20 Investment in Trans-European Networks
and major R&D projects
| (24926)
13108/03
COM(03) 579
| Communication from the Commission: A European initiative for Growth: Investing in networks and knowledge for growth and employment. Interim Report to the European Council.
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| Legal base | — |
| Document originated | 1 October 2003
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| Deposited in Parliament | 7 October 2003
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| Department | HM Treasury |
| Basis of consideration | EM of 31 October 2003
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| Previous Committee Report | None; but see (24753) 11343/03: HC 63-xxxii (2002-03), paragraph 27 (17 September 2003)
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| To be discussed in Council | 25 November 2003
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
20.1 In September 2003 we considered a Commission Communication
of July 2003: "An initiative for growth: investing in Trans
European Networks and major R&D projects".[43]
The Communication was in response to an Italian Presidency request
to the Commission and the European Investment Bank (EIB), endorsed
by the ECOFIN Council following the Thessaloniki European Council
in June 2003, to assess and report on promoting and supporting
growth. In clearing the Communication we said "This document
opens up important issues in relation both to the general objective
of promoting growth and to the levels of investment in TENs[44]
and R&D. We commend the Government's cautious but constructive
approach to the issues."
The document
20.2 ECOFIN asked the Commission and the EIB to produce further
proposals which the Economic and Financial Committee (EFC) would
assess in advance of the 7 0ctober 2003 ECOFIN and the 16-17 October
2003 European Council.
20.3 This document is an interim report and the response
to the ECOFIN request, in which the Commission puts its case for
focussing on gaps in Europe's physical networks and knowledge
and boosting private investment in support of both. The report:
- recalls the scope, scale and
potential impact of the investment required;
- reports on progress seen on individual actions
outlined in the July 2003 paper;
- sets out recommendations for the 16-17 October
European Council.
20.4 In the event, the document was published too
late to be assessed by the EFC for the 7 October ECOFIN. But the
principles in it were endorsed by the European Council, with a
request for the matters to be carried forward. The Commission
and the EIB are preparing a further report for the EFC before
the ECOFIN of 25 November 2003.
The Government's view
20.5 Although the document is to a degree overtaken,
the Financial Secretary to the Treasury (Ruth Kelly) gives us
a helpful commentary on it. She says:
General
"The 16-17 October European Council endorsed
the principles of the Initiative for Growth and invited the Commission
and other relevant actors to take it forward along the lines set
out in the Council Conclusions. The UK will assess the Commission's
further proposals in light of the parameters set by the European
Council.
Detail
"Funding from the EC's TENs [Trans-European
Networks] budget is intended to be catalytic and is at present
usually limited to 10% of the total cost of the project or 50%
in the case of a study. The Commission has proposed an increase
in the intervention rate for TEN-Ts [the Transport TEN] from 10%
to 30%.[45] It has also
submitted a similar proposal to increase Community funding for
TEN telecommunication projects (e-TENs) from 10% to 20%. However,
it does not foresee an overall increase in the budget envelope
for any of the TEN networks between now and 2006. In order to
make available the higher level of funding to TEN-T projects the
Commission acknowledges that there would need to be fewer but
higher impact projects in the immediate future.
"The UK is not convinced that an increase in
the intervention rate for TEN-Ts to 30% can be justified when,
to date, few if any projects have received even the current maximum
of 10%. Moreover, we believe that the delays to the completion
of the TEN-Ts are due in the first instance to bad planning, design
and management of projects and are not solely down to financing
difficulties. Increasing the intervention rate in these circumstances
simply ignores these problems.
"The Commission considers the budgetary impact
of increasing the intervention rate from 10% to 30% for the identified
priority TEN-T projects over the period 2007-2013 to be modest.
However, the UK is concerned that the cost could exceed the average
annual transport expenditure budget of the TENs under the current
financial perspective, giving fresh impetus to fears that the
Commission is paving the way for a significant increase [in] the
overall TENs budget in the next Financial Perspective running
from 2007.
"Increasing the intervention rate to 30% will
therefore reduce the number of projects that can be supported;
creating a real danger that limited Community resources will be
focused narrowly on projects with limited financial and economic
viability but with high prestige value, instead of on more viable
projects that would have wider EU benefits. They are likely to
be projects that are less attractive to private finance, and which
are therefore less consistent with the purpose of TENs financing.
"As recognised in the communication, there is
a wide range of ongoing EU activity to increase the impact of
R&D in support of competitiveness and growth. The UK is keen
to ensure that any follow-up to the communication builds on this
existing activity, within budgetary ceilings.
"The Commission's promised Green Paper on PPPs
[public-private partnerships] has not yet been published. However,
we would welcome reform of regulatory aspects of PPPs that would
make the use of private finance easier where it would bring benefits
to trans-national infrastructure projects. But we would be concerned
to see that any regulatory reform did not disrupt the procurement
process of existing national PPP programmes.
"The Government is also not convinced that the
Commission proposal for a new guarantee fund, financed by the
EU Budget, would be acceptable. The budget already shares the
risk associated with TENs projects by virtue of its contribution
to funding; a guarantee fund would substantially increase that
risk, and correspondingly reduce the risk borne by the private
sector and the relevant national authorities, which stand to gain
most from TENs projects. This might increase the likelihood that
uneconomic projects would be encouraged, increasing the costs
and reducing the benefits of transport TENs to EU taxpayers. Failing
to transfer the appropriate risks to the private sector would
also undermine the main benefit of public private partnerships
— better project performance stemming from arrangements
ensuring that risks are borne by those best placed to manage them."
Conclusion
20.6 We are grateful to the Minister for her detailed
commentary and note the Government's continued caution in relation
to the detail of the proposals. We are content to clear this document,
but will want to consider carefully the next Commission Communication
in this series when it emerges.
43 See headnote. Back
44
Trans-European Networks. Back
45
See (24941) 13297/03, (24970) 13244/03: HC 63-xxxvi (2002-03),
paragraph 3 (5 November 2003) and Official Report, European
Standing Committee A, 11 November 2003. Back
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