POLITICO Pro Morning Tech UK: Budget wins (and losses) — Vallance’s plan — Donelan’s TikTok twist

— The good, the bad and the indifferent – it’s budget fallout time.

What does the future of tech regulation look like? Sir Patrick Vallance has some answers. 

— The row over the U.K.’s position on TikTok takes an unexpected turn.

Good morning, we hope you survived budget day and are coping with the train/teachers/tube/lecturers/doctors/civil servants/BBC journalists (have we missed any?) strikes. 

Send your news, views and tips to the team: Annabelle Dickson, Mark Scott and me on email. You can also follow us on Twitter @TomSBristow @NewsAnnabelle @markscott82.

FIRST, THE NEWS: A budget that love-bombed tech was promised, and Chancellor Jeremy Hunt delivered, sort of. There was cash for computingregulatory promises on AI and finance … and some hefty tax and investment announcements too.

Right-hand woman: Science and Technology Secretary Michelle Donelan was sitting next to Hunt looking pleased as punch on the front bench. But as the dust settles on the government’s self-styled pro-innovation budget, the all-important detail and reaction is a mixed bag. 

Exascale is coming: The most eye-catching sum of money was the £900 million announced for a so-called “exascale” computer — for the uninitiated, that is a machine several times more powerful than the U.K.’s top supercomputer. The other big headline figure was the £2.5 billion towards a 10-year quantum computing program (more on that further down the email.) 

Prized AI: Hunt also gave the go-ahead to plans to launch an artificial intelligence sandbox — a mechanism to allow companies to test for a limited time before entering the market. That would allow innovators to “trial new, faster approaches to help innovators get cutting edge products to market.” (More on that, and other recommendations made by Chief Scientific Adviser Sir Patrick Vallance further down the email.) There will also be a prize worth £1 million a year which will be awarded to “the person or team that does the most groundbreaking AI research.”

Put your foot down: There was also another £100 million for the Innovation Accelerators programme which is focusing on three clusters: the Manchester Turing Innovation Hub, quantum projects in Glasgow and a program to accelerate new health and medical technologies led by the University of Birmingham.

Get the cash flowing: Government boasts about a marathon weekend to secure the sale of the beleaguered Silicon Valley Bank U.K. were inevitable, and Hunt used the opportunity to pitch the need for a “more diverse financing system, where the benefits of investment in high-growth firms are available to more investors.” It was a ‘watch this space’ for the plan to unlock investment from pension funds, and London Stock Exchange listing reform. Those will come in his economic statement in the fall, he said.

But but but: There is genuine disappointment that Hunt didn’t row back further on his R&D tax credit reforms. The “enhanced” credit he hailed in the budget, which will allow some SMEs to claim £27 for every £100 of investment from HMRC, will by the Treasury’s own admission only help around 4,000 small and medium-sized loss-making companies spending a lot on research, such as in life sciences and only 20,000 SMEs in total. Tech UK associate director, Neil Ross, said the bar had been set too high for most firms. The all-important detail is here. As Dom Hallas, executive director for the Coalition for a Digital Economy, put it: “There’s been some progress but it’s still not great.”

Knocking on Hunt’s door: Hallas said they would continue to engage, while Leo Ringer, partner at Form Ventures, tweeted that the “strength and breadth of feeling amongst startups means it’s worth continuing to underscore the importance of it.”

Clapping in the stands: Julian David, the chief executive of TechUK, said that while the job was not done, the budget had “put the UK back on the pitch when it comes to the global competition for science and technology.” 

Missing in action: But he said they were frustrated to not see the semiconductor strategy. We’re also going to have to wait longer to see what might happen to the £1.6 billion of Horizon research funding which was taken back by the Treasury earlier this year. And there was also nothing on reforming the apprenticeship levy which has been another key ask from business.

