In this, the third of five articles on the autumn budget, we focus on measures relating to technology, education and finance, aimed at improving productivity.
Artificial intelligence – there will be a new Centre for Data Ethics and Innovation to ensure safe, ethical and ground-breaking innovation in AI. Over £75 million will be invested to implement the key recommendations of an independent AI review, including exploratory work on data trusts. There will be new AI fellowships and funding for 450 PhD researchers.
Regulators’ Pioneer Fund – A new £10 million fund will help regulators develop innovative approaches to getting new products and services to market.
Tech Nation – £21 million will be invested over the next four years to expand Tech City UK’s reach to become Tech Nation, with a dedicated sector programme (including AI and FinTech) and regional hubs in Cambridge, Bristol and Bath, Manchester, Newcastle, Leeds and Sheffield, Reading, Birmingham, Edinburgh and Glasgow, Belfast and Cardiff.
UK games fund – a further £1 million will be provided to extend access to finance for early-stage video game developers until 2020.
Geospatial data – £80 million over two years will be provided to fund a new Geospatial Commission, to provide strategic oversight of the various public bodies that hold geospatial data, and work towards opening the Ordnance Survey’s MasterMap data to small businesses.
Ultra-low-emission vehicles – regulations will support the roll-out of charging infrastructure and £200 million will be invested in a new charging investment infrastructure fund, with matching private investment. £100 million will be provided to continue the plug-in car grant to 2020.
Connected and autonomous vehicles – changes to the regulatory framework will be made to set out how driverless cars can be tested, and the National Infrastructure Commission will launch an innovation prize to determine how roadbuilding should be adapted to support self-driving cars.
Research and development
Science and innovation – the £4.7 billion investment already announced will grow by a further £2.3 billion spending in 2021–22 to support creative and digital industries by developing immersive technology for creative content and launching an AI programme for the services sector, promote innovation in the construction sector, and grow the next generation of research talent.
Research and development expenditure credit – the rate of R&D expenditure credit will be increased from 11% to 12% with effect from 1 January 2018, and a new advanced clearance service for R&D credits will be introduced.
International talent – immigration rules will be changed to enable world-leading researches endorsed under Tier 1 to apply for settlement after three years, help highly skilled students to apply to work in the UK more quickly, and relax the labour market test to facilitate the hiring of international researchers.
Skills, jobs and productivity
Lifelong learning – there will be a formal skills partnership between the government, the TUC and the CBI to develop the national retraining scheme. The national retraining partnership will act initially in sectors with skills shortages, such as construction and digital. £8.5 million will be provided to support Unionlearn, a TUC organisation boosting learning in the workplace.
Teaching mathematics – government support will include £27 million to expand the Teaching for Mastery programme into a further 3,000 schools; £80 million for schools and colleges whose students take mathematics at A level (£600 per pupil); £18 million for specialist maths schools; £8.5 million for a pilot to improve GCSE maths resit outcomes; and £40 million for further education centres of excellence to train maths teachers.
Computer science – £84 million will be provided to ensure every secondary school has a qualified computer science GCSE teacher, and a new National Centre for Computing will be established.
T levels – £20 million will be invested to enable teachers to prepare for their introduction.
Apprenticeship levy – further work will be done to develop the levy’s implementation.
Gender disparity in STEM – the accessibility and transparency of data relating to gender disparity will be improved, to encourage more girls to study science, technology, engineering and mathematics at A level.
Teacher development premium – £42 million will be invested to test the impact of a £1,000 budget for high-quality professional development for teachers working in areas that have fallen behind, to reduce the regional skills gap.
Student loan overpayments – the Student Loans Company and HMRC will update their processes to stop payments after a loan has been repaid.
National minimum wage – accepting the recommendations of the Low Pay Commission, the government will increase the national living wage by 4.4% to £7.83 per hour from April 2018. The national minimum wage for 16- and 17-year-olds will increase to £4.20, that for 18- to 20-year-olds to £5.90, and that for 21- to 24-year-olds to £7.38. The rate for apprentices will increase to £3.70.
Access to finance
British Business Bank – a new £2.5 billion fund will be incubated, unlocking a further £5 billion investment from the private sector, with the intention of floating or selling the fund once it has established a track record.
