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Oral evidence Taken before the European Scrutiny Committee on Wednesday 19 November 2003 Members present: Mr Richard Bacon
In the absence of the Chairman, Mr Jim Marshall was called to the Chair. __________
Witnesses: MR MICHEL SERVOZ, Head of Strategic Planning and Co-ordination Unit, and MR PETER HANDLEY, Principal Administrator, Strategic Planning and Co-ordination Unit, Secretariat General of the European Commission, examined.
Q1 Mr Marshall: May I welcome Mr Servoz and Mr Handley to the Committee meeting? I understand that you were both before a select committee in the House of Lords this morning, so you are probably feeling a little fatigued. I hope that you are not too tired and will be able to give your full attention to the meeting this afternoon. The clerk assures me that, whilst the themes of some of the questions may be the same as you were asked this morning, many of the specific questions that we will be putting to you will be different. I hope that with both Houses combined we can cover a wide area of the work. When you were here last year, Mr Servoz, you will recall that Mr Connarty took the Chair on that occasion. Our Chairman, Mr Hood, was away, attending a conference. I do not know whether it is the fear of your presence at this Committee meeting, but he is ill today and therefore not able to be here. That is the reason why I am taking the Chair. On his behalf as well as the Committee's behalf, may I welcome you both to this meeting. Moving straight on to the business, we understand that the Commission presented its Annual Policy Strategy to the European Parliament and to the Council in March, and that a "structured dialogue" took place in the following months. I wonder if you could indicate to the Committee what were the main changes made to the programme following the dialogue with those other institutions? Mr Servoz: The presentation of the Work Programme was done yesterday in Strasbourg by President Prodi, and the reception by Parliament and Council was positive. I should say first, therefore, that the timing of this hearing this afternoon is very good. It is just one day after the presentation in Strasbourg. You ask the question what has changed since the Annual Policy Strategy. I would like to stress a number of facts which affect 2004 and which have led to the Commission modifying the APS a little when preparing the Work Programme. These facts are as follows. 2004 is a special year for the European institutions for the following reasons. First, we have the accession of 10 new Member States on 1 May 2004. Second, the Commission is going to change greatly in 2004. On 1 May 2004 the Commission will have 30 Commissioners, 10 Commissioners from the new Member States, for six months and then, on 1 November, the Commission will change again to become a Commission of 25 members. Finally, the European Parliament will be renewed in 2004. For all these reasons, therefore, this is a special year, a year of transition. President Prodi indicated yesterday that, in these circumstances, he wanted to present a Work Programme which was well focused, which would concentrate only on the priorities. May I briefly point out some of the differences in substance? The first priority is the same. It is accession of the 10 Member States. There was no reason to change that. The second priority remains the same: security and stability, with a focus on what the President called "the circle of friendly countries", which is the circle of countries beyond the enlargement countries. Finally - and this is maybe where there is a change which is worth noting - the Commission has decided to put the focus on what it has called sustainable growth. This is linked to something which I am sure you are familiar with - the growth initiative. In the present circumstances, the Commission wants to focus in 2004 on growth, which it thinks is really the most important issue it will have to tackle in 2004. In a few words, these are the main elements of the Work Programme and, with my colleague, I will present more detail when answering your questions.
Q2 Mr Connarty: Having chaired the meeting last year, I remember re-reading the comments. You explained that you were changing from a legislative programme to more of a general policy statement. My concern is that, over this year, something which I certainly did not know was going to be on the agenda has caused a great deal of concern - as an example, the attempt to do away with hallmarking. It appears to me that, because you did not have a stated legislative programme, it is not flagged up for anyone to know that there would be such a sustained attempt to change something in the economic field which may be very damaging to the consumers of this country. Are you still happy that, in not giving people an indication of a legislative programme, you have not damaged the reputation of the process? People are certainly saying to me that here is a very important item for this country which has been sprung on the process in Europe over the last year, and which was not flagged up in any way in the Work Programme that you talked about last year when you were here. Mr Servoz: I am not sure that I caught the exact title of the proposal.
