COVID-19 pandemic: the EU’s policy response and its implications for the UK Contents

4Financial assistance from the EU budget

50.The economic shockwaves caused by the pandemic have required national governments to step in with rescue packages for affected businesses and employees, which have varied country-by-country. While the fiscal response will primarily be undertaken at Member State and UK level,59 the European Commission has proposed some support measures from the EU budget to support individual EU countries.60

51.In particular, on 13 March 2020 it tabled a proposal for a “Coronavirus Response Investment Initiative” (CRII). This would essentially use €37 billion (£34 billion) of funding from the European Structural & Investment Funds, like the Cohesion Fund, to support Member States’ medical and fiscal response to the pandemic. In addition, it has proposed to boost investment by the European Investment Bank; expand the EU financial support for coronavirus-related research projects; and make use of the EU Solidarity Fund so that it can provide support during public health emergencies.

Coronavirus Response Investment Initiative

52.The “Coronavirus Response Investment Initiative” (CRII) is the European Commission’s key financial support measure triggered by the COVID-19 pandemic. On 13 March, the Commission proposed61 to mobilise €29 billion (£x) available cash reserves under the EU structural funds62 to respond to the crisis, on top of €8 billion of such funds already paid to the Member States but which they have not yet used. Funds under the CRII could be used for health expenditure including hospital equipment, the provision of working capital to small business, or even short-term employment schemes.63 However, because the initiative does not involve new EU money, Member States will need to decide whether to divert structural funding away from existing, or planned, projects to those relevant to the COVID-19 pandemic.

53.Under the terms of the Withdrawal Agreement, the UK remains eligible to be granted structural funds programmed until the end of this year.64 Of the €37 billion in EU structural funding the Commission estimates its proposal would make available to respond to the economic effects of the pandemic, a total of €555 million (£474 million) would be available for the UK.65 The Commission has also noted the UK still has a further €2.4 billion (£2.2 billion) of unused structural fund allocations for 2020, which it could spend on responding to the indirect economic effects of the coronavirus outbreak, or on other economic development projects for which EU structural funds are typically used. The European Investment Bank is also providing financial assistance to EU businesses, but the UK is not eligible for such support under the terms of the Withdrawal Agreement.66

54.The Committee has taken note of the European Commission’s €37 billion Coronavirus Response Investment Initiative, and its aim of redirecting EU structural funds to assist Member States in addressing the impact of COVID-19.

55.Under the Withdrawal Agreement, the UK remains eligible to be awarded EU funds until the end of 2020. However, the Government has not made clear if it will seek to make use of the €555 million (£509 million) of funding the Commission has proposed to make available for COVID-19 related projects specifically, nor how it intends to spend all or part of the additional €2.4 billion of unallocated structural fund allocation for 2020 the UK has left. We therefore ask the Government, in its forthcoming Explanatory Memorandum on the Commission proposal, to explain its position on the potential benefits of the proposed changes to the allocation of EU structural funds, and indicate to what extent the UK is likely to switch its remaining EU structural funding away from other projects to deal with the repercussions of the coronavirus.

EU funding for research into a coronavirus vaccine

56.The EU has increased its investment in research into COVID-19, especially the potential for a vaccination programme.67 The question of new medical treatments related to COVID-19, including a possible vaccine, has also again raised questions about the UK’s departure from the EU’s systems for the development of pharmaceuticals and the coordinating role played by the European Medicines Agency (EMA)68 in facilitating access to new treatments across the EU.69 The UK’s pharmaceutical industry voiced concerns as far back as January 2018, when it stated that Brexit could lead to “additional delays for UK patients in accessing new medicines”, referring to the situation in Switzerland (which is also outside of the EMA).70

57.The Committee notes the increased financial support provided by the European Commission for research into COVID-19. However, it remains unclear how exactly the UK’s exit from the EU’s pharmaceutical legal framework and the European Medicines Agency may affect the availability of any new vaccine or treatments, for coronavirus or other emerging health threats, in the UK beyond the end of the post-Brexit transition period. Given the technicalities of this topic, we consider the Health & Social Care Committee may wish to give it further consideration as part of its current inquiry into the UK’s preparedness for the coronavirus pandemic.

