Question to the HM Treasury:

To ask the Chancellor of the Exchequer, if she will make an assessment of the potential merits of issuing research and development bonds of up to £20 billion per year.

Government investment in research and development (R&D) underpins the UK’s excellence in its universities and research institutes and stimulates private sector innovation, driving growth and higher living standards. On average, every £1 of government spending delivers £7 of economic benefits in the long term. At the recent Spending Review, the government therefore prioritised R&D – increasing R&D funding to £22.6 billion per year by 2029-30, an above-inflation increase.

Our core gilt programme is the most stable and cost-effective way of raising finance to fund the day-to-day activities of the government, owing to the depth and liquidity of the market. This is, in part, down to the fungibility of the instruments issued to the market. Issuing bonds aimed at financing specific areas of spending risks fragmenting the gilt market, which would not be consistent with the government’s debt management objective of minimising the long-term cost of financing, taking into account risk.

The government keeps under regular review the introduction of new debt instruments. The government would however need to be satisfied that any new instrument would meet value-for-money criteria, enjoy strong and sustained demand in the long term, and be consistent with wider fiscal objectives.