‘No cause for alarm’ as UK ‘hits 2.4 per cent R&D target’

Official accounting changes that show the UK is already spending 2.4 per cent of its GDP on research will not undermine the case for more science spending, a former minister who championed the target has said.

In a surprise move, the Office for National Statistics announced that it had revised the way it estimates non-public research and development (R&D) expenditure to capture more spending by small businesses. These “methodological improvements” resulted in a 60 per cent uplift in estimated private R&D spending, equivalent to a £16 billion increase, with overall UK spending officially standing at £43 billion in 2020, the ONS said.

That change also means that the UK is, in theory, already achieving its long-term target of spending 2.4 per cent of GDP on R&D, which the 2019 Conservative election manifesto and the 2021 Budget said would be achieved by 2027. Previously, Britain’s combined public and private science spending was estimated at 1.7 per cent in 2019.

With the government seeking to announce up to £18 billion in annual budget savings next month to pay for its much-criticised unfunded tax cuts, the ONS change has sparked concerns that the Treasury may view science as an easier target, potentially rolling back R&D tax credits or even direct science spending, given its manifesto promise has been realised.

However, former science minister Lord Willetts, who, as a visiting professor at King’s College London, authored “The Road to 2.4 per cent: Transforming Britain’s R&D performance” in 2019, said he “would be surprised if this led to a sudden decrease in research spending”.

At the Conservative Party conference, senior government figures including Chris Philp, chief secretary to the Treasury, had been “quite robust” about the need to protect science spending and there is “a very strong commitment to R&D”, he added.

Instead, the revision was “good news as it explains the long-standing puzzle of why the UK didn’t seem to get as much private R&D funding, compared to public spending, as other countries”, said Lord Willetts, who was science and universities minister from 2010 to 2014, suggesting the change could provide further support for the idea that government-sponsored research led to more private R&D spending, a theory known as “crowding-in”.

“It isn’t so much that we’ve found this money down the back of the sofa, more that it wasn’t showing up in our bank account,” said Lord Willetts, who noted the change brought the UK up to the OECD average on R&D spending, although still behind countries such as Germany, South Korea and America, which spent much more. “I have followed economic statistics for decades and this is one of the most significant revisions I have ever seen,” he added.

Annette Bramley, chief executive of the N8 Group of northern research-intensive universities, said the new better understanding of UK R&D spending was useful, especially as the “crowding-in effect of public sector investment in R&D [is now] greater than previously calculated”.

“In March this year, the government stated that £1 of public expenditure in R&D eventually leverages an average of £2 additional private investment,” said Dr Bramley, who said the new ONS methodology indicated “those leverage ratios are going to be even higher, making a stronger argument for public investment in R&D”.

Should the government row back on its prior commitment to invest £22 billion in research per annum by 2027 because its sees the 2.4 per cent target as having been met, “there is a real threat to levelling up productivity growth through innovation”, she added, stating it would endanger “economic and social prosperity across the whole of the UK”.

Sarah Main, executive director of the Campaign for Science and Engineering (CASE), which has long championed the 2.4 per cent target, said the ONS change did not affect the rationale for a 2.4 per cent target. “It’s important to separate the target and the principle of the target – achieving an R&D-intensive future, or, in other words, an economic and cultural transformation of the UK. There is no doubt the principle is the right one to pursue,” said Dr Main.

The ONS change would inevitably invite calls to set a new more challenging target, such as the 3.5 per cent of GDP that Germany is set to achieve by 2025, a level achieved by the US in 2020, she added. “We can afford to be more ambitious.”

jack.grove@timeshighereducation.com