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HM Treasury - Autumn Statement 2022

Jeremy Hunt, the Chancellor, delivered his first five-year budget and that of the new Prime Minister Rishi Sunak, against a backdrop of global turmoil, rising inflation and an ailing economy. The 64-page document outlines a series of tax threshold freezes, cuts to tax allowances and deflated public spending increases. For higher education though, the statement brought news of investment in R&D, innovation, science and technology, levelling up, and skills.

The full Budget document can be found here

At a glance:

  • Public spending on R&D will increase to £20 billion a year by 2024-25, a cash increase of around a third compared to 2021-22 - the largest increase in R&D spend ever over a Spending Review period (p34)
  • As part of this increase, Innovate UK programmes will be allocated £2.6 billion across the spending review period, to support innovative companies and leverage in private sector investment (p34)
  • Funding for the UK’s nine Catapults will increase by 35 per cent compared to the last five-year funding cycle. This £1.6 billion investment will allow Catapults to continue to support innovation and commercialisation eg the Compound Semiconductor Applications Catapult in Wales, the Digital Catapult centre in Northern Ireland and the Offshore Renewable Energy Catapult centre in Scotland (p34)
  • Investment zones will be refocused and centred on universities in “left behind areas” to help build “knowledge-intensive growth clusters”, including through leveraging local research strengths. The Department for Levelling Up, Housing and Communities will work closely with mayors, devolved administrations, local authorities, businesses and others to identify and support these clusters. The first clusters will be announced in the coming months (p34)
  • Sir Michael Barber, the first chair of the Office for Students and founder of Tony Blair’s No 10 Delivery Unit, has been appointed to advise the Education Secretary on the government’s skills reform, including the Skills for Jobs White Paper, delivering T Levels, approving Higher Technical Qualifications, rolling out skills bootcamps, and introducing the Lifelong Learning Entitlement from 2025 (p56)
  • The total education budget will increase from £70.1 billion in 2021/22 to £82.6 billion in 2024/25. £9 billion of the £12.5 billion increase is the core schools budget (p20)
  • Up to £10 million of support will be provided, subject to business case, to work collaboratively with the Welsh government to deliver a defence-focused Centre of Excellence Site in Wales, to include high security laboratory space, training and skills infrastructure (p56)
  • A review of EU law in key growth industries - including digital technology, life sciences, green industries, financial services, and advanced manufacturing – will be carried out to identify changes that can be made over the next year which have the greatest potential to unlock growth (p57)
  • Sir Patrick Vallance, the Government Chief Scientific Adviser and National Technology Officer, will advise the government on how the UK can better regulate emerging technologies to enable their rapid and safe introduction (p31)
  • As previously announced, the government is increasing the generosity and availability of the Seed Enterprise Investment Scheme and Company Share Option Plan to give cutting-edge firms access to finance to invest and grow. The government will also continue to champion institutional investment into innovation so that UK savers can benefit from the growth of high potential businesses (p35)

Implications for governance:

Given the perilous state of public finances, the Chancellor’s Autumn Statement was anticipated with some trepidation by the higher education sector. There is likely to be relief that no major cuts directly affecting HE have so far been announced.

Governors will note however that although education funding will increase over the spending review period, the vast majority of the rise is accounted for by the growth in the schools core budget. What remains in the education pot is unlikely to allay concerns about the financial pressures being experienced across universities and colleges, with rising inflation, energy cost hikes and staff demand for bigger pay rises, eating away at frozen fee income.

In better news, the Chancellor said that despite the “tough road ahead”, it would be a “profound mistake” to cut the government’s research and development (R&D) budget.

Advancing the commitment to R&D made by Rishi Sunak when he was in the Treasury, funding will be protected, with an increase to £20 billion by 2024/25. The boost has been welcomed by university mission groups as a “vote of confidence” in the sector. However, the Chancellor did not comment on the UK’s plan to associate to the European Union’s Horizon Europe research programme, which is currently stalled over wider political conflicts with Brussels.

Other announcements with implications for HE include an increase in funding for the UK’s nine Catapults, which bridge the gap between research and industry and involve a number of university/business partnerships and collaboration.

A refocusing of Investment Zones, to centre on universities in left behind areas, could also create opportunities across the sector, and is an indication that the levelling up agenda continues to be a focus for the government. Although universities that might have been part of existing Investment Zone bids may be left disappointed as these expressions of interest will not be taken forward. University leaders have welcomed the move to put universities at the centre of Investment Zones, suggesting it will help to maximise the sector’s impact and support researchers and academics to play their part in meeting the challenges facing the UK. 

Opportunities for universities in the North and the Midlands could also emerge from the restated Levelling Up White Paper commitment to sign new devolution deals with Greater Manchester and the West Midlands Combined Authorities, which could give them departmental-style settlements at the next Spending Review.

Boosting skill levels is a key focus for the government, as trailed by Robert Halfon, the new skills, apprenticeships and higher education minister, in his speech to a Times Higher Education Conference this week. In it he is clear that degree apprenticeships are a priority. The Autumn Statement makes the point that despite around half of adults being educated at tertiary level, the UK underperforms on basic and technical skills compared to similar developed countries.

In a bid to address this and take forward government plans for upskilling and the Lifelong Loan Entitlement, Sir Michael Barber has been appointed as a special skills adviser. He will be advising new education secretary Gillian Keegan, the first person in the post to leave school at 16 and complete an apprenticeship, a point highlighted by the chancellor in his speech.

Another figure familiar to higher education will be Sir Patrick Vallance, the Government Chief Scientific Adviser and National Technology Officer, who will now advise the government on how the UK can better regulate emerging technologies to enable their rapid and safe introduction. The move is part of the Chancellor’s ambition to turn the UK’s “world-class innovation into world-class companies” and to make the UK the “next Silicon Valley”. Governors will no doubt wish to consider how their institutions are positioned to be part of this initiative.

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