Government funding of R&D
Photo: Peter Hilz/Hollandse Hoogte
In short
- Absolute government R&D expenditure rises from 4.7 billion in 2012 to 7.8 billion in 2022.
- The ministries of Higher Education, Culture and Science and Economic Affairs together fund 84% of R&D expenditures in 2022.
- Indirect R&D expenditure of the Dutch government is above the average of the EU-27.
The fact sheet is divided into five sections. We look at:
- national government expenditure on R&D;
- national government expenditure on innovation;
- national government expenditure in international perspective;
- regional expenditure;
- European expenditure.
There are several reasons why governments fund R&D:
- The government traditionally finances fundamental academic research because of a lack of other sources of funding for this type of research (a form of ‘market failure’).
- In order to maintain the knowledge infrastructure in areas important to the government, with institutes that are directly affiliated to the government (such as the National Institute of Public Health and the Environment, the Royal Netherlands Meteorological Institute and the Research and Documentation Centre).
- In connection with its own need for knowledge for the preparation and evaluation of policy.
The government invests both directly and indirectly in R&D and innovation. Direct financing has two basic forms:
- With basic financing or institutional financing, the recipients of the financing have the freedom to choose for which they use the money. Program funding for institutes for applied research is also included.
- The second form is project financing, in which financing is given for a specific time, budget and content. Here the competitive element plays an important role; for example, researchers submit research proposals and only a few of them receive funding. Funding via NWO is a good example of this. Ministries also tender research projects on the basis of competition.
In addition to these direct forms of financing, a new form has emerged from the mid-1990s: indirect financial support via tax facilities. These are tax breaks aimed at companies with the aim of stimulating private R&D (see also the page on science and innovation policy).
Until 2016, two such tax schemes existed: the Promotion of Research and Development Act (WBSO) and the Research & Development Deduction (RDA). The WBSO was aimed at reducing the tax payment on R&D personnel costs, the RDA aimed at an increased deduction of non-personnel R&D costs. As of 2016, these two schemes have been merged into one new WBSO scheme. From 2023 onwards the WBSO will be indexed.
In addition, approximately € 150 million in tax aid is available from environmental schemes each year. In contrast to the WBSO, this is only aimed at innovation. We will discuss this further later in this fact sheet.
1. Developments in government expenditure on R&D
The government finances R&D directly (through basic or project financing) or indirectly (in the form of tax support).
The following graph shows from 2000 the two forms of government support for R&D - both direct financing and fiscal support. Direct investments are presented as a percentage of gross domestic product (gdp) to place them in the context of the economy.
Government expenditures and percentage GDP
Notes: The numbers are based on the various budgets of the departments. It concerns the budgets for R&D of the national government: the budgets of the provinces are not included in this. The fiscal part only concerns the WBSO / RDA, which is aimed at R&D (MIA / VAMIL are only aimed at innovation and are not included here).
In the graph above, we see government direct R&D expenditure (in euros) increasing annually up to 2011. There was a decline in 2012. Subsequently, the total amount of government support in the long-term budget shows a slightly increasing trend until 2017. From 2017 to 2018, R&D expenditure rose sharply due to the extra investments from the 2017 Coalition Agreement. The increases from 2021 are mainly due to the National Growth Fund and the Ministry of Education.
The following table looks at the development of R&D expenditure per department in the period 2021-2022. An innovation-relevant component can be distinguished within R&D expenditure, which we will return to later in this fact sheet.
Government R&D budgets by ministry, in millions of euros and as percentage of GDP
| 2021 | 2022 | |
| Realization | Preliminary | |
| Education, Culture and Science | 4853,9 | 5323,7 |
| Economic Affairs and Climate Policy | 865,3 | 1233,2 |
| Health, Welfare and Sport | 515,9 | 488 |
| Agriculture, Nature and Food Quality | 238,7 | 254,9 |
| Defence | 189,8 | 180,5 |
| Infrastructure and Water Management | 89,2 | 117,8 |
| Foreign Affairs | 46,2 | 118,9 |
| Justice and Security | 24 | 24,8 |
| Social Affairs and Employment | 12,3 | 12,6 |
| Interior and Kingdom Relations | 11,1 | 11,6 |
| General Affairs | 0,7 | 0,6 |
| National Growth Fund | 0 | 0 |
| Total | 6847,1 | 7766,6 |
| Total in percentage of GDP | 0,8 | 0,82 |
The table shows that the Ministry of Education, Culture and Science and the Ministry of Economic Affairs and Climate Policy are by far the two largest financiers of R&D, together responsible for 84 percent of the expenditure in 2022. From 2021, resources from the National Growth Fund are also part of the R&D funding. These ensure that R&D expenditure increases. Within the expenditure of the Ministry of Education, Culture and Science, the university's first funding stream accounts for the largest part. The expenditures also rise sharply from 2023 onwards.