Q3 Mr Connarty: It was a proposal to cease using hallmarking and to bring in a new system of guarantees for gold and silver products within the European Union, which seems to have been taking a lot of energy over the last five or six months and causing a great deal of concern. What my constituents and what the industry say to me is, "I thought you discussed the Work Programme with the Commission last year. Why didn't you know that they were going to try to do this?". Mr Servoz: To be honest, I am not familiar with this particular proposal. Maybe I should get back to you in writing on this.
Q4 Mr Connarty: It has been in the news for six months. I am surprised that you have not heard it. Mr Handley: The answer is perhaps a more structural answer, in the following way. When the Commission adopts its Legislative and Work Programme for the following calendar year, it already knows precisely what it is going to do in relation to the political priorities that have been identified and agreed with the other institutions, and it provides as best a guess as it can at that stage - so October before the year in question actually starts - of what it intends to bring forward in the course of the following year. This means that it cannot know everything that is going to be brought forward in the following year. There is always a number of proposals that are brought forward later. Often it can be in response to requests from the European Council or from the Council, so the Legislative and Work Programme is the best possible indication, three months before the year starts, of what the Commission is going to bring forward, but it cannot ever attempt to be totally comprehensive at that stage.
Q5 Mr Connarty: Returning to the general question, you gave evidence last year and you said that there would be opportunities for some people outwith the European institutions to influence the programme. You gave your evidence to us as an example, and the Lords' committee are very closely attached to the process of the European institutions. Have there been any opportunities for anyone outside our committees to influence the Work Programme this year? Can you give us examples of other organisations that may have influenced the programme that we are now looking at? Mr Servoz: No, I think that this is the only example. In fact, this is the only example of a national parliament which has contacted us and with which we have had hearings. Q6 Mr David: Could I ask a question about the process as well? In the communication, the Legislative and Work Programme, you state very clearly that the Commission has presented its Annual Policy Strategy; but you also refer to the fact that there is now to be a multi-annual strategic programme drawn up by the Council and presented to the Council in December of this year. I was wondering what the relationship is between the two. It seems to me that one is obviously drawn up by the Commission and the other is drawn up by the Council. We also know in general terms that the Council wants to exercise a more strategic role in terms of the development of the institutions as a whole. Does that in any way impede or restrict the ability of the Commission to initiate policies and legislative proposals? Mr Servoz: To reply to your question, I would say that the relation exists between the two but it must be improved. To be more precise, we have worked together with the Council to help them prepare the multi-annual programming that will be approved by the Council in December, and we worked actually with the six presidencies who are drafting this programme. The result has been an excellent collaboration between Commission and Council. Frankly, the draft we have seen recently shows that there is a great coincidence between the priorities that they have identified and the priorities that we have identified, but it is incomplete. Normally what should happen - and this is what is in the draft Treaty - is a programming which is done between the three institutions: Parliament, the Council and the Commission. This is the proposal which is in the draft Constitutional Treaty.
Q7 Mr David: You say there is a coincidence ---- Mr Servoz: The word is unfortunate, I admit.
Q8 Mr David: Everybody is pulling in the same direction. Supposing, however, there is a major, fundamental difference about what are indeed the priorities, say between the Council and the Commission. How is that resolved now, given that you have two parallel programmes developing? Mr Servoz: Legally speaking, you could argue that the Commission has the right of initiative, so it can put forward any proposal that it wishes. However, should it do so, should it simply ignore the message from the Council that a particular proposal will not be approved, would it make sense for the Commission to make a proposal, knowing in advance that the Council will reject it? I do not think so. This is why we have worked with the Council and we are hoping that, in the future, programming can be done within the three institutions.
Q9 Mr David: You mention the three institutions. Again, taking Mr Connarty's point, what about organisations and interests beyond the three institutions? Are their views taken into account in any way at all? Mr Servoz: That is not foreseen in the draft Treaty. However, the Commission is quite ready, for example, to include and involve national parliaments in the process - as our presence here shows.
