By Autumn 2023, Government should review how to incentivise greater R&D for net zero, including considering the role of clarity on research priorities and government support, tax credits, greater ring-fencing of R&D spend, and enabling regulations. |
1042. Roundtable attendees advised that tax credits for early-stage (and often SME) R&D could incentivise investment into technologies in the earlier stages of their investment. A range of stakeholders feeding into this Review, from green tech start-ups through to academies and universities suggested that the Government considered how best to implement R&D tax credits for net zero. They advised that doing so would signal the Government's commitment to the sector - and in doing so encourage private investment, thus reducing the cost of capital scaling up products from low TRLs, and driving down costs.739
1043. Stakeholders pointed to the move by the USA to champion tax credits for decarbonising technology in their Section 45Q and Inflation Reduction Act (discussed more in Pillar 3). We heard from SMEs, particularly in the Greenhouse Gas Removals sector, of the appeal such tax credits provide to re-locate from the UK. The Government should consider the case for similarly bold action as part of a wider review of tax incentives for business investment if it is to a) retain new and current decarbonising technology businesses and b) support technologies to move towards commercialisation.
1044. Stakeholders were clear that tax credits alone will not be enough to demonstrate Government commitment. Some including Business in the Community stressed the need for increased R&D expenditure and its role in driving economic growth. Imperial College London explained that "...£1 of public R&D investment leverages around £2 of private investment and, at Russell Group universities like Imperial, an average return of £9 to the UK economy." 740 Stakeholders told us that increasing R&D spend is vital if the UK is to maintain its competitive position the USA, China, and Germany.
"Failure to invest in R&D will have a detrimental impact on the UK's ability to innovate and scale up technologies and solutions and could cost the profound benefit of first-mover advantage" - Imperial College London741
1045. This Review recommends that by Autumn 2023, BEIS and HMT review how to incentivise greater R&D for net zero, including considering the role of clarity on research priorities and government support, tax credits, greater ring-fencing of R&D spend, and enabling regulations.