Emergency support from the EU budget

58.To complement the national stimulus and compensation packages put together by individual Member States for companies and sectors affected by the COVID-19 pandemic, the European Commission has also proposed some limited support directly from the EU budget via the Solidarity Fund71 and the Globalisation Adjustment Fund.72 These would provide limited financial support to relieve immediate funding pressures in Member States facing difficulties because of the coronavirus. These Funds are not used solely for the coronavirus pandemic and have a combined budget in 2020 of approximately €800 million (£734 million), and their impact when set against national stimulus measures will thus be limited.73

59.As part of the Withdrawal Agreement on its exit from the EU, the UK remains eligible to apply for funding to help with its economic response to the pandemic from both the EU Solidarity and Globalisation Adjustment Funds, to which it is still contributing to financially. However, the Government has never applied for support from the latter; the overall value of any assistance received would be affected by the UK rebate mechanism; and the total financial support the two Funds deliver is dwarfed by the fiscal measures at the disposal of individual countries.74 We ask the Government to clarify if it intends to apply for either the EU Solidarity Fund or Globalisation Adjustment Fund as part of its COVID-19 response.

59 The European Commission is known to be preparing a legislative proposal for an Unemployment Reinsurance Scheme as an EU-level automatic stabilizer, but there is no prospect of this being adopted and implemented sufficiently swiftly to make a difference during the current pandemic.

60 Conclusions of the extraordinary meeting of the EU Health Council, 10 February 2020.

61 European Commission document COM(2020) 113, “Proposal for a Regulation amending Regulation (EU) No 1303/2013, Regulation (EU) No 1301/2013 and Regulation (EU) No 508/2014 as regards specific measures to mobilise investments in the health care systems of the Member States and in other sectors of their economies in response to the COVID-19 outbreak”, 13 March 2020.

62 The EU structural funds are: the European Regional Development Fund (ERDF), the European Social Fund (ESF), the Cohesion Fund (CF), the European Agricultural Fund for Rural Development (EAFRD) and the European Maritime and Fisheries Fund (EMFF).

63 The proposal does not create new EU funding. Under existing EU rules, Member States and the UK already receive a small proportion of their national structural funds as “pre-financing” to enable initial payments to projects, but any unspent pre-financing is normally returned to the European Commission by the end of June each year. The Commission now proposes that EU countries and the UK can keep these unspent funds - which amount to roughly €8 billion (£7.3 billion)—and treat them as national co-financing—allowing them to access the further €29 billion of EU structural fund support for projects related to the COVID-19 crisis.

64 Some funding granted before the end of 2020 may not be paid out by the EU until 2021 or later. Under the terms of the Withdrawal Agreement, the UK will also receive those payments.

65 €244 million from unspent pre-financing already held by the Treasury, and an additional €311 million from the EU budget.

66 Article 151 of the Withdrawal Agreement states: “As from the date of entry into force of this Agreement”, i.e. 31 January 2021, “neither the United Kingdom nor projects located in the United Kingdom shall be eligible for new financial operations from the EIB group that are reserved for Member States […]. Entities established in the United Kingdom shall be treated as entities located outside the Union”.

67 For example, on 16 March 2020, the European Commission announced that it had offered €80 million (£74 million) of support for CureVac, a German company thought to be close to the development of a coronavirus vaccine and which was reportedly the subject of a takeover bid organised by the American Government earlier that month.

68 The European Medicines Agency was relocated from London to Amsterdam following the UK’s decision to withdraw from the EU.

69 The EMA acts as the central authorisation point for the entire European Economic Area for certain types of new medicinal products, including for viral diseases. On 13 March 2020, the Agency waived its usual fees for scientific advice to firms with potential vaccines and treatments for COVID-19.

70 Association of the British Pharmaceutical Industry, Brexit and the impact on patient access to medicines and medical technologies (January 2018).

71 The European Union Solidarity Fund (EUSF) provides financial assistance “in the event of major disasters” to the public authorities of Member States or EU accession countries. On 13 March, the Commission proposed an amendment to the Regulation establishing the Fund so that it can also be used in “major public health emergencies”, in order to finance emergency medical interventions.

72 The European Globalisation Adjustment Fund (EGAF) is an assistance mechanism for communities and sectors in the EU hit by redundancies linked to changes in global trade patterns. It can be called on by Member States in relation to unemployment caused by the pandemic.

73 The Commission previously proposed to make use of both these Funds in the event of a ‘no deal’ Brexit, before the UK ratified the Withdrawal Agreement.

74 The purpose of the UK rebate is, in essence, to reduce the extent of the UK’s net contribution to the EU budget by closing the gap between what the Treasury must pay under the Own Resources Decision and what the UK as a whole (both private and public sector) has received back in EU funding. It follows that an increase in EU funding for use by the Treasury, such as a Solidarity Fund grant, already closes that gap a little and therefore reduces the value of the UK rebate.

Published: 1 April 2020