EU funding update - December 2020

After more than two years of discussions on the next long-term EU budget (Multiannual Financial Framework (MFF) 2021-2027), European leaders have agreed the future budget for the block.  The seven-year budget forms part of a larger €1.8 trillion financial support package that also includes Next Generation EU (NGEU) – a dedicated fund, which will enable Europe's post-COVID-19 recovery and boost the budgets of several key EU programmes, including Horizon Europe.

Following the agreement on the next MFF, negotiators from the Council and the Parliament reached a political agreement on the outstanding issues in Horizon Europe:

• Budgetary distribution (internal break-down of Horizon Europe's overall budget),
• Synergies with other EU programmes
• International cooperation/association of third countries

The overall budget of Horizon Europe has been agreed at €95.5 billion for 2021-2027. This includes €5.4 billion from NGEU, as well as an additional reinforcement of €4.5 billion (in current prices), which the Parliament managed to secure during the last rounds of talks.

We understand that the €5.4 billion financial contribution from NGEU to Horizon Europe will be used primarily to fund clusters 1 (Health), 4 (Digital, Industry and Space) and 5 (Climate, Energy and Mobility) of Pillar II, as well as the European Innovation Council (EIC) under Pillar III.  These parts of the programme are particularly relevant for post-COVID-19 recovery and support the broader political priorities of the European Commission such as the EU Green Deal and Digitisation.

Furthermore, we understand that €1.5 billion from the additional reinforcement secured by the Parliament has already been assigned to Pillar I, with €1 billion alone going to the European Research Council (ERC). The budget of the European Institute of Innovation and Technology (EIT) is also understood to be increased by around €300 million, while the transversal 'Widening Participation' element of Horizon Europe is understood to have a budget of 3.3% of the total programme budget. This means it can grow accordingly, if an increase of the overall Horizon Europe budget is agreed.

All this paves way for a swifter approval of Horizon Europe and enables the Council and the Parliament to conclude the legislative process under the upcoming Portuguese Presidency of the Council. Following political endorsement by the Council and the Parliament, expected later this month, the agreement will be the basis for the future adoption of the proposed Horizon Europe regulation at second reading. This effectively means that the official start of the programme will be delayed from the originally envisaged date (1 January 2021) – the Portuguese Presidency is provisionally planning a launch event in early February in Lisbon, although, this will depend on the legislative process being concluded before that date.

We understand that the Commission is currently finalising the first Work Programmes of Horizon Europe, which are expected to be published by mid-April, with most of the first calls for proposals expected to be launched around the same time. In the meantime, the relevant Commission services are also working on finalising various elements of Horizon Europe's Implementation Strategy (e.g. Model Grant Agreement, proposal templates, etc.) to ensure the successful launch of the first calls as soon as possible.

Horizon Europe: UK Association to the Programme

The way in which the UK will participate in Horizon Europe will be agreed as part of the ongoing negotiations on the future UK-EU relationship. However, regardless, of the outcome of these discussions, organisations based in the UK will be able to participate in those parts of the programme that will be open to the world. For more information about the UK's ambitions for this area of the future relationship (ref: Previous EU Research Transition Project Board Update).

With less than a month until the 2021-27 programme starts, the rules of what the EU terms of ‘association’ to the programme (which offers the broadest possible access for non-EU countries and eligibility for funding) are still yet to be finalised.  Formal negotiations with many countries are yet to even begin.

Draft Horizon Europe rules, alongside experience from predecessor programmes, provide clues for what to expect when the curtain on association finally rises, but several important uncertainties are making this difficult at the moment.

Rules on association are one of several aspects of Horizon Europe yet to be signed off, along with its internal budget breakdown (which have again entered more areas of disagreement during discussions (26/11/2020)) and synergies with other EU programmes. The European Parliament and national governments have adopted positions, but these are still not yet completely confirmed.

Association talks with most countries requiring specific deals will not begin until the rules have been set, which is expected by the end of 2020.  However, this should not mean researchers will miss out on early funding calls.  The Commission have made it clear that they are open to provisional and retroactive association, as was used for Horizon 2020, this means researchers in countries negotiating association in 2021 could apply for funding and have their proposals reviewed before their countries’ deals are concluded (this could include the ERC for the UK).  Most first-year calls should be accessible as long as agreements are approved in the first six months of the programme.