The view from DSIT: “This week, we’ve shown that actions speak louder than words in our push to make the UK a science and technology superpower,” said Donelan in comments shared with Morning Tech. “We stepped in to protect the finances of our burgeoning tech sector over the weekend, while setting out our roadmap to regulate the industries of tomorrow and committing huge sums of investment in the Spring Budget.”

STRIKE THAT: There’s a rail strike and it’s quiet, but budget fallout will continue and it’s the turn of the Lords to debate the statement too today.

**A message from Google: As devices have become a daily part of growing up, it’s important that kids learn, play, and explore online without finding something they shouldn’t. To help, Google is turning SafeSearch on by default for people under 18 years old, so inappropriate content is automatically filtered out when they search online. Learn more.**

SHIFTING SANDS: Tech is challenging existing regulations, Sir Patrick Vallance wrote in his review released alongside the budget, pointing out that 10 regulators all have digital tech in their remit.

Carpe momentum: But this provides a chance for the U.K. which it should seize to “champion a pro-innovation approach,” he writes.

How, sir? There are nine recommendations which you can read here, and the government accepted all of them

Headline I: It will now set up a regulatory testing environment for AI (a sandbox) supported by the Digital Regulatory Cooperation Forum. Work will start “immediately,” the government said in its response with more details in the AI white paper. 

Headline II: The government said it will also “act at pace” to provide clarity around how intellectual property law applies to generative AI, as well as bringing forward legislation on self-driving vehicles, with the caveat “when parliamentary time allows.”

Cyber alert: It also said it would look at amending the Computer Misuse Act 1990 to include a statutory public interest defense that would “provide stronger legal protections for cyber security researchers.”

Too soon: “One message that comes across clearly from industry is that the government should avoid regulating emerging digital technologies too early, to avoid the risk of stifling innovation,” Sir Patrick concluded.

WELCOME TO 2034: The Quantum Strategy was also released alongside the budget and the headline figure is £2.5 billion of funding over 10 years, starting in 2024. It aims to make sure the U.K. is “home to world-leading quantum science and engineering.” It also talks about the U.K. leading internationally in the regulation of this new technology. 

Where the money goes: The cash will fund research hubs, accelerator programs, training and talent schemes and the National Quantum Computing Centre.

Show us your skills: Over 1,000 PhD students will be trained in quantum or a “directly supporting field” over the next ten years, the strategy reads. A Quantum Skills Taskforce is also being established. 

But before that: This year £240 million will be spent on quantum computing programs. A new Office for Quantum is also being set up. The report reads: “Our approach is to strengthen the entire quantum ecosystem, by applying all the levers that the government has available.”

Coming attraction: Greg Clark, chair of parliament’s science and technology committee, said his committee will today launch an inquiry into the government’s quantum plan. He is also hoping to get Vallance in to give evidence on his tech regulation review before he leaves his post in April. 

TIKTOK SPLIT: TikTok is considering a split from parent company ByteDance in a bid to quell security concerns, Bloomberg reports. Meanwhile, Reuters reports that TikTok said Washington has demanded ByteDance divests its stake in the company, or the video app could face a ban in the States.

LOOKOUT: The French privacy regulator has listed AI-powered cameras as one of its priorities for 2023, POLITICO’s Laura Kayali reports.

PERSONAL CHOICES: Before the budget kicked off Wednesday, Shadow Minister Lucy Powell asked Michelle Donelan in parliament about comments she made to Morning Tech on the government’s TikTok policy. We’ve decided to publish that exchange, and then our exchange with Donelan, so readers can make up their own minds about what was said.

Powell: “Three weeks ago, the secretary of state said that TikTok on government devices was a personal choice. At the weekend it was reported that [a] review of TikTok is to be carried out and this week the prime minister said he is considering a ban. So, can she tell the house today: is it a personal choice or does TikTok pose a security risk on officials’ devices?”

