Written evidence submitted by the Department for Business, Energy and Industrial Strategy (RFA0052)
- We would like to thank the Committee for their interest in the Government’s proposal to establish a new research funding agency and look forward to future engagement on this topic.
What gaps in the current UK research and development system might be addressed by an ARPA style approach? and what are the implications of the new funding agency for existing funding bodies and their approach?
- The UK already has an excellent reputation for R&D. We have four of the world’s top 10 universities. The UK has been in the top five most innovative countries in the world since the Global Innovation Index began in 2013 and we draw in proportionally more internationally mobile R&D funding than other large countries. The UK achieves this whilst spending less than many of its key competitors; overall gross expenditure on R&D in the UK was 1.7% of GDP in 2018, behind competitor countries and below the OECD average of 2.4%.
- The Government has set out an ambition to cement the UK’s position as a science superpower with a series of new commitments, including the ambition to increase public R&D funding to £22bn by FY24/25. Increasing overall UK spending on R&D to 2.4% of GDP by 2027. Achieving this ambition will ensure that the UK is in the top quartile of OECD countries according to public R&D spend - above current spending in the US, Japan, France and China.
- The Government has committed to investing at least £800m of public R&D funding through a new funding body (UK ARPA). The new funder, UK ARPA, will be an agile organisation that will use its funding to support a small number of specific research programmes. To drive progress, these programmes will be actively led by UK ARPA employees. In this way, UK ARPA will back basic science and breakthrough technology across long time horizons by experimenting with new funding models.
- UK ARPA will use its funding and convening power to support ambitious research and drive progress in a new way. It will support thesis led programmes of research that deliver a plausible and decisive competitive research advantage for the UK. This means tackling ambitious technical challenges for a clear purpose, at a scale where succeeding produces transformational change in the economy and wider society.
- ARPA is an addition to the funding landscape that will complement existing funding arrangements provided by UKRI and others. It will provide increased coverage and support for a particular type of ambitious, long-term research and innovation. And it will take a novel approach to programmatic funding that includes the freedom to pursue rare opportunities in a responsive and flexible way, without undue bureaucratic constraints.
- Setting up a UK ARPA recognises the high cost of missed technological opportunity. These opportunities bring risks of failure – and some programmes will fail – but risks will be managed through significant up front scoping, exploration and seed funded experimentation alongside clear evaluation points and the ability to stop programmes. The £800m funding commitment represents <2% of total annual R&D investment (which is broadly in line with international comparators such as DARPA [2.6%] of US [public R&D funding]). It is not intended to replicate the funding for research – including high-risk research – already provided through UKRI. ARPA’s coverage, as a result of its direct programme management, and funding model, will necessarily be limited. It will represent one segment of a balanced overall R&D funding portfolio, and will have freedom within that to pursue innovation in how funding is delivered to meet its goals. Other organisations (eg. Wellcome Trust), and other countries (for instance Canada) are also taking similar approaches. They recognise that while their traditional approaches can fund ground-breaking work, it benefits the diversity of the whole when those existing systems can combine with more experimental methods.
What should be the focus be of the new research funding agency and how should it be structured?
- The Government’s ambition is for the focus of the new organisation to be supporting basic science and breakthrough technology, where there is a plausible and decisive competitive research advantage in doing so. Individual programmes will be convened around the vision of the people leading them. The organisation itself will be small, with a limited number of specialised directors and programme managers who are given significant freedoms to manage its R&D activities. The organisation will be autonomous, and Ministers will not seek to influence its research focus on a short-term basis.
What funding should ARPA receive, and how should it distribute this funding to maximise effectiveness?
- The Government committed to at least £800m of funding in the March 2020 Budget, which will support the first years of UK ARPA’s operation. This will give ARPA space to establish itself and distribute funding to the first programmes. Future funding decisions can then be made in light of how effectively ARPA has embedded itself in the UK research landscape, and any initial successes from the research projects it has supported.
- ARPA’s research programmes will all be led by an idea - that through the support and convening power of the organisation, a decisive competitive advantage can be realised. The most effective type of support to capitalise on these opportunities will vary from project to project, and so ARPA will have broad flexibility to deploy money in the way that best matches the specific challenge: from grants, to loans, to partnerships and prizes, and more experimental funding models.
What can be learned from ARPA equivalents in other countries?
- ARPA equivalents in other countries offer a wealth of experience in innovative funding mechanisms that the UK Government can and will learn from. Previous ARPA-like organisations illustrate the large returns that can achieved where researchers are given freedom to progress their research, in situations where risk-taking is crucial to driving change. The Government will not seek to duplicate the US DARPA (or any other institution), but apply these lessons to create a new organisation with a unique and complementary role within the current UK context. We are committed to seeking high-quality advice on the development of ARPA from all parts of the research and innovation ecosystem on an ongoing basis. This includes seeking advice from directors, project managers, and researchers and innovators from organisations in other countries. We have held many discussions already and will continue to gather input over the coming months.
- In making these comparisons Government will look not only at what differs between the many different ARPA equivalents that already exist, but also the features that are shared. We consider that these ‘essential’ features include a programme-based approach, led by a clear vision, carefully protected freedoms and flexibilities for the organisation to quickly set direction and disperse funding, and a commitment to hiring and empowering a small number of exceptional people. As other organisations have highlighted, the role of any specific ‘customer’ in providing pull-through for technologies, the right approach to evaluation, and the relationship to other funders are more variable and all need to be tailored the UK’s research and innovation landscape.
What benefits might be gained from basing UK ARPA outside of the ‘Golden Triangle’ (London, Oxford and Cambridge)?
- The Government has already committed to developing an ambitious new R&D place strategy to support thriving research and development across the country as an important component of the levelling up agenda. As an important new part of the Government’s broader support for UK R&D and innovation, it is important that ARPA helps deliver levelling up across the country.
- ARPA itself will be a small, agile organisation with a limited number of staff; it will not conduct research directly and will achieve its aims by distributing funding to support research elsewhere. Benefits to places outside of the ‘Golden Triangle’ will therefore result from ARPA’s funding decisions and project portfolio.
 QS World University Rankings 2021
 OECD (2019), Main Science and technology indicators (MSTI) (2016 data point used, Percentage of GERD funded by rest of the world) http://www.oecd.org/sti/msti.htm
 OECD (2020) (2018 data points used), “Main Science and Technology Indicators” http://www.oecd.org/sti/msti.htm
 OECD STI Indicators. Comparator countries’ investment based on 2017 Government-financed GERD as a percentage of GDP