Q10 Mr David: On that point, I would have thought it was very important, given that one of the key recommendations in the draft Treaty is greater involvement of national parliaments, particularly in terms of the Commission bringing forward to national parliaments its initial thoughts on draft regulations. Surely, if that is going to happen - and the likelihood is that it will - would it not therefore make sense to have national parliaments involved in the construction of your Work Programme? Mr Servoz: I think it does and, if my memory serves me well, COSAC has discussed this very issue for some time and they have not come out with a specific conclusion. Our position on the Commission is that basically we are open to proposals, and we would like to see some kind of consensus between national parliaments on this.
Q11 Mr Davis: Does the Commission publish any comparison of what has been done during a particular year with what was promised in the programme for that year? Mr Servoz: Yes, we do a comparison. Actually, we monitor the execution of the Work Programme during the year and at the end of the year. This is something we do more and more regularly. Initially, I would say that the monitoring was not done on a frequent basis but, as of this year, 2003, we are doing more regular monitoring.
Q12 Mr Davis: Is it published? I assume you do it, but do you publish it? Mr Servoz: It is published, in the sense that Mrs de Palacio made a presentation in July in the European Parliament. She made a mid-term review of the execution of the Work Programme, so it is public in that sense.
Q13 Mr Davis: That is the middle of the year. What about at the end of the year? Mr Servoz: At the end of the year, in his address to Parliament yesterday, President Prodi indicated to Parliament what was the state of execution of the Work Programme for this year.
Q14 Mr Davis: Do we, as a national parliament, get an opportunity to review it? Mr Servoz: Through the Work Programme, which is available to you and which you are going to scrutinise, you can have a clear indication of the state of execution of the Work Programme for 2003.
Q15 Mr Davis: Have I misunderstood something? I thought that this programme that I am looking at was all about what you promise to do in 2004. I am asking about what has been achieved during 2003. At what stage do we get a comparison of what you said you would do with what you have actually done? It is all promises, you see. Jam tomorrow. I want to look at what you have actually achieved. Mr Servoz: There are two documents in which you find some indications of the execution of the Work Programme. First, in the Work Programme for 2004 the Commission indicates some elements regarding the execution of the Work Programme for 2003. Second, every year the Commission adopts a synthesis report, which is a report based on the reports prepared by its services. In this report you have a detailed account of what has been achieved during the particular year. This synthesis is normally adopted by the Commission in May. So the synthesis for 2003 will be adopted in May 2004. Mr Davis: I look forward to reading it.
Q16 Mr Heathcoat-Amory: I am rather surprised that our visitors have apparently not even heard of the directive on hallmarking, mentioned by Mr Connarty. How do we expect the public to understand what is going on in the European Union when the Head of the Strategic Planning and Co-ordination Unit apparently has not even heard of it? This is perhaps symptomatic of a malaise in the entire system. This relates to my main question. We have always more initiatives, more draft directives, more ambitions, more expenditure, but we meet this afternoon, when the accounts of the European Union have been qualified for the ninth year running. If the European Union was a public company, the directors would probably be in prison by now, or disbarred from office. There is a major scandal over some of the programmes, particularly the Eurostat. Mr Servoz did not mention quality of delivery or budgetary rigour in his priorities, but I think that this is really what the public expect. You will be spending more money next year with enlargement. There will be an expansion of your activities. My question is this. Why do you not give more priority to proper and effective delivery of perhaps a more modest programme before you bid for even more expenditure and wider activities? Mr Servoz: First of all, regarding hallmarking - I am sorry, it is probably simply due to the fact that my briefing notes did not contain some lines regarding this particular proposal. I have offered to provide you with some written information. It is simply due to the lack of preparation on my side on this particular issue. On the budget and Eurostat, you are quite right that there is an issue here which is quite important. I would like to point out that President Prodi went out of his way to address Parliament yesterday, in quite a long and in-depth way, to show to Parliament how seriously he takes the matter. I think that the decisions that the Commission and the President of the Commission have taken recently show that the matter is taken seriously - although in fact most of this is an historical matter, in the sense that the problem arose in a period before this Commission. Nevertheless, the President has taken it very seriously. A number of disciplinary decisions have been made, or a number of disciplinary procedures are under examination. Second, the President has indicated that an action plan will be presented which contains a number of decisive elements to prevent the recurrence of problems like the Eurostat case. I want to stress that the President has taken the matter extremely seriously. Concerning the budget, you asked how we can be sure that the Commission is taking things seriously and making a good case for the budget and the expenditure it wants to make. Here I would mention the proposal that the Commission will be making on Financial Perspectives. In a few weeks, the Commission will present the Political Framework that it wants to propose for the years 2006 to 2013. This is not only asking for more money to spend; it is also a political project. In fact, before a political project, one where the Commission will present its priorities for the future, the instruments it proposes to use to deliver, and the expenditure envelopes that it proposes for that. This proposal will be made by the Commission in a few weeks' time. This is something on which Parliament, Council and national parliaments have the decisive power.
