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.

Overall, the Liberal Democrats’ manifesto focuses both on creating an innovation-led economy and on inequality: both are essential components of what we think the next UK Government should do. What we’d like to see though is a greater connection between these two priorities: more thought about how investment in innovation can be used imaginatively to address inequality.

Spreading ownership of companies and assets

We believe that a more inclusive knowledge economy requires wider ownership of companies and productive resources. The manifesto proposes some small steps in this direction, saying for example that the Liberal Democrats will ‘encourage employers to promote employee ownership by giving staff in listed companies with more than 250 employees a right to request shares, to be held in trust for the benefit of employees’. They also pledge to support social enterprise development, although they don’t say how.

The party also proposes a mechanism for the public to have a share in the profits that are made by technology companies when they use people’s data. While we welcome the recognition that data ownership needs reform, we believe that unlocking social value from personal data doesn’t necessarily mean paying people. We believe that there is more to be gained from a mindset that sees data as something that can be used as part of a commons which benefits everyone, rather than paying people for data use (which in reality would generate a miniscule amount).

Additionally, we’d like to see the next government invest in better tools that enable people to decide under what conditions they want to share their personal data, as well as decentralisation and ‘fat protocols’ being encouraged, whereby value can be captured by the holders, users and early developers of digital tokens.

R&D spending

The headline commitment to ‘increase national spending on research and development to three per cent of GDP’ is in line with the general policy consensus that UK R&D intensity should be increased. Like the other parties, the Liberal Democrats still need to show how this spending target will be achieved; how it will be used; what it is aiming to achieve; and what benefits it will bring to the whole of the country.

As we warned in our Fuelling the Future series, while increasing R&D spending (possibly to £20bn a year) is welcome, it’s how that money is spent that is critical. The manifesto sets a goal of ‘doubling innovation spending across the economy’ which is, to some extent, an acknowledgement that this additional support shouldn’t just go to the usual suspects.

Nesta welcomes the Liberal Democrats’ recognition of the role of innovation and R&D as a driver of growth and prosperity in all parts of the UK. And although we heartily support the ambition to ‘boost R&D outside of the “golden triangle” of Oxford-Cambridge-London’, simply increasing the Strength in Places Fund - the flagship programme set up by the current government to support ‘regional excellence’ - isn’t going to address the long-standing imbalance in the UK’s innovation system.

Nesta has long called for UK research and innovation to have a greater diversity of priorities, politics, places and people. As well as where R&D money is spent, the question of what it’s spent on is crucial. Nesta’s work in health over the past 10 years has demonstrated the importance of investing in more-than-medicine approaches to health. For example, little more than five per cent of the health research budget is currently spent on prevention, even though 75-90 per cent of health is attributed to socioeconomic, environmental and behavioural factors that could be preventable.

Nesta welcomes the manifesto commitment to health prevention and strongly supports more research in mental health. We would go further though, and call for a step-change in investment, infrastructure and evidence to tackle the social, behavioral and environmental determinants of health, proposing a new centre of research and innovation to provide the profile, leadership and coordination needed to accelerate progress at scale.

Creative industries

The Liberal Democrats make supporting growth in the creative industries one of the key tenets of their proposal for an innovation-led economy. This is welcome, as 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.

We also welcome the proposal to enable industry bodies to sponsor work visas, which would remove the need for company sponsorship: the Nesta-led Creative Industries Policy and Evidence Centre has demonstrated how the current immigration system does not fit the needs of a sector where one in three workers are freelancers.

The party is also proposing an expansion of R&D tax credits to include the cost of purchasing datasets and cloud computing. Nesta agrees that the existing R&D definitions are arguably too limited and believe that there is a case for expanding existing incentives to include some of the more creative innovations at which the UK excels. But, we question if tax credits are the right mechanism to do this.

Ethical, inclusive world-leading technology

Nesta welcomes the Liberal Democrats’ ambition for the UK to lead the world in ethical, inclusive, new technology. Demand for responsible technology is only likely to grow, particularly so when it comes to the development of ethical algorithms. The UK could set itself up as a leader, influencing global standards and regulations, thereby giving UK companies an edge. However, for a responsible technology sector to flourish and be competitive, the UK would have to take more purposeful action, investing and creating a supportive environment for this innovation to flourish. In particular, regulation and regulators would need to play an important role in ways that we have outlined in our Anticipatory Regulation framework.

The manifesto features some rather vague proposals around data regulation, including ‘introducing a Lovelace Code of Ethics to ensure the use of personal data and artificial intelligence is unbiased, transparent and accurate, and respects privacy’ and ‘giving the Centre for Data Ethics and Innovation the power to “call in” products that appear to breach this Code’. Nesta believes that they need to go further and commit to giving people more control over their data to prevent misuse and consent to positive use, giving deeper consideration to new data governance mechanisms such as Data Commons and Data Trusts that could help more data be shared in a beneficial and more equitable way.

A proposed Code of Ethics could help build public confidence but would have to be clearly defined, related to identifiable harms and enshrined in legislation; it should also be based on wide and in-depth public dialogue.

We are cautious about the proposed power for the Centre for Data Ethics and Innovation without more detail on what basis these decisions would be made; clarity on the increased funding that the Centre would require in order to support these additional responsibilities; and details of how that may fit with the role of the Information Commissioner's Office (ICO).

Upskilling

The Liberal Democrats’ ambition to empower people with the skills they will need in the future is welcome in a country where more than six million people are employed in occupations that are likely to change radically or disappear by 2030, according to Nesta’s research.

