EU Budget post 2020 - what's at stake for innovation and creativity

For the next long-term EU budget 2021-2027, the European Commission proposes to increase the financial resources in different areas, such as culture, research and innovation, digital economy and cohesion policy. The aim is to ensure the EU growth, while sustaining innovation, creativity and intellectual property protection.

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In May 2018 the European Commission has started to present its proposals for the next Multiannual Financial Framework (MFF). Overall, the Commission proposes a long-term budget of € 1,135 billion in commitments (expressed in 2018 prices) over the period from 2021 to 2027, equivalent to 1.11% of the EU 27's gross national income (GNI). (Expressed in current prices – taking inflation into account – this would amount to €1,279 billion in commitments.)

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The EU budget is modest in comparison with the size of the European economy and national budgets, but it can have a bigger impact than public spending at national level, by providing real European added value in different areas. Examples include cutting-edge research projects that bring together the best researchers from across Europe, large infrastructures or projects to succeed the digital transformation or equipping the Union with the tools it needs to protect and defend its citizens.

The Commission is therefore proposing a modern, simple and flexible budget with different sector-specific financial programmes, which are going to promote innovation, creativity and intellectual property protection in the MFF.

Horizon Europe

Horizon Europe is the next EU Research and Innovation programme, based on the achievements and success of Horizon 2020. The European Commission has proposed a budget allocation of €100 billion for 2021-2027, which includes €97.6 bn under Horizon Europe (€3.5 bn of which will be allocated under the InvestEU Fund) and €2.4 bn for the Euratom Research and Training Programme.

While continuing to drive scientific excellence through the European Research Council (ERC) and the Marie Skłodowska-Curie fellowships and exchanges, Horizon Europe will introduce the following main new features:

• a European Innovation Council (EIC) to help the EU become a frontrunner in market-creating innovation: the Commission's proposal will establish a one-stop shop to bring the most promising high potential and breakthrough technologies from lab to market application, and help the most innovative start-ups and companies scale up their ideas. The new EIC will help identify and fund fast-moving, high-risk innovations with strong potential to create entirely new markets. It will provide direct support to innovators through two main funding instruments, one for early stages and the other for development and market deployment. It will complement the European Institute of Innovation and Technology (EIT);
• new EU-wide research and innovation missions focusing on societal challenges and industrial competitiveness: under Horizon Europe, the Commission will launch new missions with bold, ambitious goals and strong European added value to tackle issues that affect our daily lives. Examples could range from the fight against cancer, to clean transport or plastic-free oceans. These missions will be co-designed with citizens, stakeholders, the European Parliament and Member States;
• maximising the innovation potential across the EU: support will be doubled for Member States lagging behind in their efforts to make the most of their national research and innovation potential. Moreover, new synergies with Structural and Cohesion Funds will make it easy to coordinate and combine funding and help regions embrace innovation;
• more openness: The principle of 'open science' will become the modus operandi of Horizon Europe, requiring open access to publications and data. This will assist market uptake and increase the innovation potential of results generated by EU funding;
• a new generation of European Partnerships and increased collaboration with other EU programmes: Horizon Europe will streamline the number of partnershipsthat the EU co-programmes or co-funds with partners like industry, civil society and funding foundations, in order to increase their effectiveness and impact in achieving Europe's policy priorities. Horizon Europe will promote effective and operational links with other future EU programmes, like Cohesion Policy, the European Defence Fund, the Digital Europe Programme and the Connecting Europe Facility, as well as with the international fusion energy project ITER.

The Joint Research Centre (JRC), the Commission's science and knowledge service, will continue to contribute with scientific advice, technical support and dedicated research.

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Creative Europe

For the next long-term EU budget 2021-2027, the European Commission has proposed to increase funding for Creative Europe, the programme supporting European cultural and creative sectors and audiovisual works, to €1.85 billion.