Q17 Mr Tynan: I want to press you on the issue of outside bodies having influence as regards the programme. It has been raised by two of my colleagues. It would be interesting to hear your views as to whether any outside body should have the opportunity to look at the programme, to make suggestions for change and to develop different avenues regarding the direction of that programme. Do you believe that would be a useful mechanism? Often people feel that the European Parliament is remote; that the Commission does not apply to them. Under the circumstances, the intention was to bring the European Parliament and the Commission closer to the people of Europe. I think that the opportunity to be involved with the programme would be an essential opportunity. Could I have your views on that? Mr Servoz: I presume that I have to speak in a personal capacity. If I speak very openly, I would say the following. In institutional terms, the Work Programme is prepared by the Commission alone. It is then presented to Parliament and then to the Council, and Parliament and Council may react. The situation which has been created by the Seville European Council is one where there is an evolution towards EU institutional programming. In fact, it is a system where eventually the three institutions will try together to identify the priorities and specific initiatives. Unfortunately, in this system, in the preparation of this programming, there is no legal organisation to take on board the national parliaments and outside bodies. However, the Commission has shown its openness, on an informal basis, to taking on board all the opinions and advice which it can receive. That is why in this respect we welcome advice given by outside bodies before the preparation of the Work Programmes. That is to say, in the period between the adoption of APS and the Work Programme.
Q18 Mr Cash: I would like to make a quick observation on hallmarking. It is not just the question of whether or not you knew: it is the fact that it does have a very substantial impact on what is historically, in our terms, a hallmarking system to maintain the level and quality of precious metals in a way that guarantees their quality. It is therefore an important matter and it is being taken very seriously here. On the question which you answered with regard to the Court of Auditors, I have been pursuing this one way and another for 15 years now and I want to ask you a very simple question. Do you believe that it is possible, as I would like, to have the accounts of the Commission or of the Union vetted, with a lock on it, by the equivalent of a public accounts committee such as we have here in the United Kingdom? The Court of Auditors does a good job, but do you not agree that actually these matters will only be properly looked into when, at a domestic level, there is access to those accounts in the hands of, say, a public accounts committee? Mr Servoz: There is a procedure which is called the discharge procedure, which is organised by Parliament. The accounts of the Commission are presented to Parliament and then there is a procedure where the COCOBU examines these accounts and then, eventually, at the end of the process gives discharge to the Commission - of course always accompanying this discharge with comments and recommendations for improvement. I hasten to say that these recommendations are of course followed up by the Commission.
