MEPs withdraw threat to call for cut to European Innovation Council funding

20 Oct 2022 | News

The decision is part of the European Parliament’s final position on the 2023 budget. MEPs also vowed to block any attempt by the Commission to siphon off Horizon Europe money to fund the Chips Act or its secure satellite communications scheme

Christian Elher, MEP. Photo: European Union

MEPs have lifted their threat to press for a cut to the 2023 budget for the European Innovation Council (EIC), after the European Commission made moves to unlock the flow of funding to start-up companies that are due to get equity funding from the EIC Accelerator programme.

“We decided not to follow in the Commission's footsteps to defund the EIC and to take the budgetary threat off the table for 2023,” Horizon Europe rapporteur Christian Ehler MEP told Science|Business.

He noted that the reprieve is “one last chance” for the Commission to work on a long-term solution, or the Parliament will have to reconsider the 2024 budget.

Earlier this year, Ehler had put forward a proposal to withhold €811 million from the EIC Accelerator programme for start-ups in 2023, unless the Commission sorted out management issues plaguing the equity fund. 

With the EIC Accelerator, the Commission has moved beyond traditional grant funding for start-ups, adding an equity component and giving the EU ownership of stakes in companies set up to commercialise outputs of publicly-funded research.

A pilot was launched in 2018 and ran smoothly for three years, but on its fully fledged launch in 2021, the Commission realised it did not have the internal resources to carry out the due diligence needed to access the commercial prospects of applicants, or to protect its interests by having a hand in the  supervision of companies awarded equity funding. As a result, funding decisions were being delayed and start-ups were kept waiting for money.

Last month, the Commission announced it had appointed AlterDomus, a Luxembourg-based fund manager to run the EIC Fund and take over the decision making on high risk equity investments made by the Accelerator.

Ehler welcomed the appointment of the fund manager but said concerns about the EIC fund are not fully resolved yet. “The interim solution has flaws that we would like to see addressed. However, the interim solution at least ensures that the money is flowing again,” he said.

The Commission has said further arrangements will be made by the end of the year to put in place a permanent manager of the fund.

The budget waltz

Parliament’s decision to back off from calling for cuts to EIC funding was part of a broader vote this week that set the main priorities for the upcoming negotiations with member states on the 2023 budget.

MEPs voted for an increase of €311 million for the Horizon Europe research programme, with Janusz Lewandowski MEP saying, “We are strongly of the view that the EU’s research and innovation programme Horizon must be adequately resourced.”

MEPs also want to ringfence the research budget to prevent it from being diverted to new initiatives, such as the Chips Act for the research and development of a new generation of semiconductors and the secure connectivity programme aimed at developing a satellite communication service for member state governments.

It’s not the first time the Commission and member states have angled to use the research budget to fund new initiatives. It happened under Horizon 2020, when the Juncker Commission took money away from research and other programmes to establish a fund for strategic investments.

“This issue is rather becoming the norm, it’s not an exception,” said Thomas Estermann, director of governance, funding and public policy development at the European University Association. “It is very important to think about it to ensure that Horizon Europe money is not taken once it has been decided where it goes,” he said.

In addition, MEPs want member states to put back into the programme money that was not spent in previous years. Parliament estimates €836 million in unspent research money could be rolled back into Horizon Europe, but will have a difficult task convincing member states to agree to that.

Estermann says EU institutions should first look into the reasons why that money has not been spent, given Horizon Europe continues to be oversubscribed and many good projects are not being funded because of tight budgets.

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