Documents considered by the Committee on 28 February 2018 Contents

10EU research funding: interim evaluation of Horizon 2020

Committee’s assessment

Politically important

Committee’s decision

Cleared from scrutiny; drawn to the attention of the Business, Energy & Industrial Strategy, Education and Science & Technology Committees

Document details

Communication from the Commission—Horizon 2020 interim evaluation: maximising the impact of EU research and innovation

Legal base

Department

Business, Energy and Industrial Strategy

Document Number

(39425), 5271/18, COM(18) 2

Summary and Committee’s conclusions

10.1The Treaties give the EU the power to establish a “Framework Programme” for research, which funds scientific research and innovation projects across Europe. The current, eighth, Framework Programme was named “Horizon 2020”, and runs from 2014 to 2020 with contributions totalling €77 billion (£68 billion)169 from the EU budget.170 The UK is currently the second-largest recipient of funding under the programme, after Germany.171 The EU also operates supplementary research programmes in particularly sensitive areas, namely defence, space and nuclear energy.

10.2In January 2018 the European Commission published a policy paper which reflected on the implications of its interim evaluation of Horizon 2020 and how the Commission will use those results to inform the design of the successor Framework Programme (FP9). Negotiations on the legal framework for FP9 are due to begin later this year, and it is due to become operational in January 2021. Among the main changes being considered by the Commission are a substantial increase in the proposed financial endowment of the next Framework Programme; further simplification of the application and funding process for researchers; and—important in the context of the UK’s exit from the EU—increasing the participation of third country researchers in EU-funded projects, based on reciprocal co-funding in partner countries.

10.3We have set out the current framework for the EU’s research programmes, and the details of the Commission’s reflections, in more detail in “Background” below.

10.4The Minister of State for Higher Education (Sam Gyimah) submitted an Explanatory Memorandum on the Commission document in late January 2018.172 This reiterated that the joint position the Government reached with the European Commission in December 2017 would entitle UK researchers to continue full participation in the remaining two years of Horizon 2020 and the sectoral research programmes until the end of 2020.173 It also noted that the Government “will seek to agree a far-reaching science and innovation agreement with the EU that establishes a framework for future [post-Brexit] collaboration”, including “discussing possible options for participating in FP9”. The Government has also said separately that it wants to stay involved in supplementary EU research programmes for defence, nuclear energy, and space.174

10.5We have taken note of the interim evaluation of Horizon 2020, and the “lessons learned”. The document provides a useful insight into the likely substance of the European Commission’s upcoming proposals for the next EU Framework Programme for Research (FP9), which will form part of the next Multiannual Financial Framework from January 2021 onwards.

10.6Overall, the Government appears supportive of the conclusions drawn by the Commission and the proposed changes to the Framework Programme after 2020. However, we are concerned about the lack of detail provided by the Minister about the UK’s priorities for FP9 and the scope of its involvement in that Programme, the design of which will undoubtedly be of great interest to British researchers irrespective of the exact legal form of the UK’s post-Brexit involvement.

10.7In particular, we consider that the design of FP9 will be important in two different scenarios, depending on the outcome of the Article 50 negotiations:

10.8Given the Government’s insistence that it will seek a “far-reaching […] agreement” with the EU, which in practice is likely, we consider it necessary for Parliament to be kept informed of developments in the design and financial endowment of the next Framework Programme. The Committee will therefore closely follow the negotiations on the next Multiannual Financial Framework and FP9, and draw important developments to the attention of the House and the relevant departmental Select Committees as necessary.

10.9We also draw the attention of the House to the EU’s partial suspension of Switzerland’s participation in Horizon 2020 between 2014 and 2016, after it refused to extend freedom of movement to Croatian nationals (see paragraph 10.42).176 This shows that the EU has been willing to make a third country’s participation in its research programmes conditional on securing agreement in areas of its bilateral relationship which are not directly related to science and innovation. In case the negotiations are protracted, the Government will also need to consider how it might mitigate the financial implications for UK researchers of any gap between the end of the transitional period and the entry into force of a new UK-EU agreement on research cooperation.

