Government must work hard to meet its research and development target

When it comes to investment in science - Government don't have a plan to reach their own targets...

In mid-April, the Public Accounts committee released a report¹ on research and development funding across government. Amongst their findings, was the assertion that government does not have an ambitious plan to reach their own target, for the public and private sector to work together to invest 2.4% of the UK’s GDP on R&D by 2027. In line with CaSE’s ongoing work relating to investment, we took the opportunity to review just how far there is to go to reach this target.

In 2016, the UK collectively invested 1.67% of its GDP on R&D, falling much below the EU-28 (2.03%) and OECD (2.35%) averages. The government’s new Industrial Strategy aims to enhance research and innovation in the UK, of which this target for R&D investment is a major part. In the UK, the balance of public to private investment in R&D is around 70% private and 30% public. This means that for the government to reach the 2.4% target, both public and private investment needs to increase. It is not strictly within the government’s gift to make investment decisions of the private sector, but it has many policy levers in its possession in order to attract businesses to invest in the UK.

Following a report we commissioned in 2014, we found that increased public investment effectively crowds in private investment. We have consistently called for the Government to set an interim milestone to invest 0.7% of GDP on R&D by 2022. To reach 2.4% of GDP by 2027, we also recommend that the Government aims to spend 0.8% of GDP on R&D. This will ensure that the government keeps up its side of the target, while making the environment more attractive for private organisations to invest.

What would reaching this target look like in financial terms? Assuming our rough 70:30 ratio remains the same, the private sector would need to increase its investment by an additional £8bn in 2027, an increase of 33% on current figures. Working from a 2016 baseline, the public sector would need to invest an additional £6.2bn in 2027, an increase of 68%. This is a huge increase, if the Government are serious about reaching its own target then these are the types of increases we will need to see.

Over the next year CaSE will be carrying out a project of work around investment, scrutinising Government investment, understanding what spending this investment well looks like, and working with Government to understand how they can help to drive private investment in the UK.

1: https://publications.parliament.uk/pa/cm201719/cmselect/cmpubacc/668/668.pdf