Philip Hammond will boost public spending on genetic research and laser technology by £200m in this week’s spring statement to support some of Britain’s fastest-growing industries as they prepare for Brexit.
The chancellor said the extra spending on projects in Cambridge, Edinburgh and Oxfordshire, would ensure the UK was “at the forefront of science and technology innovation” and maintain its reputation as a “pioneering nation as it leaves the EU”.
With the UK poised to leave the European Union at the end of the month, Hammond is expected to use his mini-budget to reassure MPs that the Treasury has the firepower to support the business community, even in the event of a no-deal Brexit.
Economists expect the chancellor to say that the public finances remain in a healthy state following a year of rising tax receipts and strict limits on government spending.
At the last budget in October the Office for Budget Responsibility, the Treasury’s independent forecaster, predicted that Hammond would have around £15bn of spending capacity before he breached his annual deficit rule, which limits government overspending to 2% of GDP.
It’s possible that following bumper income tax receipts in January the OBR will increase the level of headroom by more than £15bn, giving the chancellor greater scope to increase the state’s support for households and businesses over the rest of the parliament.
However, economists expect the OBR to lower the UK’s expected growth rate over the next two years, dampening future tax receipts and limiting the scope for extra spending.
Carys Roberts, chief economist at the IPPR thinktank, said Hammond needed to go much further to address the weaknesses of the UK economy and its persistently low rates of productivity growth.
“This is a small amount of money that is being spent in areas that already find it easy to raise funds. Concentrating support on hi-tech projects in Oxford and Cambridge is partly why we had a Brexit vote in the first place. It is other parts of the country and other industries that are desperately in need of government support.”
Hammond is understood to be planning only a limited spending spree when he stands up to deliver his mini-budget on Wednesday, to maintain the Treasury’s war chest should a no-deal Brexit trigger a recession and widespread job losses.
The Organisation for Economic Cooperation and Development, which advises 34 of the world’s richest countries, said last week that a no-deal Brexit would most likely cause the economy to shrink, though it added this prospect could be offset by extra Treasury spending and moves by the Bank of England to reduce the cost of borrowing.
Hammond will say the £200m of extra cash will be spent on three projects the over the next four years in Cambridge, Oxfordshire and Edinburgh. The sums are:
• £45m to support work in Cambridge sequencing one million genomes and exploring innovative cell therapies to tackle genetic diseases. It builds on a discovery earlier this year that aims to cure the most common form of blindness in western countries.
• £79m for a new national supercomputer in Edinburgh to increase the UK’s current capability by five times.
• £81m for medical laser technology at the Harwell research centre in Oxfordshire, which is home to the European Space Agency’s UK base. The funds will support an industry worth £13bn to the economy, and employing around 65,000 people. Researchers at the campus have already developed laser technology which can scan the chemical contents of objects, and is used to detect explosives and other dangerous materials hidden in airport luggage, the Treasury said.
The chancellor said the funds were part of the government’s commitment to raise investment in research and development to 2.4% of GDP by 2027. “UK scientific research is worth £36bn and is at the cutting edge of international innovation and discovery,” he said. “We want to retain pole position as we leave the EU, and the announcements I make next week will ensure we maintain our competitive advantage.
“These investments will support innovators across the country to make the breakthroughs that will push biotechnology, medicine, science and aerospace forward.”