Changes from report parliamentary committee draft to plenary report

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Removed48. Welcomes the developments that have resulted in lifting both the quantified and unquantified reservation in the area of textiles and shoes imported from China; notes with satisfaction that the United Kingdom has now paid the total amount due (final payment of EUR 1,57 billion in January 2023) including interest (EUR 1,4 billion in February 2023); notes that 26 Member States made significant provisional payments for their expected amounts due to the Union budget and that in line with the CJEU judgment in the case C-213/19 the Commission will apply the same quantification method for these Member States as for the United Kingdom, which will result in recalculated amounts, allowing the Commission to finalise the exercise completely;

Added69. Calls the Commision to conduct a deep analysis of all amounts recovered on the basis of EPPO notfications and to inform the discharge authority about the results; recalls that the Commission plays the primary role in the follow up and recovery of damages to the EU budget, following EPPO notifications; regrets that EPPO until now is not aware of the mechanisms set up by the Commission to that effect; notes that the issue of EPPO notifications has been raised in the inter-institutional exchange of views on Regulation (EU, Euratom) 2020/2223 ); welcomes the EPPO Working Arrangement and the set up of a working group to ensure that EPPO notifications will enable the Commission to maximize recovery to the EU budget;

Added70. Welcomes the developments that have resulted in lifting both the quantified and unquantified reservation in the area of textiles and shoes imported from China; notes with satisfaction that the United Kingdom has now paid the total amount due (final payment of EUR 1,57 billion in January 2023) including interest (EUR 1,4 billion in February 2023); notes that by the end of 2023, 27 Member States had made significant provisional payments for their expected amounts due to the Union budget and that in line with the CJEU judgment in the case C-213/19 the Commission will apply the same quantification method for these Member States as for the United Kingdom, which will result in recalculated amounts, allowing the Commission to finalise the exercise completely;

Recommendations

71. Calls on the Commission to:

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Changed(i) take over the suggestions of the European Parliament in its resolutions on own resources in order to ensure sufficient resources to repay the investments made under NGEU;

(ii) make use of all means available to stimulate cooperation between anti-fraud services and customs agencies to detect, prevent and correct fraud affecting Union revenue;

(iii) inform the discharge authority about the results of the review of the collected own resources;

(iv) examine carefully the differences in recovery rates by Member States in order to identify possible specific weaknesses;

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Added(v) provide detailed explanations to the discharge authority on reasons why the Commision only partially implemented 13 % of the Court’s recommendations from 2019 and has not implemented further 10 % of their recommendations;

▸6 unchanged paragraphs

Single market, Innovation and Digital

72. Notes that the budget for the programmes under MFF heading 1 ‘Single Market, Innovation and Digital’ was EUR 25,2 billion (12,9 % of the Union budget) distributed as follows: EUR 15,8 billion (62.8 %) for Research, EUR 3,5 billion (14.0 %) for Transport, Energy and Digital, EUR 2,7 billion (10.6 %) for InvestEU Programme, EUR 2 billion (8.0 %) for Space, and EUR 1,2 billion (4.6%) for other areas; notes that as of 31 December 2022 the final adopted budget commitments appropriations were EUR 21 845,08 million and 99,99 % of them were implemented (EUR 21 842.58 million); notes further that the final adopted budget payment appropriations amounted to EUR 20 605.64 million and 99,35 % of them were implemented (EUR 20 4710.31 million);

Innovation and research

73. Highlights the importance of Union R&I funding programmes for the scientific, societal, and technological/economic development of the Union, to reduce inequalities, for the recovery, the green and digital transitions and the need to decrease Union energy dependency on Russia; recalls that Horizon Europe is the most significant research and innovation programme in Europe, with a total budget of EUR 95.5 billion, including EUR 5.4 billion from the NGEU instrument; notes that the RRF has allocated around EUR 48 billion in investments to R&I;

74. Notes the late adoption of the Horizon Europe legal bases in 2021 and welcomes that the Commission managed to reach close to 100 % budget implementation in 2021 and 2022; notes that the number of grant agreements signed by the end of 2022 was 5 509; notes that, despite the fact the average success rate of proposals has increased from 11,9 % in Horizon 2020 to 15,9 % in Horizon Europe, 7 out of 10 high-quality proposals still cannot be funded and an extra EUR 34,3 billion would have been needed to fund those proposals;

75. Notes that the Court has examined 127 transactions covering the full range of spending under this MFF heading, notably the Horizon2020 programme, the Connecting Europe Facility (CEF), financial instruments and the space programme, including the regularity information in the annual activity reports of the Directorate-General for Research and Innovation (DG RTD) and Directorate-General for Defence Industry and Space (DG DEFIS);

