16. We have given further
consideration to the following on the basis of further information
from the Government. We maintain our opinion[47]
that they raise questions of political importance, but now make
no recommendation for their further consideration:-
H M TREASURY
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(17371)
8793/96
SEC(96)1131
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Commission Report on Community budget guarantees in respect of European Investment Bank (EIB) lending outside the Community.
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(17719)
COM(96)586
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Draft Decision granting a Community guarantee to the European Investment Bank against losses under loans for projects outside the Community.
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Legal base:
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(i) -
(ii) Article 235; unanimity.
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Background
16.1 We last reported
on these documents on 11 December. The Government had expressed
misgivings, but we noted that neither the Chancellor of the Exchequer
(who had written to us on the first proposal) nor the Economic
Secretary to the Treasury (in her Explanatory Memorandum on the
second) had explained whether the Government's concern was at
the overall level of EIB lending or at the level of potential
exposure of the Bank or the Community if the guarantee is set
at a particular level. We wrote to the Chancellor on this point.
The Chancellor's response
16.2 We have now received
a letter, dated 22 January, from the Chancellor (Mr Clarke) in
which he says:
"Your letter
explained that the Committee is unclear as to whether the Government
is concerned at the overall level of EIB lending or the level
of potential exposure of the Bank or the Community if the guarantee
is set at a particular level.
"The answer
is that our negotiating position has been coloured by our concern
about both these points, which are closely linked. Recent years
have seen an inexorable rise in the level of EIB external lending.
This increases the risk borne by the Community Budget (or the
Member States, in the case of lending to the ACP countries).
The guarantees provided by the Budget are 'global' - ie they apply
to entire mandates not to each particular loan. So reducing the
guarantee level from 100% to 65-75%, as now proposed, would in
practice not reduce the risks faced by the Budget, since it is
inconceivable that over 65-75% of the lending would be subject
to default. Lowering the guarantee level on this basis, therefore,
simply permits more lending. That is why we have argued that
any reduction in the guarantee level should be accompanied by
a reduction in the risk falling on the Community Budget. We have
now secured a useful step in this direction by getting agreement
that the EIB should aim to find alternative sources of guarantee
for the commercial risks on 25% of its external lending."
Conclusions
16.3 We are grateful
to the Chancellor for his response. Although we still regard
these proposals as raising matters of political importance, we
now see no need to recommend a debate and clear the document.
47 (17371) 8693/96 and (17719)-; see HC 36-vii (1996-97), paragraph 4 (11 December 1996). Back
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