R&D expenditure is increasing over the years. Government R&D expenditure as a percentage of GDP increased to 0.80 in 2021.
2. Innovation and innovation-related expenditure
Since 2014, figures on government spending on innovation have been gathered alongside government spending on R&D. The collection of data on innovation expenditure is in its infancy, however.
Innovation spending is defined as government budgets intended for the funding of activities focused on and intended for innovation in the public or private sector that lead to new or greatly improved products, processes/methods and services, or administrative, organisational or marketing innovations.
The following table shows the different forms of government support for R&D and innovation for 2021-2022. In 2022, 78% of the total government contribution to R&D and innovation will consist of direct expenditure on R&D. 15% consists of indirect tax aid for R&D and innovation. Direct innovation expenditure is 7%.
Direct and indirect financial support for R&D and innovation, in millions of euros
| 2021 | 2022 | |
| Realisation | Provisional | |
| R&D expenditure | 6847,1 | 7766,6 |
| of which innovation relevant | 1315 | 1555,3 |
| Expenditures on non-R&D innovation | 447,3 | 671,7 |
| Fiscal support for R&D and innovation | 1565 | 1480 |
| of which only for innovation | 149 | 139 |
| Total expenditure for R&D and innovation | 8859,3 | 9918,3 |
3. International comparison of government funding of R&D
How does R&D spending in the Netherlands compare with that in other countries? The figure below compares government spending on R&D (as a proportion of GDP) in a number of European countries. The figure shows that the Netherlands is slightly above the average of the EU-27 countries.
| 2020 | |
| KOR | 1.08 |
| AUT | 1.07 |
| NOR | 1.05 |
| DEU | 0.93 |
| CHE | 0.86 |
| DNK | 0.83 |
| SWE | 0.82 |
| FIN | 0.81 |
| NLD | 0.7 |
| USA | 0.69 |
| OESO | 0.64 |
| EU-27 | 0.63 |
| FRA | 0.59 |
| BEL | 0.56 |
| ESP | 0.54 |
| ITA | 0.51 |
| JPN | 0.5 |
| UK | 0.46 |
| IRE | 0.28 |
For a good comparison, fiscal support should also be included in direct R&D expenditure. Most countries have such schemes; only a few do not (yet) (Germany and Switzerland). If looking at indirect R&D expenditure, the Netherlands is above the EU-27 average (see data publication Government support for R&D, in % of GDP). As percentage of GDP, the size of government support through tax incentives varies from 0 to 0.31%; in the Netherlands it is 0.15% (2020).
4. Regional
Activities related to knowledge and innovation also take place at regional level, though few figures have been gathered on this. However, a survey of funding for knowledge development and innovation at regional level was carried out for the 2013-2019 edition of TWIN. This funding comprises European resources, provincial resources and matched funding from central government. Regional development agencies, management authorities and other regional organisations are also involved. Up to and including 2021, the budgets that the provinces committed for knowledge and innovation were between €137 and €270 million. These investments are higher in 2020, 2021 and 2022, partly because extra resources have been made available in connection with COVID-19, but also because of new projects and initiatives. The provinces have budgeted a total of € 249 million for knowledge and innovation in 2022.
5. Europe
The European Union also contributes to the funding of R&D in the Netherlands. Since 1984 this has mainly been in the form of funding under the Framework Programmes, which has grown steadily. Horizon 2020 (2014-2020) had a total budget of €77 billion. Horizon Europe (2021-2017) started medio April 2021 and has a total budget of €96 billion. Dutch institutions, both public and private, acquired a relatively large amount of funding from Horizon 2020 and Horizon Europe so far, amounting to one-and-a-half times the Dutch contribution to the programme. The share of European public funding in total public R&D funding in the Netherlands has grown from 9% during the 7th Framework programme to 13% for Horizon 2020. In 2021, the first year of Horizon Europa, the share of European public funding was 13%. The average annual income from this source between 2014 and 2020 was €769 million.
OECD 2012 Working Paper on internationally comparable indicators of public funding
Every year the Rathenau Instituut gathers data on government funding of R&D and innovation. The data are based on the government budgets submitted to the House of Representatives at the official opening of parliament. The Rathenau Instituut surveys the ministries and publishes the results in its TWIN publication (Total Investment in Research and Innovation). Since 2015, this publication has also included data on efforts at regional level, as well as EU funding.
For an explanation of the used definitions and abbreviations we refer to the webpage Definitions for Science in Figures.