infrastructure and the built environment.
  • £21m to create a low-cost fleet of operational small radar satellites (NovaSAR) offering commercial services that would help the UK to gain a leading position in remote sensing.
  • £13m for the UK’s next-generation high-performance computer (ARCHER Phase 2).
  • £80m investment in the Institute for Animal Health to support the rural economy and create the basis for a new research and innovation campus in Surrey.
  • £61m on science-base infrastructure capital projects.

Imran Kahn, director of the Campaign for Science and Engineering (CaSE), said the capital investment and animal-health laboratory were real priorities for the science sector.

‘Politicians of all stripes keep talking about “rebalancing the economy” and moving towards high-tech manufacturing instead of relying on consumer debt,’ he said in a statement.

‘These words have to be turned into action, so it’s really encouraging for the UK economy that last year’s cuts are being slowly reversed — investment in science and engineering is vital if we’re to achieve sustainable growth.’

However, CaSE pointed out that the £500m extra science investment announced in 2011 was set against a £1.7bn cut made in the 2010 Spending Review, when items such as research equipment were moved out of the official science budget and had their funding slashed.

Infrastructure plan

An extra £5bn investment in the National Infrastructure Plan takes government contributions to £6.3bn. The plan will now include:

  • More than £1bn investment to tackle congestion and improve the road network, including £270m for two new managed motorway schemes at congested times on the M3 and M6.
  • More than £1.4bn investment in railway infrastructure and commuter links, including £270m for a rail link between Oxford and Bedford, and £390m on enhancement and renewal works to improve stations and infrastructure.
  • £100m to create up to 10 ‘super-connected cities’ across the UK, with 80–100Mbit/sec broadband and city-wide high-speed mobile coverage.
  • £170m of extra funding to allow more local transport projects to go ahead

The government hopes to attract up to £20bn of private-sector investment in infrastructure through deals with two groups of UK pension funds and the Association of British Insurers.

Local authorities will also be given more flexibility to support major infrastructure by considering local borrowing, for example, to fund the London Underground Northern Line extension to Battersea, and exploring new sources of revenue, such as options for tolling on the A14.

Institution of Civil Engineers (ICE) director-general Tom Foulkes said the plan laid the foundations for a more structured approach to infrastructure delivery.

‘Clearly government has taken on board the case made for the prioritisation of capital expenditure for infrastructure investment, despite difficult economic circumstances.

‘Its aspirations on how to finance infrastructure in the longer term through a range of models and working with the pensions industry to leverage £20bn are also encouraging. However, the government must now ensure its aspirations are translated into reality.

‘Going forwards, there must also be regular, high-profile, public reporting on the progress of the infrastructure plan to ensure that goals are met and that the plan remains up to date.’

However, Philippa Oldham, head of transport at the Institution of Mechanical Engineers (IMechE), was less impressed.

‘There is the need for an integrated approach to investment. Currently, the government is introducing piecemeal initiatives rather than providing a joined-up strategy,’ she said.

‘The majority of the investment projects identified are UK road-network projects. This does not move us closer to an integrated transport network, which is in line with the government’s green ambitions of encouraging people onto the greenest mode of transport.

‘It means less money will be available to overhaul the UK rail system and less will be done to reduce congestion at London’s already-congested airports.’

Business aid

Measures to help private business announced in the statement included:

  • A £20bn national loan-guarantee scheme to lower the cost of loans to small businesses and a £1bn business finance partnership to lend to small and medium enterprises (SMEs) in the UK through non-bank channels.
  • An additional £1bn for the Regional Growth Fund to help grow businesses in areas currently dependent on the public sector.
  • £45m to support UK firms wishing to export, doubling from 25,000 to 50,000 the number of SMEs supported, and making similar support available to 500 mid-sized businesses.
  • 100 per cent capital allowances in six Enterprise Zones (Black Country, Humber, Liverpool, North Eastern, Sheffield and Tees Valley).
  • Around £250m from 2013 to help energy-intensive industries manage the costs of electricity, including increasing the relief from the climate-change levy on electricity to 90 per cent.
  • £55m for the Strategic Rail Freight Network to help remove bottlenecks and improve capability and longer-term connectivity to the UK’s major ports.
  • A seed enterprise investment scheme (SEIS) providing 50 per cent income-tax relief for anyone investing up to £100,000 in qualifying new businesses and a one-year tax waiver on capital gains invested through the scheme.
  • A new research and development tax credit from 2013.

Phil Orford, chief executive of the Forum of Private Business, welcomed the SEIS but said that the government should have done more to encourage private lenders.

‘Small firms need a range of funding options and equity finance is certainly one of these, but lending at interest remains their preferred route by far.

‘Combined with these tax breaks, the government’s new credit-easing scheme and an extended Enterprise Finance Guarantee (EFG), providing incentives for new lenders to compete with the high-street banks, would be more likely to boost competition in small-business borrowing markets, driving up levels of service and bringing down costs. It is a shame that this has not happened.’

Terry Scuoler, chief executive of manufacturers’ organisation EEF, welcomed the help for energy-intensive industries.

‘The government must build on this by sending a signal to companies looking to invest here that it will maintain this package beyond the current spending-review period,’ he said.

‘The government must also work closely with industry to address the competitiveness issues that electricity-market reforms will raise once it has decided how to move forward with them.

Education and skills

The chancellor announced £600m to fund around 100 new free schools, including specialist maths schools for 16- to 18-year-olds to help produce more science and engineering graduates.

A further £10m over five years from 2013–14, matched by investment from the Wellcome Trust, will go into ‘Project Enthuse’ to improve the quality of science teaching in schools.