10.10This could present a particular problem for UK-EU relations given that the withdrawal negotiations will take place in parallel to discussions on many other politically sensitive aspects of the post-Brexit UK-EU relationship. Given the politically fraught nature of the Brexit negotiations so far, it cannot be ruled out that similar complications could arise. The UK’s continued involvement in the successor to Horizon 2020 should therefore not be taken as a given.

10.11Overall, we are concerned that the lack of detail about the Government’s long-term approach to cooperation with the EU on research matters—combined with the fact that the UK’s continued participation in Horizon in 2019 and 2020 is not yet legally water-tight—could be deterring researchers from other Member States and associated countries from applying for research funding with UK undertakings. We note in this respect that the latest statistics on UK participation in the Framework Programme show that between May and September last year the UK stopped being the country with the largest share of participants in Horizon 2020.177

10.12Given the above, we would be grateful if the Minister could write to us by 14 March 2018 to confirm that the Government will seek for the UK to become “associated” (or the equivalent term under the future legal framework after 2020) with the next Framework Programme, or, if not, which other “options for participating” the Government is exploring. In either case, we expect the Minister to provide more substantive detail about the Government’s proposals for a “more ambitious and close partnership with the EU than any yet agreed between the EU and a non-EU country”, and how it would, in the Government’s opinion, differ in practice from the close association enjoyed by both Switzerland and Norway with Horizon 2020 and its predecessors.

10.13We have drawn the Commission report to the attention of the Business, Energy & Industrial Strategy, Education and Science & Technology Committees, given their remit with respect to UK science and higher education policy.

Full details of the documents

Communication from the Commission—Horizon 2020 interim evaluation: maximising the impact of EU research and innovation: (39425), 5271/18, COM(18) 2.

Background

10.14The Treaty on the Functioning of the EU requires the establishment of a “multiannual framework programme” providing financial support for research and innovation. The legal framework for Framework Programmes for Research is adopted under the ordinary legislative procedure by the European Parliament and the Council.

10.15The current, eighth, EU Framework Programme for Research and Innovation is “Horizon 2020”, which runs from 2014 to 2020 with a budget of €77 billion (£68 billion). It has been described by the European Commission as a “key EU asset” to stimulate economic growth, promoting scientific excellence and industrial leadership, and tackling societal challenges.178 It is structured around three “pillars”: excellent science; industrial leadership; and societal challenges, which have “their own specific objectives and broad lines of actions”.179 The EU also supports research activities through other means, for example the European Institute of Innovation & Technology (EIT),180 which supports the launch of innovative products and services by funding collaborative research projects between companies and universities.181

10.16Funding opportunities under Horizon 2020 are typically only available to consortia of researchers from multiple participating countries. Non-EU countries can participate in the Framework Programme, with the widest level of involvement being granted through a formal agreement for “association” with Horizon 2020 with the EU, principally in return for a financial contribution.182 Given the obvious importance of this aspect of the Framework Programme for the UK in the context of Brexit, we have discussed the implications of the UK participating as a non-Member State in more detail in paragraphs 10.33 to 10.47 below.

10.17In addition to the general funding programme for research under Horizon 2020, the EU also operates sector-specific research programmes for areas with military or national security implications, namely:

10.18The Committee discussed the implications of Brexit for UK involvement in the Euratom research programme187 and the European Defence Fund188 recently. It will consider the impact on the UK’s participation in the Galileo and Copernicus initiatives separately in the near future.

The interim evaluation of Horizon 2020

10.19Article 32 of the Regulation establishing Horizon 2020 required the European Commission to conduct a review of the Framework Programme and associated activities. In May 2017 the European Commission published the results of its interim evaluation.189

10.20The main substantive findings of the review were that Horizon 2020 funding is “attractive and relevant”, with macro-economic models projecting its impact to be “in the order of €600 billion (£532)190 and 179,000 jobs by 2030”. Scientific publications resulting from EU-funded research are “cited at twice the world average rate”, and “patents produced through the programme are of higher quality and likely commercial value” than similar patents produced elsewhere. The simplification of the funding application process compared to the previous Framework Programme has allowed grant decisions to be taken, on average, 110 days faster than under FP7.

