R&D funding in the 2021 Budget: Science funding and "building back better"

By Andrew Mackenzie, Head of Policy and Communications, The Physiological Society, Twitter: @AWMackenzie

Given the UK Government’s aspiration to “turbocharge” UK science, the budget on 3 March was notable in the lack of detail provided on the role of research and development (R&D) in supporting the UK to “build back better” from the COVID-19 pandemic. Many in the scientific community have raised concerns about lack of science funding announcements in the Budget and are asking how future Horizon Europe association costs will be met.

How much does the UK currently spend on R&D?

In 2018, total R&D expenditure in the UK was 1.7% of GDP. That has fallen from the equivalent of 2.0% in 1981 and is considerably below the OECD average of 2.4%. By comparison, Germany spends 3.1% of GDP on R&D and in the US, it is 2.8% (1).

In the UK, R&D funding is made up of both public and private investment. In 2018, total public funding (including higher education and research councils) was £9.6 billion, with £25 billion funded by the business/enterprise sector. Over the last few decades, the proportion of public vs private R&D funding has changed significantly: while in 1985 42% of R&D was public, by 2018 this had fallen to 26%.

The Government has committed to raising the total UK investment in R&D (public and private) to reach 2.4% of GDP by 2027 (2).

Making up the public funding element of this, the March 2020 Budget outlined the Government’s ambition to increase public R&D investment to £22 billion per year by 2024-25. This announcement was welcomed across the science sector, as it represented the UK’s largest ever increase of R&D funding (3).

Later last year, the November 2021 Spending Review outlined the first step in reaching the commitment to spend £22 billion per year by 2024-25, with an announcement that public R&D funding would increase to £14.6 billion in 2021-22 (4).

What does the March 2021 Budget mean for science?

The Government states that the March 2021 budget “sets out the steps the government is taking to support the recovery, ensuring the economy can build back better.” It is therefore notable how few references there are to funding for science.

Whereas the words ‘research’ or ‘researcher’ appeared 61 times in the March 2020 Budget and 42 times in the November 2020 Spending Review, it appears just 7 times in March 2021’s Budget (5).

While the Chancellor did announce a new fund to help scale up innovative R&D intensive businesses, support to increase vaccine testing capacity, and a future a review of R&D tax reliefs, there was a notable omission of any more substantial reference to research funding.

The Government’s Plan for Growth, published alongside the March 2021 budget, mentions the 2027 2.4% funding target, but provides no further details on how this will be achieved (6).

The low profile of R&D in this Budget strikes a different chord to Prime Minister Boris Johnson a few weeks ago, who used his New Year message to say that the government intended to “turbocharge our ambition to be a science superpower” (7).

The day after the Budget, UK Research and Innovation’s (UKRI) Chief Executive Ottoline Leyser told the Public Accounts Committee that the 2.4% is “a very challenging target” (8).

Horizon Europe…who is picking up the tab?

One the most significant unanswered questions is where the funding for the UK’s association to Horizon Europe is coming from. The Brexit deal agreed at the end of 2020 enables the UK to fully associate with Horizon Europe, the world’s largest research programme. This is very welcome and will ensure continued collaboration between UK and European researchers, which is essential for tackling global challenges such as ageing, climate change and preparing for future pandemics.

When the UK was an EU member state, involvement in European research programmes was funded as part of the UK’s membership fee. However, now that the UK is outside of the EU, it is paying separately to associate with Horizon Europe and increasingly there are concerns that this payment will be made by raiding existing research funding. Association costs are likely to be around £2 billion a year, which the Campaign for Science and Engineering has calculated is around a fifth of UKRI’s total budget or the annual research spend of the two largest research councils: the entire engineering, physical science and medical research portfolios combined (9).

Diverting funding from the UK’s existing science budget to pay for association costs would have a huge impact on UKRI, risking damage to the growth of UK R&D.

Building back better

The UK faces a challenging economic period ahead. However, the COVID-19 pandemic has shown the immense value of a strong R&D base in responding to public health crises.

Public R&D investment leverages private investment, driving up overall R&D investment. A new study by Oxford Economics suggests that each £1 of public R&D eventually stimulates between £1.96 and £2.34 of private R&D (10).

A research paper for the Department of Business, Energy and Industrial Strategy in February 2020, carried out by Cambridge Econometric, modelled the impact of increased R&D investment on the UK economy. It found that higher R&D expenditure would lead to increases in GDP, employment and productivity. If the Government reach their target of 2.4% of GDP by 2027, it will result in an increase of total UK GDP of 1.2-1.4%. In absolute terms, an extra £15 billion in annual R&D spending will lead to annual GDP being higher by £30.5 billion and 80,000 extra jobs in 2027 (11).

As the UK seeks to ‘build back better’ from the COVID-19 pandemic, the economic and the social case for increased investment in R&D is clear. The research ecosystem has suffered setbacks over the past year due to the pandemic. The Government should place R&D at the heart of the COVID-19 recovery and ensure the funding is in place to deliver on Boris Johnson’s aim to “turbocharge our ambition to be a science superpower”.

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