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Changed54.76. Notes that the Court estimates that the level of error in spending on ‘Single Market, Innovation and Digital’ in 2022 was material at 2,7 % ; notes with satisfaction that this is a considerable decrease compared to 4,4 % in 2021; takes note ofnotes the Court’s observation that the research and innovation expenditure is most affected by error, particularly in the area of personnel costs; notesis concerned that the Commission calculated an error rate of 1,5 % for this heading;heading, which is in the lower half of the range of the Court estimation; is concerned that the Court’s observation of the underestimation of the rate by the commission has persisted for a number of years, with a specific weakness identified in the Commission’s ex post audits;

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Changed55.77. Notes that quantifiable errors relating to ineligible costs represent 98 % of the Court’s estimated level of error of 2,7 % in 2022; notes with concern, in particular, that the rules for declaring personnel costs under Horizon 2020 remain complex and that their calculation remains a significant source of error (67 % of the estimated error level in 2022); notes that the Commission has developed and promotes the use of the ‘Personnel Costs Wizard’ to help beneficiaries to declare their personnel costs correctly;

78. Notes that Horizon 2020 continues to represent the large majority of projects in the Court’s sample, with just one Horizon Europe project in the 2022 sample; stresses that, according to the Court, certain simplifications in Horizon 2020, in particular the introduction of a flat rate for indirect costs, have reduced the administrative burden on beneficiaries and have the potential to reduce the risk of error;

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Changed57.79. Notes the remarks made by the Director-General for Research and Innovation in his discharge hearing that the Commission intends to increase the disbursement of Horizon Europe funds through lump sums from 2 % in 2022 to 50 % in 2027; notes, in that context, the Court’s specific review of the Commission’s procedures and guidance on lump-sum funded grants in research; notes the Commission’s statement that the level of scrutiny in terms of economy, efficiency and effectiveness is higher in the evaluation of lump-sum proposals; emphasises the need to check the actual implementation of projects using lump sums;

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Changed58.80. Stresses the crucial role of the private sector in addressing the innovation gap in the Union and improving Union competitiveness and growth; believes, in particular, that it is imperative to keep promoting and facilitating as much as possible the participation of small and medium-sized enterprises (SMEs) in Union R&I funding programmes; notes the Court’s conclusion that SMEs and newcomers are more prone to errors than other beneficiariesbeneficiaries, since they lack the experience and resources to administer the funds, and welcomes the efforts made by the Commission to specifically support them, for example through information campaigns, contacts with the system of National Contact Points and the dedicated helpdesk of the Research Enquiry Service; considers that the simplification of rules and procedures are the most important driver for increased participation of SMEs;

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Removed59. Notes that the R&I Family Fraud Risk Assessment was updated in 2022 as work preceding the 2023 update of the Common Anti-Fraud Strategy; notes the drafting and adoption in 2022 of the ‘Guidance on Horizon Europe ex-ante anti-fraud checks’, which is part of the Horizon Europe ex-ante control strategy; notes that the main forum of the R&I Family on anti-fraud matters is the commitee for Fraud and Irregularities in Research (FAIR Committee)), that met two times in 2022; notes that DG RTD also updated its Anti-fraud Strategy in 2022;

Added81. Stresses the importance of having transparent and clear rules applied to the selection procedure and to the public procurement procedures in all executive agencies; regrets the rise of complaints of researchers for non-transparency, notably for the Research Excutive Agency; recalls that under the 2021-2027 long-term Union budget, the REA manages several Union programmes and support services; calls for the Commission to conduct an assessment of all procedures and an ex-post evaluation of the added value of all their executive agencies in accordance with Article 3.1 of the Council Regulation (EC No 58/2003 of 19 December 2002 laying down the statute for executive agencies to be entrusted with certain tasks in the management of Community programmes (Official Journal L 011 , 16/01/2003 P. 0001 – 0008));

Added82. Notes that the R&I Family Fraud Risk Assessment was updated in 2022 as work preceding the 2023 update of the Common Anti-Fraud Strategy; notes the drafting and adoption in 2022 of the ‘Guidance on Horizon Europe ex-ante anti-fraud checks’, which is part of the Horizon Europe ex-ante control strategy; notes that the main forum of the R&I Family on anti-fraud matters is the committee for Fraud and Irregularities in Research (FAIR Committee), that met two times in 2022; notes that DG RTD also updated its Anti-fraud Strategy in 2022; considers that a zero-tolerance policy for fraud is also necessary in the area of research; in light of the ongoing simplification efforts it is important to guarantee that all European grants and subsidies benefit the projected goals and to develop effective tools to identify fraud and fraud patterns in the context of lump sums; notes that one important element to avoid fraudulent misuse is the referral of respective cases to the Early Detection and Exclusion System panel;