Enterprise investment scheme – to expand the scope of EIS, the following changes will apply to shares issued on or after 6 April 2018, subject to state aid clearance. The annual EIS allowance for investors will be doubled to £2 million, provided that any amount over £1 million is invested in knowledge-intensive companies. The annual EIS and VCT investment limit for a knowledge-intensive company will be doubled to £10 million. The rules for determining whether a knowledge-intensive company meets the permitted maximum age requirement will be made more flexible: the operating costs conditions in the definition of a knowledge-intensive company will be amended for companies that have existed for less than three years, and a knowledge-intensive company will be able to use the date from which its annual turnover exceeded £200,000 (rather than the date of its first commercial sale) when determining the date from which the end of the initial investing period is calculated.
Venture capital trusts – various measures will be enacted to encourage more high-growth investment through VCTs. From the date of royal assent to the Finance Bill 2017–18, VCTs will no longer be able to offer secured loans to investee companies, and any returns on loan capital above 10% must represent no more than a commercial return on the principal. From 6 April 2018, the grandfathering provisions, which currently preserve certain old rules in relation to funds raised, will not apply to new VCT investments, and VCTs will be required to invest 30% of funds raised in an accounting period beginning on or after 6 April 2018 in qualifying holdings within twelve months after the end of the accounting period. From 6 April 2019, the period for reinvestment of gains on disposal of qualifying holdings investments will increase from six to twelve months, and the proportion of a VCT fund that must be held in qualifying holdings will increase from 70% to 80%. The scope of the anti-abuse rule relating to share buy-backs by VCTs will be limited, with effect for VCT subscriptions made on after 6 April 2014, so that income tax relief will no longer be withdrawn where the relevant VCTs merge more than two years after the latest subscription for shares, or where it is not one of the main purposes of the merger to obtain a tax advantage.
Venture capital schemes – the definition of ‘relevant investment’ will be amended so that all investments, including all risk-finance investments made before 2012, will count towards the lifetime funding limit for companies receiving investment under the tax-advantaged venture capital schemes (EIS, SEIS and VCT; the limit is £12 million, or £20 million for knowledge-intensive companies). In order to ensure that the venture capital schemes are focused on support for companies with high growth potential, a new risk-to-capital condition to the EIS, SEIS and VCT rules will be introduced: it will be necessary to show both that the company has objectives to grow and develop over the long term and that there is a significant risk that there could be a loss of capital to the investor of an amount greater than the net return, with all relevant factors about the investment to be considered in the round. The risk-to-capital condition will apply to all investments made on or after the date of royal assent to the Finance Bill 2017–18; HMRC will cease to provide advance assurances on proposed investments that are not considered to meet the new condition from the date of publication of draft guidance accompanying the Bill.
Funds of scale – there will be up to three waves of investment in private sector funds, the first seeded by the British Business Bank to the value of £500 million.
Enterprise capital fund – this programme will back new and emerging fund managers, unlocking £1.5 billion of new investment.
Overseas investment in UK venture capital – the Department for International Trade will enable investment of £1 billion.
Pension funds – the Pensions Regulator will clarify guidance on investments with long-term horizons to encourage pension funds to invest in innovative firms.
Entrepreneurs’ relief – the qualifying rules will be changed to remove the disincentive to accept external investment.
National Security Strategic Investment Fund – this new fund will invest in advanced technologies that contribute to national security, and the British Business Bank will support developing clusters of business angels outside London.
Enterprise finance guarantee – this will be extended to March 2022, and expanded to support loans to a value of up to £500 million annually. Further work will be done to overcome the barriers preventing intellectual-property-rich companies using their intellectual property to access growth funding.
Support for exporters – UK Export Finance will introduce a new guarantee to banks to increase liquidity in the supply chain, alongside a targeted campaign to promote the support offered by UKEF to exporters and overseas buyers and an export strategy review.
Investment management strategy – a new long-term strategy for the asset management industry will be published.
Competition and Markets Authority – the authority will be provided with an extra £2.8 million annually and the government will enable the competition regime to work effectively after Brexit.
Airline insolvency arrangements – there will be a review of consumer protection where there is airline or travel company failure.
Open Banking – the Open Banking project will be extended to cover payments made by credit card and other means. £2.5 million will be used to develop innovative Open Banking apps.
Challenger banks – the Royal Bank of Scotland will fund a £775 million package of measures to improve competition in the business banking market, and the Prudential Regulation Authority will make capital requirements for certain smaller banks more proportionate.
Post Office banking services – more publicity will be given to banking services available at the Post Office.
Credit unions – the number of potential members that a credit union serving a local area can have will be increased to 3 million.
Banking fines – a further £36 million of banking fines will be used to support armed forces and emergency services charities and other good causes.