Government funding of R&D

The fact sheet is divided into five sections. We look at:

1. national government expenditure on R&D;
2. national government expenditure on innovation;
3. national government expenditure in international perspective;
4. regional expenditure;
5. European expenditure.
    

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

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 2020 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 2020-2026. An innovation-relevant component can be distinguished within R&D expenditure, which we will return to later in this fact sheet. In accordance with international agreements, the expenditure is based on the figures of the 2022 budget.


Government R&D budgets by ministry, in millions of euros and as percentage of GDP

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 83 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 rise sharply in 2021 and 2022.

R&D expenditure is increasing over the years. Government R&D expenditure as a percentage of GDP increases from 0.76 in 2020 to 0.79 in 2022. The increase in direct R&D expenditure also translate into a higher percentage of GDP for the years 2021 and 2022. In the following years, the percentage decreases to 0.73 in 2026. For those years, according to the estimate of the Central Planning Bureau, GDP will rise faster than direct R&D expenditure. With regard to the GDP figures, it should be noted that the war in Ukraine creates additional uncertainty for these figures.

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.

The following table shows the different forms of government support for R&D and innovation for the period 2020-2026. In 2022, 75% of the total government contribution to R&D and innovation will consist of direct expenditure on R&D. 17% consists of indirect tax aid for R&D and innovation. Direct innovation expenditure is 8%.

Direct and indirect financial support for R&D and innovation, in millions of euros

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 statistics refer to 2020. The figure shows that the Netherlands is comparable to the average of the EU-27 countries.

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, Switzerland and Sweden). If these figures are combined, the Netherlands is just 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 0.34%; in the Netherlands it is 0.15% (2019).
 

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 2019, the budgets that the provinces committed for knowledge and innovation were between €137 and €172 million. These investments will be 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 are budgeting a total of € 242 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. Dutch institutions, both public and private, acquired a relatively large amount of funding from the last (Seventh) Framework Programme, 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 Horizon2020. The average annual income from this source between 2014 and 2020 was €760 million.