Funding: UK on the lookout for value for money

Nuala Moran

There were also new tax breaks for science-based companies and their investors, to pull products through to commercialisation.

The overall aim is to create an “ecosystem for innovation”, by improving the strategic management of investments in science and innovation, and to make the system more responsive. At the same time attempts will be made to put skills and brokering systems in place to encourage collaboration between industry and the research base and enable them to interact in different ways.

The centrepiece of the announcements was the creation of a new body for biomedical research, modelled on the US National Institutes of Health. The new agency will disburse the combined R&D budgets of the National Health Service and the Medical Research Council, a total of £1 billion a year.

The move “will align research priorities more closely with wider health objectives, and provide a more coherent approach for translating the results of research into economic benefit”. One of the great and the good is to be appointed to lead a consultation and decide the shape of the new agency.

Radical rationalisation on the way, says Brown

There will also be a reform of the way £2.7 billion of the science budget is disbursed by the other seven research councils. Currently this is handed on to universities on the basis of a complicated peer review process. The chancellor, Gordon Brown, promised a “radical rationalisation” to move to a metrics-based system, and implied he would like to see some money going direct to the universities, though the inevitable consultation will now take place.

The R&D tax credit scheme was extended to take in companies with 250 to 500 employees, a move that was welcomed by the UK BioIndustry Association, a body that has lobbied hard for the move. Welcoming the change, Aisling Burnand CEO of the BIA, said the previous limit was a disincentive for consolidation, adding, [“It] was especially problematic for bioscience companies which have to operate at a commercial scale for a significant period before generating profits.”

Since it was set up in 2000 the scheme has returned £1.5 billion to 20,000 companies.

There were changes also to Venture Capital Trusts (VCT) that aim to focus them on investing in smaller and higher risk companies. The tax relief was reduced from 40 to 30 per cent, but the holding period for getting tax relief on VCT shares was extended from three to five years. VCTs are restricted to investing in privately-held companies, or ones that are listed on London’s AIM market.

A new mechanism for filling the funding gap between seed funding and larger venture capital investment rounds got off the ground also, with the launch of the first two Enterprise Capital Funds. The government is putting £100 million into the scheme and pulling in private investors, to make investments of between £500,000 and £1.5 million.

The first two funds are:

• The IQ Capital Fund – a £25 million fund that will operate across the Cambridge, Oxford and Bristol areas, focusing on technology-based SMEs;
• 21st Century Sustainable Technology Growth Fund – a £30 million fund operating across the UK and focusing on sustainable technologies. Three further funds are expected to be announced soon.

And another merger

At the centre of government the Office of Science and Technology and the DTI Innovation Group will merge from next week to form the Office for Science and Innovation. And there will be a greater role for the Technology Strategy Board (currently part of the Innovation Group) in developing the innovation strategy for all the leading sectors of the economy.

This industry-led board will be freed from central government control and given a wider remit. There will be a particular focus on enhancing business engagement with universities, “So that the UK derives full benefit from the government’s substantial investment in the UK research base.”

There will be a new push on renewable and low carbon energy technologies, to be spearheaded by a £100 million National Institute of Energy Technologies, funded jointly by government and industry. At the same time the market for renewable technologies will be driven by a £50 million fund for installing microgeneration devices on public buildings and setting up an accreditation scheme covering products and installation.