Q19 Mr Bacon: You have just said something which I would like to follow up directly. I have read the Court of Auditors' reports, and the National Audit Office reports that we carry out here on the Court of Auditors' reports each year. I think that to say that they are "of course followed up" is simply wrong. Every year one hears something along the lines of what you have said - that Mr Prodi is taking it seriously - and every year there is another report with another qualification. You have said that the matters under discussion related to a period before the present Commission. May I remind you that Marta Andreasen was appointed in order to sort out those problems. When she identified such problems, what was the response of the Commission? Was she held up as an example of a fine public servant? No. She was told, when she refused to sign the accounts because they were dodgy, "Sign them. That's why you are paid a high salary", and then she was disciplined. Why should we believe your statement that Mr Prodi is taking it seriously when, for the last nine years since 1994 when this system was introduced, the same has recurred? When you got in an accounting officer - that was her job title - to sort it out, and she identified problems, she was hauled over the coals? Why should we believe you? Mr Servoz: You should believe me because, first of all, the European Court of Auditors, this year and the previous year, has noted an improvement in the management of the Commission. We were very pleased in the Commission to note, for the first time in many years, positive remarks from the Court of Auditors. These remarks were in particular on the transparency and the accountability of the Commission regarding its management. I am not saying that things are perfect: far from it. We have to improve, and we know it. The President has said that very clearly. However, I think there is improvement; it has been noted, and I think that the improvement is quite substantial. If I may, I would prefer not to make any comment on the special case of Mrs Andreasen. Mr Marshall: Could we move on to the problems arising from accession?
Q20 Angus Robertson: Moving on to issues relating to accession, when you gave evidence to the Committee previously the Committee discussed the increase in staffing which would be required by European Union institutions following accession. You identified the particular problem posed by translation. Will there be adequate provision for the necessary translation by May 2004? Mr Servoz: Yes, we are working on that. We are discussing with Parliament and with the Council the size of the human resources increase that we have requested. We hope that this request will be granted. This would allow us to have the full linguistic capacity on 1 May 2004, which means catching up with the 19 or 20 languages that we will have to deal with on 1 May.
Q21 Angus Robertson: That is a very positive response. May I ask you a wider question about accession? There is a lot of focus on the 10 accession states, but there is a wider European dimension to things. I recently returned from the three Caucasus republics, where there is very significant disappointment across the political spectrum, amongst all the political parties, that those three republics have not been included in the near-neighbourhood policy of the European Union. Bearing in mind the difficulties in transition to democracy there, does the Commission not believe that there is a positive role that the EU can play in the future in helping those countries which are our near neighbours? Mr Servoz: The Wider Europe Initiative is an initiative which concerns all our neighbours, but not necessarily the countries which are just beyond the accession countries. It is a policy which is wider and which should also concern the Caucasus countries. This policy, as you know, is one of the President's most important projects. His idea is that eventually we should move forward to a Single Market with all these countries. He even says that we should go forward to seeing a system which would contain everything but the institutions. That is clearly an ultimate objective, but this is just to indicate the direction in which the Commission would like to move forward.
Q22 Mr David: Could I also ask you about the enlargement process because, as you have identified, it is one of the main priorities for next year? The other day this Committee received a communication from the Commission which was an analysis of the preparedness of the accession countries. I think that it is true to say that it provided quite surprising reading. Frankly, the amount of work that still remains to be done by most of the accession countries is quite alarming. I am also aware that the Commission has responded by saying that you will take action to ensure that things improve quickly and dramatically. Could you give us an indication of what exactly the Commission is planning to do and what is the timescale for this? Mr Handley: The Commission produced on 5 November its comprehensive monitoring report on the 10 Member States joining the Union next May. On the whole, the report was positive because it said that all 10 candidate countries have made substantial progress in applying the 29 chapters of the acquis. In every candidate country there is a problem area. That is without exception. By and large, however, the problems are containable. The conclusion drawn by Commissioner Verheugen, who is responsible for enlargement, is that these problems can be addressed and all of the new Member Stages should be in a position to apply the acquis correctly from 1 May next year. That is just to put the inevitable areas of concern into some kind of overall perspective. The Commission is confident that things will all work correctly in an enlarged EU from next year. Have I answered your question?
Q23 Mr David: No. You began to answer it. As you said, there are areas in each Member State where there need to be improvements. What do you intend to do to ensure that there are improvements and what is the timescale for that? Mr Handley: We have been monitoring the progress of the candidate countries consistently ever since the negotiations were completed. We are providing substantial amounts of technical assistance to them all, through the PHARE, SAPARD and ISPA programmes. We are working with them to develop their administrative capacity to be responsible for spending Community programmes, like on agricultural structural funds, from the time that they become Members of the Union. There is also the possibility that the Union can apply safeguard measures for up to three years, if there are problems of disturbance to the Single Market in the first period after these countries form the Community. So we will be continuing to monitor developments very closely and we do have some sanctions available, if needed.
