Chapter 1 - Finance
                               
Table 1.8 MOD Research & Development Expenditure Outturn
This table details the MOD's annual expenditure on Research and Development (R&D) activity. Expenditure is broken down into intramural (i.e. R&D activity undertaken within the Department) and extramural (i.e. R&D activity undertaken outside of the Department). The data included in this table are derived from an annual survey of MOD R&D expenditure conducted by DASA and information from MOD accounting systems. DASA seek to classify R&D activity within the Organisation for Economic Co-operation & Development's Frascati Guidelines which align to National Accounts definitions.

For an explanation of the breaks in series after 1997 and before 2001/02 please refer to Defence Statistics Bulletin No 6.

Following a data quality review in 2009, the MOD development estimates from 2003/04 to 2005/06 were revised downwards. The MOD research expenditure estimates remain unaffected by these revisions. For the years 2001/02 and 2002/03 MOD net development expenditure, as defined by Frascati, may have been overstated by up to 40% per year, but insufficient records exist to enable a true estimate to be made. We therefore advise that the data for these years be treated with caution as we cannot guarantee that the data complies with the Frascati guidelines and meets all of the high professional assurance standards set out in the Code of Practice for Official Statistics.

Full details highlighting the deficiencies in the estimates for 2001/02 and 2002/03, the revisions to later years and our future plans to continue to improve these statistics are published in DASA Defence Statistics Bulletin No 9 which is available on the DASA website.

Inclusive of non-recoverable VAT at Current Prices (£ million)
Research & Development1,2
 1997/98   2000/01   2002/03   2003/04 3 2004/05 3 2005/06 3 2006/07 2007/08 2008/09
Total Gross Expenditure on R&D
 2 371 || 2 321 || 2 790 || 2 200   2 260   2 318   2 212 2 220 2 074
Of which:
                            
    Intramural
 750 || 932 || 288 || 380   357   365   361 279 262
    Extramural
 1 622 || 1 389 || 2 502 || 1 820   1 903   1 953   1 851 1 941 1 812
                               
Receipts4
 57 || 81 || 56 || 68   69   75   88 81 83
Of which used:
                            
    Intramurally
 39 || 45 || 46 || 59   61   74   81 74 75
    Extramurally
 18 || 36 || 10 || 9   8   1   7 7 8
Total Net Expenditure on R&D
 2 314 || 2 240 || 2 734 || 2 133   2 191   2 243   2 124 2 139 1 991
                               
Inclusive of non-recoverable VAT at Current Prices (£ million)
Research
 1997/98   2000/01   2002/03   2003/04   2004/05   2005/06   2006/07 2007/08 2008/09
Total Gross Expenditure on Research
 577 || 612 || 524 || 548   664   626   664 672 622
Of which:
                              
    Intramural
 325 || 400 || 145 || 164   190   171   179 197 186
    Extramural
 251 || 212 || 379 || 384   474   455   485 474 436
                               
Receipts4
 13 || 45 || 9 || 24   26   28   32 37 37
Of which used:
                            
    Intramurally
 12 || 45 || 9 || 23   25   27   31 37 36
    Extramurally
 2 || - || - || 1   1   1   1 1 1
Total Net Expenditure on Research
 564 || 566 || 515 || 524   639   598   632 635 584
                               
Inclusive of non-recoverable VAT at Current Prices (£ million)
Development
 1997/98   2000/01   2002/03   2003/04 3 2004/05 3 2005/06 3 2006/07 2007/08 2008/09
Total Gross Expenditure on Development
 1 794 || 1 709 || 2 266 || 1 652   1 596   1 693   1 548 1 549 1 452
Of which:
                            
    Intramural
 424 || 532 || 143 || 216   167   194   182 82 76
    Extramural
 1 370 || 1 177 || 2 123 || 1 436   1 429   1 499   1 366 1 467 1 376
                               
Receipts4
 44 || 36 || 48 || 44   43   47   56 44 46
Of which used:
                            
    Intramurally
 28 || - || 38 || 35   36   47   49 37 39
    Extramurally
 16 || 36 || 10 || 8   8   -   7 6 7
Total Net Expenditure on Development
 1 750 || 1 673 || 2 218 || 1 609   1 552   1 645   1 492 1 505 1 406
Source: DASA (Defence Expenditure Analysis)
1. Since 2000/01 the Departmental Resource Accounts (DRAc) follow Statement of Standard Accounting Practice 13, "Accounting for Research and
    Development". Since 2000/01 the figures are calculated on a resource basis, and are consistent with the aggregate of Research & Expensed
    Development plus Additions to Intangible Assets. Following last years quality review, figures from 2003/04 onwards continue to be consistent with the
    aggregate of Research & Expensed Development but comprise only that element of Additions to Intangible Assets (taken to represent capitalised
    development) which has been assessed as Frascati compliant. This table therefore comprises elements from both the Operating Cost Statement and the
    Balance Sheet in the MOD accounts.
2. On 1 July 2001 DERA was split into two organisations: the Defence Science & Technology Laboratory (Dstl) (about a quarter of DERA) staying as a Trading
    Fund within MOD, and QinetiQ, the remainder, becoming a private (extramural) company.
3. Access to project level data for the first time enabled us to more closely align to the OECD definitions and remove activities which do not strictly comply to
    these. Non Frascati expenditure during this period represented an average of 20% per year of the annual estimate of aggregate MOD net development spend.
4. Receipts are monies received by MOD and its Trading Funds for expenditure on R&D, for example from other government departments and private industry.
    This money is not necessarily spent on defence-related R&D.