BEIS research budgets set UK on the path to 2.4%

James Tooze explores what recent public budget increases will mean for UK research

On Friday last week, the Business department released its research budget allocations for this financial year, including the budget for UKRI. These budget allocations have previously been published as a document outlining research expenditure for the next few years, but this years’ emerged as a single web page, which could be because of the current pressure on Government resources due to the pandemic and, as yet, no multi-year Spending Review to inform future spending. The commitments are a significant milestone, however. This is the first year of new investment from a majority Government that has pulled no punches in outlining its intention to ramp up research investment.

Budgetary increases reaffirm Government commitments

The Business department (BEIS), which ultimately distributes funding to UKRI, is the department with the largest responsibility for public research investment. Our previous analysis found that over the past few years, BEIS and its constituent parts were responsible for roughly 70% of public investment in R&D. Therefore, the research budget distributed by BEIS is the key indicator of public investment for this year. In some conversations we have had with officials, this year’s settlement for BEIS is likely to represent an even larger proportion of the UK public research budget, which I will discuss later. For 2020/21, BEIS will distribute £10.36bn, representing an increase of £1.6bn from the last financial year. This increase is extremely welcome and is an incredibly positive move in this time of uncertainty.

This increase represents a 19% increase in BEIS’ research budget, in cash terms. In March, the Chancellor pledged that the Government would increase public investment in 2020/21 by 15% and this announcement goes a long way to realise this commitment. While BEIS’ budgetary increases are proportionally larger than the 15% commitment, BEIS does not control all of the public sector’s research spending and to meet a 15% increase in the total research budget will require investment from other parts of Government. Within the overall BEIS budget, UKRI’s budget has also seen a 20% increase from last year. 

This increase is perhaps all the more significant when compared to the increases seen over the last few years. UKRI’s budget is now just below £8.5bn, an increase of almost £1.5bn from last year and showing the level of trust the Government has in an organisation still in its relative infancy. The allocations do not give details of how UKRI’s budget will be distributed across constituent councils, that is UKRI’s decision to make, but the size of this budgetary uplift means all areas of research should benefit.

How do these commitments stack up against reaching 2.4%?

CaSE has plotted a path for public research investment in order to reach the Government’s target to increase the UK’s research intensity to 2.4% of GDP by 2027. While CaSE’s projections refer to the total public investments made in R&D, and these BEIS allocations are only part of the public investment portfolio, we can mark the progress of BEIS research budgets against our recommendations.

We would not expect BEIS research budgets to reach our recommendations, as other forms of public investment would make up the difference or exceed our projections. The figures in recent years have shown that proportionally, BEIS research budgets are rising more rapidly than required to meet our projections. By comparison, CaSE recommended that the public sector invest £9.5bn in 2018/19 when the BEIS research budget was £8bn. In 2020/21, we recommended public investment should be £11.2bn while BEIS budgets are almost £10.4bn. We have not yet updated our projection work factoring in the economic consequences of the current pandemic because they are as yet unknown. However, it is likely that the ratio of public and private investment will change at least in the short term. And with an input target like 2.4% a fall in GDP will distort projection work. At a time when businesses, universities, research charities, science parks and centres face a great deal of uncertainty and disruption over the future of their R&D activities, it is more important than ever that public investment in research is brought forward.

What about the rest of the public research budget?

Our conversations with Government officials have led us to expect that total public research investment will be just under £13bn in this financial year, meaning that roughly £2.5bn of investment will come from outside of BEIS. This is roughly the same that the public sector, outside of BEIS, invested in research last financial year. If this figure remains the same, public investment will be significantly higher than our projection, but will change the balance of public investment in research. I have long talked about the importance of a variety of public sources of investment, particularly from Government departments, providing support for the entire breadth of UK research and innovation.

The two departments outside of BEIS that have significant research budgets are the Department of Health and the Ministry of Defence but most departments, including the Ministry of Defence, have experienced long-term decreases in budgets for R&D. Departments such as Defra and the Department for Education, who used to have significant research budgets, have been forced to consistently slash research investment over the last decade. Our arguments for increased support for departmental R&D were prominent in the House of Commons Science and Technology committee’s inquiry in to the Balance and effectiveness of research and innovation spending.

The Government and UKRI have this week formally responded to the recommendations of the inquiry, which you can read here. The report ultimately recommends that in the development of a roadmap plan of how the UK can reach the 2.4% target departmental R&D should feature prominently with UKRI taking on a coordinating role. The Government response did acknowledge the importance of other departments playing a role in increasing R&D intensity and we’d like to see more encouragement to compel departments to use their research budgets for their intended purpose. The Government Office for Science published a review of Government Science Capability, in which they recommend a number of ways in which the stewardship of departmental R&D could be improved which we welcomed. We look forward to working with BEIS, UKRI and these other government departments in the development of a roadmap.