The government will pump at least £800m into a new “blue skies” science research agency as part of a series of pro-business measures designed to boost Britain’s competitive edge.
The UK agency, the brainchild of Boris Johnson’s closest political adviser, Dominic Cummings, will fund “high-risk, high reward science” and will be modelled on the Advanced Research Projects Agency (ARPA) in the US.
The ARPA project grew out of the Cold War, having been launched by the American government in 1958 in response to the Soviet Union’s launch of the world’s first satellite, Sputnik. It later was renamed DARPA after its focus shifted to defence and national security.
The chancellor, Rishi Sunak, said on Wednesday that it was time for the UK to return to its own pioneering roots. “We are the country of Newton, Hodgkin and Turing,” he said. “Ours is a history filled with ideas, invention and discovery and it is truly a national history: the first steam railway ran between Stockton and Darlington, the first television was invented by a Scot. A Welshman invented the hydrogen fuel cell, and Jocelyn Bell Burnell, born in Northern Ireland, discovered the first radio pulsars.
“To compete and succeed over the next decade and beyond, we need to recapture that spirit.”
The agency is part of plans to increase public investment in research and development from £11.4bn currently to £22bn per year by 2024-25 and make the UK “one of the scientific and research centres of the world”.
The extra funding includes £900m in spending to develop the government’s national space strategy and space innovation fund over the next five years, as well as to commercialise nuclear fusion technology through the UK Atomic Energy Authority. It will also help develop UK supply chains for large-scale production of electric vehicles, a move announced in September.
Around £400m of the £22bn pot will support world-leading research, infrastructure and equipment at institutes and universities across the UK, while £300m will be aimed at experimental maths research, boosting funding for PhD programmes and fellowships.
Companies will receive a slightly larger tax break on their own R&D spending. The allowance will rise from 12% to 13%, meaning businesses would save around £2,400 worth of tax on a typical claim.
Sunak is also expanding a tax allowance aimed at stimulating investment in new structures and buildings from 2% to 3%, which could provide £100,000 worth of relief for businesses investing in buildings worth £10m. That is on top of emergency business rate cuts – which will result in the scrapping of business property taxes over the next financial year – and an increase in employment allowance that gives certain businesses the chance to reduce their national insurance bill from £3,000 to £4,000.
But in order to save cash, the Treasury has scrapped plans to cut corporation tax from 19% to 17% on 1 April. The move is expected to raise around £33bn in total for the Treasury over the next five years.
The chancellor also unveiled a funding package to support growing businesses, with £130m earmarked for extending the startup loans programme and £200m set aside for the British Business Bank to invest in new companies looking to grow in size.
As part of efforts to boost the UK’s global exports, the government is planning to install dedicated trade envoys representing the North, the Midlands, Wales and the West of England in embassies across the world. Meanwhile, UK Export Finance – the government agency responsible for promoting British exports with credit, guarantees, loans and insurance – will receive an extra £2bn to help finance green projects, while an extra £1bn will be used to support overseas customers looking to buy goods and services from the UK’s defence and security sector.
Suren Thiru, head of economics at the British Chamber of Commerce said: “With business investment persistently anaemic, we are pleased to see the chancellor deliver sharper incentives for businesses to invest. The increase in the R&D expenditure credit and structures and buildings allowance will give companies across the UK a helping hand to push ahead with investments in plant & machinery and property.”
Carolyn Fairbairn, director general of the Confederation of British Industry lobby group, said the pro-business measures proved the government was taking “decisive action on vital long-term issues”. She said there were still some gaps that the government failed to address around skilled workers, energy efficiency and transitioning the UK to a low-carbon future, but that overall it sent a powerful signal about the UK’s approach to long-term opportunities.
“The significant uplift in R&D funding, creation of a UK version of ARPA, a fundamental review of business rates and spending promises on infrastructure will all bring real benefits to people, business and communities.”