The Commission's proposal to reinforce the EU's cultural and creative sectors is focused on three areas:

• 1. MEDIA: €1.081 billion will fund audiovisual projects and stimulate competitiveness in the audiovisual sector in Europe. The MEDIA programme will continue to support the development, distribution and promotion of European films, TV programmes and video games. In the coming years, more money will be invested in the international promotion and distribution of European works and innovative storytelling, including virtual reality. An online directory of EU films will be created to reinforce the accessibility and visibility of European works;
• 2. CULTURE: €609 million from the new budget will be allocated to promoting Europe's cultural and creative sectors. Cooperation projects, networks and platforms will be set up to connect talented artists across Europe and make it easier for creators to cooperate across borders;
• 3. ACROSS CULTURAL AND MEDIA SECTORS: €160 million will fund SMEs and other organisations working in the cultural and creative sectors. The funding will also be used to promote cultural policy cooperation across the EU, to promote a free, diverse and pluralistic media environment, and to support qualitative journalism and media literacy.

Culture has a positive role to play in reinforcing the resilience of European society and our economy. Due to digitisation and global competition, stronger support is needed for the European cultural and creative sectors. More can be done to stimulate cross-border productions, to ensure that European works are more widely distributed, and to ensure we make the most out of digital technology, while maintaining Europe's cultural and linguistic diversity.

In addition, by reinforcing culture and creativity in the EU, we can better support media freedom and pluralism, crucial for maintaining open, inclusive and creative societies. This is why the Commission is proposing an increase of funding for the Creative Europe programme.

Digital Europe

The European Commission has proposed to create the first ever Digital Europe programme and invest €9.2 billion to align the next long-term EU budget 2021-2027 with increasing digital challenges.

The Commission's proposal focusses on five areas:

• Supercomputers: €2.7 billion will fund projects to build-up and strengthen supercomputing and data processing in Europe, which is crucial for the development of many areas – from health care and renewable energy to car safety and cybersecurity. The funding will ensure a more effective and wider use of supercomputing in both the public and private sectors, including small and medium-sized enterprises. Digital Europe will aim to deploy a world-class supercomputer and data infrastructure with exascale capabilities (a billion billion or 10¹⁸ calculations per second) by 2022-2023, and post exascale facilities by 2026-2027, endowing the EU with its own independent and competitive technology supply, achieving excellence in applications and widening supercomputing availability and use. The planned initiatives will build on the European strategy on supercomputers that will help the EU advance in many areas from health care and renewable energy to car safety and cybersecurity;
• Artificial intelligence (AI): €2.5 billion is planned to help spread AI across the European economy and society. This budget builds on the European approach on AI presented on 25 April 2018: the aim is to boost investments to make the most out AI, while taking into account the socio-economic changes brought about by AI and to ensure an appropriate ethical and legal framework. The Digital Europe programme will give better access for public authorities and businesses, especially smallest ones, to AI testing and experimentation facilities in Member States, while increased investments in research and innovation under Horizon Europe will ensure that the EU stays at the forefront of scientific and technological developments in AI. The Commission proposes to develop common 'European libraries' of algorithms that would be accessible to all, to help the public and private sectors to identify and acquire whichever solution would work best for their needs. Open platforms and access to industrial data spaces for artificial intelligence will be made available across the EU in Digital Innovation Hubs, providing testing facilities and knowledge to small businesses and local innovators;
• Cybersecurity and trust: €2 billion will be invested into safeguarding the EU's    digital economy, society and democracies through boosting cyber defence and the EU's cybersecurity industry, financing state-of-the-art cybersecurity equipment and infrastructure as well as supporting the development of the necessary skills and knowledge. The proposal builds on the wide range of cybersecurity measures presented in September 2017, and on the first EU-wide legislation on cybersecurity that came into force in May 2018;
• Digital skills: €700 million will ensure that the current and future workforce will have the opportunity to easily acquire advanced digital skills through long-and short-term training courses and on-the-job traineeships, regardless of their Member State of residence. In the Digital Europe programme, the Digital Innovation Hubs will carry out targeted programmes to help small and medium-sized enterprises and public administrations to equip their personnel with the needed advanced skills to be able access the new opportunities offered by supercomputing, artificial intelligence and cybersecurity;
• Ensuring a wide use of digital technologies across the economy and society: €1.3 billion will ensure the digital transformation of public administration and public services and their EU-wide interoperability and facilitate access to technology and knowhow for all businesses, notably SMEs. Digital Innovation Hubs will be 'one-stop shops' for small and medium-sized enterprises and public administrations, providing access to technological expertise and experimentation facilities, as well as advice to better assess the business case of digital transformation projects. A network of Digital Innovation Hubs will be supported, ensuring the widest geographical coverage across Europe. Digital Innovation Hubs are today one of the key elements of the Digitising European Industry strategy.