10.21Nevertheless, the Commission acknowledges that challenges remain to make EU research funding more efficient and effective. For example, with its current financial envelope, the Programme has had to reject funding applications that meet all relevant quality thresholds.191 A large proportion of scientific publications produced with Horizon 2020 funding are still not publicly accessible, and the fragmentation of specific funding instruments under Horizon 2020 could lead to money flowing to those who understand the system rather than those with the best case for EU research funding.

10.22The Commission also established a “High Level Group” of experts, led by Pascal Lamy, in September 2016, with a mandate to provide advice on how to maximise the impact of the EU’s investment in research and innovation in the future. The group started its work in December 2016, and its final report was published in July 2017.192 It recommended, among other things, a doubling of the next long-term EU research budget to €144 billion (£128 billion); the establishment of a European Innovation Council which would be able to invest the EU budget in “risky innovations that have rapid scale-up potential”; the use of lump sums to reimburse researchers;193 and increasing formal involvement by non-EU researchers (subject to co-financing by their host country).

10.23The European Parliament endorsed the findings of the Interim Evaluation in June 2017,194 as did EU Science Ministers at the Competitiveness Council in December.195

Lessons for the next Framework Programme for Research

10.24In January 2018 the European Commission published a follow-up policy paper which aimed to translate the results of the interim evaluation, and the findings of the High Level Group, into concrete initiatives to improve the implementation of Horizon 2020 in its last three years (2018—2020). It also sets out how the Commission will use the evaluation results to inform the design of Horizon 2020’s successor Framework Programme (FP9), formal negotiations on which will begin between the Member States and the European Parliament later this year.

10.25Among the main changes being considered by the Commission are:

10.26In addition, the Commission has already implemented some of the High Level Group’s recommendations in the final Horizon 2020 Work Programme for 2018–2020. For example, it has established a pilot version of the European Innovation Council by jointly implementing various existing Horizon 2020 instruments that can already be used to support start-ups developing high-risk, high-return projects.197 The Commission is also testing the use of lump sums as an alternative to cost reimbursement for researchers in some areas.198

10.27The new Minister of State for Universities (Sam Gyimah) submitted an Explanatory Memorandum on the document on 29 January 2018.199 It makes no substantive assessment of the Commission’s reflections and their possible impact on the design on the next Framework Programme for Research. The Minister does reiterate the Government’s ambition of concluding a “far-reaching science and innovation agreement with the EU”, including “possible options for participating FP9”.

UK-EU research cooperation after Brexit

10.28The European Commission’s policy paper on the future of the EU’s research funding programme has clear implications for the UK, despite its withdrawal from the EU.

10.29Firstly, some changes have already been introduced as part of the 2018–2020 Work Programme for Horizon 2020. Although the UK is expected to cease being an EU Member State in March 2019, the Government and the EU have provisionally200 agreed that the UK will remain a contributor to—and participant in—all EU funding programmes until the end of the current budgetary cycle in December 2020. As such, UK undertakings will remain eligible to apply for Horizon 2020 funding for the remainder of the programme, and will receive any monies due even if payment falls after Brexit.

10.30Secondly, the Government has been clear that it wants to remain involved in the successor programme to Horizon 2020 from 2021 onwards.201 In its September 2017 “future partnership paper” on cooperation with the EU on science and research, the Department for Exiting the EU said it would seek to “agree a far-reaching science and innovation agreement with the EU” after Brexit. The paper notes that this would be in the interest of both sides, especially in the field of medicine and health, but the Government wants to discuss continued UK involvement across the spectrum of EU research policy (i.e. the Framework Programme, as well as the EU’s separate research programmes for the defence, space and nuclear industries).

10.31However, the conditions and implications for UK’s involvement in the successor to Horizon 2020 and the industry-specific programmes are unclear. They all follow the EU’s long-term budgetary cycle, which currently runs until the end of 2020. Each programme’s legal framework—including its budgetary endowment and the conditions for participation by non-EU countries—for 2021 onwards are yet to be established by the Council and the European Parliament. The Commission is due to present formal proposals for discussion later this year. The UK will not have any formal input in the legislative process after it ceases to be a Member State, although it may be informally consulted.

