The government is to contribute £20 million to a University Challenge Fund to help universities to exploit academic research. The Welcome Trust and the Gatsby Trust have contributed a further £20 million to the scheme, and the government hopes to raise another £10 million from other sources.

Brown also announced an extra £250 million for education in an effort to reduce skill shortages in areas such as information technology and computing. £100 million of the money will be spent on lifelong learning and the rest in schools. There will, however, be no new money for the Office of Science and Technology and, therefore, for the UK's seven research councils.

The chancellor claims that reforms to capital gains tax and corporation tax will help companies to invest more in R&D. In addition, the treasury and the Department of Trade and Industry are conducting a wide-ranging review of the UK's record on investment in R&D. A consultation document - Innovating for the Future: investing in R&D - describes some shocking facts about British industry: for example, less than half of all small- and medium-sized manufacturing companies employ qualified scientists and engineers, and less than half of those that do employ them in a R&D capacity. The DTI is seeking responses to the document by the end of June, prior to the publication of a white paper (policy document) on competitiveness later this year.

The consultation paper reports that the UK's investment in R&D has declined in comparison to its competitors over the past twenty years.