European Defence Fund

The new €13 billion European Defence Fund will provide €4.1 billion to directly finance competitive and collaborative research projects, in particular through grants. Beyond the research phase, €8.9 billion will be available to complement Member States' investment by co-financing the costs for prototype development and the ensuing certification and testing requirements.

The Fund will place the EU among the top 4 defence research and technology investors in Europe, and act as a catalyst for an innovative and competitive industrial and scientific base.

The main features of the European Defence Fund are:

• financing of projects which help make the EU safer and which correspond to priorities agreed by Member States within the framework of the Common Security and Defence Policy and other regional and international organisations such as NATO;
• only collaborative projects involving at least 3 participants from 3 Member States are eligible;
• the EU will only co-fund the development of common prototypes where Member States commit to buying the final product;
• cross-border participation of SMEs and mid-caps is strongly incentivised by providing higher financing rates, favouring projects by consortia which include SMEs and, if necessary, launching dedicated calls for proposals;
• targeting breakthrough innovation, with 5% of the funds dedicated to disruptive technology and innovative equipment allowing the EU to boost its long-term technological leadership;
• permanent Structured Cooperation (PESCO) projects may, if eligible, receive an additional co-financing bonus of 10%, but funding is not automatic.

Cohesion Policy beyond 2020

The EU's economy is bouncing back, but additional investment efforts are needed to tackle persistent gaps between and within Member States. With a budget of €373 billion in commitments for 2021-2027, the future Cohesion Policy has the investment power to help bridge these gaps. Resources will continue to be geared towards regions that need to catch up with the rest of the EU. At the same time it will remain a strong, direct link between the EU and its regions and cities.

The main features of the Commission's proposal for a modernised Cohesion Policy are:

1. A focus on key investment priorities, where the EU is best placed to deliver: the bulk of European Regional Development Fund and Cohesion Fund investments will go towards innovation, support to small businesses, digital technologies and industrial modernisation. It will also go to the shift towards a low-carbon, circular economy and the fight against climate change, delivering on the Paris Agreement.

2. A Cohesion Policy for all regions and a more tailored approach to regional development:

• investing in all regions: Regions still lagging behind in terms of growth or income – mostly located in the South and East of Europe – will keep benefiting from important EU support. Cohesion Policy will continue investing in all regions, as many of them across Europe – including in richer Member States – struggle to achieve industrial transition, fight unemployment and hold their own in a globalised economy;
• a tailored approach: Cohesion Policy keeps 3 categories of regions: less-developed, transition and more developed regions. To reduce disparities and help low-income and low-growth regions catch up, GDP per capita remains the predominant criterion for allocating funds. In addition, new criteria aim at better reflecting the reality on the ground – youth unemployment, low education level, climate change and the reception and integration of migrants.
• locally-led: the 2021-2027 Cohesion Policy stands for a Europe that empowers, by supporting locally-led development strategies. Local, urban and territorial authorities will be more involved in the management of EU funds, while increased co-financing rates will improve ownership of EU-funded projects in regions and cities. 