Conditions for non-EU participation in the next Framework Programme

10.32After the end of the post-Brexit transitional period, during which the UK will remain an automatic participant in (and contributor) to all EU funding programmes, the Government will have to negotiate a new partnership agreement with the EU on cooperation in science and technology.

10.33The European Commission is due to present legislative proposals for the next Framework Programme by the end of 2018, but, based on experience in previous multi-annual funding rounds, final agreement is unlikely to emerge between the Council and the Parliament until mid-2020. Therefore, it is impossible to say with certainty under what conditions the UK, as a non-EU country, will be able to participate in EU research funding programmes after 2020. However, the basic elements of the current framework for third country participation are likely to be maintained. We have described these below.

“Association” with Horizon 2020

10.34The framework for Horizon 2020 provides for a formalised form of participation by non-EU countries called “association”.202 This option is available to all four EFTA countries; to candidates for EU accession; and to countries covered by the European Neighbourhood Policy (ENP) or associated with the 7th Framework Programme.203 At present, there are 16 Horizon 2020 “associated countries”, including Norway, Switzerland, Iceland, Turkey, Israel and Ukraine.204

10.35In practical terms, associate status means that funding applications from researchers in that country are treated the same way as those from an EU Member State. As such, they are automatically eligible to apply to any Horizon 2020 call for proposals, and they are counted towards the minimum number of participants required to access funding from the Framework Programme (which is usually three from three different participating countries).205

10.36Association with the Framework Programme requires non-EU participating countries to make an annual financial contribution to its budget. For industrialised countries like Norway and Switzerland, the financial contribution is normally calculated annually, by taking the overall contribution from the EU budget to the Programme that year (as determined by the Council and the European Parliament) and applying a “proportionality factor”: the associated country’s proportion of the overall GDP of the EU plus that of the third country in question.206 As a result, wealthier countries pay proportionally more for association with the Framework Programme than poorer ones, but the exact contribution is established annually through a pre-defined methodology and not negotiated separately.207

10.37Researchers from countries which are not eligible for associate status (or which have not successfully applied for it) can also participate in projects funded by Horizon 2020. However, they are usually not eligible for any funding from the EU budget, meaning that their home country would normally finance their participation directly. Their involvement can also be restricted depending on the nature of any individual research project, for example those with defence application. Moreover, members of a research consortia based in a non-associated country do not count towards the minimum number of participants needed to qualify a project for funding from the EU budget. This clearly makes researchers from non-associated countries less attractive as core research partners, as they do not help meet funding eligibility requirements.

10.38As such, associate status—or the equivalent under the post-2020 legal framework—would be the most straightforward route for the UK to remain closely involved in the EU’s Framework Programme for Research after Brexit. It would also minimise the risk that researchers from other participating countries would forgo collaboration with UK counterparts when applying for EU funding.

10.39Given that the EU institutions have themselves emphasised the need for greater international collaboration in the field of research, we expect FP9 legal framework to offer at least the same—if not improved208—levels of participation as those of Horizon 2020. However, there will nevertheless be a substantive difference in the Government’s influence over the overall direction of the next Framework Programme compared to its current position:

10.40The EU can also impose additional conditions when granting “associate” status with the Framework Programme, which depend on the overall political relationship with the third country in question.

10.41For example, under the terms of Switzerland’s 2014 agreement on association with Horizon 2020,210 Swiss researchers could only participate as ‘associated’ researchers in specific aspects of the Framework Programme. The EU withheld full participation in response to a Swiss referendum which prevented the country’s Government from extending a pre-existing EU-Switzerland agreement on free movement to Croatia, which had joined the EU in July 2013. In all other parts of the Programme, the Swiss were considered “non-associated” as described in paragraph 10.38. They obtained full association with Horizon 2020 on 1 January 2017, after the Government in Bern extended existing free movement rights for EU nationals to Croatian citizens.211 If it had not done so, the country would have automatically lost associate status under Horizon 2020 altogether.212

10.42The potential political difficulties if the EU links the UK’s participation in the Framework Programme after Brexit to other elements of the negotiations on a new partnership are not acknowledged in the Government’s “future partnership paper” on science and innovation. Instead, it says it wants a “more ambitious and close partnership with the EU than any yet agreed between the EU and a non-EU country”. There has been no indication as to how how this partnership would be materially different from those the EU has with, for example, Norway or Switzerland, in the field of research.

