Budget 2018 - Chancellor announces £1.6 billion additional funding for Industrial Strategy

The government’s Autumn Budget this year didn’t have the same emphasis on productivity and technology investment that we saw this same time last year. Chancellor of the Exchequer, Philip Hammond, took to the House of Commons to instead focus on the message that ‘austerity is coming to an end’.

In fact, Hammond did reference technology and productivity being important to the UK, but said that he would leave it up to everyone to go and read the finer details in the ‘red book’, rather than go into detail during his speech.

The most interesting announcement was that the government has decided to go it alone by announcing a digital services tax on the internet giants - which has been talked about a lot, but has generally been considered unworkable without global cooperation. My colleague will be writing up that announcement in a separate piece, which will be posted shortly.

However, what of the other key announcements? Primarily, an additional £1.6 billion of funding will be made available to support the government’s Industrial Strategy, which was announced in November last year and aims to boost the UK’s productivity.

In addition there are some interesting announcements regarding AI investments, which follows the government’s recently announced £1 billion AI sector deal.

On the productivity and Industrial Strategy announcements, the Budget document notes:

The government has also made significant strides to boost growth by cutting business taxes to stimulate investment, and has increased investment in the teaching of science and maths. The government is also acting to ensure businesses and consumers continue to benefit from new technologies, including by asking Jason Furman to lead a review of competition in the digital economy. The government’s modern Industrial Strategy will support this effort.

The Budget sets out a vision for an economy driven by research and innovation, and announces a further £1.6 billion for R&D funding. The government is providing additional funding to support the Industrial Strategy Grand Challenges and secure the UK’s position as a world leader in new and emerging technologies such as Artificial Intelligence (AI), nuclear fusion, and quantum computing.

Building on the government’s long-term commitment to R&D, and the Industrial Strategy ambition to raise total R&D investment to 2.4% of GDP by 2027, the Budget includes significant additional support for cutting-edge science and technologies that will transform the economy, create highly skilled jobs, and boost living standards across the UK.

As part of this investment in R&D, the government will increase the Industrial Strategy Challenge Fund by £1.1 billion. This includes:

• Up to £121 million for ‘Made Smarter’ to support the transformation of manufacturing through digitally-enabled technologies, such as the Internet of Things and virtual reality
• Up to £78 million for the Stephenson Challenge, supporting innovation in electric motor technology, making vehicles lighter and more efficient than ever before.

The government will also invest a further £235 million to support the development and commercialisation of quantum technologies, including up to £70 million from the Industrial Strategy Challenge Fund, and £35 million to support a new national quantum computing centre. The Budget states that “these technologies will transform capabilities in computing, sensing and communications, bringing promising new approaches to solving global problems such as disease and climate change”.

AI, AI, AI

As noted above, the government has clocked that ‘AI is the future’ and is already taking strides to invest in its capabilities, largely through the £1 billion AI sector deal establishing the UK’s Centre for Data Ethics.

However, the Budget has some further investments in it that are worth noting - including the only two mentions to the Government Digital Service.

The Budget sets out the following next steps:

• the Office for AI and Government Digital Service (GDS) will review how government can use AI, automation and data in new ways to drive public sector productivity and wider economic benefits. This will feed into the innovation strategy being led by the Cabinet Office
• the Data Science Campus at the ONS and the GDS will conduct an audit of data science capability across the public sector, to “make sure the UK public sector can realise the maximum benefits from data”
• The Budget announced that the Centre for Data Ethics has been commissioned to study the use of data in shaping people’s online experiences, and the potential for bias in decisions made using algorithms
• To attract, retain and develop world-leading research talent, the government will invest up to £50 million in new Turing AI Fellowships to bring global researchers in AI to the UK, and £100 million in an international fellowship scheme.