Total Investment in Research and Innovation 2020-2026 (TWIN 2020-2026) describes trends in government expenditure on research and development (R&D) and innovation (see glossary on p. 35) over the period from 2020 to 2026, based on the 2022 National Budget. In 2020, the Dutch government spent EUR 6.1 billion on R&D. This constitutes about 30% of total direct expenditure on R&D in the Netherlands. In addition, the government provides direct funding for innovation. It also encourages private investment in R&D and innovation by allowing tax breaks for companies that invest in R&D and innovation.
In this publication, we look not only at government expenditure but also at total R&D expenditure (by the private sector, the public sector and other organisations) and at spending at provincial and EU level. Furthermore, we compare Dutch government expenditure on R&D with that of other countries. We look at actual and budgeted Dutch government expenditure based on the 2022 National Budget. The final expenditure figure in this report may differ from the budget and multi-year forecasts for the same year in previous TWIN reports. Readers should also bear in mind that it was not possible to include additional investment from the 2021 coalition agreement in this report and that there are several uncertainties, such as the war in Ukraine and rising inflation.
Our analysis leads to the following main conclusions:
1. Direct government expenditure on R&D will increase by more than EUR 1 billion over the period 2020-2026.
Direct government expenditure on R&D will increase by EUR 1.2 billion (+20%) from EUR 6.1 billion in 2020 to over EUR 7.3 billion in 2022 and is forecasted to remain at that level until 2026. The increase is largely accounted for by resources from the National Growth Fund and by the increase in funding from the Ministry of Education, Culture and Science. Both will grow by more than EUR 0.5 billion over the period 2020-2026. The increase in funding from the Ministry of Education, Culture and Science will mainly benefit the universities. The resources of the National Growth Fund are intended to contribute to economic growth in the longer term. A total of EUR 20 billion is available from this fund over the period 2021-2025, part of which is available for R&D. In the years 2023-2026, the National Growth Fund is expected to spend more than EUR 0.5 billion annually on R&D.
2. As a result of the increase, the government's share of the ambition to spend 2.5% of its GDP on R&D is expected to be achieved by 2022.
As part of its European commitments, the Netherlands agreed to spend 2.5% of GDP on R&D by 2020 in order to ensure the vitality of the knowledge society and to stimulate economic growth. Over the period 2013-2019, the public sector, the private sector and other funders together spent between 2.14% and 2.18% of GDP on R&D. In 2020, this rate increased to 2.29%, partly because the GDP of the Netherlands decreased in 2020 due to the COVID-19 pandemic. In order to reach 2.5% in 2022, the latest projections suggest that an additional EUR 5.3 billion will be required, on top of the EUR 17.8 billion spent in 2019. If we assume that the public sector, the private sector and other sources continue to invest proportionately the same amount in R&D within the Netherlands (1.0: 2.0: 0.4), the government should invest EUR 1.5 billion more in R&D carried out in the Netherlands compared to 2019. In the TWIN reports, we see that the government has budgeted to spend EUR 1.6 billion more in 2022 compared to 2019. For the years following 2022, we see that government investment will again be lower than necessary to achieve its 2.5% share. Government expenditure on R&D may increase over the coming years due to the investment announced in the 2021 coalition agreement. An additional investment of EUR 3.0 billion is required from the private sector in 2022 compared to 2019. International and other parties would have to invest an additional EUR 0.7 billion in R&D carried out in the Netherlands.
3. The proportion of project funding is increasing due to the National Growth Fund.
The resources of the National Growth Fund are shifting the ratio of institutional to project funding further towards project funding. The proportion of project funding has grown steadily in recent years from 23% in 2005 to 33% in 2021. The National Growth Fund's resources are expected to increase this percentage after 2021, to 37% in 2024. This is a fairly average percentage in terms of international comparison.
4. Universities are expected to receive an additional EUR 0.5 billion.
The expenditure of the Ministry of Education, Culture and Science on R&D will increase from EUR 4.4 billion to EUR 5.0 billion (+12%) over the period 2020-2022, according to the national budget. This is mainly due to an increase in institutional funding for universities, which is set to rise from EUR 3.2 billion in 2020 to EUR 3.7 billion in 2022 (+16%) and remain around this level thereafter. This increase also excludes the additional investment announced in the 2021 coalition agreement.
5. Indirect expenditure on R&D is no longer exceptionally high.
In addition to direct expenditure on R&D, the Dutch government also provides tax-related support to encourage the private sector to invest in R&D. The Dutch government provided 0.15% of GDP in tax-related government support for R&D in 2019. In the past, the Netherlands provided relatively large amounts of tax-related government support compared to other countries. In 2017, for example, only the United Kingdom, Belgium and France spent more in relative terms. However, tax-related support as a percentage of GDP has risen faster in some other countries than in the Netherlands. In 2019, six countries provided relatively more tax-related government support for R&D as a percentage of GDP. In addition to the countries mentioned above, this also applied to Austria, Ireland and Italy in 2019. The Dutch government's tax-related support is still above the EU-27 average (0.10%) and the OECD average (0.12%).
6. Innovation expenditure also rising sharply due to National Growth Fund.
Direct expenditure on non-R&D innovation is expected to rise very sharply by 71% between 2020 and 2026. Expenditure will increase from EUR 573 million to EUR 980 million. This increase will also be mainly thanks to the National Growth Fund. In 2020, no funds were yet available from the National Growth Fund. By 2026, the Ministry of Economic Affairs and Climate Change estimates, EUR 526 million will be allocated to innovation, in addition to the funds for R&D under item 1.
7. Importance of European research funding continues to grow
In recent years, funds from the European framework programmes have become an increasingly large part of the public funding available to Dutch researchers. On average, Dutch researchers obtained around EUR 760 million per year from Horizon 2020. With a total budget of EUR 95.5 billion, the new Horizon Europe programme has a slightly larger budget than its predecessor Horizon 2020.
8. Provinces make additional investments in knowledge and innovation in 2020-2022.
The budgets that provinces on aggregate have committed to knowledge and innovation in recent years ranged between EUR 137 and 172 million, up to and including 2019. This investment is higher in 2020, 2021 and 2022 mainly due to additional funds being made available in relation to COVID-19, but also due to new projects and initiatives. The provinces are budgeting for a total of EUR 242 million for knowledge and innovation in 2022.