The term 'innovation' conjures images of gleaming tech centres on university campuses or imposing factories churning out the components needed to power next generation AI. And these are indeed part of the picture. Advances in science and technology have transformed our world.
Yet there is another opportunity often missed by policymakers: innovation in foundational sectors – the everyday nurturing parts of society like social care, education and utilities.
Despite sustaining our existence and giving our lives meaning, foundational sectors are often neglected. This is to the detriment of the large parts of the population involved with them, who are disproportionately female, migrant and from minority ethnic backgrounds. Dereliction of foundational sectors erodes the quality of services on which we all depend.
Foundational sectors represent a significant proportion of UK economic and social activity, including many services. The size of foundational sectors means that even modest improvements through research, development and innovation (RDI) could ultimately have significant impact.
Supporting foundational sectors might even help reduce geographical inequality because, unlike some high-tech industries, activity is more evenly spread across the country.
Much of the scope for innovation in foundational sectors involves social rather than technological means, and sometimes a combination of both. Examples of social innovation include new regulatory financing or governance models.
For example, home heating is responsible for around 15% of UK carbon emissions, and we need to cut this figure to reach the nation's Net Zero ambition. A potential social innovation based solution would be new business models. What if heat was delivered as a service? What might a 'Netflix' of heating look like?
Part of the challenge of building support for innovation in foundational sectors is that they are hidden, overlooked or hard to measure. Traditional economics struggles to account for the value of care. For example, an economist might see a low staff to child ratio in a nursery as a sign of productivity, but a parent might view things quite differently.
When seeking to support innovation in other areas, policymakers frequently focus on physical infrastructure but foundational sectors are often more dependent on social infrastructure – the bonds that bind communities together like libraries or youth clubs.
Of course the wrong sort of innovation in foundational sectors could cause harm. Digital technologies could be used for surveillance, benefiting private business owners rather than workers or service users.
What we need is innovation in foundational sectors that offers sustainable, long-term net benefits which are widely shared. This could be achieved through public engagement, rigorous ethical review, bottom-up decision making and the involvement of social movements.
The idea of the foundational economy has been around for at least a decade. A major milestone was the publication of the Manifesto for the Foundational Economy in 2013 that made the case for industrial policy to go beyond a few high tech sectors and support sectors which provide the goods and services taken for granted by citizens.
Subsequently, the Institute of Welsh Affairs has championed this idea and the Welsh Government has started to embed it into policy, creating a £4.5m Foundational Economy Challenge Fund on which Nesta commented.
In 2020, Nesta published a report, Love's Labours Found, that describes what facilitating innovation in the foundational economy might look like and focused specifically on social care. The immediate aim would be to improve pay, conditions and quality through modest productivity gains.
In the medium term, facilitating the creativity, imagination and autonomy of the foundational workforce would make their work more fulfilling and raise its value. This would also improve productivity and the ability of the sector to attract investment. Further proposals on innovation in the foundational economy can be found in a subsequent Nesta report: Innovation after lockdown.
This is a big shift, but it can be done. We can learn from the creative industries, where initiatives and institutions – including UKRI’s Challenge Programmes and the Nesta-led Creative Industries Policy and Evidence Centre (PEC) – have helped to strengthen RDI in a sector which was previously overlooked for innovation policy.
In its recent Innovation Strategy, the government announced a review of the RDI landscape. Nesta’s contribution to the review (which can be viewed below) highlighted the opportunities for innovation in foundational sectors, as well as the importance of using data, experimentation and collaboration to better understand the RDI landscape, what works and where investment should be directed in the future.
To paraphrase economic historian RH Tawney: foundational sectors provide that which we cannot buy by working overtime. Society depends on sectors that provide care, nurturing and support. It’s time that we recognise the value of the foundational economy and provide it with the support it needs to innovate and grow.
With thanks to Isaac Stanley who authored Nesta’s report Love’s Labour’s Found, along with Mark Byrne, Albert Bravo-Biosca, Siobhan Chan, Eliza Easton, Celia Hannon, Karlis Kanders, Juan Mateos-Garcia, Juliet Ord, Kathy Peach and Nancy Wilkinson for their advice in preparing the Nesta response to the RDI Landscape Review.
If you are interested in discussing this response please contact Laurie Smith.