Q24 Mr David: Could I press you on that? You mention sanctions. What sanctions? Mr Handley: Safeguards, commercial measures. They may not be allowed to access the rest of the Union market if, for example, they are not up to scratch with certain standards or controls.
Q25 Mr David: Could I pursue that a little more? This is a huge area of critical importance to the future of the European Union. You mentioned a little while back that you were confident that every one of the accession states should be able to comply with the acquis communautaire. What happens if they do not? The logic of that, therefore, is putting in question whether or not they actually will be able to join next year, is it not? Mr Handley: No, it is really a question of saying that, after next May, they are in the same position as any existing EU Member State, which is that they are expected to comply with Community legislation and they will be dealt with through procedures that are in place if they do not apply Community law correctly. It applies equally to the UK, or to Germany, or to France, as it would in future to Poland or the other new Member States.
Q26 Mr Marshall: Effectively, it is those countries which fail to comply with the Stability Pact, is it? Mr Servoz: I think that it is a slightly different issue. You are talking about infringement procedures for not respecting, for example, veterinary standards or things like that.
Q27 Mr Cash: It is very interesting territory. What you are really describing in relation to the acquis communautaire is that everyone is expected to comply with it all, but at the same time you have a process of what is called flexibility, variable geometry, or enhanced co‑operation. So that everyone is expected to comply, but some can comply with it more than others. There is a fundamental inconsistency there. There is the accession of 10 new states. Do you not agree that, because of the fundamental diversity and the nature of the countries concerned, in their relationship to the Union as it now, the effect of variable geometry, of this pick-and-choose operation - whether it is with regard to defence, to monetary union, which of course it already is, to justice, home affairs, immigration - the list is endless - this will, instead of stabilising, create tension, increase costs and a hard-core Europe? A Europe largely dominated, as we saw in Le Monde on 13 November this week, by a comprehensive political alliance between France and Germany, of which Germany will most likely be the leading partner, and that therefore the Union will be under very severe pressure of unsustainable tension within a relatively short time? Mr Servoz: We think that what we should avoid is indeed a hard-core Europe and a soft-core Europe. The concept of variable geometry is precisely what the Commission has tried to avoid. I do not think that we should move into a situation where there are first-class Member States and second-class Member States. If you look at the past and the situation of Greece, Portugal and Spain when they joined the EU, you could have made the same remarks about variable geometry. There has been a very thorough investigation of the situation of the 10 new Member States: very thorough because it is clear that Member States and also people in the Commission and Parliament had doubts about whether these countries were going to be able to deliver. I think that the judgment has been made, after this thorough investigation, that, yes, they will be ready on 1 May 2004 but we will need to be very careful in monitoring. We have reinforced our equipment to deal with infringement procedures, and there will be safeguard measures. I think that all the monitoring equipment is therefore in place. We know that it will not be easy, because these countries have transposed the acquis communautaire, but then you have to implement the acquis communautaire on a day-to-day basis. We know that most of them are already doing it, but we know that there are difficult areas - for example, JAI. The veterinary area is another difficult area. However, this will be monitored very carefully. Let us at least give the 10 new Member States the credit that the European Union has already been through this kind of process with countries like Greece, and it worked well.