Several countries have already signalled their desire to associate, for example, Norway (whose access is guaranteed under broader treaties with the EU, provided the government wants it) and Switzerland who have signalled likewise, and have already set aside the money.  Other countries are less certain, Canadian officials say the country is ‘reviewing’ its possible participation in Horizon Europe, while prime minister Justin Trudeau stated in October the Canadian intention to ‘deepen collaboration’ with the EU in specific areas such as health.  Nili Shalev, director-general for Israel-EU collaboration at the Israel Innovation Authority, says the country views Horizon Europe ‘positively’, in part because Horizon 2020 has provided ‘substantial benefit’ for both Israel and the EU.  However, they have said that Horizon Europe’s rules are looking ‘more restrictive’ than Horizon 2020’s and one of Israel’s biggest uncertainties about a deal is how much association will cost – this is also a primary concern for the UK.

So far, negotiations on the EU’s future relationship with the UK have touched on research collaboration, but the Commission has yet to talk to other countries which fall into its ‘category D’ (see below) about Horizon Europe association. Policy watchers believe this is because the Commission wants any agreement with the UK to act as a template for other deals, including on the difficult issue of how costs will be calculated.

For Horizon 2020, the cost of association was based on a ratio of national to EU GDP and the Commission pitched this method to the UK for Horizon Europe in March, however, the draft rules for Horizon Europe propose ‘…an automatic correction of any significant imbalance compared to the amount that entities established in the associated country receive through participation’.  The Commission has refused to clarify what is on offer now, but, the main administrative downside of a two-way correction method is that the Commission would have ‘…….no idea how much money to allocate to calls’ (Thomas Jørgensen, senior policy coordinator at the European University Association).

A political downside of the GDP model is that countries won’t want to pay more than their researchers win back - a complaint already voiced by the UK - where estimates of the net contribution have run to several billion euros.  Despite these issues, there are discussions which advocate that adding a two-way correction mechanism that is limited to a certain percentage of the GDP-based contribution does make sense, both politically and administratively, to effectively take out the sting of the risk. 

With the various perceived downsides, complications and uncertainties, countries could choose not to associate to Horizon Europe if association is too costly or risky, even though it was billed in an early stage of planning as being more ‘open to the world’ than its predecessors.  Nevertheless, for non-associated countries researchers would still be able to participate in some parts of the programme – under third country status rules.  This would, however, obviously, affect UK participation in schemes which are important to our academics (ERC, MSCA).

It is clear that researchers and institutions in countries with no association agreement would still be eligible for many parts of the programme (this would not include the mono-beneficiary instruments, which include the European Research Council and Marie Skłodowska-Curie actions) and they would have to pay their own way. However, low or middle-income countries could be eligible for funding if their participation is seen to be essential to achieving an EU objective of the programme (this is already the case under H2020) but this would not be open to the UK unless the UK is specifically mentioned as a necessary participant in a call.

One alternative to association is a more focused deal, countries including China and the United States have enhanced access to parts of Horizon 2020 through science and technology treaties with the EU.  The draft Horizon Europe envisages a ‘general opening for international participation and targeted international cooperation actions’.

Association is still key for ensuring access to more parts of the available funding.  Commission data has put the proportion of Horizon 2020 funds won by EU member states at about 90 per cent, with associated countries achieving 9 per cent and third countries gaining one per cent.

The current draft Horizon Europe rules backed by governments in September envisaged four categories of association.

Covers the three countries in both the European Economic Area and the European Free Trade Area: Iceland, Liechtenstein and Norway.

For countries theoretically working to join the EU, including Albania and Turkey.

Countries that fall under the European Neighbourhood Policy. This covers Algeria, Armenia, Azerbaijan, Belarus, Egypt, Georgia, Israel, Jordan, Lebanon, Libya, Moldova, Morocco, Palestine, Syria, Tunisia and Ukraine.

Liberal democracies whose intellectual property laws, R&D capacity and social welfare are comparable with the EU’s, such as Australia, Canada, Japan, New Zealand, Singapore, South Korea, Switzerland and the UK.

 *Except where their exclusion is necessary to protect EU ‘strategic assets, interests, autonomy or security’