Osborne CSR 2015

Earlier today the Chancellor delivered his much anticipated 2015 Spending Review and Autumn Statement (you can see all the full documentation here and speech here).

Back in July the Chancellor set out his political narrative when delivering his Budget Statement. The goal to evolve the UK to a higher wage, lower tax and low welfare economy was set out then and echoed again today.

Today’s focus was on how the Conservative Government would deliver the cuts to public spending that it received a mandate to do at the General Election. Revised forecasts from the Office for Budget Responsibility allowed the Chancellor some latitude on how he would meet the projected government surplus. However, whilst the statement was therefore far from the overall tone of doom and gloom that some had predicted, and some budgets were protected or increased (for example defence, international development and policing), it was still an outline of how £12bn of savings would be made from government departmental spending.

So what does it all mean for the UK’s bioscience sector?

As this is a top-line statement, we do not have all the answers today and relevant details will form over the coming weeks and months, but there are some strong signals of the direction of travel that are important to note.

Firstly, the Chancellor has today announced that the science resource budget is protected in real terms and will rise to £5.2bn by 2020. This sits alongside the previously announced £6.9bn in the capital budget. Whilst further details are yet to emerge, this outcome in the wider context of cuts is incredibly positive and is testament to the effort that the science community has made collaboratively to underline the importance of science investment, as set out in the BIA’s Spending Review evidence pack.

Secondly, Innovate UK looks to have received a flat cash settlement. In his speech the Chancellor stated that “spending on our new catapult centres will increase” and the text of the report states “the Spending Review and Autumn Statement increases investment in catapult centres”. No further detail is provided as of yet. As widely trailed, the Government today announced that it “will introduce new finance products to support companies to innovate” replacing some existing Innovate UK grants and reach “£165m per year by 2019/2020”. This suggests that the Government’s recent narrative of “loans not grants” has won the day and that existing schemes such as the Biomedical Catalyst may not continue in their current form. We will be working with Innovate UK and others to understand what this means in practice and how it will impact the life sciences sector. The BIA understands that the Government has been impressed by the approach taken in France by bpifrance (the French Innovate UK/British Business Bank) with whom the BIA has previously engaged with on Citizens’ Innovation Funds. What is essential now is to track this development and ensure fit for purpose initiatives are developed for high risk, high innovation sectors such as bioscience and that Innovate UK can continue to effectively bridge the valley of death for early stage research in life sciences. This will be the BIA’s key focus over the next period of time.

Thirdly, following the publication of the Nurse Review last week, today’s statement has confirmed that structural change is underway for Research Councils. Subject to legislation the Government will introduce a new body, Research UK, which will work across the seven Research Councils. The Government will look to integrate Innovate UK into Research UK in order to strengthen collaboration and commercialisation between academia and the business community, though Innovate UK will retain a separate funding stream and business focus.

Finally, looking across to the Department of Health (DH). Following yesterday’s announcement that the NHS is to receive an additional £10 billion a year above inflation by 2020, with £6 billion ‘frontloaded’ in the first year of the Spending Review, it is encouraging to see Dame Sally Davies’ statement welcoming the protected funding settlements for the DH R&D budget (including NIHR). It is also great to see a new announcement of an initial £4m investment to establish an Antimicrobial Resistance Centre of Excellence in Research and Development at Alderley Park, subject to the usual business case analysis.

Naturally, the full statement contains a raft of interesting references restating the Government’s position in relation to tax, the Northern Powerhouse, devolution, skills, UKTI and the wider business environment.

One particular announcement the BIA will be exploring in further depth is the detail of the previously announced apprenticeship levy. Today’s statement announces that the levy will be introduced in April 2017, applied to businesses with a paybill of more than £3m and at a rate of 0.5% of an employer’s paybill to deliver 3 million apprenticeships by 2020. Further to the BIA’s response to a previous consultation on the levy, we are concerned that the rate of the levy could have significant and arguably unfair impact on firms operating in sectors such as life sciences where the proportion of employees in highly skilled and qualified roles is higher and we will be seeking further clarification on proposals from the Government.

We will be compiling a more detailed analysis of this wider information but we hope this concise summary assists BIA members and the broader bioscience sector with an understanding of the key directions of travel the Statement points to and highlights where we will be focusing our attention in the near-term.

As ever, do contact us with queries or comments and we look forward to keeping in touch on this live and significant policy development.