Horizon 2020: boosting research and innovation

Horizon 2020 is the financial instrument implementing the Innovation Union, a Europe 2020 flagship initiative aimed at creating an environment which encourages and supports research and innovation activities, makes turning ideas into products and services easier and brings growth and jobs to the economy. Although progress has been made, with the EU’s innovation performance consistently improving, the innovation gap between Member States (MS) is widening. Moreover, MS governments’ research and development (R&D) investments decreased in 2011. Inter­nationally, the EU’s major competitors USA, Japan and Korea perform better, while China, India and Brazil have started to catch up. The Innovation Union is therefore critical to achieving the Europe 2020 target, that 3% of EU GDP be invested in R&D (1% from public funding, 2% from the private sector). This investment is expected to create 3.7 million jobs and increase the EU’s annual GDP by nearly €800 billion.

In November 2011, the Commission proposed its legislative package for Horizon 2020, a Framework Programme for the period 2014-20. Horizon 2020 will combine all current research and innovation funding – provided by the 7th Framework Research Programme (FP7), the Competitiveness and Innovation Framework Programme (CIP) and the European Institute of Innovation and Technology (EIT) – into one programme governed by a single set of rules. These rules are simpler than in the previous programmes (e.g. fewer different reimburse­ment rates in use) in order to make preparation of proposals and the management of projects easier and faster, to reduce participants’ administrative costs, and to minimise financial errors.

Horizon 2020 is focused on three main pillars: excellent science (boosting top-level research), industrial leadership (investment in key technologies, greater access to capital and support for SMEs) and societal challenges (breakthrough solutions from multi-disciplinary collaboration in areas such as health, demographic change or climate).

In order to encourage SMEs’ involvement, less than one-third of which currently engage in any innovative activities, the Commission proposed a dedicated financial instrument providing grants for R&D and assisting with commercialisation, through access to equity (finance for early and growth stage invest­ment) and debt (e.g. loans, guarantees) facilities.

The Commission also proposed to increase the number of new Knowledge and Innovation Communities (KICs) within the EIT. These are long-term partnerships of organisations from the education, technology, research, business and entrepreneurship fields working on societal challenges.

With these measures, the Commission aims to attract strong participation from industry, SMEs, universities and research centres, as well as to increase the commercialisation of R&D results.

The Commission estimates that €1 of EU Framework Programme funding results in an increase of industry added value of between €7 and €14. It also finds that MS which invest in R&D are recovering faster from the crisis. In September 2011, recognising that research and innovation are crucial instruments for economic recovery and job creation, the EP called for the 2014-20 budget to be about €100 billion (double the FP7 budget). The initial Commission proposal was €80 billion. The compromise on the Multiannual Financial Framework reduced the final figure to €70 billion (in 2011 prices).

On 28 November 2012, the Industry Research and Energy (ITRE) Committee voted the Horizon 2020 package, giving a negotiating mandate to the rapporteurs (Teresa Riera Madurell S&D, Spain; Maria Da Graça Carvahlo, EPP, Portugal; Christian Ehler, EPP, Germany; Marisa Matias, GUE/NGL, Portugal; and Philippe Lamberts, Greens/EFA, Belgium). In the trilogue negotiations, which resulted in an agreement with Council in June 2013, MEPs succeeded in securing a number of changes to the proposal.

The agreed funding model will pay up to 100% of direct costs (e.g. machinery bought for a project, travel), plus an additional 25% on top to cover indirect costs (e.g. heating, lighting, facility maintenance). Indirect costs will not be fully reimbursed but the Commission committed itself to examine the possibility of transferring some costs incurred in operating large infrastructure into direct, fully reimbursable costs.

MEPs inserted two new objectives with separate structure and budget lines to the societal challenges pillar to:

• Strengthen cooperation and dialogue between the scientific community and society and increase the attractiveness of R&D careers for young people
• Widen the range of participants in the programme through teaming institutions, twinning research staff and exchange of best practices

SMEs will receive at least 20% of the combined budget of the ‘industrial leadership’ and ‘societal challenges’ pillars. Furthermore 7% of the combined budget of these pillars is earmarked for the new dedicated SME instrument intended to increase their participation in Horizon 2020 funded projects (by e.g. facilitating outsourcing of research for non-research intensive SMEs and supporting their collaboration). A new Fast Track to Innovation will be launched in 2015 to speed the time “from idea to market” and increase participation from SMEs and industry. Open access to scientific publications resulting from Horizon 2020 funding will be mandatory.

MEPs shortened the time to grant (the period between the deadline for bids for funding and the signature of a grant agreement) to eight months (12 months in FP7), even though the new Financial Regulation sets a deadline of nine months. In order to adjust the balance between small, medium and big projects, 40% of the Future and Emerging technologies budget (part of pillar 1) is earmarked for light, open and responsive funding of collaborative projects (FET Open). MEPs also earmarked 85% of the energy challenge budget (part of pillar 3) for non-fossil fuel energy research.

To avoid multiplication of public-private partnerships in implementing Horizon 2020, stricter evaluation of the creation and operation of such structures will be introduced. A compromise between the institutions reduced the number of new KICs from six to five.

The European University Association noted the absence of an option for full reimbursement of research costs despite full costing being vital to the financial sustainability of many universities (a view shared by many organisations with high-end, expensively maintained R&D facilities). The League of European Research Universities supported the flat-rate system, arguing that multiple rules for funding would have endangered the simplification goal of Horizon 2020. Observers claimed that the simplified reimbursement scheme may benefit research organisations from the MS which joined after 2004, as they have lower indirect costs and less experience of the earlier, more complicated claim procedures.

Employers welcomed the agreement and emphasised that Horizon 2020 should assist industry and SMEs over the whole innovation cycle with all (not only technological) types of innovation. Industrialists found the simplifications satisfactory, and indeed essential for reversing the decline in industry participation observed in recent research framework programmes.