The long-term challenges facing the UK – low productivity, increasing inequality, declining trust in politics – are all closely linked to the knowledge economy. To address them, the next government needs to change how the knowledge economy works – building an inclusive economy, preparing people for the future and transforming democracy, in particular by giving more people the power to shape the direction that new technologies and innovations take.

The Conservative manifesto focuses on ‘areas where the UK can generate a commanding lead in the industries of the future’, but it does not explicitly link innovation investment to solving challenges facing society. We also see a missed opportunity to acknowledge the importance of social and institutional – as well as technological – innovation, which will be crucial for improving productivity and working conditions in the wider economy.

With all three manifestos now released from the main parties, this blog is able to make some policy comparisons.

R&D spending and innovation

The manifesto restates the Conservatives’ existing commitment to increasing the proportion of GDP spent on research and development (R&D) to the OECD average of 2.4 per cent (Labour and Liberal Democrats have gone for three per cent). To meet this, the manifesto acknowledges the need for public spending on R&D to increase, and commits to ‘the fastest ever increase in domestic public R&D spending, including in basic science research’.

In some ways, however, the manifesto retreats from previously announced Conservative policy positions. There is no longer a deadline attached to achieving the 2.4 per cent target (the 2017 Industrial Strategy set this as 2027 and committed to achieving three per cent of GDP spent in the longer term). In addition, Boris Johnson recently committed to doubling public R&D spending to £18 billion per year; this figure isn’t stated in the manifesto. Instead, the Conservatives commit to an additional £7.3 billion investment over four years (in the costings document). We would welcome more clarity on how this relates to the previous commitment to doubling spending to £18 billion.

The manifesto notes that ‘some of this new spending will go to a new agency for high-risk, high-payoff research, at arm’s length from government’. This alludes to the creation of a UK equivalent of DARPA, the US Advanced Research Projects Agency, with a potential budget of £800 million over five years. DARPA’s success is the product of a very specific set of circumstances that will be difficult to recreate in the United Kingdom, however. Replicating it here would require very careful adjustment for the different scale and context. More needs to be said about how any such system would be made accountable to the public – and how it would avoid simply repackaging existing spending commitments and funding allocation biases.

Further, as we warned in our Fuelling the Future series, while increasing R&D spending is welcome, how that money is spent is critical. This additional support shouldn’t just go to the usual suspects. We’d like to have seen more consideration of how R&D spend could be used to address gaps and tackle regional imbalances. For example, the manifesto restates the importance of life sciences, including an ambition to ‘make the UK the leading global hub for life sciences after Brexit’. But as we’ve pointed out in previous research, the biomedical sciences already dominate the UK research landscape. We believe that a similar investment needs to be made in research on preventative health.

While the Conservatives are investing in innovation in climate change (for example, committing £800 million to build the first fully deployed carbon capture storage cluster by the mid-2020s), they are not doing the same to address societal challenges. Instead the focus is on ‘areas where the UK can generate a commanding lead in the industries of the future’. This would be a move away from the ambition of the current Industrial Strategy, and, we believe, would be a missed opportunity to mobilise innovation towards addressing the challenges facing the UK.

The Conservatives plan to increase the R&D tax credit rate to 13 per cent (in contrast with Labour, who propose to phase out large corporation R&D tax credits) – more on this and definitions in the creative industries section below.

While there’s evidence that tax credits do increase private R&D investment, it’s not clear what extra benefit a rise from 12 per cent to 13 per cent would provide. Tax incentives are hard to target, access and roll back from. They can also be susceptible to fraud and error. Improving implementation of the current R&D tax credit regime would have been preferable to increasing their rate and the scope.

We welcome the Conservatives’ commitment to supporting entrepreneurship and in particular, to increase participation among women and BAME groups, who are under-represented among entrepreneurs. Expanding startup loans may help with this, but it’s likely that a wider range of policy initiatives will be needed to shift longstanding patterns of participation. Meanwhile, we would have liked to see acknowledgement of other gaps in participation in innovation – for example, our recent research has shown that less than 14 per cent of AI research papers have at least one female author.

