Press Story

Embargoed: 00:01h Friday 7 June 2013

Poorly targeted tax credits for research and development are failing to rebalance the UK economy, according to the final report of the Commission on the Future of Higher Education, published by the think tank IPPR next week (10 June). The report will argue that, much of the benefit of R&D tax credits currently goes to large firms in London's financial and business services sectors but should instead be directly invested in strategically important R&D through new Applied Research and Innovation Centres in universities.

At the moment, the Government funds 'Catapult' centres in UK universities but IPPR's Commission says they are poorly funded, lack a strategic remit to support economic rebalancing, and only have limited engagement with SMEs. While Catapult centres currently have just £50m of funding a year, the IPPR Commission's reform plan would transform them into Applied Research and Innovation Centres with just under £1 billion a year.

The Commission's report argues that R&D tax credits are not sufficiently targeted at those areas where the country needs to raise its research and innovation rate if the economy is to be rebalanced. It recommends reducing the R&D Expenditure Credit for large companies, reducing the 'Patent Box' tax break from 20% to 15% and investing funds from older telecoms spectrum that has not been charged to companies.

These funds would be in addition to the existing £4.6 billion science and research budget, which the Commission argues should continue to be ring fenced and sustained in cash terms through the next Spending Review. In order to enhance innovation and support future economic growth the science and research budget should be increased annually above inflation once the deficit has been eliminated, which is currently estimated to be in 2017/18.

Nigel Thrift, Chair of IPPR's Commission on the Future of Higher Education and Vice Chancellor of Warwick University, said:

"We need better funded Applied Research and Innovation Centres located in regions where there is business capability for expansion and there should be a priority on areas of significant economic disadvantage that need to rapidly improve their levels of business innovation. These centres should be tasked with helping to lead local economic regeneration."

The Commission argues that overall aim of the Applied Research and Innovation Centres should be to bridge the gap between research findings and outputs, and their development into commercial propositions. They should:

o Create and maintain expansive directories of the most excellent researchers working on basic research in their respective field, as well as the companies working on issues of potential relevance to basic research.
o Provide a location for experts working on innovations at different levels of technology readiness to come together to discuss the bigger picture and strategic direction of their field, and to learn about one another's specific activities and work.
o In collaboration with universities run a small number (or just one) expansive basic research project at each centre that addresses a long-term future need of that centre's focus. This would ensure that long-term future vision is an integral part of their work, along with the commercial orientation.
o Enable businesses to share R&D costs, access skilled researchers and utilise expensive equipment which would otherwise be out of reach. This will reduce risk and shorten time to market;
o Provide greater critical mass in research expertise and business capability, exploiting knowledge across value chains by co-locating multiple players in a physical hub for interaction;
o Strategically focus R&D investment in the development of new technologies in areas where global markets are expanding and where the UK has excellent research and business capability;
o Leverage private sector investment alongside public investment, to help raise business investment in R&D.

The Commission says they should broadly cover the same sectors as the catapult centres:
o high value manufacturing,
o cell therapies,
o offshore renewable energy,
o satellite applications,
o the connected digital economy,
o future cities, and
o transport systems.

Notes to Editors:

The final report of IPPR's Commission on the Future of Higher Education will be published on Monday 10 June and will be available from: http://www.ippr.org/publication/55/10847/a?critical?path?securing?the?future?of?higher-education?in?england
The members of IPPR's Commission on the Future of Higher Education are:
Chair: Professor Nigel Thrift, Vice Chancellor and President, Warwick University
o Professor Janet Beer, Vice Chancellor, Oxford Brookes University
o Professor Sir Steve Smith, Vice Chancellor, University of Exeter
o Professor Sir Rick Trainor, Principal, King's College London
o Thom Arnold, President, Sheffield Students' Union, 2011-2012
o Dame Jackie Fisher, Principal and Chief Executive, Newcastle College Group
o Dr Sandra McNally, Director of the education programme at the Centre for
o Economic Performance, London School of Economics
o Hugh Morgan Williams, Chairman, Canford Group plc and North East Access to Finance Ltd
o Professor John Sexton, President, New York University

Contacts:

Richard Darlington, 07525 481 602, r.darlington@ippr.org

Tim Finch, 07595 920 899, t.finch@ippr.org