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HM Treasury Autumn Budget and Comprehensive Spending Review

Chancellor Rishi Sunak presented the government’s autumn Budget and comprehensive spending review promising it was paving the way for a post-Covid economy that was “fit for a new age of optimism”. But while he reaffirmed the government’s commitment to the skills agenda and increased funding for research and development – albeit at a slower rate than originally planned – his statement omitted key decisions on higher education funding and student finance. Instead the sector has been left waiting for the government’s final response to the Augar report, which among other things recommended a cut in tuition fees.

View the full budget document

View the Chancellor’s speech to Parliament.

At-a-glance:

  • The Chancellor confirmed last year’s pledge to increase R&D investment to £22bn, but said this would come two years later than originally planned. In his Commons statement he told MPs that in order to “deliver on our other priorities” the target would be met in 2026/27, with R&D spending rising to £20bn “by the end of this Parliament” (May 2024) (speech)
  • He said the £20bn represented a cash increase of 50% and was in addition to the cost of R&D tax reliefs. Combined with the tax reliefs total public investment in R&D was rising from 0.7% of GDP in 2018 to 1.1% of GDP by the end of the Parliament (speech)
  • The Chancellor confirmed that core funding “for the UK’s world-leading universities and research institutions” will increase by £1.1bn per year by 2024-25 compared to 2021-22 (2.48)
  • There will be full funding for association to Horizon Europe, enabling further collaboration with European partners. “In the event that the UK is unable to associate to Horizon Europe, the funding allocated to Horizon association will go to UK government R&D programmes, including those to support new international partnerships,” says the Budget statement (2.38)
  • The Turing Scheme will be funded for the next three years, including £110 million for the academic year 2022/23, funding “thousands of students” across the UK to take up placements and exchanges overseas (4.16)
  • There will be £800 million by 2025-26 for the new Advanced Research and Invention Agency (which includes the £50 million provided in 2021-22); funds for the UK to become the first country to launch a rocket into orbit from Europe in 2022, with the aim of becoming a leader in commercial small- satellite launch (4.71)
  • Investment in R&D outside of the Greater South East of England will increase as government investments in research, development and innovation grows over the next three years. The government will set out the plan for doing this in the forthcoming Levelling Up White Paper (4.71)
  • Funding for core Innovate UK programmes will increase to around £1bn per year by 2024-25, driving high-tech innovation and leveraging in private investment. The government will also provide “significant backing” for priorities identified by the new National Science and Technology Council, including AI, quantum computing and space technologies (4.71)
  • Outside of research, many key decisions on HE funding have been delayed. While the Department for Education overall has been promised a real terms funding uplift of 2.4 per cent, the Chancellor stated that “further details of the higher education settlement alongside the response to the Augar report, will be published in the coming weeks”.
  • Total spending on skills will increase by £3.8bn by 2024-25, equivalent to a cash increase of 42% (26% in real terms) compared to 2019-20. (4.13)
  • There will be £2.8bn capital investment across the spending review period so young people and adults can learn in “high-quality facilities”; to establish 20 Institutes of Technology across England; and improve the condition of further education colleges in England (4.13)
  • The Chancellor announced a total investment of £554 million by 2024-25 to substantially increase retraining and upskilling opportunities for adults. This provides a 29% real terms uplift in adult skills funding compared to 2019-20 and meets the government’s commitment to a National Skills Fund. Apprenticeship funding goes up to £2.7bn by 2024-25 (4.13)
  • To ensure that economic opportunities are spread more evenly across the UK, the Chancellor announced £1.4 bn over the spending review period for the Global Britain Investment Fund to support investment in the UK’s life sciences, offshore wind and automotive manufacturing sectors (4.74)
  • Economic growth and a green industrial revolution across the UK will attract and retain inward investment by continued expansion of the Global Entrepreneur programme and the establishment of a new Global Talent Network to attract the best global talent in science and technology to the UK (5.17)

Implications for governance

The extra investment in research and development announced by the Chancellor represents some genuinely good news for universities, and HE leaders will be encouraged to see that at least some of their messages about the key role of the sector in rebuilding the UK’s economy have been heard.

But the further delay in the government’s response to Augar, along with more details on the budget settlement for HE, mean an extended period of uncertainty and planning blight for institutions. There may be hope that by publishing its spending review first, the government may be limited in how it responds to the Augar recommendations. But for now proposals such as lowering the fee cap, limiting student numbers (perhaps linked to graduate outcomes), and lowering the repayment threshold on student loans, cannot be ruled out.

Turning to what the Budget statement does promise, the rise in core funding for R&D, with investment eventually rising to £20bn by the end of this Parliament, has been welcomed by the sector, despite the target of £22bn spending being put back by two years. Governors will want to consider how their own university may benefit, and how to capitalise on related opportunities. The Russell Group has said increasing funding in a consistent and predictable way will help to leverage in more private investment earlier, and suggested there is now “a golden opportunity to nurture emerging vibrant innovation clusters based around centres of science and technological excellence at leading universities right around the country”. The University Alliance has also welcomed the additional funding for Innovate UK (almost doubling investment in this to £1.1bn by 2024-25) helping universities to support businesses to innovate and grow and align this with providing a pipeline of highly skilled talent based on the needs of employers and industry. MillionPlus meanwhile has asked how the increased investment will be allocated. There may be some signs of a more even distribution, with the promise that funding for R&D outside of the South East of England will increase, in line with the Levelling Up agenda. Plans for this will be included in the forthcoming Levelling Up White Paper – another key document governors will want to watch out for.

Much of the Budget commitments relating to the government’s “skills revolution” had already been announced, but governors may nevertheless wish to consider the implications for their own institution of the increases in funding for apprenticeships, and the creation of 20 new Institutes of Technology in England. UCAS says it knows that interest in apprenticeships is growing, and half of applicants now say they are interested in this route into HE.

The Chancellor had some encouraging news in support of international HE, with commitments on Horizon Europe, the Turing Scheme, and the Global Talent Network. The latter, due to launch next year, in the US and Bengaluru in India, aims to  work with businesses and research institutions to identify UK skills needs and source talent in overseas campuses, innovation hubs and research institutions to bring to the UK.

A final consideration for governors may be the possible impact on university budgets of the increase in the minimum wage from £8.81 to £9.50 from April. According to Unison, those university staff on the lowest pay points who work more than 35 hours per week are still earning less than the foundation living wage rates. This may be another area where universities will need to tread carefully, especially with the current threat of industrial action over pay and pensions from UCU members.

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