Public Services

Hammond signals government commitment to R&D and innovation

David Bicknell Published 23 November 2016

Chancellor wants UK to be a 5G leader and announced creation of a national productivity investment fund

Chancellor Philip Hammond's Autumn Statement, the last before being replaced by an autumn budget, has signalled significant investment in research, development and innovation.

Among his key pledges, Hammond announced the creation of a new national productivity investment fund worth £23bn. It will focus on innovation and infrastructure, with investment in research and development rising by £2bn a year by 2020.

"We do not invest enough in research, development and innovation, as the pace of technology advances and competition from the rest of the world increases, we must build on our strengths in science and tech innovation to ensure the next generation of discoveries is not only made here, but developed and produced in Britain," he said.

Hammond set aside an extra £1.1bn for English transport networks, where he said, "small investments can often achieve big wins".

The chancellor also announced plans for a £450m trial of digital signalling on railways, as well as £390m to work to build up a competitive advantage on law emission vehicles and developing connected autonomous vehicles.

An investment of £1bn in digital infrastructure was also unveiled to try and provide "world class" facilities and a leading position for the UK around 5G.

Hammond indicated that departmental spending limits will remain in place, saying £3.5bn efficiency and reform savings must be delivered "in full."

Digital transformation

In areas of digital transformation, the Government Digital Service (GDS) has committed to outline its latest strategy by the end of the year, with some small details of ongoing plans outlined in today's statement.

For instance, the government has committed to ensuring HM Revenue and Customs (HMRC) can support new tax credits claims via digital devices from next April.

Hammond also announced aims to ensure the tax system can better keep pace with the changing nature of how people live and work. By January 2017, the government intends publish its response on consultations on implementing more digitised approach to taxation.

Meanwhile, with the government coming under criticism over final plans to privatise or overhaul the Land Registry's operations, it announced it will remain in the public sector in order to focus on becoming a more "digital data-driven registration business".

"Modernisation will maximise the value of HM Land Registry to the economy, and should be completed without a need for significant Exchequer investment," said the document.

Devolution

The chancellor also committed to negotiate a city deal with authorities in Sterling in order to try and allow every city in Scotland to take up similar arrangements.

New borrowing powers were also set aside for mayoral combined authorities in England as a means to push its devolution agenda further.

Of notable further engagement, both London and the West Midlands were said to be negotiating the possibility of additional powers, the chancellor added.

Under the title of the 'Industrial Strategy Challenge Fund', a commitment was also made within the government's plans to establish a cross-disciplinary fund backing a more collaborative approach between business and the UK's science base to outline key challenges for its researchers to tackle.

"The fund will be managed by Innovate UK and research councils. Modelled on the USA's Defence Advanced Research Projects Agency programme the challenge fund will cover a broad range of technologies, to be decided by an evidence-based process," said provisional documents provided for the statement.

Hammond took steps towards what he described as the problem of innovative UK start-ups being snapped up by larger firms. The chancellor said he would invest £400m through the British Business Bank to take a step towards the problem of UK start-ups being snapped up by larger competitors.

In what he described as a final announcement, Hammond also said he had taken the decision to abolish the Autumn Statement.

"No other major economy makes hundreds of tax changes twice a year and neither should we," he said. "So the Spring Budget in a few months will be the final Spring Budget. Starting in Autumn 2017, Britain will have an Autumn Budget, announcing tax changes well in advance of the start of the tax year.

To amusement in the chamber, the chancellor announced there would be a Spring Statement from 2018, in line with a mandate from parliament to improve budget scrutiny.

Opposition view

In response to Hammond's statement, shadow chancellor John McDonnell raised particular concern about a lack of measures to address fears over a social care system that he argued that was at a "tipping point" for local authorities across the country.

"We call for additional support for social care, but the funding being provided today is only a stop gap measure. Our social care system will not be secure without long-term funding," he said.

The shadow chancellor was also critical of the £1.1bn for English transport networks, arguing it was a renouncement of policies the government had not delivered on.

"There are just no new ideas here, just a promise to deliver what they previously failed to deliver on," he said.

McDonnell said the government's stated ambition to serve as a global leader of a new industrial revolution led by digital technology and transformation was not being delivered.

"It isn't just enough to change a few ministerial titles, the government and the chancellor need to deliver. But we've yet to see the proposed green paper on industrial strategy that was promised over the summer," he said.

"The same government that now talks also of high tech investment also oversaw a £1bn cut in real terms to science funding in the last parliament."

A number of Labour MPs criticised the chancellor for what they called a failure to mention social care within his statement at a time that the NHS was "on the brink".

MP Andy Burnham asked the chancellor why he had mentioned new grammar schools in his oral statement rather than detailing care improvement and innovation aims.

In response, the chancellor said that while the opposition "were fond" of raising the issue of cuts to social care budgets, it was for local authorities to manage budgets as they see best.

Hammond pointed to ongoing commitments around the government's Better Care Fund strategy that aims to deliver more integrated health and social care as an example of its commitments.

"They have to manage the envelope of resource that they are given. What we have done is create a Better Care Fund that by the end of this parliament will be delivering £1.5bn annual into social care. We have allowed local authorities to raise a social care precept that by the end of this parliament will be delivering another £2bn a year," he said. "That is £3.5bn in of additional funding into the social care system."

Responding to today's statement, the King's Fund thinktank was critical of what it said was an absence of health and social care funding expected to increase the already "intense pressures" on service providers and the wider NHS.

King's Fund policy director Richard Murray warned of a "threadbare" safety net being stretched even further, with potential impacts for already vulnerable people.

"While the increase to the national living wage is welcome, it will add to the costs faced by local authorities and social care providers, making an already fragile market even more unstable," he said.

"The government will also need to look again at health funding in future. The planned increases in health spending are not enough to maintain standards of care, meet rising demand and transform services. In particular, the pressures will peak in 2018/19 and 2019/20, when there is almost no planned growth in real-terms NHS funding."

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