Report Calls for Doubling Funding of EU Flagship R&D Program

This month, a high-level advisory group to the European Commission (EC) released a report that presents a vision and strategy to enhance the next EU-wide Research and Innovation (R&I) program, which funds R&D activities, to begin in 2021.

Written by 12 independent scientific and industry leaders from across Europe and led by former World Trade Organization Director-General Pascal Lamy, the group was tasked by the EC to produce the report as part of the interim evaluation process for Horizon 2020 (H2020), the EU’s current seven-year, €77 billion ($88 billion) R&I funding program. The report presents a set of 11 recommendations, including a call for the EU to double its budget for the successor to H2020.

The recommendations are intended to inform the process of envisioning the structure of the post-H2020 research program. The framework of the new program is still uncertain, in part due to ongoing negotiations around the UK’s expected withdrawal from the EU in 2019.

EU investment in R&I program has evolved over time

Among its many functions, the EC — which manages the EU’s day-to-day business, including proposing legislation, implementing decisions, and enforcing EU treaties — aims to increase the coordination and cooperation of national and regional scientific research through three main funding mechanisms: the EU Framework Program for Research and Technological Development, European Structural and Investment Funds (ESIF), and sectoral R&D funds.

The Framework Program (FP) is the EU’s largest financial instrument to advance the European Research Area, a system of scientific research programs and policies that promotes transnational collaboration among EU member states with the goal of increasing the mobility of knowledge workers and deepening multilateral cooperation.

Since the EC created the program in 1984, eight consecutive multi-year framework programs have been implemented, increasing from €3.2 billion ($3.6 billion) for FP1 to €77 billion ($88 billion) for H2020, which followed FP7.

H2020 funds both basic and applied research through three main research areas, called “pillars”: Excellent Science, which focuses on basic research; Industrial Leadership, which is based on the EU’s Europe 2020 and Innovation Union strategies; and Societal Challenges, which funds potential solutions to social and economic problems.

Funding boost would help EU catch up with leading R&D spenders

While the current EU R&I program comprises only 10 percent of European public R&D investment, the report states that EU framework programs have a unique added value of cultivating “transnational collaboration and competition on a scale, scope and speed that no single country can match.”

H2020 and its predecessors fund projects that ultimately contribute to advancing the European Research Area. The interim evaluation of H2020 shows the current program has a strong additionality rate, meaning that it does not offset member state funds, with 83 percent of the projects initiated because of the availability of EU-level funding.

As R&D continues to play an important role in global competitiveness, the report recommends the EU strive to “align its investment with that of its main competitors,” such as the U.S., China, South Korea, and Japan, and – absent a full doubling – recommends a minimum of €120 billion ($137 billion) budget for the next seven-year framework program.

In 2015, the EU’s R&D expenditure as a percentage of GDP was around 2 percent, compared to the U.S.’ 2.8 percent and China’s 2.1 percent. In 2000, the EC set a target for the EU and its member states to invest 3 percent of GDP on R&D, but as of 2015 only three countries — Sweden, Austria, and Denmark — have reached it. The report emphasizes that achieving the target through EU and member state investment plans is “essential.”

The report states that meeting the 3 percent target would require an additional €150 billion ($171 billion) and greater private sector investment. National and regional-based policy tools, such as tax credits and co-funding mechanisms, are recommended in the report as ways to spur private interest in R&D investment.

EU-level funding successes correlated with national R&D spending

Independent of the EU’s direct investments such as H2020, EU member states invested over €96 billion ($110 billion) in R&D in 2015, with Germany, France, and the UK comprising €30.8 billion, about a third of the total spending.

Member states contribute funds to the EU through multiple mechanisms, including customs duties and value-added taxes, which fund disbursements to member states through a set of EU programs, such as H2020. Associated states (such as Switzerland) and non-associated third countries (such as the U.S.) are eligible to receive framework program funding, as determined by bilateral or funding match agreements.

According to the report, there is often a correlation between the overall success of EU R&I funding programs and the “level and performance” of national level programs. For example, there has been a moderate increase in national R&D investment in the UK and Germany, which are considered to be scientific powerhouses of Europe, as the EU‘s funding has increased. Therefore, the report recommends that there should be a matched increase in both EU and member state funding. The report also calls for clarifying and refining the roles of both the EU and member states to ensure that “complementarity” of investments is optimized, with the overall vision of the post-H2020 funding program acting as “a common strategic reference agenda for all R&I investments in Europe.”

More funding would address H2020 shortfalls and set strategic agenda

The report asserts that increasing the funding for the post-H2020 funding program would alleviate underfunding issues that have plagued H2020 and its predecessors. H2020’s interim evaluation reported that the attractiveness of the program has led to a low success rate, with 11 percent of proposals currently being funded. The program would require an additional €62 billion ($71 billion) to fund all “high-quality” proposals.

Looking towards the next program, the report recommends a success rate of between 15 and 20 percent, with funding for at least 30 percent of all high-quality proposals. The group concludes that increasing the budget “will not generate any concern about absorption capacity.”

The report also addresses the EU’s role in funding defense research, stating that the group “welcomed” the EU’s decision to fund defense science and technology, and praised the U.S. Defense Advanced Research Projects Agency (DARPA) model as an ideal execution strategy. However, the group recommends that defense and non-defense research funding should be considered separately, with any defense funding increases being made separate from the doubling of non-defense research.

The EC will receive a formal proposal for FP9 in 2018. A central topic in planning for the post-2020 program will be on addressing the UK’s modified status after the expected withdrawal in 2019.