83. Recalls that fostering, attracting and retaining talent is one of the five flagships comprising the New European Innovation Agenda (NEIA), adopted on 5 July 2022; notes the statements of Commissioner Ivanova in her discharge hearing on the efforts made by the Commission to increase inclusivity in Horizon2020 and Horizon Europe; notes the Commissioner’s acknowledgement that further efforts are necessary to increase the participation of women and young people in Union R&I programmes; notes in that regard the efforts made by the Commission to implement the provisions on gender equality plans in Horizon Europe, and the joint RTD-EAC effort to attract female talent to STEM; welcomes that, in addition to other Union initiatives aiming to support and empower women in tech and innovation, in 2022 the Commission launched the second edition of Women TechEU call with an increased budget of EUR 10 million, which attracted a record number of interest with 467 applications from 35 Member States and Horizon Europe Associated Countries;

84. Welcomes the role of the ERC in supporting top researchers in Europe, which is underlined by numerous awards, including 14 Nobel Prizes, 6 Fields Medals and 11 Wolf Prizes; welcomes the 2 300 patent applications and 400 spin-off companies generated thanks to ERC projects;

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Added85. Stresses the independence and autonomy of the ERC when fulfilling its role in supporting excellent research in the Union; recalls that the ERC requires a unique set-up to host ERCEA staff, the ERC Scientific Council and the experts responsible for the panel evaluations and that this configuration is indispensable for its work; is astonished by the Commission's plan to move several executive agencies and the ERCEA into new buildings without proper consultation and their agreement, while disregarding their actual office needs and thus endangering business continuity; highlights that even some Commission services were not adequately informed about these plans; stresses that the ERCEA has the right to sign lease contracts on its own and without the Commission's approval to maintain its extraordinary business model; underlines that the Commission must plan and collaborate with the ERCEA in good time to find suitable office spaces that fulfil their requirements and do not endanger their activities;

86. Notes the disparities in R&I development within the Union and welcomes the different measures taken by the Commission to boost Member States’ R&I investments, especially less performing R&I countries, including around EUR 48 billion from the RRF, coupled with EUR 43 billion from the cohesion Policy and EUR 3 billion from the ‘Widening participation and spreading excellence’component of Horizon Europe; notes that despite the Commission’s efforts to increase funding allocated to researchers in widening countries several ‘catch-up countries’ are not yet showing progress;

87. Notes that, following Russia’s war of aggression against Ukraine, the Commission stopped the participation of Russian public entities in ongoing Horizon 2020 projects and future Horizon Europe projects; notes that the latest amendment of the ‘main’ Horizon Europe work programme 2021-2022, adopted on 10 May 2022, included actions to support researchers previously active in Ukraine; notes that the Commission provided financial support of in the form of a grant of EUR 1.5million to the National Research Foundation of Ukraine for the establishment of a Horizon Europe Office in Ukraine (Kyiv), which will promote funding opportunities and offer support in drafting proposals and finding partners in Europe;

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Added88. Acknowledges that, in 2022, CEF reached its full implementation phase and deems it an achievement; regrets the decrease, compared to 2021, in funding for calls for proposals under the CEF Transport 2022 funding instrument on projects targeting new, upgraded and improved European transport infrastructure; takes note that CEF Transport 2022 calls that were launched during the 3rd quarter of 2022 opened additional funding possibilities with an extra EUR 6 billion. of Union co-funding; insists that a sufficiently high CEF Transport budget line is key to ensuring implementation of the Trans-european Transport Network (TEN-T) network, including the enlargement in the Eastern region to provide connection to the Eastern partners such as Ukraine, greening of European transport, increased military mobility and offsetting the unprecedently high inflation rates;

Added89. Applauds the initiative of the European Air Traffic Management Voluntary Solidarity Fund for Ukraine and Moldova under the responsibility of Eurocontrol, aiming to sustain staff/training costs and any other costs to ensure operational readiness when air traffic recovers; furthermore, welcomes another Eurocontrol solidarity mechanism to assist the front-line states struggling with the effects of a sharp drop in air traffic; points out that the Eurocontrol Member States decided to establish two specific funds: one in the form of a donation to Ukraine and Moldova of EUR 46.5 million. and one in the form of a loan of EUR 46,1 million. to Estonia, Latvia, Lithuania and Poland;

