The Race to the Top: A Review of Government's Science and Innovation Policies

Abstract

THE RACE TO THE TOPGlobalisation brings opportunities and challenges. It provides UK companies with access to new and larger markets, cheaper intermediate goods and lower prices for consumers, but many of our companies have to compete with companies in emerging economies, such as China, with wage costs that can be 5 per cent of the UK's.Company strategies based on low costs alone will end up in a downward spiral, each year bringing a new low-cost competitor. The best way for the UK to make the most of globalisation opportunities is to support the restructuring of British companies into high-value goods, services and industries. We should seek to compete with emerging economies in a ``race to the top'' rather than in a ``race to the bottom''.The UK is well placed to take advantage of the new markets. We have a flexible labour market, an extraordinary record of scientific discovery, a large and growing supply of high-quality university graduates, an open economy and an international outlook.The shares of manufacturing and services in the UK's GDP is seen by some as a measure of our economy's success or failure. But we should measure our performance by how fast we move into knowledge intensive goods and services and out of low value-added ones. On this measure, UK companies have made good progress in recent years and we see plenty of opportunities for further growth.The best way for the UK to compete, in an era of globalisation, is to move into high-value goods, services and industries. An effective science and innovation system is vital to achieve this objective. The UK is internationally renowned for its research base and this status requires continued support. The Review recommends more effective ways to exploit our investment in research. Government policy has typically focused on the supply-side factors affecting innovation; some of these areas need continued attention. The provision of innovation support is fragmented and a new leadership role for the Technology Strategy Board (TSB) will co- ordinate across Research Councils, Regional Development Agencies (RDAs) and government departments. A major campaign to improve science, technology, engineering and mathematics (STEM) teaching in schools is needed. The Review recommends building on the success of our knowledge-transfer initiatives in four key areas, and support for early-stage technology companies. Demand-side factors, such as procurement and regulation, which can play a critical role in encouraging innovation, have received too little government focus. The Review shows that value for money and innovation can be complementary objectives in government procurement and urges government departments and the economic regulators to engage in emerging technology development in collaboration with the TSB.