Corporate Europe Observatory

Exposing the power of corporate lobbying in the EU

EU Research funds: a €20 billion gift to industry!

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€20.3 billion within the EU's upcoming Research program (2014-2020, called “Horizon 2020”) are about to be captured by industry: the “Industrial Leadership” component of Horizon 2020 explicitly states that this money will support activities whose agenda is industry-driven. Is transforming research funding into subsidies to big business the best possible use of scarce public funds?


Research funding is a hot topic these days between the European Parliament and member states, who are negotiating amendments to the draft text published in November 2011 by the European Commission. As things stand, the new round of research funding for 2014-2020 would add up to a whopping €86 billion euros, making it the largest EU budget after farm subidies and structural funds for regional development.

However, it turns out that a very controversial part of the Commission's text is going to stay: €20.3 billion over 7 years (more or less the same amount as the total public research budget of a country like Sweden) are now supposed to go to a new 'Industrial Leadership' programme, which is a de facto direct subsidiation of industry research projects. It will finance activities which “shall follow a business-driven agenda.”1 What is the logic behind giving research money to industry?

The EU justifies this by saying that “To stay at the forefront of global competition with a strong technological base and industrial capabilities, increased strategic investments in research, development, validation and piloting are required”.2 Industry would need subsidies for its competitiveness. But what guarantees are there that these subsidies will actually finance added innovation capacity rather than already planned investments? The hope is that the supported activities will “have a strong focus on leveraging private sector investment”, meaning companies will commit more money to these projects once they get subsidies. Another argument is that this money will primarily go to SMEs, because those are in general the most innovative but they also face cash-flow difficulties between the moment they make a discovery and the moment they can begin selling something out of it. This period of time has been called by some spreadsheet poet the “valley of death” of innovation, and for the past years it has been almost impossible to attend any meeting at the Parliament on the matter without hearing the expression.

However, this was already one of the main justification for this proposal's predecessor, the Joint Technoloy Initiatives (JTIs), which secured the private sector a comfortable €3.14 billion between 2007 and 2013; but extra private investments and SMEs participation hardly happened. According to sources at the European Parliament and DG Research, large companies mainly pocketed the subsidies without adding much to it and SMEs hardly got anything because big business has way more lobbying power than them in Brussels. There is solid ground to suspect this money mainly funded projects big business had planned to do anyway, meaning the money was merely treated as a windfall profit.

Last week, science made a huge leap forward with the quasi-certain discovery of the Higgs boson, a crucial missing brick in the standard theory of particles physics and a possible first step towards a more unified understanding of the way the universe is functioning. The outcome of more than 50 years of research! Italy's National Institute for Nuclear Physics (INFN) was one of the main contributors and funders to the CERN’s Large Hadron Collider (LHC), the Geneva-based infrastructure that enabled the discovery. But two days later, the Italian government informed the Institute they would slash their funding almost by half as part of the austerity measures taken to tackle the country's sovereign debt crisis. A €59 million cut as a reward for one of science's most outstanding discoveries...3 On another issue, a recent CEO investigation4 showed that large agribusiness and biotech corporations were about to capture a large proportion of the EU's research funding for agriculture, blocking much-needed public support to crucial research projects into more sustainable agricultural approaches. These €20 billion surely could find a better use.

Research funding is a hot topic these days between the European Parliament and member states, who are negotiating amendments to the draft text published in November 2011 by the European Commission. As things stand, the new round of research funding for 2014-2020 would add up to a whopping €86 billion euros, making it the largest EU budget after farm subidies and structural funds for regional development.However, it turns out that a very controversial part of the Commission's text is going to stay: €20.3 billion over 7 years (more or less the same amount as the total public research budget of a country like Sweden) are now supposed to go to a new 'Industrial Leadership' programme, which is a de facto direct subsidiation of industry research projects. It will finance activities which “shall follow a business-driven agenda.”1 What is the logic behind giving research money to industry?The EU justifies this by saying that “To stay at the forefront of global competition with a strong technological base and industrial capabilities, increased strategic investments in research, development, validation and piloting are required”.2 Industry would need subsidies for its competitiveness. But what guarantees are there that these subsidies will actually finance added innovation capacity rather than already planned investments? The hope is that the supported activities will “have a strong focus on leveraging private sector investment”, meaning companies will commit more money to these projects once they get subsidies. Another argument is that this money will primarily go to SMEs, because those are in general the most innovative but they also face cash-flow difficulties between the moment they make a discovery and the moment they can begin selling something out of it. This period of time has been called by some spreadsheet poet the “valley of death” of innovation, and for the past years it has been almost impossible to attend any meeting at the Parliament on the matter without hearing the expression.However, this was already one of the main justification for this proposal's predecessor, the Joint Technoloy Initiatives (JTIs), which secured the private sector a comfortable €3.14 billion between 2007 and 2013; but extra private investments and SMEs participation hardly happened. According to sources at the European Parliament and DG Research, large companies mainly pocketed the subsidies without adding much to it and SMEs hardly got anything because big business has way more lobbying power than them in Brussels. There is solid ground to suspect this money mainly funded projects big business had planned to do anyway, meaning the money was merely treated as a windfall profit.Last week, science made a huge leap forward with the quasi-certain discovery of the Higgs boson, a crucial missing brick in the standard theory of particles physics and a possible first step towards a more unified understanding of the way the universe is functioning. The outcome of more than 50 years of research! Italy's National Institute for Nuclear Physics (INFN) was one of the main contributors and funders to the CERN’s Large Hadron Collider (LHC), the Geneva-based infrastructure that enabled the discovery. But two days later, the Italian government informed the Institute they would slash their funding almost by half as part of the austerity measures taken to tackle the country's sovereign debt crisis. A €59 million cut as a reward for one of science's most outstanding discoveries...3 On another issue, a recent CEO investigation4 showed that large agribusiness and biotech corporations were about to capture a large proportion of the EU's research funding for agriculture, blocking much-needed public support to crucial research projects into more sustainable agricultural approaches. These €20 billion surely could find a better use. 1. Proposal for a Regulation of the European Parliament and the Council establishing Horizon 2020 - The Framework Programme for Research and Innovation (2014-2020) – Partial general approach, Competitiveness Council of 31 May 2012, http://register.consilium.europa.eu/pdf/en/12/st10/st10663.en12.pdf 2. Ibid. 3. Triumph turns to tears as Italian physicists are given bleak budget news, Nature news blog, 10 July 2012 http://blogs.nature.com/news/2012/07/triumph-turns-to-tears-as-italian-p... 4. Agribusiness CAPturing EU research money?, Corporate Europe Observatory, 26 June 2012 http://www.corporateeurope.org/publications/agribusiness-capturing-eu-re...
 
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