Energy

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Changed64.90. Notes the complexity of the energy policy framework in the Union and stresses that ensuring better interconnectivity is at the core of the Union energy market; welcomes the adoption of the new trans-European energy infrastructure Regulation Regulation (EU) 2022/869 (‘TEN-E Regulation’ );Regulation’); considers that the Union has, through TEN-E, CEF and the RRF/ RePowerEU Plan, made a robust legal framework available for investments in energy infrastructure, addressing the challenges of decarbonisation and decreasing dependency on imports of fossil fuel; notes the efforts made to coordinate the construction of high-priority electricity infrastructure across Member States, digitalise the Union energy system, and stimulate the grid investment with the right regularity environment, in particular through CEF Energy;

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Changed65.91. Notes that, in total, CEF Energy 1 and 2 (2014-2023)(2014-2022) provided EUR 6,36,24 billion of support to energy projects (EUR 5,85,74 billion works, EUR 0.5 billion studies) to more than 117118 Projects of Common Interest (PCIs) and by the end of 2022, 107123 actions that received support from CEF-1 Energy were completed;

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Added92. Notes that Russia’s war of aggression against Ukraine and weaponisation of energy upended energy markets in 2022, triggering price volatility and energy insecurity across the Union’s energy system; highlights the Commission’s response to the crisis by developing the REPowerEU Plan aiming to reduce dependence on Russian fossil fuels and phase out Russian energy imports before 2030; notes that the REPowerEU Plan mobilises close to EUR 300 billion, approximately EUR 72 billion in grants and EUR 225 billion in loans; notes that the REPowerEU Plan has additionally provided a legal basis for both Member States and the Commission to modify national RRPs and to check whether Milestones and Targets (M&Ts) are well defined to clarify them where necessary;

Recommendations

93. Calls on the Commission to:

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Added(i) include extra funds needed for Horizon 2020 and Horizon Europe in the draft 2025 budget to improve on the current state where 7 out of 10 high-quality proposals still cannot be funded;

(ii) continue to apply simplified rules and procedures, digitalisation measures and simplified cost options (SCOs) while addressing, in particular, the risk of irregularities and fraud and the costs of controls;

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Added(iii) continue to simplify rules and procedures in line with the new financial regulation, to support training sessions and practical information for applicants in member states, in particular for SMEs, spin-offs, start-ups, regional NGOs or local action groups;

▸4 unchanged paragraphs

(iv) continue to promote the use of the ‘Personnel Costs Wizard’ to beneficiaries, in particular newcomers and SMEs, to decrease the error level related to personnel costs;

(v) continue its efforts to achieve a more inclusive Union research programme by giving support, setting clear targets and organising special research programmes for under-represented target groups, such as women and young people, also aspiring for balanced geographical distribution across the Union;

(vi) encourage and support Members States, specially ‘catch-up countries’, to fully exploit the synergies between available Union funds, including RRF and Cohesion funds, to increase the number of research and innovation activities in these countries; and

(vii) continue the funding to create an integrated, innovative and resilient Energy Union that promotes secure, sustainable, competitive and affordable energy for all, particularly SMEs and vulnerable and energy-poor consumers, while accelerating Europe’s clean and just energy transition for it to become the first climate-neutral continent by 2050;

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Added(viii) increase awareness, coherence, and sustainability of the support to SME internationalisation;

Added(ix) check the actual implementation of projects using lump sums;

Added(x) report to the discharge authority:

Addeda. how many cases of suspected fraud have been referred by the competent Commission departments to the EDES panel, for what exclusion grounds, and how many of these cases have resulted in 1. an early detection decision, 2. an exclusion decision of the panel;

Addedb. for how long entities have been excluded from participation in Union funds;

Addedc. if any of the excluded entities has received Union funds after the exclusion decision had ended;

Cohesion, Resilience and Values

94. Notes that the budget for the programmes under MFF heading 2 ‘Cohesion, resilience and values’ was EUR 79,1 billion (40,4 % of the Union budget) distributed as follows: 53,6 % for the European Regional Development Fund (ERDF) and other regional operations, 23,6 % for the European Social Fund (ESF), 12,6 % for the Cohesion Fund (CF), 4,4 % for Erasmus+, 2,3 % for CEF Transport, 0,6 % for ESI and 2,9 % for other areas; notes that as of 31 December 2022 the final adopted budget commitments appropriations were EUR 67 805,19 million and 98,29 % of them were implemented (EUR 66 644,24 million); notes further that the final adopted budget payment appropriations amounted to EUR 63 104,31 million and 99,86 % of them were implemented (EUR 63 054,76 million);

