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Government changes
8-October-2008
Let’s hope that the new Secretary of State for Business can bring some sense to what has become a diffused and ragged Science & Innovation policy that is neither helping Research nor Business. I expand on this in a fuller article which first appeared in the Research Fortnight magazine on 8 October 2008.
To see the full article click here.
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Boston Consulting Group annual survey
10-September-2008
Just published is the 2008 survey. The report suggests that there is rising dissatifaction with the return on innovation investments. In my experience this is usually due to poor planning and poor project execution. Understanding the job the customer is trying to achieve, objectively comparing ideas with competitor offerings, seeking out collaboration to deliver something new/ innovative and strongly managing the implementation to ensure successful exploitation should be demanded by CEOs before any investment is made. I would be happy to work with any CEO to increase the success of their innovation investments!
For the full BCG report please follow this link .....
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UK R&D tax credits
24-August-2008
What possible basis is there for the recent Treasury suggestion that R&D tax credit for SMEs will increase by £80million pa? In fact if you look at the actual support claimed by SMEs it has fallen from £210 million in 2002-03 to £180million in 2005-06 (the latest published figures). By contrast, the amount claimed by large companies has risen from £180 million in 2002-03 to £420 million in 2005-06. Large companies are
obviously getting better at claiming the tax credit because during this time actual company spend on R&D did not increase at all. A high profile debate is now required to quickly determine the most effective way for
government to support business growth in the UK, particularly small innovative
companies. I hope that the major industry organisations—the CBI, IoD, EEF, TUC,
BCC—will put this issue high on their agendas.
To view the full commentary click here
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Innovation Nation white paper.
19-March-2008
Three cheers for the new
White Paper on innovation, Innovation Nation, published
on 13 March by the Department for Innovation,
Universities and Skills (DIUS) —because at the very least it increases pressure on government to do more on innovation policy. The paper does cover a wide range of
important issues and, for the most part, the direction
outlined looks right. Having said that, however, the
paper lacks detail, is very light on tangible actions,
falls short on a pace-setting agenda and does not yet
demonstrate that DIUS really understands how business
operates. I expand on this in a fuller article which first appeared in the Research Fortnight magazine on 19 March 2008.
To see the full article click here.
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Back to basics for the Technology Strategy Board
10-October-2007
The old DTI Technology Strategy Board has been revamped and relaunched as an 'arms length' agency reporting to the new DIUS department. In my view the new TSB lacks a clear strategy, is underfunded and too far removed from innovation policy. This article traces the history of the TSB and makes some suggestions going forward. The article first appeared in the Research Fortnight magazine on 10 October 2007.
To see the full article click here.
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R&D tax credits - poor value for money?
10-October-2007
David Cameron’s task force on science seems to have concerns about the R&D tax credit. Their recent policy paper states:
“We recommend the R&D tax credit should be retained, but the effectiveness of the tax credit in stimulating additional R&D should be carefully examined”. There are practical reasons for retention. For a start, dismantling of a credit that some firms have come to rely on could be punitive if swept away overnight. But, from a national point of view, the R&D tax credit is demonstrably not good value for money. There are two reasons for this. First, there is now ample evidence from economic research that while an R&D tax credit will increase business expenditure on R&D, its full impact will be felt only after a period of up to 10 years. In addition, the eventual benefits are limited for the costs involved. Economists conclude that for every £1 of permanent tax break an extra £1 will be spent on R&D. At the current level of spending on tax (£600 million per annum), this means that the Inland Revenue must forfeit £6 billion in taxes over 10 years to generate an annual increase in business R&D that reaches £600m only by the end of the 10-year period. And yet, even an increase of £600m per annum, if achieved, represents just 4.5 per cent of the current level of business spending on R&D (£13.4bn, in 2005). This is nowhere near the increase of 50 per cent that is required if the Treasury is to meet its target for R&D spending by industry of 2.5 per cent of GDP by 2014. Second, around 80 per cent of the value added to the UK’s economy is generated by highly successful and innovative businesses, such as the financial services, the oil & gas sectors and the creative industries. These enterprises are significant users of technology but they traditionally report low R&D expenditure because of the very restrictive definition of R&D. The Conservative party paper highlights this and calls for innovation in the service sectors to be recognised. Meanwhile, the Sainsbury Review, released last week, has reached the astonishing conclusion that the R&D tax credit is a success. The basis of this claim is an economic study (Do R&D tax credits work? Evidence from a panel of countries 1979-1997 by Bloom, Griffiths and van Reenan,
Journal of Public Economics, August 2002). But that paper concludes that “a 10 per
cent fall in the cost of R&D stimulates just over a 1 per cent rise in the level of R&D in
the short-run, and just under a 10 per cent rise in R&D in the long-run.” This is precisely the point that I make above—huge expenditure for limited benefit.