Devolution and rebalancing the economy

The manifesto states that ‘we need to get away from the idea that “Whitehall knows best” and that all growth must inevitably start in London’, promising a White Paper on devolution in England in 2020. But beyond recommitting to previous government nationally-set funding schemes, such as City and Growth Deals and the Towns Fund, and promoting inward investment across the country through initiatives like the Northern Powerhouse and Midlands Engine, there is little to go on in terms of judging the Conservatives planned approach to local growth.

We would have liked to see a lot more on how to spread innovation-led growth across the country, linking people and places to the jobs of the future. To break the perception that ‘Whitehall knows best’, more could be done to equip local areas with additional support to develop their analytical and strategic capabilities, as well as introducing new ways of looking at local economies. We have experimented with these kinds of techniques through our innovation mapping work.

Creative industries

There are several commitments in the Conservative manifesto that touch on areas relating to the creative industries (although the manifesto itself does not look at specific sectors and their needs). Most pointedly this includes ‘maintain[ing] support for creative sector tax reliefs’. However, greater focus on the sector would have been welcome: Nesta has repeatedly called for recognition of the sector’s strength, given that the creative industries are growing twice as fast as the rest of the economy.

The party is also proposing a review of the definition of R&D ‘so that important investments in cloud computing and data, which boosts productivity and innovation, are also incentivised’. Nesta has made the case for some time that the existing R&D definitions may be too limited and we believe that there is a case for expanding existing incentives to include some of the more creative innovations at which the UK excels. Therefore we strongly welcome this.

The manifesto also highlights the ‘thoughtful recommendations’ of the Augar Review. The Nesta-led PEC published a provocation on the Augar Review’s focus on salaries and how it may be using too sharp an implement to understand the total value of different types of education, including the creative arts. We hope that these will be considered in this review.

Regulation and responsible technology

The Conservatives note that ‘good regulation is essential to successful businesses’ and state they will ‘ensure that regulation is sensible and proportionate’ and will ‘always consider the needs of small businesses when devising new rules’.

We agree that regulation plays an important role in creating an environment for innovation to flourish, and needs to guard against a tendency to favour large incumbents. But the manifesto says little about the outcomes the Conservatives want from regulation, and there’s no acknowledgement of the challenges of regulating disruptive emerging technologies.

The manifesto, for example, is silent on issues relating to artificial intelligence, digitisation and data. We argue that the UK should adopt a proactive, anticipatory approach to regulation that can both allow the UK to capitalise on new opportunities and shape technology in a way that’s socially responsible.

New models of ownership

Our report Imagination Unleashed envisages experimentation with ownership models for companies and productive assets like data, in order to give people a greater stake in the knowledge economy. The only nod to changes in ownership models is a proposed £150 million Community Ownership Fund ‘to encourage local takeovers of civic organisations or community assets that are under threat’. It’s noticeable that even models that have previously had significant support from Conservative politicians, such as cooperatives, mutuals and social enterprises, receive no mention at all.

Skills

The Conservatives’ headline policy is to provide £600 million a year (over five years) of matched funding and strategic investment in skills, although the detail on how it will be spent is still to follow. The purpose of it appears to be to support people in need of upskilling or re-skilling, which is a real and urgent need as jobs and occupations change.

The design of such a fund should consider specifically how these groups of workers can be motivated to participate in learning in terms of relevant career advice, realistic re-training pathways, and right for time to learning. Given that almost half (49 per cent) of adults from the lowest socioeconomic groups in the UK have received no training at all since leaving school, the same considerations should be given when designing the £500 million UK Shared Prosperity Fund ‘to give disadvantaged people the skills they need to make a success of life’.

