The report calls for a strategic investment of £2bn in the short term, showing that if this delivered even 0.1% growth, it would be paid for by tax revenues within three years.

A Manifesto for Innovation and Growth argues that owing to structural problems within the UK economy, neither austerity nor traditional stimulus packages will be enough to deliver growth.

Instead, the Chancellor should prioritise science, research and technology through a package of targeted measures including:

• Increasing the budget for science, engineering and technology in line with inflation;
• Investing in underlying infrastructure such as the next generation of superfast broadband;
• Funding a new form of industrial strategy aimed at driving innovation and unlocking potential new markets

Author, Charles Levy, said: “The UK has great strengths in science and technology but it is failing to translate these into economic advantage, with the result that our competitors are racing ahead of us, particularly around new General Purpose Technologies such as Big Data and nanotechnologies. This is largely down to structural problems such as access to finance for innovation, missing infrastructure and weak national and local institutions. 

“We are calling for £2bn of targeted investment aimed at tackling some of these dysfunctional elements in our economy.

“The government has three options to pay for this. One option would be to slow the pace of its austerity programme. Given the UK’s structural problems, austerity alone will not kick-start the economy. Alternatively, the Chancellor could widen the scope of the Spending Review to introduce means-testing for certain benefits, such as TV licences and Winter Fuel Allowance for pensioners.

“As a final option, the government could re-channel funds from ineffective policies such as enterprise zones, capital allowances, R&D tax credits and the patent box.

“Yet ultimately, this investment will pay for itself. Even if it delivers just 0.1% growth, over three years it will pay for itself through the increase in tax revenue alone.”

The report calls for short and long-term action aimed at transforming the UK economy. Focussing on the short-term, it calls for:

• £180m to maintain the science, engineering and technology budget;
• £100m to double the current deployment of the next generation of domestic broadband connections;
• £300m to create the next set of world-class university research facilities;   
• Protect BIS from cuts in real terms (an additional allocation of £180m);
• A new £1bn round of the Regional Growth Fund, prioritising investments with a specific innovation focus;
• £220m additional funding for the Technology Strategy Board as the only organisation with the capacity to operate as a delivery body for innovation.

It also sets out a manifesto for long-term action centred around investment in the infrastructures that underpin innovation and action aimed at unlocking the opportunities presented by disruptive technologies.