5UK participation in EU funding programmes post-Brexit (update)28
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This EU document is politically important because:
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Overview
5.1At the end of 2020, the UK will by default stop being a participant in all programmes, schemes and funds financed from the European Union budget, including the Common Agricultural Policy, the Framework Programme for Research and the Structural and Cohesion Funds.29
5.2However, as part of its negotiating objectives for a new relationship with the EU, published on 27 February 2020, the Government is seeking continued UK participation, formally known as “association”,30 in four EU programmes — the “Horizon Europe” research programme; the Euratom nuclear research programme; the Copernicus earth observation project; and the “PEACE PLUS” cross-border cooperation scheme on the island of Ireland — from the start of 2021.31 The option of seeking involvement in other EU programmes, such as the Erasmus+32 student mobility scheme, was couched in conditional terms or dropped altogether.33 The Government also repeatedly said it would “not agree […] for the EU’s institutions, including the Court of Justice, to have any jurisdiction in the UK”.34
5.3The UK’s continued involvement in those programmes selected by the Government is, however, not automatic, and needs to be negotiated with the EU. Based on the draft text for a UK-EU agreement published by the European Commission on 18 March 2020, and the precedent of its existing cooperative arrangements with “third countries”,35 the EU appears to be setting the following conditions for continued British participation in the programmes selected by the Government:
- a yearly financial contribution, calculated by taking the EU’s own annual budget for each of the programmes in which the UK is participating (which will of course be set without Treasury input)36 and multiplying it by Britain’s GDP as a proportion of that of the EU (which is approximately 15.6 per cent). Based on the four EU programmes in which the Government is seeking UK involvement, this could lead to an estimated gross cost to the UK taxpayer of £2 billion annually, before funding received back from the EU budget by British beneficiaries is taken into account;37
- a new ‘correction’ mechanism that would automatically require the UK to pay more into EU-funded schemes in which it participates if the money it receives outstrips its contribution by a — yet to be specified — proportion, preventing it from becoming a significant net recipient of EU funds.38 Although this mechanism would be entirely new (since it is not included in the EU’s current agreements with other countries on participation in its programmes), the European Commission has made clear to the Government since at least May 2018 that it would be part of the EU’s demands;39 and
- some limited powers for the EU institutions within the UK for the “protection of the Union’s financial interests”, including jurisdiction for the Court of Justice (CJEU) in relation to dispute settlement between the European Commission and British funding recipients, and on investigatory powers for the Commission’s anti-fraud unit OLAF to examine potential misuse of EU money.
5.4The issue of continued British participation in “Union programmes” has been discussed during each of the three UK-EU negotiations rounds on a new economic relationship to date, in March, April and May 2020.40 Although EU Chief Negotiator Michel Barnier has reported “convergence” on this matter within the negotiations,41 it is not known to what extent the two sides are close to an agreement on the UK’s rights and obligations as part of continued involvement in EU programmes. The Government has not publicly commented on the Commission’s proposed conditions (including the controversial issue of any continued Court of Justice jurisdiction, however limited). In any event, EU consent for UK participation in its programmes is likely also dependent on the wider outcome of the UK-EU trade negotiations, where little progress is reported to have been made.42
5.5In addition, continued UK participation is dependent on the EU itself agreeing its next long-term budget, the Multiannual Financial Framework 2021–2027, because such a budget is a necessary precondition for the EU establishing the programmes in which the UK wants to participate from the start of next year.43 Discussions between the 27 Member States and the European Parliament have been on-going since spring 2018, with no agreement currently in sight. As we noted in our Report of 7 May 2020, MFF 2021–2027 talks have become more complex because of the COVID-19 crisis, which has triggered a difficult debate about the use of the EU budget to contribute to a Coronavirus Recovery Fund (and how it should be paid for by the EU’s national governments).
5.6As a consequence of the above, there is no clarity yet — especially for potential beneficiaries of participation in EU programmes — on whether the UK will remain part of the EU funding schemes prioritised by the Government from early 2021, or on which terms.
The Government’s position
5.7The European Scrutiny Committee wrote to the Chief Secretary to the Treasury (Rt Hon. Steve Barclay MP) — as the Minister responsible for any questions relating to UK contributions to the EU budget — on 26 March 2020, asking for more information about the reasons for selecting some EU programmes for continued UK participation but not others;44 the Government’s position on the Commission’s proposed methodology for the UK’s budgetary contribution in return for “association”, including the new financial correction mechanism; and whether the EU’s likely insistence that participation in its programmes requires acceptance of some limited jurisdiction of the Court and Commission would breach the Government’s rejection of “any jurisdiction by the CJEU over the UK’s laws, or any supranational control in any area”.