Nesta’s own future of work and skills manifesto, Precarious to Prepared, sets out how a combination of data on occupations and skills, additional rights for at-risk workers, and incentives for employers to raise the quality of work across regions and sectors can come together to respond to the challenge of jobs change.

Work

The Conservative Party manifesto makes provisions for increasing the quality of jobs - one of the pillars of an inclusive economy Nesta itself has identified. Conservatives forecast a National Living Wage of £10.50 an hour for everyone over 21 years old (the current National Living Wage is £8.21 per hour for people aged 25 and over).

There is also a commitment to enforcement of workers’ rights through a new agency, and in line with the Taylor Review recommendations. But, it doesn’t immediately offer any specific additional rights to the workers. Our recent research shows that lack of time is one significant barrier to participating in training. The proposed fund for affordable childcare (more modest than the Liberal Democrats proposal) can go some way to help people dedicate time to learning. If Conservatives are committed to establishing a right to re-train, we hope that employers play a role too, specifically by giving workers time off to train, or investing in training.

Schools and curriculum

School funding is the Conservatives’ headline education pledge, with the previously announced £14 billion of additional funding for schools. This has been welcomed by many, although falls short of both Labour and the Liberal Democrats’ funding pledges. A welcome boost of £2 billion ‘to upgrade the entire further education college estate’ is also announced, but falls short of much-needed ongoing funding of high-quality vocational and technical education.

Increasing teacher starting salaries to £30,000 is welcome, but detail on how the existing teaching workforce will be supported is needed too. With DfE data showing more teachers leaving the profession than joining it in 2017, there is a need to tackle high teacher workload and retention as a priority, through high-quality professional development and making the most of technology. Technology in education has the potential to tackle challenges and support teaching and learning. Any future government should invest in technology for schools and colleges, and commit to understanding what works through better evidence, in order to help tackle challenges like teacher workload.

The Conservatives have recognised the importance of creativity and have responded to the fact that subjects such as art and music have been squeezed from the curriculum, proposing an ‘arts premium’ for secondary schools. This responds to the Nesta-led PEC’s call for investment in ‘creative skills’ across the economy as well as work looking specifically at the drop in arts education in England. However, it is unclear whether an arts premium will make up for the drop in provision and take-up over the last decade, and will not provide cross-curricula creative skills.

There is also a missed opportunity to also focus on wider skills. While the Conservative party recognises the importance of preparing young people for work, they have not responded to our research showing that skills such as creativity, problem solving and critical thinking, as well as social and emotional skills, are essential for people to thrive in our changing economy. While we support a broad knowledge base for all young people, the current assessment system leaves little room for breadth of subjects and skills, and performance measures such as the EBacc should be reviewed urgently.

Nesta has previously argued that a ‘high-energy democracy’ – where there’s a much higher level of organised popular participation in political life – is a prerequisite for a more inclusive knowledge economy. While each of the three main parties devote some space to questions of democratic renewal, the Conservatives’ proposals here are not far-reaching. The Conservatives would not, for example, lower the voting age.

The most significant commitment is to set up a ‘Constitution, Democracy & Rights Commission’ to explore issues like the functioning of the Royal Prerogative, the role of the House of Lords and ‘access to justice for ordinary people’. We’d argue this should also explore opportunities for participatory democracy, including citizen involvement in shaping the direction of innovation and technology. The next government could take advantage of the opportunities provided by digital technology to open up parliamentary processes like Select Committee hearings to a much wider range of people.

The Conservative Party manifesto offers to continue many of the current government’s policies and ideas, and confirms a few announced over the last few weeks. It is too early to say whether these proposals will go far enough to create an inclusive economy. To us, an obvious gap is in not taking an opportunity to mobilise innovation towards the UK’s most pressing societal challenges.

This is one of Nesta's responses to the manifestos from the main parties. How far do they each grapple with the challenge of changing how the knowledge economy works? We've been analysing how each party responds to the three key challenges we have outlined, as well as suggesting ways that the next government can use innovation to make the knowledge economy far more inclusive.