Donelan: “Ensuring the security of U.K. data is a priority and our experts continue to monitor the threats posed to data. The Government Security Group led by the Cabinet Office are reviewing the evidence base to take action for government devices. What I actually said, Mr Speaker, was in terms of the general public it is absolutely a personal choice but because we have the strongest data protection laws in the world, we are confident that the public can continue to use it. That is very different to what the Honorable Member stated.” 

But but but: Here’s how our exchange with Donelan from February unfolded…

Morning Tech: “Late last week you might have seen EU officials being told not to use TikTok. Do you think U.K. government officials should be on TikTok?”

Donelan: “I think that that’s a personal choice thing. As a Conservative I strongly believe in personal choice.”

Morning Tech: “But there is national security…”

Donelan: “Well there is but we have no evidence to suggest that there is a necessity to ban people from using TikTok. That would be a very, very forthright move in this that would require a significant evidence base to be able to do that. Of course, we constantly review these things. National security always must come first. And if there was evidence presented to me that was contrary to that view, I would address it, but certainly there hasn’t been.”

Editor’s note: A DSIT spokeswoman has said since the interview in February that Donelan was referring to government officials’ personal phones rather than work phones which already have high security measures. There was no mention in our interview, or from DSIT since, that Donelan was referring to the “general public” as she claimed in the House of Commons yesterday.

Donelan speaks: “I believe that for the general public  – which naturally includes government officials using their personal phones – then it should be a personal choice whether or not to use TikTok,” the minister said in comments shared with Morning Tech yesterday evening. “In regards to official government devices as I said in the chamber, the Cabinet Office are leading and the Government Security Group is reviewing the evidence.”

LIFT-OFF: It was also DSIT’s first oral questions in the Commons yesterday and minister George Freeman was so excited he answered the first question from Vicky Ford about space before it was even asked.

Batting order: Freeman, Donelan, Julia Lopez and Paul Scully all took turns at the Despatch Box, which worked fine, apart from once when the Speaker had to hurry them up with a “one of you”! 

What’s your superpower? Freeman was an enthusiastic opener, he clearly loves his brief. Creating a science “superpower” was Donelan’s principle answer to most questions she took, while Lopez answered anything on broadband and data. Scully was saved until the end for a question on R&D funding.  

Labour attack: Chi Onwurah led the opposition attack on the government’s handling of Horizon and R&D tax credits. The SNP also went on the offensive over the U.K.’s inability to date to join the Horizon program. 

No news corner: When will we join Horizon? Or variations thereof was the most asked question, but there was nothing new for the government to say on this. Labour’s Alex Davies-Jones spoke about the importance of the Competition Bill, but got no new information out of Donelan who replied it was coming “this session.”

Whose Silicon is it anyway? Is there a corner of England which hasn’t had the word ‘Silicon’ thrust upon it? Jonathan Gullis described his patch as “Silicon Stoke,” before Tanmanjeet Singh Dhesi trumped Slough as the “Silicon Valley” of the U.K.

TOP JOB: UK Research and Innovation needs an executive director, paying up to £120,000.

ONLINE SAFETY: Mark your diaries, Morning Tech hears the long-awaited House of Lords committee stage of the Online Safety Bill is likely to start on or around April 25. A Lords insider tells us it is expected to take place over eight days spread across four weeks (with the usual caveat that other business could get in the way.) Report stage is expected to be closer to the end of June.

Morning Tech wouldn’t happen without editor Oscar Williams, Emma Anderson and Grace Stranger.

**A message from Google: When online family safety experts Internet Matters asked children about life online, three out of four said the internet was important for learning things they didn’t get taught in real life. Growing up online helps feed kids’ curiosity in ways only dreamed about even 10 years ago. But, naturally, parents worry about what their children might find on the internet. To help, Google has made SafeSearch the default setting for anyone under the age of 18 years old, so inappropriate content doesn’t show up in their searches. We also turn off Autoplay on YouTube, and filter access to apps on the Play Store. These new settings are one way Google is helping families be safer online. Learn more.**

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Tom Bristow

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