5.8As of [20 May], the Minister has not replied to the Committee’s request for information by 10 April, nor provided any explanation as to the significant delay in responding. More generally, the Government has not yet publicly commented on the draft legal text on UK participation in EU programmes circulated by the European Commission in March, or provided further context to Michel Barnier’s remark that there was a degree of “convergence” on this issue.45
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5.9The Committee is extremely disappointed that the Government has been unable to provide the requested clarifications about UK policy towards participation in EU programmes, as set out in the Committee’s letter of 26 March 2020. The Committee is of course acutely aware of the pressures the on-going coronavirus pandemic and associated economic crisis are placing on the Government’s resources. However, the Government continues to insist that, despite these circumstances (and the reported lack of any meaningful progress towards a trade agreement with the EU so far), it expects to secure a deal on the UK’s future relationship with the EU by the end of 2020.46
5.10Moreover, we consider that the specific issues on which we sought further information in our letter of 26 March — on the reasons for seeking involvement in certain EU programmes but not others on the one hand, and the EU’s likely demands in respect of both a financial contribution and continued CJEU jurisdiction over beneficiaries of EU funding on the other — should have been considered by the Government prior to the publication of the negotiating objectives on 27 February. One relates to a domestic policy decision, and the other is an issue that the EU was expected to raise as soon as the UK set the objective of obtaining continued participation in any “Union programmes”. The questions put to the Government by the Committee should therefore have been straightforward to answer.
5.11In light of the above, the Committee has again written to the Chief Secretary to the Treasury to request the information previously sought in our letter dated 26 March, to provide an update on the negotiations with the EU on UK participation in its programmes, and to explain the reasons for the failure to respond to that letter. It is also considering requesting the Minister to provide evidence to the Committee in person about the issues raised in this Report should there be further delays in any, or an unsatisfactory, response.
28 Proposal for a Council Regulation laying down the multiannual financial framework for the years 2021 to 2027; 8354/18 + ADD 1, COM(18) 322; Legal base: Article 312 TFEU; special legislative procedure; unanimity; Department: HM Treasury; Devolved Administrations: consulted; ESC number: 39683.
29 Although the UK left the European Union on 31 January 2020, it remains a participant in EU funding schemes until the end of 2020 because it has agreed to honour, in full, its share of the EU’s 2014–2020 Multiannual Financial Framework and a share of other EU liabilities accrued during the period of the UK’s EU membership. On 11 March 2020, the Office for Budget Responsibility estimated that the total net cost of that settlement will amount to approximately £32,9 billion from 1 February 2020 until its resolution.
30 “Association” is the EU’s term for formal participation by “third countries” in many of its funding programmes. This would give British organisations and individuals the same eligibility to receive EU funding from a particular programme as counterparts based in the European Union itself, in return for a British financial contribution.
31 The Government had long indicated the UK might seek continued involvement in specific EU schemes post-exit. However, the final list of programmes selected is very different from the indications given in the October 2019 Political Declaration on the new UK-EU relationship, which specifically referenced possible British participation in “Union programmes” in areas as varied as “science and innovation, youth, culture and education, overseas development and external action, defence capabilities, civil protection and space”.
32 The Government’s negotiating objectives of 27 February 2020 noted that continued involvement in the Erasmus+ student mobility programme could be an option “on a time-limited basis, provided the terms are in the UK’s interests” (which it did not define further).
33 This means that the Government is not currently seeking UK participation in other programmes including the European Defence Fund for defence industrial development, the Creative Europe programme for the cultural industries, the Neighbourhood, Development & International Cooperation Instrument for development assistance, the Union Civil Protection Mechanism, and of course the Galileo satellite navigation programme. The European Commission published an overview of which EU programmes are open to non-EU countries in January 2020.
34 See for example “Our approach to the Future Relationship with the EU”, (27 February 2020). On 3 February 2020, the Prime Minister had already laid a Written Statement in Parliament which said: “Any [UK-EU] agreement must respect the sovereignty of both parties and the autonomy of our legal orders. It cannot therefore include any regulatory alignment, any jurisdiction for the CJEU over the UK’s laws, or any supranational control in any area”.
