Draft Council declaration sets R&I spending target at 4% of GDP

EU leaders are considering setting a target for public and private research and innovation spending to reach 4% of GDP, even as they cut national research budgets and show no signs of meeting the current 3% target.

The objective is included in the draft ‘Budapest Declaration on the New European Competitiveness Deal’, with the final version to be published after the informal meeting of heads of state and government in Hungary on 8 November.

“We will promote cutting edge research, research transfer and its economic valorisation within the EU and commit to meet a 4 % GDP expenditure target in research and innovation by [2030],” the declaration says.

Diplomats said the document, dated 24 October, is the first draft. The final text will be informed by comments from member states, and could include a different figure or timeframe, or even drop the 4% target altogether.

At the start of the century, EU countries set the target of spending 3% of GDP on R&D by 2010, but that has since been pushed back to 2030. In 2022, R&D expenditure in the EU was 2.27%, with only four countries surpassing 3%: Sweden, Belgium, Austria and Germany. Meanwhile, South Korea registered 5.21% and the US 3.59%.

EU leaders first called for a ‘European competitiveness deal’, including action on the single market, Capital Markets Union, and research and innovation, in their conclusions from the special European Council meeting on 17 and 18 April. They also reiterated the 3% expenditure target.

If adopted, the 4% target would be a positive signal from member states, said MEP Christian Ehler, who was Parliament’s co-rapporteur for Horizon Europe.

“It is a good recognition that innovation is the only plausible tool to boost our competitiveness, and that innovation depends on sufficient R&D investments, both public and private. The target is in line with the R&D intensity of our global competitors so it reflects Europe's needs,” he told Science|Business.

Reaching the 4% target would also require a significantly bigger budget for the next Framework Programme for Research and Innovation, FP10, Ehler said. “The €220 billion suggested by the Heitor report is a realistic and needed contribution to a 4% goal and the test case for the political seriousness of even the 3% ambition formulated two decades ago.”

Ambitious target

Research stakeholders have  been calling for a more ambitious target. Earlier this year, several organisations launched the Research Matters campaign, which aims to increase funding for R&D to “over 3% of GDP” in all European countries.

“We are pleased to see this level of ambition. What member states need to ensure is that this doesn’t stay in words or paper only,” said Silvia Gómez Recio, secretary general of the Young European Research Universities Network, in response to the draft declaration.

Kurt Deketelaere, secretary general of the League of European Research Universities, said the 3% figure is “outdated” and 4% is “a much more realistic target”.

However, it is “time for member states to make up their mind,” he told ScienceBusiness. “Heads of state and government sign off targets like that when they are at an EU meeting, and once they are back home, they cut the R&I budget,” he said.

The Netherlands recently announced annual cuts of €1 billion to university and research funding, while France and Italy have also cut research spending. At the same time, other priorities have chipped away at Horizon Europe’s budget in recent years.

“It is clear that member states, and the private sector, will have to be forced to come to 4%,” Deketelaere said. One option, backed by commissioner designate for research Ekaterina Zaharieva, would be to monitor national R&I budgets via the European Semester, the EU’s main policy tool for coordinating economic and fiscal policy across the bloc.

This could for instance mean R&I spending is considered a long term expenditure and excluded from short term deficit calculations, says international economist and former rector of Maastricht University, Luc Soete.

He argues that countries which cut national research budgets thinking this will be compensated by more EU spending should also be “less entitled to go to the Framework Programme for funding”.

There is however a limit to what targets can achieve, as Europe’s poor performance is “first and foremost the result of a lack of private R&D funding and/or R&D performed in the private sector,” Soete said.

Fragmentation of public R&D spending across EU member states is also an issue. “Assuming that simply to add all the national public expenditures on R&D in the EU would be equivalent to the US or Chinese is pretty ridiculous,” Soete said. “A much more systemic transformation is needed.”

The recent reports by former Italian prime ministers Enrico Letta and Mario Draghi, and from the Commission’s independent FP10 advisory group, suggest a range of remedies from a Capital Markets Union, to giving industry more say in steering collaborative research.

Soete wants to go even further and make EU bodies such as the European Research Council responsible for assessing all fundamental research proposals, to boost excellence and ensure the same proposal is not submitted to both EU and national funding agencies, wasting administrative resources.

It will be important to note the wording used in the final declaration. The draft mentions a 4% “research and innovation” target, whereas the current target refers to research and development, which excludes various types of expenditure.

For example, tax credits are not included in current measures of R&D expenditure, but in countries where they are in place, including France, Belgium and the Netherlands, they can represent up to an additional 1% of GDP, Soete said.

Fifth freedom

The draft Council declaration also highlights the importance of supporting disruptive technologies in sectors such as artificial intelligence, quantum, biotech, space, advanced materials, and net-zero technologies.

“We must adopt a ‘continuum approach’ to deal with this issue between key building blocks, namely academia, industry and public institutions, through a web of interconnected funding mechanisms and ambitious public procurement strategies,” it says.

It also calls for the role of the European Innovation Council to be strengthened, and for research, innovation, knowledge and education to become the fifth freedom of the single market, as recommended in Letta’s report.

EU leaders welcomed Letta’s report following their April meeting, but this would be the first time they have explicitly referenced the fifth freedom.

“We are looking forward to working with the EU institutions, member states and stakeholders to make sure we make it a reality,” said Gómez Recio.