Evaluation of the research component of the Future Fund points to the need to reconsider valorisation policy.

In mid-May, the Ministers of Economic Affairs and Climate Policy (EZK) and Education, Culture, and Science (OCW) presented the evaluation of the research part of the Future Fund to the House of Representatives, along with an initial response in the form of a Chamber letter (see Government.nl). Dialogic conducted the evaluation at the request of the Ministry of EZK.

The Future Fund (Business part and Research part together) was established in 2014 at the instigation of the House of Representatives ('Motion Pechtold c.s.'). The basic idea is to set aside a portion of gas revenues for investments in future generations' earning capacity through a revolving fund. The Future Fund contains a range of instruments and has been a separate budget item in the EZK budget since 2017 (article 3). The size of the Research part of the Future Fund eventually amounts to €127.5 million. EZK and OCW share the policy responsibility for the Research part of the Future Fund. Four schemes have been financed with the Research part of the Future Fund: 1) Research Facilities Future Fund Credit Scheme (TOF) aimed at financing new or improving existing high-quality research facilities of public and private research institutions; 2) Smart Industry Fieldlabs Scheme (SI-fieldlabs/SIF) aimed at financing 'smart industry' field labs (through a combination of a loan and a subsidy); 3) The Proof of Concept (PoC) scheme focuses on innovative startups that specifically build on knowledge developed at a TO2 institution; and 4) Thematic Technology Transfer (TTT) scheme (incl. Onode pilot) aimed at stimulating valorisation activities of a collaboration or consortium of knowledge institutions and a venture capital investor acting as a fund manager in a specific technology or application domain.

Based on the evaluation, the following conclusions were drawn:

1. At the level of the Research part as a whole, the conclusion is that the resources for financing research facilities and valorisation at the time of the establishment of the Future Fund were more than welcome. However, the funds involved (ultimately €127.5 million) had (unintentionally) a predominantly incidental or one-off character. They have not resulted in more structural policy instruments (as is the case in the Business part of the Future Fund). The requirement for revolving funding is not well suited to designing suitable instruments aimed at financing research facilities and valorisation.
2. The added value of these four instruments under the same name is limited. The Research part of the Future Fund is not managed as a coherent set of instruments and is not experienced as such. In practice, the Research part of the Future Fund provides impulse financing for matters that should actually be more structurally budgeted, namely valorisation and financing of research facilities. Valorisation is a legal task for higher education and knowledge institutions that requires the use of structural funds. In practice, insufficient funds are made available from the regular funding of higher education and knowledge institutions for valorisation, and valorisation is mainly realised through temporary impulse financing. The same applied to funding research facilities. Until recently, no structural funding had been allocated for this, until significant budgets were promised for a period of 10 years earlier this summer.
3. Due to the mandatory nature of a revolving fund, no proper consideration could be given as to whether basic financing, a subsidy, a loan, or other forms of instrument design are most appropriate (for facilitating research facilities and supporting valorisation). When looking at the efficiency of the design of the individual instruments, we assess the policy effectiveness of TOF and SIF as low. For PoC and TTT, where similarly high-risk activities are involved, we consider the policy effectiveness higher. Although we have not carried out a comprehensive cost-benefit analysis, we estimate that the ratio between social benefits and social costs is more favourable for PoC and TTT than for TOF and SIF. However, it should be noted that many of the benefits are yet to materialize in the near future.

Several recommendations were made in the report. For example, it was advised to make valorisation a part of investment projects of the National Growth Fund, but it was also cautioned not to exclusively link the valorisation policy to a (currently) temporary instrument like the National Growth Fund. In their initial response (see the Chamber letter), the ministers acknowledge that the Research part did not function as originally envisioned. Therefore, they intend to rethink how the Future Fund has been implemented so far. They also aim to reassess the existing policy goals and make sharper choices where the policy goals still align. The ministers also acknowledge that improvement is possible in terms of coherence in the valorisation instrumentarium. They provide several examples of actions that have already contributed to this (NGF proposal Delta Plan for valorisation, valorisation vision, governance agreement for higher education and science, etc.). Additionally, they intend to build on existing positively evaluated instruments. Furthermore, the ministers will consider integrating the Research part into the Business part and explore the desirability of experimentation space in the Research part (potentially with a revolving fund requirement). The ministers aim to inform the House of Representatives in the autumn about their vision on the use of the Future Fund as a whole and its future design.

Want to learn more about this evaluation? Ask Pim den Hertog.