Future UK participation in the EU research programmes for defence, nuclear energy and space

10.43The Government’s policy paper on post-Brexit cooperation and science and innovation also sets out its ambition of ensuring the UK’s continued involvement in the EU’s supplementary research programmes for defence, space and nuclear energy (see paragraph 10.18 above).

10.44The rules for non-EU participation in Horizon 2020 as described above do not necessarily apply to these research programmes, as these are established on separate legal terms. Given the political sensitivities around the scientific research they finance, many EU countries have particular concerns about participation by countries outside of the EU’s legal framework in these areas.

10.45As with the Framework Programme the legal foundations for these specific research programmes will also be comprehensively revisited in the coming years ahead of the start of the next EU budgetary cycle in January 2021 (the Multiannual Financial Framework), as their current funding from the EU budget will run out at the end of 2020. However, if the current rules for participation were carried over, the ability of the UK to participate in these programmes after Brexit will vary on a case-by-case basis:

10.46As can be seen, the modalities for UK participation in these programmes after Brexit will depend not only on the Government’s negotiations with the EU, but also on the legal boundaries for third country involvement that the EU institutions adopt during the negotiations on the next long-term EU budgetary cycle. We will continue to press the Government for the details of its proposals for the future cooperation agreement with the EU on these matters, and follow closely the EU-level negotiations on the successors to the current EU research programmes under the next Multiannual Financial Framework.

Previous Committee Reports

None.


169 €1 = £0.88723 or £1 = €1.12710 as at 29 December.

170 See Regulation 1291/2013 establishing Horizon 2020. The proposal establishing the Framework Programme was last discussed by the previous European Scrutiny Committee on 21 May 2013. The total financial allocation will be higher as non-EU countries which have formal ‘association’ with the Programme make additional contributions (see “Background” for more information).

171 See https://www.gov.uk/government/statistics/uks-participation-in-horizon-2020-september-2017 (accessed 19 February 2018). In 2015, UK-based organisations received €1.59 billion (£1.47 billion) in EU funding for research & development. This constituted 12% of all EU R&D expenditure that year. R&D funding also represented 21% of total EU expenditure in the UK in 2015, compared to an EU average of 10%.

172 Explanatory Memorandum submitted by the Department for Business, Energy & Industrial Strategy (29 January 2018).

173 See our Report of 19 December 2017 for more information on the Brexit financial settlement.

175 The Committee wrote to the Treasury on 21 February 2018 about the financial and political implications of the UK’s participation in and contribution to EU funding programmes (including FP9), if the post-Brexit transitional period lasts beyond 31 December 2020.

176 See European Commission, “Swiss participation in Horizon 2020“ (accessed 19 February 2018). We have described the circumstances of Switzerland’s temporary suspension from parts of the Framework Programme in the “Background” section.

177 Department for Business, Energy & Industrial Strategy: statistics on UK participation in Horizon 2020 on 30 September 2017 and on 31 May 2017.

179 See Commission document SWD(2017) 220, p. 7.

180 The EIT is funded from Horizon 2020, but manages its own grant process.

181 In addition, the EU Treaty provides the basis for both Public-Public and Public-Private research partnerships under Articles 185 and 187 TFEU respectively. Under the former, the EU can contribute financially to multiannual research programmes proposed by EU Member States or countries associated to the Framework Programme. The latter provides the legal basis for EU-driven Public-Private Partnerships, called Joint Undertakings. A recent Commission review of Article 185 partnerships remains under scrutiny.

182 For example, the EU made Switzerland’s full participation in Horizon 2020 conditional on accepting the free movement of persons. It suspended Swiss access to parts of the Framework Programme after Switzerland failed to extend free movement to nationals of Croatia after it joined the EU in 2013.

183 The European Defence Fund will also have a funding stream for the construction of prototypes for new defence equipment, called the European Defence Industrial Development Programme (EDIDP). Negotiations on the launch of the EDIDP are still on-going at EU-level. See our Report of 31 January 2018 for more information.

