Some thoughts on the Commons PAC report on the Industrial Strategy Challenge Fund
The House of Commons Public Accounts Committee, which scrutinises government spending with the support of the National Audit Office, has published the report of its inquiry into the Government's Industrial Strategy Challenge Fund. I was asked by Research Fortnight (link to paywalled piece here) to give a comment on the conclusions, and here's a longer version of my initial reactions to the report, in case anyone is interested.
The report criticises the ISCF for a focus on R&D and inputs rather than productivity or jobs impacts. It’s fair comment that the Government doesn’t seem to have articulated a clear idea of how the programme is to supposed to achieve the ultimate impacts sought from the Industrial Strategy of which this was a part. However, in the end the ISCF is clearly an R&D programme, so criticising it for focusing on increasing levels of R&D and R&D collaboration seems to me a bit unfair.
Whilst the Government doesn’t seem to have a clear underlying theory of action as to how ultimate impacts are expected to come about, the committee clearly has an implicit model in mind, given the stress it puts on intellectual property protection, SMEs and regional balance. But they don’t make their model explicit either, and there’s always a danger that politicians have an unrealistically broad set of expectations in terms of the outcomes from such programmes and at the same time unrealistic expectations about the directness and speed with which those outcomes should be achieved. The committee don’t say why they think it is important SMEs should be more represented, nor why they think it is a problem that projects are concentrated in a few regions. These are not necessarily unreasonable objectives but there is a real danger of overloading any one programme, however large and ambitious, with multiple and contradictory goals. Arguably, if these objectives are so politically important, then perhaps they deserve their own programmes?
What next for the ISCF? I guess at the very minimum it will be rebranded in the forthcoming innovation strategy. There’s more emphasis on productivity these days so we might see the adoption of language about that. We could see more emphasis on diffusion and adoption of innovation in the coming strategy, and this could partly be influenced through changes in public procurement (the Government's Green Paper consultation on 'Transforming Public Procurement' closed recently). It would be great to see more recognition of the fact that the UK, as an 80% services economy, will need more than just more R&D to achieve the Government's goals. Hopefully we will see more emphasis on sector-specific innovation policies for non-R&D based sectors.
However, given the 2.4% target, big R&D programmes are still going to be a part of the policy mix around innovation, and this makes sense given where the UK currently is - strengthening (for some sectors) and rebuilding (for many sectors) industrial and collaborative R&D capacity is a necessary first step.