05 Jan 2011   |   News

The year ahead for innovation

Governments worldwide spent fortunes on R&D and innovation as part of economic stimulus packages. What will happen in 2011, now austerity is à la mode and the taps are turning off?

Something surprising happened during the recent lame duck session of US Congress. Lost amid a flurry of year-end activity, the America Competes Act, which overhauls how the federal government supports private-sector R&D, was reauthorised to the tune of US$45 billion.

Renewal of the act has been seen as a major boost in the face of Republican Party attacks against science-funding “waste” and the end of the US stimulus package. And it’s an indication of the different approaches nations are taking to fund science in the face of continuing economic and political obstacles. While the US government is casting a wide net to fund science, the UK and Spain have cut science funding in real terms. France, China, Sweden, and Germany are among countries that are increasing science funding, despite making cuts elsewhere.

America Competes authorises the continued growth in the budgets of three key US science-funding agencies: the Department of Energy’s Office of Science, the laboratories of the National Institute of Standards and Technology, and the National Science Foundation. President Obama is expected to give his final approval shortly, and the now-split US Congress will decide in January and February exactly how much will be doled out under the act.

“Passage of the act comes at a crucial time in our nation’s economic and technological trajectory - a time that President Obama characterised as a ‘Sputnik moment,’” John Holdren, Assistant to the President for Science and Technology and Director of the Office of Science and Technology Policy, wrote in a White House blog when the act was renewed. “Full funding of the Competes Act is among the most important things that Congress can do to ensure America’s continued leadership in the decades ahead.”

Also in late December, President Obama signed a two-year retroactive extension of the R&D tax credit from 1 January 2010 to the end of 2011, a boon for biotech and other high tech sectors.

Post-stimulus funding chasm

Other countries are watching, but not necessarily waiting to see the results of how the US copes with the post-stimulus funding chasm. UK researchers were told they must “achieve more with less” as the government said there would be cuts to science in the October 2010 government spending review (see “Axe poised over UK R&D budget”). In December, UK science-funding bodies were told to absorb cuts of up to 41 per cent in capital expenditures on buildings, maintenance or equipment, on top of the 10 per cent reduction in the science budget that Chancellor George Osborne announced in October. Concerns are that some of the shortfall in capital expenses will have to be made up from research budgets.

Instead of cutting across the board, the UK government intends to set strategic priorities to channel R&D spending to areas of basic science in which the UK has a reputation for excellence, as well as focus on increasing technology transfer and innovation. Vince Cable, Minister for Business, Innovation and Skills, said at the time, “Money is important both for quality and quantity. But it is an input, not an output, measure. The question I have to address is can we achieve more with less?”

Cutting R&D will damage long term growth

Although countries including the UK (see UK R&D budget frozen at £4.6B for next four years) and Spain (see Budget cuts hit Spanish science) that have been hard hit by recession, have cut R&D budgets, governments elsewhere have ring-fenced R&D spending, as a key element of economic revival. The US is doubling basic science spend between 2006 and 2016. China has seen a 25 percent increase in government funding for R&D, Sweden is to increase government funding by more than 10 percent between 2009 and 2012, and Germany said in 2009 that it was injecting €18 billion into research and higher education during the coming decade. The EU has also pledged to maintain its R&D budget.

Providing backing for these increases, the 2010 OECD innovation report said cutting back investment in research will damage the foundations of long-term growth. “Investment in science and technology is an investment in the future. At a time of fiscal consolidation, countries must carefully consider the long-term impact of spending cuts on science and technology,” said OECD Secretary-General Angel Gurría. He added, “There is also a need to increase the efficiency of this spending.”

R&D spending a priority in France, China

France has increased its research spending for 2011, and will continue with projects funded by stimulus money (see “In times of austerity, France keeps up science stimulus”. France still is prioritising research spending and investment, with justice and R&D being the only parts of the public budget not cut.

China’s economy dipped at first after its $600 billion stimulus ended, and then regained steam, but the question remains whether science benefitted (See “Innovating in a post-stimulus world”). As economic stimulus plans wound down across the world, China’s huge plan of Yuan 4 trillion ($600 billion), or some 13 percent of GDP, has drawn mixed reviews from economists, but generally has been perceived as successful.

The two-year plan, started in November 2008 to boost economic activity in the face of the slowdown, included Yuan 8.8 billion for renewable energy and energy efficiency projects and another Yuan 4 billion to R&D and innovation.

In the post-stimulus world, China also plans to invest as much as Yuan 7 trillion to accelerate construction of new infrastructure, including telecommunications networks, during its 12th Five-Year Plan from 2011 to 2015, according to the China Daily.

Adding up the pieces

So what has all this extra spending achieved? While there may be short term gains in terms of employment of researchers and spending on supplies and equipment, it would be naïve to expect increased spending on R&D to translate through to new products or services immediately. As a result, proving that science is worthy of ongoing investment remains an open question in many countries. However, there have been some quiet victories that provide some optimism for the future.

For example, as a result of stimulus spending, the US now holds more than 80 percent of the lithium battery market, according to Patrick Clemins, director of the R&D Budget and Policy Program at the American Association for the Advancement of Science (see “Stimulating US innovation”). While lithium batteries were invented at the University of Texas, overseas companies, particularly in Asia, dominated the industry until recently. “Through stimulus investment, the jobs were brought back here,” Clemins said.

Whatever the results of the US stimulus spending, perhaps more troubling to the scientific community - and reflecting the continuing economic uncertainty - is what happens now, since neither US political party has yet to reveal a clear plan for future science funding.

Both NSF and NIH, as the primary individual grant funders in the US, face a tough road ahead, with federal budget tightening and the end of stimulus funds that pumped up their budgets over the past couple years. NSF, which benefitted from federal funding increases in the early 2000s, has managed to spread out grants, so only a certain number of scientists will come back every year. NIH, by comparison, has doled out most grants for two years, Clemins said, so all grant receivers will need to return this year or next.

In the US, continued economic uncertainty leaves the future of science funding and innovation in question for now.

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