Philip Hammond is to guarantee billions of pounds of UK government investment after Brexit for projects currently funded by the EU, including science grants and agricultural subsidies.
The chancellor’s funding commitment is designed to give a boost to the economy in what he expects to be a difficult period after the surprise result of the EU referendum in June.
The Treasury is expected to continue its funding beyond the UK’s departure from the EU for all structural and investment fund projects, as long as they are agreed before the autumn statement. If a project obtains EU funding after that, an assessment process by the Treasury will determine whether funding should be guaranteed by the UK government post-Brexit.
Current levels of agriculture funding will also be guaranteed until 2020, when the Treasury says there will be a “transition to new domestic arrangements”.
Universities and researchers will have funds guaranteed for research bids made directly to the European commission, including bids to the EU’s Horizon 2020 programme, an €80bn (£69bn) pot for science and innovation. The Treasury says it will underwrite the funding awards, even when projects continue post-Brexit.
Hammond said the government recognised the need to assuage fears in industry and in the science and research sectors that funding would be dramatically reduced post-Brexit.
“We recognise that many organisations across the UK which are in receipt of EU funding, or expect to start receiving funding, want reassurance about the flow of funding they will receive,” he said. “The government will also match the current level of agricultural funding until 2020, providing certainty to our agricultural community, who play a vital role in our country.”
The chancellor added: “We are determined to ensure that people have stability and certainty in the period leading up to our departure from the EU and that we use the opportunities that departure presents to determine our own priorities.”
One key funding pot that it had been claimed was at risk was the EU Peace programme in Northern Ireland, a community development project to help victims of the conflict.
The pledge to fund EU programmes in the UK until 2020 was made during the referendum campaign by senior figures in the leave camp, including Boris Johnson and Michael Gove. However, academics have said that EU programmes for research have benefits that go beyond funding, including international collaboration opportunities and mobility for researchers.
According to the Treasury, EU funding for a range of projects amounted to more than £4.5bn in 2014-15, with businesses and universities winning a further £1.5bn through competitive bids.
During the referendum campaign, concerns were raised that the government would be unable or unwilling to compensate bodies for the loss of money from Brussels when Britain eventually leaves the EU. Hammond’s spending pledge is an attempt to allay those fears and at the same time head off the threat of recession.
Hammond’s commitment comes after Liam Fox’s Department for International Trade was forced to delete a confusing statement posted on its website, which appeared to announce that the UK would continue to trade with the EU under World Trade Organisation rules post-Brexit “until any new trade deals are negotiated”.
Businesses have previously warned that trading under WTO rules would be disastrous, meaning the imposition of steep tariffs on goods exported to the EU, including 10% on cars and 12% on clothing.
Chuka Umunna, the Labour MP who chairs the Vote Leave Watch campaign group, said being forced to trade under WTO rules would be “a hammer blow for the British economy, and would demonstrate once and for all the hollow nature of Vote Leave’s promises”. The department said the post had been issued in error.
The Treasury is keen to support the Bank of England in its attempts to stimulate activity and the chancellor has already said he will “reset” fiscal policy – taxation and public spending – in his autumn statement if he deems it necessary.
Hammond hopes that the guarantee to continue funding EU-backed projects will ensure a flurry of activity over the coming months, thus providing a boost to both demand and confidence. The government is also aware that much of the EU money spent in Britain goes to help poorer parts of the country, which voted for Brexit in the referendum.
Treasury policy has shifted markedly since the period before the referendum, when then chancellor George Osborne warned that leaving the EU would lead to a recession that would force him to impose savings of £30bn in an emergency budget.
Since 23 June, the emergency budget has been ditched, plans to put the public finances into the black by the end of this parliament have been scrapped, and hints have been dropped of higher spending on infrastructure to be announced in the autumn statement.
British scientists receive around £1bn annually from the EU, including through Horizon 2020. In leaving the EU, British access to those funds will be a matter for debate.
Already the ramifications of the Brexit vote have been felt. Jo Johnson, minister of state for universities and science, told scientists in June that “the referendum result has no immediate effect on those applying to or participating in Horizon 2020. UK researchers and businesses can continue to apply to the programme in the usual way.”
However, those in British academic institutions paint a very different picture. Since Britain voted to leave the EU, a number of scientists have revealed that they have been asked to leave existing collaborations for fear that the British share of project funding was at risk, while others say they have been excluded from taking part in new bids.
Andrew Graham, co-founder of OC Robotics in Bristol, said the news would be a huge reassurance to European colleagues and partners in consortia bidding for European commission funding that having a UK partner in those projects would not be a risk to the project.
“I and my colleagues have been campaigning hard for an assurance like that,” he said. “There have been some instances of clear reluctance on the part of some partners in those consortia – this should do a great deal to allay any fears they have about what having a UK partner means for the project. It’s fantastic news for a great many small and medium-sized enterprises and academic institutions across the country.”
Alistair Jarvis, deputy chief executive of Universities UK, said the pledge would offer “much-needed stability for British universities during the transition period as the UK exits the EU, and provide an important signal to European researchers that they can continue to collaborate with their UK colleagues as they have before”.
Jarvis added that the next stage would be to address the uncertainty faced by EU students considering applying to British universities. He said the government needed to “confirm that those beginning courses before we exit the EU will be subject to current fees levels and financial support arrangements for the duration of their course”.