95. Notes that in 2022, the implementation of the cohesion policy under the 2014-2020 programming period continued and that for the 2021-2027 period, the Commission concluded the negotiations of all programmes and made only advance payments, which amounted to EUR 6,5 billion;

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Removed69. Takes note that the absorption rate for cohesion policy funds under the programming period 2014-2020 reached 79,2 % at the end of 2022 (86 % at the end of 2023, including newly added Recovery assistance for cohesion and the territories of Europe (REACT-EU) in 2021-2022), having a similar level at the same point in time as in the period 2007-2013; notes that the 2014-2020 programmes account for over 1 million projects and that so far, they have supported 2,4 million businesses, created 370 000 new jobs, increased the energy performance of more than 540 000 households, created 6 000 megawatts of new renewable energy sources and that 6,3 million households benefited from broadband;

Added96. Recalls that spending under the subheading “Economic, social and territorial cohesion” (Subheading 2a) focuses on reducing development disparities between the different Member States and regions of the Union; stresses the importance of Union cohesion policy in supporting the implementation of the European Pillar of Social Rights and achieving its headline targets and assisting Member States and regions to harness new opportunities and address challenges, such as globalisation, unemployment, poverty and social exclusion, industrial change, digitalisation and supporting up and re-skilling and lifelong learning;

Added97. Recalls the Court’s Special Report 27/2021 “EU Support to tourism – Need for a fresh strategic orientation and a better funding approach”; recalls the Court’s recommendation to the Commission to set out a consolidated new strategy for the Union’s tourism ecosystem in cooperation with the Member States in order to develop an effective tourism agenda for 2030 and to apply selection procedures for ERDF-funded tourism investments to support this new strategic orientation; underlines the Commission’s responsibility to support the Member States in promoting tourism-related investments, in accordance with the strategic agenda;

Added98. Notes that the absorption rate for cohesion policy funds under the programming period 2014-2020 reached 79,2 % at the end of 2022 (86 % at the end of 2023, including newly added Recovery assistance for cohesion and the territories of Europe (REACT-EU) in 2021-2022), having a similar level at the same point in time as in the period 2007-2013; is concerned that this level of absoption was only achieved through a temporary 100% Union co-financing rate waiving any requirement for national co-financing of projects that have been a long-established principle of Union finances; notes that the 2014-2020 programmes account for over 1 million projects and that so far, they have supported 2,4 million businesses, created 370 000 new jobs, increased the energy performance of more than 540 000 households, created 6 000 megawatts of new renewable energy sources and that 6,3 million households benefited from broadband; notes that absorption in 2022 improved for a large part because of CRII, CRII+, CARE, and FAST-CARE for the purpose of crisis response, diminishing projects to support the structural cohesion objectives of creating convergence and cohesion in the Union;

Added99. Welcomes the financial flexibility available in the use of cohesion funds and underlines that, thanks to this flexibility, cohesion policy played a frontline role in addressing the COVID-19 crisis, the war-related emergencies, as well as the energy crisis; reminds, however, that the rationale of this policy is to ensure a long-term planning of measures that should strengthen economic, social, and territorial cohesion between European regions; believes that post-2027 cohesion policy must provide the flexibility needed in the use of funds to enable the Member States and regional and local authorities to steer resources in an appropriate and reliable manner, always in line with cohesion policy long-term objectives;

100. Notes further that, in 2022, Cohesion's Action for Refugees in Europe (CARE) and the Flexible Assistance to Territories (FAST-CARE) mobilised over EUR 1,3 billion to help Member States and regions to support millions of Ukrainian refugees seeking shelter in Union territory, including mainstream social integration programmes, healthcare, food or essential assistance, and orientation for the job market; welcomes that the proposed measures are subject to the same obligations regarding adequate management and control systems and sound financial management that apply to cohesion policy funds;

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Changed71.101. Notes that the Court has examined a sample of 260 transactions covering the full range of spending under MFF Heading 2; notes with concern that the Court’s estimated overall level of error in ‘Cohesion, resilience and values’ in 2022 wasincreased to 6,4 %, which is significantly above the materiality threshold;threshold, having already taken into account corrections with a total value of EUR 618 million applied by Member States in 2022; draws attention to the marked increase in the overall level of error estimated by the Court in 2022 compared to previous years (3,6 % in 2021, 3,5 % in 2020) while the CommissionCommission’s estimates of the payment risk for 2022 to beis between 1,9 % and 2,7 %, remaining stable comparedsimilar to previous years (1,9 %-2,5 % in 2021, 2,1 %-2,6 % in 2020); draws attention to the Court’s report that a significant part of errors (3 % out of 6,4 %) were made in expenditure originating from CRII and CRII+;