Q28 Mr Cash: Is it a cardinal principle of the Commission and the institutions generally to apply the process of variable geometry? As you said in a paper a few years ago with regard to monetary union, that was the best form of flexibility yet devised, because it was both irrevocable and it anchored monetary union in the engine of the system. In other words, are you 100 per cent in favour, as a Commission, of variable geometry? Mr Servoz: Regarding the acquis communautaire that the 10 new Member States have acquired to become a Member on 1 May 2004, there is no variable geometry. Mr Marshall: Can we move on from stability within the European Union itself to stability with our near neighbours? Q29 Mr Connarty: Still on the question of stability, I welcome the fact that we have talked about a wider Europe. There is one omission, however. I see nothing specific about the EU and the Middle East peace process. I do think that the EU has been a very important contributor to trying to bring some stability and economic infrastructure to the Palestinian people, for example. I do not know if that is left out because you feel that it is already covered. Turning to our other close neighbours in the wider Europe, Russia and Ukraine, you mention specifically the Partnership and Co-operation Agreements with Russia and an action plan against organised crime. I have to say that when I was in Colombia a few years ago, talking to the anti‑narcotics police there, they singled out Ukraine specifically as one of the major routes into Europe for cocaine from Colombia. I do see that as being a major danger. I do not think that, in the time I have been in some of the new accession states, I have felt confident that they had the capacity to cope with organised drug-trafficking through their borders and through their states. There have been some achievements in the area, but what further improvements are the Commission intending should be targeted, to increase the capacity to deal with organised crime in Russia and Ukraine? Mr Handley: In the Work Programme for 2004 you will not see any new legislative proposals coming forward, but that does not mean that the Commission will not be doing anything. It is essentially a question of implementing. You have referred to the Partnership and Co‑operation Agreements with these countries. Indeed, what we would like to do next year is to reinforce practical co-operation on the justice and home affairs side, deal with the drugs issue, crime, and illegal financial transactions which help contribute to the funding of terrorism. There is therefore already a sufficient consciousness that there is a problem that needs to be addressed. We have recently reinforced the framework for co-operation with these countries, particularly with Russia through the declaration in St Petersburg, and there is a serious body of work that will be going on next year, precisely on the matters that you raise.
Q30 Mr Connarty: Would you comment on the Middle East? Mr Handley: The Middle East is certainly central to our stability priority. It is not so far away from the European Union, after all. However, we are not intending to bring forward any solo European proposals in the context of our Work Programme next year. The Commission is working within the quartet with the other partners to try to take forward the peace process, and is also talking to the other partners in the region, as well as to the United States. At this stage, however, for the European Union the "road map" is on the table and needs to be given a chance to work.
Q31 Mr Marshall: Mr Connarty has indicated the porosity of some of our borders. Is there any intention to introduce an agency to manage control of external borders? Mr Handley: The Commission has very recently adopted a proposal for an agency to deal with co‑operation at the European Union's external borders. When I say "external borders", I am referring to the borders of the enlarged European Union. This is basically driven by a need for greater solidarity between the Member States. For example, it would not be fair for a country joining the EU for the first time next year which finds itself at the eastern borders of the Union to have to deal, without any assistance, with all the influx of problems that might come through its borders. This agency is not an operational agency, in the sense that it is not a body of European border guards. It is designed to provide a co-operation and co-ordination mechanism to help national Member State border authorities deal with the problems, to exchange experience, and also to provide training and technical assistance. The proposal is now with the Council, so we hope to see some progress already this year because the Italian presidency has indicated that it would very much like to get a political agreement on the setting up of this agency before the end of this year.
Q32 Mr Marshall: I notice that you have said quite specifically that this organisation was advisory and also had training capabilities, which implies that the control will remain in national hands. Does it still remain, however, a Commission objective to have a European border guard? A European-wide one, which would be controlled by the Union rather than by the individual Member States? Mr Handley: In previous communications the Commission has suggested that the long-term goal should be to have a really well-integrated border management system for the European Union. At various European Councils there has been growing support for this kind of idea but I think that, at this stage of the process, the consensus around the Council table is that this is the maximum needed.
Q33 Mr Cash: I would like to press you on this question about the agency. When you are dealing with borders, it would be nice to think that everything would be sweet and easy, but actually you can have border incidents. If you have border incidents, it is incredibly important to know what the legal authority is of those who seek to enforce the law in relation to those incidents. Could you explain a little more just exactly what these specific tasks would be? It seems to me that you are getting into very dangerous territory here. Mr Handley: When you talk about "border incidents", you are talking of ----
Q34 Mr Cash: Somebody might have to shoot somebody. Is the agency going to be entitled to do that? Mr Handley: No, the agency is not an operational agency. It is not itself providing border guards. It is providing a better co-ordination, so that the Lithuanian guards and the Polish guards are all working from the same common manual of external border practice.