184 The legal basis for Copernicus is Regulation 377/2014, cleared from scrutiny on 27 November 2013. See https://ec.europa.eu/growth/sectors/space/galileo_en.

185 The legal basis for both Galileo and EGNOS is Regulation 1285/2013, cleared from scrutiny on 4 July 2012. See also https://ec.europa.eu/growth/sectors/space/galileo_en.

187 For more information on the Euratom research programme, see our Report of 21 February 2018.

188 For more information on the European Defence Fund, our Reports of 13 November 2017 and 31 January 2018.

189 See Commission document SWD(2017) 220.

190 €1 = £0.88723 or £1 = €1.12710 as at 29 December.

191 In recognition of the funding constraints, the European Commission in 2015 established a “Seal of Excellence“ which is awarded to projects submitted to Horizon 2020 which were deemed to deserve funding but did not receive it due to budget limits. It recognises the value of the proposal and supports the search for alternative funding.

192 See Report of the independent High Level Group , “Investing in the European future we want“ (July 2017).

193 One of the main administrative burdens for recipients of Horizon 2020 funding is the requirement to document incurred costs through extensive financial reporting, which are then reimbursed by the EU. A lump funding system would remove cost reporting obligations, instead defining at the start of the project what outputs will be delivered in return for the financial contribution.

194 European Parliament resolution of 13 June 2017 on the assessment of Horizon 2020 implementation in view of its interim evaluation and the Framework Programme 9 proposal.

197 See https://ec.europa.eu/research/eic/index.cfm. The EIC pilot has a budget of €2.7 billion (£2.4 billion) between 2018 and 2020 by bringing together different existing strands of Horizon 2020 funding.

199 Explanatory Memorandum submitted by the Department for Business, Energy and Industrial Strategy (29 January 2018).

200 See Joint Report of 8 December 2017. This agreement would still need to be legally ratified as part of the UK’s overall Withdrawal Agreement under Article 50 TEU, negotiations on which are on-going.

202 Liechtenstein has chosen not to participate in Horizon 2020.

203 It follows that, from a purely legal perspective, the eligibility requirements for association would need to be amended to permit the UK to participate, as it does not meet any of the current geographical or political criteria.

205 In most cases, funding from the EU budget will only be made available if they an application is made jointly by researchers from three different participating countries.

206 For example, Norway’s proportionality factor in 2017 was 2.34 per cent. That year, the EU budget for Horizon 2020 (commitment appropriations) was €10.35 billion, so Norway would make an additional contribution of 2.34 per cent (€242 million or £214 million). The UK’s contribution under this methodology would be substantially higher given its larger GDP.

207 A similar methodology is used for non-EU countries’ participation in other EU programmes. Overall, in 2017, Norway was expected to make a gross contribution in this manner for participation in various EU programmes amounting to approximately €354 million (£x).

208 As noted, the interim evaluation of Horizon 2020 suggests the Commission will broaden opportunities for non-EU participation in the next Framework Programme, including a non-geographical criterion “based on excellence in R&I”.

209 The Programme Committee, which meets in 14 different configurations in Brussels, was established under Council Decision 2013/743. They are a forum for Member States—and associate countries—to discuss strategic planning for the Framework Programme, including by approving Work Programmes, and to ensure the EU takes account of nationally-funded research activities. Discussions on strategic planning and on ensuring links to nationally funded activities is an essential part of their work.

212 See article 13 of the EU-Switzerland agreement.

213 For more information on the Euratom research programme, see our Report of 21 February 2018.

214 For more information on the Defence Research Programme, see our Report of 13 November 2017.

215 Similarly, the second strand of the EDF—the European Defence Industrial Development Programme (EDIDP), which will fund military prototypes—is not yet operational in any capacity. Under the proposed legal framework, both Member States and the European Parliament are seeking to prevent non-EU undertakings from participating in any EU-funded projects directly. The Committee is following these discussions closely, and will continue to do when the Commission tables further proposals for the research and development strands for the Fund after 2020.

216 For example on 17 February 2018 the Daily Telegraph reported that the transitional agreement will already exclude the UK from access to Galileo’s military applications.




5 March 2018