State R&D investment target postponed, chancellor announces

Rishi Sunak said that R&D state spending would now hit £22bn by 2026/27, two years later than previously announced

The UK target to invest £22 billion of state money into research and development (R&D) has been postponed by two years, the chancellor of the exchequer revealed today.

Delivering his budget, chancellor Rishi Sunak announced that R&D spending by 2024/25 would now only reach £20 billion – £2 billion short of the original target set in the 2020 budget.

“I can confirm we will maintain our target to increase R&D investment to £22bn,” Mr Sunak told MPs. “But in order to get there and deliver on our other priorities, we will reach the target in 2026/27, spending by the end of this parliament £20 billion a year on R&D.”

The £20bn 2024/25 budget for R&D includes £5.9bn for “core research”, funded by UK Research and Innovation and the National Academies; £2.1bn for Horizon Europe association; £1.1bn for Innovate UK; £2bn for R&D allocated via the Department for Health and Social Care; £1bn for Official Development Assistance R&D and £3.8bn for R&D projects funded via all other remaining government departments.

R&D investment would increase from 0.7% of state gross domestic product (GDP) to 1.1% by 2024/25, Mr Sunak said – a figure, he said, compared favourably to comparable nations like the USA, France and Germany, which invest between 0.7% and 1% of GDP in R&D.

This “unprecedented” R&D spending would increase core ringfenced research funding to £5.9 billion per year by 2024/25, the chancellor continued, confirming that this figure would be in addition to the cost of R&D tax relief, worth approximately £7.4bn to the sector between 2019-20. The majority of this core R&D will be distributed to universities.

We are pleased that the government has confirmed an early and continuing model for increasing public research funding, which will mean public investment rising over 35% by 2024/25
– Prof Dame Nancy Rothwell, the Russell Group

Prof Steve West, president of Universities UK, welcomed the funding confirmed today, which would, he said, “help to maintain the UK’s position as a global science superpower”. Particularly welcome was the news the Treasury would meet the entire costs of Horizon Europe, he continued.

“Sustainable funding is, of course, vital for universities as they look to maximise their role in both levelling up and expanding pioneering research,” Prof West added.

The government is reforming R&D tax reliefs “to support modern research methods” by including data and cloud computing costs under qualifying expenditure. Mr Sunak said UK R&D tax relief was the second-highest in the OECD, “yet it’s not working as well as it should”. The chancellor warned around half of the R&D expenditure that companies claim tax relief on, amounting to around £48bn, was spent abroad. New rules would clamp down on this misuse of public funds, he expanded.

The forthcoming levelling-up bill would set out how the government will increase funding for R&D and innovation outside of the golden triangle, the budget confirmed.

The health research budget includes £40m new investment in social care research, £95m for the Office for Life Sciences and funds for “Generation Genome”, £1.4bn for life sciences research, a newborn screening programme to detect over 200 rare diseases, and a “Diverse Data” programme, to increase the representation of minority groups in genomic research data sets. There is also £30bn available “to create the new green industries of the future”, the chancellor continued, which help the UK achieve its goal of becoming a “science superpower”.

After consultation with the home secretary, Priti Patel, Mr Sunak said the government will launch the Scale-up, High Potential Individual, and Global Business Mobility visas in spring 2022 ” to attract highly skilled people and support inward investment”.

Prof Dame Nancy Rothwell, chair of the Russell Group and vice-chancellor of the University of Manchester, said: “In a challenging economic climate, it is very welcome that the chancellor has today confirmed long-term plans to increase public funding for research, which will provide much needed certainty to private investors and help signal that the UK is serious about cementing its position as a science superpower.

“In particular, we are pleased that the government has confirmed an early and continuing model for increasing public research funding, which will mean public investment rising over 35% by 2024/25. Increasing funding in a consistent and predictable way like this will help to leverage in more private investment earlier, boost business confidence and ultimately help to set the UK on a course to meet its ambition to invest 2.4% of GDP in R&D by 2027.”

Nick Hillman, director of the Higher Education Policy Institute, said: “‘The slowdown in planned public spending on research and development is disappointing. Unlike other areas of government spending, when it comes to research, public funding ‘crowds in’ rather than ‘crowds out’ private funding.” Mr Hillman noted that the increase, while smaller than hoped, still amounted to a “big increase in the commitment to science and research”.

“I am pleased to see that the 2.4% commitment [to invest a 2.4% of UK GDP in R&D by 2027] lives to fight another day,” he concluded.

Dr Annette Bramley, director of the N8 Research Partnership, said: “The increase in R&D spending to £22bn by the end of this parliament and the rise in funding to Innovate UK’s budget to £1bn reflects the importance of supporting industry and universities to drive innovation and the knowledge economy for the future prosperity of the country. Yet, there are many areas where our universities expertise could be more fully exploited in order to transform the UK’s economic and social wellbeing.”

The British Academy welcomed the chancellor’s statement and added: “We still believe that the original target to invest at least 2.4 per cent of GDP in research by 2027 remains imperative if we are to compete on a global stage where percentage investments are already much higher. We therefore welcome the government’s renewed commitment to this target, particularly the increase in the proportion of the 2.4% which will come from public investment.”

Read more: Augar response ‘in coming weeks’, Treasury confirms

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