The chancellor, Rishi Sunak, has delayed £2bn in annual spending on research and development (R&D), even as he committed to funding a new advanced research body that was the idea of ex-No 10 adviser Dominic Cummings.
The government will spend £20bn a year on R&D investment in the 2024-25 tax year, down from a previous commitment of £22bn, Sunak said in the autumn budget on Wednesday. The £22bn target will be hit two years later than previously planned, in 2026-27.
The earlier target was announced in the March 2020 budget, which was delivered before the UK’s first pandemic lockdown and the historic recession it prompted.
The delay in spending was also likely to further push back the Conservatives’ 2019 manifesto commitment to spend 2.4% of GDP on R&D, said Benjamin Craig, senior manager for R&D tax incentives at Ayming, a consultancy. Sunak said the UK would spend only 1.1% of GDP by 2024.
However, he also announced £800m over the next five years – including £50m by March – to fund the Advanced Research and Invention Agency (Aria), a new body that will fund “high-risk, high-reward” technologies. Aria was initially backed heavily by Cummings, the former adviser to Boris Johnson.
The chancellor also promised increases for existing research funding bodies. This included a £400m boost in the budget of Innovate UK, which gives grants to promising technologies, by 2024-25. The Aerospace Technology Institute will receive funding for research including lower-emissions planes until 2031, in welcome news for the aviation industry after the programme was previously frozen.
In his budget speech Sunak also announced new R&D tax reliefs that he said would help the UK to remain a “science superpower”. The reliefs, which businesses use to cut their corporate tax bills, will be expanded to include data and cloud computing costs.
Rain Newton-Smith, the chief economist of the Confederation of British Industry, the UK’s largest business lobby group, said there were “some positive steps forward”, including the extra funding for Innovate UK and the changes to R&D tax reliefs.
However, she said business leaders were concerned about the end of the government’s “super deduction” tax break in 2023, saying a rise in corporation tax from the current rate of 19% to 25% at that time could discourage investment in new technologies.
“It takes 18 months to approve expenditure, so those decisions are being made now,” Newton-Smith said. “It looks like the chancellor will want to look at the evidence for the super-deduction. But we’re of the view he could do something around that now.”