3. Fewer, clearer, shorter rules and a more flexible framework:

• simplifying access to funds: the Commission proposes to make the rules less complex in the next long-term EU budget, with less red tape and lighter control procedures for businesses and entrepreneurs benefiting from EU support;
• a single rulebook: one set of rules now cover 7 EU funds implemented in partnership with Member States ('shared management'), which will make life easier for EU funds programme managers. It will also facilitate synergies, for example between Cohesion Policy funds and the Asylum and Migration Fund when it comes to the development of local integration strategies for migrants. The framework also allows for more efficient links with other funds from the EU budget toolbox; for example Member States can choose to transfer some of their Cohesion Policy resources to the InvestEU programme;
• adapting to needs: the new framework also combines the stability necessary for long-term investment planning with the right level of flexibility in order to cope with unforeseen events. A mid-term review will determine if changes in the programmes are needed for the last 2 years of the funding period, and limited transfers of resources within EU funds programmes will be possible. 

4. A strengthened link with the European Semester to improve the investment environment in Europe: the Commission proposes to strengthen the link between Cohesion Policy and the European Semester, to create a growth- and business-friendly environment in Europe, so that both EU and national investments can deliver their full potential. This stronger Cohesion Policy support to structural reforms will ensure full complementarity and coordination with the new, enhanced Reform Support Programme.

Five priorities for growth and innovation

Eleven thematic objectives used in 2014-2020 have been simplified to five clear policy objectives in the 2021-2027 Cohesion Policy:

• Smarter Europe, through innovation, digitisation, economic transformation and support to small and medium-sized businesses;
• a Greener, carbon free Europe, implementing the Paris Agreement and investing in energy transition, renewables and the fight against climate change;
• a more Connected Europe, with strategic transport and digital networks;
• a more Social Europe, delivering on the European Pillar of Social Rights and supporting quality employment, education, skills, social inclusion and equal access to healthcare;
• a Europe closer to citizens, by supporting locally-led development strategies and sustainable urban development across the EU.

This simplification enables synergies and flexibility between various strands within a given objective, removing artificial distinctions between different policies contributing to the same objective. It also lays the basis for thematic concentration for the ERDF and the ESF.

Regional development investments will strongly focus on objectives 1 and 2. 65% to 85% of ERDF and Cohesion Fund resources will be allocated to these priorities, depending on Member States’ relative wealth.

Interregional and cross-border innovation projects will be facilitated by the new possibility for a region to use parts of its own allocation to fund projects anywhere in Europe jointly with other regions. The new generation of interregional and cross-border cooperation (“Interreg”) programmes will help Member States overcome cross-border obstacles and develop joint services.

The Commission proposes a new instrument for border regions and Member States eager to harmonise their legal frameworks, the European Cross-Border Mechanism. Building on a successful pilot action from 2014-2020, the Commission proposes to create the Interregional Innovative Investments. Regions with matching ‘smart specialisation’ assets will be given more support to build pan-European clusters in priority sectors such as big data, circular economy, advanced manufacturing or cybersecurity.

Stairway to Excellence

The iniatitive 'Stairway to Excellence' is another way the Commission is helping Europe's regions prepare for the future, with solid innovation strategies supported by EU funds in the next long-term EU budget for 2021-2027.

The initiative, coordinated by the Joint Research Centre, will give regions four main forms of support:

1. Commission and external experts will help regions spot areas for improvement in their smart specialisation strategies, in their regional innovation systems (quality of public research, efficient business-science links and business-friendly environments) and in the way they cooperate with other regions in the fields of research and innovation;
2. experts will also help them tap into all potential funding streams, such as Horizon Europe, Digital Europe and Cohesion Policy funds, and combine them thanks to new opportunities for synergies, offered by the Commission's proposals for EU funds 2021-2027
3. the Joint Research Centre will help identify and remedy specific regional bottlenecks to innovation, such as lack of interaction between local business spheres and academia or low participation in the current Horizon 2020 programme;
4. the Joint Research Centre will also organise networking opportunities and workshops for regions to meet and exchange good practices in building regional innovation strategies. This will also facilitate the development of partnerships for interregional innovation investments.

Graphics: © European Commission 2018

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