In addition, the review overplays the 2005 HM Revenue & Customs survey of R&D tax credit users in saying that 57 per cent felt the initiative was an incentive to boost R&D. The more telling response is that only “around a fifth, 19 per cent, of the successful claimants took the expected value of the tax credits into account when setting budgets.” So there is very little evidence to suggest that the initiative
encourages businesses to do more R&D, and much evidence to suggest that tax credits are a heavy deadweight cost to taxpayers. A high profile debate is now required to quickly determine the most effective way for government to support business growth in the UK. I hope that the major industry organisations—the CBI, IoD, EEF, TUC, BCC—will put this issue high on their agendas.
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New voices in support of wider innovation
17-June-2007
For some time, I have been commenting that wealth creation through innovation is far more than science. It was therefore interesting to see in the Sunday Times today that The Secretary of State at the DTI has now recognised the importance of the low R&D (but high value adding) 'service sector' in creating economic growth. In the same article Jonathan Kestenbaum, the new Chief Executive of NESTA makes exactly the same point. He has coined the phrase 'hidden innovation' to describe those activities which are going on but not widely publicised and is quoted as saying, "Too many people still see innovation as the reserve of scientists and in doing this they overlook our broader capacity for innovation in the UK."
To find the most profitable area for innovation in your business please call me for a confidential discussion.
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R&D tax credits - the King's clothes?
5-April-2007
The recent Budget report from the UK Treasury says, "As one of the key drivers of productivity growth, the Government has ensured the tax system acts as a positive incentive for business innovation. ....... As innovation becomes increasingly important in maintaining the UK’s globally competitive position, R&D tax credits play an even greater role in the UK’s response to globalisation." Really? where is the evidence for this? Innovation is much more than inventing new technology. What about all those companies who are successfully innovating by motivating their staff, thinking up new ways of doing business and collaborating in the open innovation model?And what about all those companies whos are really adding value to the economy but are not eleigible for the R&D tax credit because they are not covered by the very restrictive definition of R&D? It is time to start a discussion on how government support can really benefit business.
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Government support for Enterprise & Innovation
1-March-2007
Are Britain’s smaller businesses really worth all the government money that’s being spent on them? This provocative question was posed when February’s Cambridge University Centre for Business Research (CBR) conference on Enterprise and Innovation unveiled the picture of the enterprise economy painted by six successive CBR surveys in 13 years.
So now instead of continuing to hand out hefty tax breaks – like R&D tax credit and the zero rate corporation tax – alongside funding for training and other such government support expenditure that now totals a hefty £7.9 billion, shouldn’t the government be asking for its money back? Or at least asking what it,and the British economy, is getting in return? It’s a question that does not surprise CBR director Alan Hughes: “It’s true we are spending an awful lot of public money – the equivalent of £220 per year for every person of working age in Britain,” he says. “And what is more, it’s being spent through a very wide range of government departments and through lots of different programmes. Individual support programmes, especially in the DTI, are carefully evaluated. But what is not clear is whether anyone has asked what we are getting back in aggregate for all this spending, and whether we should be spreading the funding so widely. The time is right for the question to be asked, should business support spending be more focussed?” ...................
Well, let’s see if the forthcoming Budget answers this very important question.
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The Cooksey Review -UK health research
5-January-2007
Sir David Cooksey has produced a report with recommendations which among other things attempt to bridge gaps between research and clinical application. This is very surprising to me as analysis of the US experience (National Institute of Health) shows little evidence of a direct correlatiion between investment in basic research and exploitation. Basic research is a vital investment for government both for the skilled people and the knowledge it generates. But innovation strategy for wealth creation is all about providing goods and services that add value to what people do -- not artificially trying to push scientific research into commercial exploitation. There is a huge danger that the basic research capability will be weakened and no real commercial benefit will be gained.
In another interesting recommendation, there will be an intermediate body (OSCHR) which will arbitrate Medical Research Council and Dept Health research funds. I fear this will add another level of administration into the process and further dilution of basic research. The Treasury is asking the Research Councils to demonstrate the economic benefits of the money that has been invested in research. Are they behind this latest move? Personally I doubt whether such a direct correlation exists.
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Government Technology Strategy
5-November-2006
The Technology Strategy Board has just announced it's latest call for proposals. The technology direction continues to build on the work of earlier calls and the process for application is improving with every round. BUT I am worried. This round of funding (£50 million) appears to be substantially lower than previous rounds which had grown to £80-100 million. This inevitably means a stalling in the momentum which had been building on this exciting new programme. I asked the chairman, Graham Spittle, whether the funding would be increased in future calls and what his budget would be for the new 'arms length' arrangement for the TSB. Alarmingly he could give no assurances on either of these points. I will be writing a fuller article on this issue in the New Year.
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Comments on HM Treasury Science & Innovation strategy
31-August-2006
With the Spring 2006 budget, the Treasury published a consultation on their 10-year Science & Innovation Investment Strategy: next steps. The Royal Academy of Engineering has made a response raising several important issues.
The RAE response can be downloaded here.
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