Doing government spending on science differently

It’s August 2021 and an enterprising staff member at a research council has put together a new idea. The idea is so brilliant, so novel, and so transformative that it has firmly implanted itself in the mind of a civil servant.

To bring this idea to life the civil servant must turn this good idea into an actual programme of work through the alchemy that is the business case. The business case must be SMART (specific, measurable, achievable, relevant and time-constrained). It will usually be delivered in three stages: a strategic outline business case, an outline business case, and then on to a full business case. It must be developed in conjunction with the relevant expert regardless of their expertise in developing business cases. And irrespective of the inherent uncertainty of the programme the business case should optimise for value for money.

Providing all of this can be funnelled into the template requirements of a strategic, economic, commercial, financial and management case, the civil servant has between 40 and 400 pages to set out their case.

Once all of this is in place the business case can be sent on its way for approval. The civil servant may expect some 13 specific approvals for the work. And today, some two and a half years later in February 2024, the idea may finally be ready to execute.

Closing time

A version of this caricature, and this is an extreme if not entirely unusual example, is provided courtesy of former universities minister David Willetts in his Independent review of the DSIT business case and approvals process. In his own words Willetts is concerned that

the Business Case process has grown in what can feel like a low-trust environment, with teams needing to ‘prove’ each step has been undertaken, resulting in a strong tendency towards over-documentation, duplication and excessive scrutiny.

Willetts’ view is that the UK risks squandering its competitive advantage in science, losing its best businesses, getting caught behind emerging technologies, frustrating investment, and wasting the talents of our best scientists and civil servants because the business case process is too cumbersome.

The evidence he has gathered suggests he has a point, and that the Department for Science, Innovation and Technology could lead the way in doing something different.

Willetts’ key frustration is that the business case process values a level of certainty that is almost impossible to achieve when evaluating research spending. The business case process is a risk mitigation strategy to ensure government departments are spending money on things where they can demonstrate it will deliver value for money. It reflects an approach to risk that prizes the prudent use of public resources to deliver predictable outcomes.

The problem with this approach when applied to research, innovation, and science is that outcomes are often unknowable. After all, the whole point of scientific endeavour is to discover what is not yet known. As Willetts writes, “it assumes more capacity to forecast costs and benefits than is possible when the Government is funding innovative and risky R&D.”

There is therefore a tension between the government’s science ambitions and the way it internally funds its own science ambitions. The ambition is couched in a rhetoric of moonshots and discovery. The business case dwells in the language of control and appraisal.

The challenge is finding an approach that safeguards public spending while appropriately funding the unknowable and ambiguous world that is science policy.

Time after time

There are some approaches that already attempt to reconcile this tension and the review gives us examples of two. The integrated review places maintaining the UK’s position as a global science and technology power as the single overriding policy objective which other ideas fall behind. There is also the Advanced Research and Invention Agency (ARIA) which is covered by a single business case with delegated authority for project leads to spend money on whatever project leads see fit. Arguably ARIA leans too far into removing all public scrutiny and the integrated review is only part of a wider set of spending decisions – but they both demonstrate a different business case is possible. The challenge is that to improve science spending means improving business cases and improving business cases depends on changing the way the government works.

Willetts has a set of key recommendations for aligning the business case process with the government’s science ambitions. They boil down to reducing the size of business cases, bundling smaller projects into portfolios of work for approval, increasing delegated authority for spending, producing specific guidance for science and technology, and developing business cases in advance of spending reviews.

These ideas are all helpful in speeding up and reforming the business case process. If enacted, they would radically shrink down the bureaucracy of government spending and with a bit of luck there would not be too much scrutiny lost either. The question is whether they are sufficient to allow the speed of decision making to match the speed of technological advance and the speed of decision making of the private sector who rely on the public sector for infrastructure spending and other kinds of support.

It may be helpful to consider business cases not only through a standard of risk and uncertainty but through the prism of the underlying purpose of the programme that is seeking funding. This means looking at risk against a portfolio of programmes, not just individual projects. Risk does not only manifest in one programme but cumulatively across all programmes. For example, it would be risky for the government to place its whole science budget in ARIA even if the business case was solid on its own merits. It would also be risky to place its whole budget in funding tax credits for the same reason, and so on.

Instead, there could be different levels of approval, delegated responsibility, and kinds of process depending on how the programme fits within the portfolio mix and national priorities.

Ideally, there would be a much speedier process for capital spending where there is a partner involved who is stumping up some of the cash to reflect both shared risk and the urgency of building things like lab spaces. There should rightly be more initial scrutiny where a programme has high levels of autonomy but delegated spending, scrutiny and reporting requirements should be agreed synchronously to government spending decisions and then left alone for a period.

And where the public purse is being asked to fund something which is inherently ambiguous, the government should have the confidence to articulate a risk appetite, knowing some of this funding will fail, given that no amount of value for money appraisals can give the full possibilities or applications of unknowable scientific discoveries.

One more time

As Willetts highlights, allowing space for failure can reduce future failure by discovering what does not work. In this sense, a speedier business case process that allows individual projects to fail more quickly and on their own terms can also mitigate risk against future failure. Speed and scrutiny need not always be in opposition.

In examining the business case process Willetts has alighted on some of the fundamental dynamics that underpin the whole science ecosystem. His proposals could shape how innovation policy actually works in DSIT and by extension how national science policies come to be funded. And, he managed to do it in fewer than 25 pages.