Preparing for the Spending Review | Part 1: The Context

This is the first edition in a new series of blogs on the 2019 Spending Review by BIA’s Senior Policy and Public Affairs Executive, Eric Johnsson, who is leading our work in the area. Below he takes a look at the background and some factors to consider this year’s Spending Review.

When Brexit seemingly takes up an ever-increasing amount of time and resources, it’s important (and perhaps even – dare I say it – refreshing) to remember there are other matters of great concern for the life sciences sector. 

One of those matters is this year’s Spending Review (SR)– the process by which the Government decides how much each government department will spend within a given period. This has a major impact on our sector as public funding bodies, such as UK Research and Innovation (UKRI), its Councils and the National Institute for Health Research (NIHR), are funded through government departments. 

In other words, during the SR, it’s vital to demonstrate to the Government that the UK is a world leader in life sciences and why more public investment into our sector is good for the health and wealth of the country. As such, it is one of the BIA’s priorities for 2019.  

The Treasury, which leads on the SR, has not confirmed how many years the SR will cover, but last month the Science Minister Chris Skidmore told a parliamentary committee that the SR will determine spending priorities for the period 2019-2023. In non-Brexit times, the SR would’ve probably received a whole lot more attention than it has done so far. Here’re four reasons why this year’s SR is particularly important. 

1. The 2.4% R&D target
   For starters, it is the first SR since the Government made a commitment  to reach 2.4% of GDP investment in R&D by 2027. This 2.4% target includes both public and private R&D investments. Both need to increase to reach the target. 
   
   To boost the public investment, which accounts for about one third of the total R&D invested, the Government has committed to the investment of an additional £7bn of public money up until 2021/22. Already this new investment alone makes this SR very different from the one in 2015, which took place at the height of austerity and threatened to slash the science budget (in the end the £4.7bn science budget was protected in real terms until 2019/20,  thanks in no small part to the joint lobbying efforts of the entire science community). 
   
   Private investment, which accounts for around the other two thirds of the total R&D invested, needs to increase by around 33%. In the 2015 SR, the BIA campaigned to demonstrate how grants from the Biomedical Catalyst totalling £130m leveraged over £100m of private capital and enabled those companies to go on to raise over £1bn in further private finance. Given the importance of the 2.4% target for this year’s SR however, it is arguably more important than previously to demonstrate how every pound of public money that goes into the sector attracts further private investment. 
    
2. The formation of UKRI
   Secondly, this is the first SR since the formation of UKRI. The umbrella body operates across the UK with a combined budget of more than £7bn and brings together Innovate UK, the seven Councils and Research England. Most of the Government’s R&D boost is being distributed through UKRI. So far, UKRI hasn’t announced the respective budgets for Innovate UK and each of the Councils beyond 2019/20, which may restrict their ability to commit to long-term funding. As a well-funded ecosystem is vital for the competitiveness of the sector and its ability to attract new investment, this year’s SR is perhaps an opportunity for UKRI to determine the budgets for a longer period. 
    
3. Sector Deals and the UK’s increasing global competitiveness 
   Thirdly, this is the first SR since the publication of the Life Sciences Industrial Strategy and the two Life Sciences Sector Deals. Last December, on the first anniversary of the first Sector Deal, the life sciences became the first sector to secure a second Sector Deal. Both Sector Deals take forward many of the recommendations in the Life Sciences Industrial Strategy and the Government and industry are together overseeing the implementation of the Sector Deals through the Life Sciences Council, which was formed last year. 
   
   These efforts send strong international signals that the UK is serious about life sciences and BIA data shows that the Government is right to back the sector. UK biotech raised a record £2.2bn in 2018, almost double the amount raised in 2017. Across Europe, UK companies accounted for 40% of all biotech venture capital raised and 45% of funding raised through IPOs. The SR is an opportunity for the Government to continue to build on years of successful Industrial Strategy for the life sciences and make a firm funding commitment to the sector.
    
4. The elephant(s) in the room
   
   Finally, this is the first (and perhaps only) SR that will cover the  period in which Brexit takes place. The life sciences sector is facing many uncertainties – including access to talent and Horizon 2020’s successor Horizon Europe – that the SR could help mitigate. 
   
   But (believe it or not) economic uncertainty and changing geopolitics go beyond Brexit and the UK. The US and China continue to battle it out over tariffs while the highest court at the World Trade Organization (WTO) is slowly losing its ability to resolve disputes. At the same time, both the US and China are recognising the life sciences as an industry of the future and are committing considerable public investment to support their sectors. 

Despite these efforts by competing countries, the UK’s sector remains strong and the SR is an opportunity for the sector to further cement itself as the clear European leader while also allowing it to continue to challenge clusters in California and Massachusetts.

There’s more to come. This blog is the first in a series on the SR. Part 2 will be published shortly, in which  I’ll look at a recent event on the SR which we organised as part of the All-Party Parliamentary Group (APPG) for Life Sciences. Until then!