European Standing Committee A
Wednesday 28 March 2001
[Mr. Nicholas Winterton in the Chair]
Olive Oil
[Relevant Documents: European Union Document No. 9431/00, Special Report No. 11/2000 of the Court of Auditors on the support scheme for olive oil and European Union Document No. 5213/01, a Commission report on the quality strategy for olive oil and a draft Council regulation relating to the aid scheme and the quality strategy for olive oil.]
10.30 am
The Minister of State, Ministry of Agriculture, Fisheries and Food (Ms Joyce Quin): This issue is complex and refers to an area of the common agricultural policy of which the United Kingdom does not have direct experience; we do not have olive oil producers and do not operate an olive oil regime. However, proposals have been made for reform of the sector and we take a keen interest in reform of all CAP issues. The Committee's views on the shape of the regime will be helpful to the Government in approaching those opportunities in future.
The Committee wanted the opportunity to debate the Court of Auditors' special report on the support scheme for olive oil, and I understand that desire because the report paints an unfortunate picture of irregularities and lack of financial controls in the olive oil sector. However, the report covers the aid scheme prior to the 1998 reform of the regime and concentrates on two elements that were particularly prone to irregularities and fraud: consumption aid and export refunds. The interim reform of the olive oil regime, which was agreed under the United Kingdom presidency in 1998, discontinued the consumption aid scheme from 1 November that year. That reform retained export refunds in theory, but the Committee will be interested to know that for more than two years the Commission has pursued a policy of setting them at zero, on the basis that exports have been taking place without export refunds. Indeed, exports are at record levels, so the re-introduction of export refunds, which have caused problems, is now looking less and less likely.
The 1998 reform also introduced single flat rate production aid, which was set for three years, national guaranteed quantity allocations, an enhanced private storage aid system to replace intervention, and the important requirement for a geographic information system--GIS--to replace the olive cultivation register. It also restricted eligibility to claim aid on new trees and charged the Commission with presenting fundamental reform proposals by the end of 2000. The reform was a transitional measure and reflected the Council of Ministers' wish to focus checks on production aid, with olive mills seen as the essential link in the production chain and therefore an important element to target in terms of financial controls.
The 1998 reforms originated in an options paper introduced for discussion by the European Commission. Among other things, the paper suggested two alternatives for producer aid. Those were either to continue to pay the aid according to the tonnage of olive oil produced, or to start paying it according to the number or area of productive olive trees cultivated by a producer. The Commission noted that either system would require rigorous checks, and proposed that it should be linked to a new GIS-based register. The Commission did not consider that it was in a position yet to decide between the two alternatives. It therefore proposed that the interim regime should apply for three years and that, during that period, GIS-based registers should be introduced.
The 1998 reform package required the Commission to produce a report on further reform of the olive oil regime by the end of 2000, with proposals for the regime that should apply from November 2001. The intention was that the Council would make a definitive decision on whether production aid should be paid on the basis of tonnage or of number of trees. The Commission report is in Council document 5213/01, which is one of the documents marked relevant to this debate.
Although the report contains a useful analysis of the workings of the interim regime, the Commission has concluded that it does not yet have sufficient information to decide between the two alternative options. It has, therefore, proposed that the interim regime should be extended for a further two years. Although the Government are disappointed at that outcome, we accept the reasons behind the extension. We look forward to more far-reaching reform from 1 November 2003, and will vigorously oppose any requests for a longer extension of the current arrangements.
There is, however, one element of the Commission proposals that we particularly welcome. The Commission has proposed that, from November 2003, the Council should adopt a provision limiting production aid to olive oil produced from trees covered by an operational olive cultivation GIS. We strongly support the proposal that the Council and all member states should commit themselves to linking producer aid under the new regime to GIS-based controls. We see GIS as one of the cornerstones of control of the regime. It ties in with the Court of Auditors' report, which recognises that a satisfactory olive cultivation register is an essential tool for the effective enforcement of whatever system is chosen for the payment of aid. Frustration and lack of certainty surrounding the number of olive groves and olive trees have caused many of the problems that have been identified in previous reports.
The GIS controls will be based on new crop declarations and computerised processing of aerial photographs. The GIS has still not been completed by any member state. The proposed restriction of aid paid under the scheme is a strong incentive for renewed efforts to introduce the required GIS and to have it verified. Italy, Spain, France and Portugal now expect to have GIS in place this year. Greece is making efforts to beat the November 2003 deadline. Currently, if a particular GIS is not fully operational, member states are required to make on-the-spot inspections of up to 10 per cent. of all crop declarations.
I hope that I do not need to remind the Committee of the Government's desire that all possible measures are taken to eliminate fraud in the olive oil regime. That desire is shared by the Commission and other member states. I assure the Committee that great efforts are being made to combat fraud in this sector. The 1998 transitional reform brought an end to consumption aid, which was shown to be ripe for large scale, organised fraud. Control measures have concentrated on checks at mills since the reform, and 30 per cent. of mills are inspected every year. That is a very high proportion given that there are nearly 12,000 mills, and shows the considerable efforts made to eliminate fraud.
Since the end of last year, when the Committee expressed interest in debating the Court of Auditors' report, discussions have been progressing in the Commission on further ways of strengthening controls in the sector. That is in direct response to the Court of Auditors' report and with the knowledge gained from two years' working experience of the control measures introduced by the 1998 reform. The Commission's ideas on strengthening controls were discussed in the EU experts group on olive oil. Those discussions culminated in a proposal for adjustments to the current control system and the introduction of supplementary measures to apply from this marketing year.
A proposal to amend the detailed rules for the application of the system of production aid was agreed on 14 March. The new system will improve fraud control in the sector in several ways. Infringements leading to enforcement of special control arrangements for mills have been clarified. Olive oil mills suspected of committing fraud will now be required to submit information on their milling activities on a daily basis. That is an onerous requirement, but deliberately so. The rationale for it is that daily transmission of figures to the Commission makes it much more difficult for mill operators to submit false returns or claim production aid to which they are not entitled. The Commission is determined to take an all-or-nothing approach to prove whether a mill is trying to massage its returns, and to reduce and discourage fraud.
The new regulation also sets out the criteria requiring individual member states to take steps to penalise infringements of the aid regime. It provides definitions to ensure standardised implementation of the rules by member states and for advance payments of aid to be deferred to allow additional checks on mills under suspicion of fraudulent activity. All those provisions are steps in the right direction.
There is also the important question of recovery action by member states. The Court of Auditors commented on the incompleteness of data on the amounts to be recovered, and delays in the recovery procedure for consumption aid. Ministry of Agriculture, Fisheries and Food officials asked the Commission's European Agricultural Guidance and Guarantee Fund clearance of accounts service about progress in that area. They were advised that member states now provide the Commission with details of their debtors' registers every six months. From the EAGGF financial year 2000, those registers are also subject to audit by the certifying bodies of each paying agency.
The message from all that activity is that significant efforts are being made towards improving clearance of accounts. That started in 1995 with the introduction of formally accredited paying agencies. The inquiry into the management of debts continues in the current year, with follow-up of paying agencies already visited and audits at several other paying agencies.
The Committee is to be asked to support the Government's objective of pressing for further reform of the olive oil regime to reduce its cost, complexity and opportunity for fraud. The developments that I have described will certainly contribute to that, but there is still a long way to go before we can declare a satisfactory state in the sector. We will therefore continue to take every opportunity to urge the Commission and other member states to adopt further reform measures.
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