Hammond to Offer $674 Million to Boost Innovation in Budget

(Bloomberg) -- U.K. Chancellor of the Exchequer Philip Hammond will use Wednesday's budget to allocate more than 550 million pounds ($674 million) to boost innovation and technology, as he focuses on targeted measures while keeping back the Treasury's firepower to offset any turbulence from Brexit. 

The money, from the National Productivity Fund, will support work in areas including electric vehicles, robotics and artificial intelligence, the Treasury said in a briefing note. Hammond will also set out details on work to boost 5G mobile phone coverage in Britain.

The plan comes as Hammond pledged on Sunday to set aside money to cushion the economy as Britain prepares to start negotiations to exit the European Union. He warned the budget would not include any spending commitments funded by borrowing as he seeks to balance the books in the next parliamentary term.

Other measures may include spending on social care and the National Health Service, both of which are struggling with under-funding. Those commitments may be partly funded by increasing the national-insurance rate for the self-employed, the Financial Times and the Times newspaper reported Monday, without saying where they got the information. National insurance is a levy on payrolls. 

‘Enough Gas'

Hammond should have ample room to meet his new fiscal rule: that structural borrowing should be no higher than 2 percent of national income in 2020-21. Projections made in November showed the deficit narrowing to less than 1 percent, giving the chancellor 27 billion pounds of “firepower” should fiscal stimulus be required to support the economy.

Speaking on the BBC's "Andrew Marr" show, Hammond said Britain needs “gas in the tank” as the U.K. negotiates its exit from the EU. The economy's resilience since the June referendum gave Prime Minister Theresa May a “very strong hand” as she prepares to begin talks this month, he said.

“My job as chancellor is making sure our economy is resilient" so that "as we embark on the journey we'll be taking over the next couple of years confident that we have enough gas in the tank to see us through,” Hammond said. “Any chancellor would be sensible to try to make sure that he has enough flexibility to manage the economy.”

The innovation fund would invest 270 million pounds to benefit projects including cutting-edge artificial intelligence and robots for offshore and nuclear energy, space and deep mining, the development of batteries for the next generation of electric cars, and new ways of manufacturing medicine.

Broadband Investment

An extra 90 million pounds will be used to fund 1,000 doctorate candidates and 200 million pounds to support new fellowships for early and mid-career researchers, including 50 million pounds for programs to attract top global talent.

The broadband investment will include a hub to test 5G technology at leading research institutions. The budget also will speed-up deployment of super-fast broadband, with the government expected to offer incentives to invest in full-fiber networks by offering vouchers to local businesses to encourage take-up where new networks are built and upgrading connections to public buildings, such as schools and hospitals.
 

To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net, Andrew Atkinson