35 See for example the EU-Switzerland agreement on participation in the ‘Horizon 2020’ research programme, or the dispute resolution clauses of the European Commission’s model grant agreement for funding awarded from that programme.
36 The budget for individual EU funding programmes would be set under the Union’s normal annual budgetary procedure, in which the UK no longer participates as a non-Member State.
37 See for more information the Committee’s Report of 26 March 2020. The Commission has proposed an “operational contribution”, consisting of the UK’s proportion of the EU’s own budget for a specific programme, plus a “participation fee” for each EU programme in which it is involved, calculated as a fixed percentage of the operational contribution referred to above. See: European Commission, “Draft text of the Agreement on the New Partnership between the European Union and the United Kingdom” (12 March 2020), Part Four.
38 The UK as a Member State was a significant net contributor to the EU budget. From European Commission figures, it appears its share of receipts from specific EU programmes in a given year during the 2014–2020 budgetary cycle only outstripped its proportional contribution to the EU budget that year (which averages approximately 12.5 per cent of all Member States’ contributions, due to the rebate) in a limited number of cases, primarily for the Euratom research programme for nuclear power because of the presence of the EU-funded Joint European Torus fusion energy project in Culham, Oxfordshire.
39 In May 2018, the European Commission published its proposals for the next generation of specific EU funding programmes for the 2021–2027 budgetary cycle, which explicitly included a reference to “ensur[ing] a fair balance as regards the contributions and benefits of the third country participating in the Union programmes” by means of an “automatic correction of any significant imbalance compared to the amount that entities established in the associated country receive through participation in the Programme, taking into account the costs in the management, execution and operation of the Programme”.
40 See the UK-EU negotiating agendas for 3–4 March, 20–24 April and 11–15 May.
41 On 5 March 2020, EU Chief Negotiator Michel Barnier said: “We note convergence on some of our objectives and on some specific points, such as cooperation in civil nuclear matters and the UK’s participation in some EU programmes”. The Government’s Written Statements on the negotiations to date, published on 9 March and 28 April 2020, respectively, have only referred to the fact that the negotiations “covered all work streams, including […] general terms for UK participation in programmes, including provisions for financial contribution”.
42 We noted in our Report of 26 March 2020: “The process of seeking “association” could also easily become politicised by developments in the wider negotiations between the UK and the EU on a new economic and security relationship. The example of Switzerland, which was suspended from significant parts of the EU’s research funding programme over its refusal to extend free movement to Croatian nationals after the country joined the EU in 2013, is instructive in this regard. UK and EU scientific cooperation could easily become a casualty of the wider negotiations even if participation in the relevant EU programmes is in both sides’ interest”.
43 The Multiannual Financial Framework is also directly relevant to the UK because it will establish spending limits for the EU’s annual budgets during the 2021–2027 period, including for those programmes in which continued British participation is sought. Under the methodology proposed by the European Commission, the UK’s financial contribution to the specific programmes in which it wants to be involved would be calculated on the basis of those annual budgets.
44 In particular, we asked the Government if the UK is still seeking participation in Erasmus+, the student mobility programme; in the EU’s ‘Fusion for Energy’ agency, its contribution to the international nuclear fusion research programme ITER; and in the EU’s ”Connecting Europe Facility”, which funds cross-border infrastructure projects, especially with respect to energy infrastructure.
45 On 9 May 2020, UK Chief Negotiator David Frost tweeted that the UK had sent the EU draft legal texts for “a complete draft Free Trade Agreement”, as well as “agreements on: air transport, air safety, civil nuclear cooperation, energy cooperation, law enforcement, unaccompanied asylum-seeking children, readmissions, [and] social security”, and a “Fisheries Framework Agreement”.
There was no reference to alternative proposals with respect to UK participation in Union programmes.
46 On 5 May 2020, the Chancellor of the Duchy of Lancaster (Rt Hon. Michael Gove MP) told the House of Lords EU Committee that “the Government have now developed a rhythm of decision-making that […] allows [Ministers] to carry on with other business-as-usual activity” despite COVID-19, including negotiations with the EU, and that the Government is therefore “confident that we will be able […] to secure agreement in good time” with the EU without needing to extend the post-Brexit transitional period into 2021.
Published: 27 May 2020