The flagship policy here is a commitment to a dedicated ‘Skills Wallet’ to spend on education and training, to which the government will contribute £4,000 at age 25, £3,000 at age 40 and £3,000 at age 55. While governments around the world are starting to experiment with setting up individual learning accounts like this, the Liberal Democrats’ proposal is one of the more generous.

By trying to encourage learning throughout someone’s life, this proposal recognises that skills provision needs to anticipate change and prepare for the unpredictable, as Nesta has previously argued. It also means that workers can learn even when they can’t access training through their jobs - particularly important for those in temporary or precarious employment, who often miss out completely because training is usually provided by employers.

The challenge for the Liberal Democrats will be in supporting people to use this money in the best possible way, and in motivating them to engage in learning. Our recent research shows that significant barriers to learning exist even when financial support is available, especially for people in low-paid work. Almost half (49 per cent) of adults from the lowest socioeconomic groups in the UK have received no training at all since leaving school.

Time and support to learn

Beyond funding for learning, the next government needs to tackle personal and systemic barriers to learning, for example by creating additional rights and providing other types of financial support to allow workers to take time off to re-train. The Liberal Democrats have some proposals that go in this direction, including their most expensive policy idea - offering working parents 35 hours a week of free childcare as well as a new Worker Protection Enforcement Authority to protect those in precarious work, and a series of new employment rights aiming to better protect those working in the gig economy.

In addition to this, Nesta would like to see more of a focus on workers in jobs that are likely to change or disappear in the context of automation - as per our own manifesto for the future of work and skills. Additional rights to help workers cope with the changes afoot might include, for example, the right to take time off work to re-train (updating the currently restrictive time off work policy) and a right to know if their job is likely to be automated in the near future.

Finding the ‘jobs of the future’

To help people understand which jobs will be in demand in the future, and the training they need for better jobs, it’s crucial we improve and share the quality of career advice, by opening and sharing new labour market data.

Big data and machine learning can offer timely, granular and accurate insights on jobs and skills, as demonstrated by Nesta’s first data-driven taxonomy of skills. We would like to have seen proposals in the manifesto that aims to empower workers to make better decisions about the training they access. A critical step towards this is a national jobs and skills data commons: a framework that would include, for example, shared language on occupations and skills, as well as ways of linking and accessing data.

Rewarding work for all

An inclusive economy should provide good, rewarding work, and this requires innovation in how work is valued and organised. The manifesto pledges to ‘establish an independent review to consult on how to set a genuine living wage across all sectors’, and ‘to pay this living wage in all central government departments and their agencies’. While welcome, it’s not clear why a new review is needed, given there’s already a robust methodology for calculating a real living wage.

The manifesto also misses an opportunity to link the agenda for improving job quality with the Green Economy priorities and the health and social care plan. When investing in these challenges, Nesta would like to see the next government requiring employers to demonstrate how they are contributing to good quality local jobs.

Preparing young people for the economy of the future

The Liberal Democrats propose a number of measures to prepare young people to make the most of the opportunities presented by our fast-changing future. We believe that a broad, fair and smart education system is needed for young people through school, post-16 and into further and higher education.

An ambition to recruit 20,000 new teachers and boost starting salaries will be welcomed by the education sector, but more detail is needed on how this target will be met. Specifically, retention is just as important as recruitment and any future government must prioritise ensuring great teachers are not leaving the profession early, tackling particularly the issue of high workload. High-quality technology can help to tackle workload: Nesta is working with schools to make more effective use of technology by improving products and building the evidence base for what works.

Nesta is enthusiastic about the focus on a broad curriculum across the education sector. Skills such as critical thinking, problem solving and creativity, as well as social and emotional skills, are crucial for young people to thrive in the future and navigate a changing employment market (see our Future Ready Fund for more).

In particular, the Liberal Democrats have responded to Nesta’s call for investment in creative skills, highlighting that ‘Creative subjects are being squeezed out of the classroom’. We believe these vital skills are not only learned at school, and hope that this will be recognised in the proposed investment in further education colleges.

The manifesto is proposing significant reforms to the voting system, including introducing proportional representation and giving 16 and 17 year-olds the right to vote. It also hints at other reforms that could help create the ‘high-energy democracy’ that we have argued for in our report Imagination Unleashed, which argues for a higher level of organised popular participation in political life.

The Liberal Democrats also make a commitment to “establish UK and local citizens’ assemblies to ensure that the public are fully engaged in finding solutions to the greatest challenges we face.'' We believe that this could go further: moving beyond citizen assemblies and traditional public engagement, to using participatory futures techniques that help people to develop a collective image of the future they want, so that we can make better, more informed decisions.

Nesta believes that the public should be more involved in decisions about how innovations affect their lives, and so welcome proposals in the manifesto for citizen involvement in decision making around Artificial Intelligence. What is lacking however is a response to the much bigger question about how the trajectories of new technologies and innovations can be shaped in a way that the public feel will bring the greatest social benefit.

A single citizens’ assembly won’t be able to bestow consent and clarity for a field which is as dynamic and complex as AI, nor would it have the local democratic legitimacy that is needed alongside anything more centralised. Arguably, it could also remove the onus for active and responsible approaches to AI within the public sector itself. Nesta would like to see the next government take a more strategic approach to anticipating how new technologies might impact society and explore a wider range of creative ways to involve people in shaping visions of the future.

The Liberal Democrats’ manifesto makes proposals reflecting each of the areas of action needed to spread the benefits of the knowledge economy to many more people. It includes some measures to create an inclusive economy, a workforce ready for the future, and to transform democracy, including giving more people the power to shape the direction innovation. But, greater connection between the priorities of equality and innovation is needed so that there is more thought about how investment in innovation can be used imaginatively to address inequality.

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.