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 - accompanied by an initial response in the form of a Chamber letter - to the House of Representatives (see Government.nl). At the request of the Ministry of EZK, Dialogic conducted this evaluation.

The Future Fund (Business part and Research part together) was established in 2014 at the instigation of the House of Representatives ('Pechtold c.s. Motion'). The basic idea is to allocate a portion of gas revenues for investments in future generations' earning potential through a revolving fund. Since 2017, the Future Fund has included a variety of instruments and is a separate budget item in the EZK budget (Article 3). The Research part of the Future Fund 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 by 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' fieldlabs through a combination of a loan and a subsidy; 3) The Proof of Concept (PoC) scheme focuses on innovative startups that build specifically on the 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 capitalist acting as a fund manager in a specific technology or application domain.

Based on the evaluation, the following conclusions were drawn:

1. At the overall Research part level, the conclusion is that the funds for financing research facilities and valorisation were more than welcome at the time of the establishment of the Future Fund. However, the funds involved (€127.5 million eventually) had (unintentionally) a predominantly incidental or impulsive character. They did not result in more structural policy instruments (as is the case with the Business part of the Future Fund). The requirement of revolving funding is poorly compatible with designing appropriate instruments for financing research facilities and valorisation.
2. The added value of these four instruments under the same umbrella is limited. The Research part of the Future Fund is not managed as a coherent set of instruments and is not perceived as such. In practice, the Research part of the Future Fund provides impulse financing for matters that should actually be budgeted more structurally, namely valorisation and financing of research facilities. Valorisation is a legal task for higher education and knowledge institutions that requires the allocation of structural resources. In practice, insufficient funds from the regular funding of higher education and knowledge institutions are earmarked for valorisation, and valorisation is mainly shaped through temporary impulse financing. The same applied to the financing of research facilities, for which no structural funding was allocated until significant budgets were earmarked for a 10-year period earlier this summer.
3. Due to the compelling nature of a revolving fund, a proper consideration could not be made regarding whether basic financing, a grant, a loan, or another form of instrument would be most appropriate (for facilitating research facilities and supporting valorisation). Looking at the efficiency of the design of the individual instruments, we assess the policy efficiency of TOF and SIF as low. For PoC and TTT, where similarly high-risk activities are involved, we consider the policy efficiency to be higher. Although we did not conduct a comprehensive cost-benefit analysis, we estimate that the balance between social benefits and social costs is more favourable for PoC and TTT than for TOF and SIF. However, many of the benefits are yet to materialise in the near future.

The report includes several recommendations. One of the recommendations is to include valorisation as part of investment projects of the National Growth Fund, but caution advised against exclusively linking valorisation policy to a (for now) temporary instrument such as the National Growth Fund. In their initial response (see the Chamber letter), both ministers acknowledged that the Research part did not function as originally intended. Therefore, they intend to reconsider how the Future Fund has been implemented so far. They also wish to reassess the existing policy goals and make sharper choices where the policy goals still align. The ministers also recognise that there is room for improvement in the coherence of valorisation instruments. They provide multiple examples of actions that have already contributed to this (NGF proposal Delta Plan valorisation, valorisation vision, higher education and science governance agreement, etc.). Additionally, they aim to build on existing positively evaluated instruments. The ministers will also consider integrating the Research part into the Business part and assess the desirability of experimental space in the Research part (potentially with a revolving funding requirement). The ministers aim to inform the House of Representatives in the autumn about their vision on the overall utilisation of the Future Fund and its future design.

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