The timing was unfortunate. Just two days after Rishi Sunak reiterated his ambition for Britain to be ‘at the forefront of global scientific and technological advancement’ with the creation of a new Department for Science, Innovation and Technology, AstraZeneca announced it was no longer going to build a £300m manufacturing plant in the UK. Chief Executive Pascal Soriot said his company had chosen Ireland over Britain because our tax rates and other regulations were ‘discouraging’.
This unlucky coincidence suggests that the biggest obstacles to realising the new Department’s laudable mission to ‘to turn scientific and technical innovations into practical, appliable solutions’ may be the Government’s own policies.
Let’s start with tax. With corporation tax rising to 25% this April and the super-deduction expiring at the same time, it’s hardly surprising that companies like AstraZeneca are choosing to jump before they are pushed over this cliff edge. Likewise, Shell and Equinor have said windfall taxes mean they will invest less in North Sea oil. Research from our parent organisation the Centre for Policy Studies shows that the UK is set to fall to 33rd out of 38 OECD countries in the International Tax Competitiveness Index, well behind big players in science and tech like the US and Japan.
CPS research also shows that a business-friendly environment is almost as important to investors as headline tax rates. The Chancellor’s ambitious talk about making the UK ‘the next Silicon Valley’ coming at a time when the Government is pushing through the onerous and unwieldy Online Safety Bill will surely send mixed signals. Much has been made of the threat this bill poses to free speech, but CapX writers have also warned that it will deter internet start-ups with fewer resources to comply with the raft of new regulations.
Then there’s that great enemy of growth and this site’s personal bête noir – a planning system that makes it overwhelmingly difficult to get anything built. If Sunak wants scientists to make the discoveries of the future in Britain, then they need laboratories to do it in, not to mention places to live. Yet more CPS research shows that lab space is in perilously short supply and far more expensive than in rival countries.
There is a political problem too. Rumours that Sunak initially offered the job of Secretary of State in the new Science department to Michael Gove are an indication of just how important he thinks it is. But though promoting science and innovation may be at the core of Sunak’s agenda, it is not what this Government was elected to do back in 2019. In fact, it is arguably fundamentally at odds with its mandate.
The most likely location for the next Silicon Valley is somewhere that, like California, has existing strengths in research and industry as well as being a desirable place to live. That sounds a lot more like London or Oxford and Cambridge than it does the places most in need of levelling up. Gove’s refusal to leave the Department for Levelling Up is perhaps a hint he recognises this tension.
Sunak is clearly personally animated by his vision of Britain as a ‘science superpower’, but voters struggling with the cost of living and public services that don’t work may have different priorities.
While it’s easy to reach for the cliche about deckchairs on the Titanic, this week’s reshuffle was, on balance, a sensible move. Britain will be spending £22bn a year on R&D by the end of this Parliament and it’s right to have a Secretary of State accountable for that. But CapX readers don’t need reminding that governments don’t create innovation, free markets do. So perhaps the best thing this new Department can do is get out of the way.
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