Q35 Mr Cash: Where is the authority for this action, assuming that there is a case - which I can envisage - where somebody will be shot? It could be to do with smuggling or something, and there will be a return of fire. Under what legal authority will the person who has pulled the trigger know that he is justified in having done so? Where does he get the authority from? Mr Handley: National law. Mr Cash: But if the agency has been given additional legal powers to override the national laws ‑‑‑‑ Mr Marshall: I thought, Mr Cash, that we had cleared that point up in the answer that Mr Handley gave to me. Mr Cash: Not to my satisfaction. Mr Marshall: He made the point that the responsibility for the practical day-to-day matters would be the responsibility of national governments and they would provide national border guards. If the kind of incident occurs that you have just postulated, then if it happened in Britain it would be under British law; if it happened in Lithuania, it would be under Lithuanian law.
Q36 Angus Robertson: Can I ask how the budget for security support should be defined? Should it specify that support should be provided only for crisis management operations of the nature of Petersberg tasks, or should it allow for operations which are of a more military nature? Mr Servoz: It is only for the Petersberg tasks.
Q37 Angus Robertson: Does the Commission take the view that there should be distinct budget lines for development assistance and for security support, so that funding is not diverted away from the poorest countries? Mr Servoz: Yes, absolutely. In fact, in the context of the new Financial Perspectives the Commission intends to put forward some simplification proposals on the instruments which are used for development assistance and for security. The Commission intends to propose only two financial instruments: one for development and the other for security.
Q38 Mr Marshall: Could I follow that up? As you well know, Mr Servoz, the Petersberg tasks cover a whole gamut of objectives, from very soft to very hard security issues. Where would you say that some are of a more military nature than others? Where would you draw the line? Where would the Commission draw the line? Mr Servoz: I agree with you that the line is difficult to draw. I think that the Commission has indicated its wish to focus on research which could have a military impact. That is the main area of focus, which I think is indicated as a priority for next year. Dual-user research, research with a military impact, are the main focus of the Commission for next year. However, I agree with you that sometimes the line is difficult to draw.
Q39 Mr Marshall: So the answer is that we do not know? At the present time we do not know? Mr Servoz: I would rather say that it is a matter to be decided on a case-by-case basis, because I cannot give you a very precise definition.
Q40 Mr Davis: The same paragraph in this document which refers to Petersberg tasks also refers to, "Continue action against international terrorism". Looking at the detail that you provide here, however, I can see nothing related to terrorism. What actually do you propose? Mr Handley: This is not a new track, of course. It is something that has been pursued by the Commission since 11 September, and many of the proposals have already been made in this area. There has been a series of proposals made to try and make it harder for terrorist activities to be funded. There has been a series of justice and home affairs measures in order to make it easy to extradite terrorists, for example. There has been a lot of activity. This is therefore an ongoing area of international concern for 2004, as indeed is the area of bio-terrorism, where we have been doing a lot of work already this year on trying to make sure that the European Union is ready in the event of any possible terrorist attack of that nature. Q41 Mr Davis: Let us just stick with terrorism. I appreciate that it is ongoing, but it sounds a bit to me like a mantra. Where do I see specific proposals in these appendices related to terrorism? Can you help me find them, because I did not see them? Mr Handley: The text you are referring to there is not necessarily saying that there is something new that is going to be done and new legislative proposals coming forward. In that particular case it is referring to a continue area of ongoing implementation.
Q42 Mr Davis: But you have a heading here, "Commission proposals awaiting action". I cannot find what you have described in there. Where is it? Mr Handley: It is a series of actions on arrest warrants and ----
Q43 Mr Davis: Can you just direct my attention to it? I cannot find these in the appendix. It may be that I am missing something. You tell me it is ongoing. You tell me that the proposals are not new; they already exist; they are awaiting some sort of decision. I would expect them therefore to be in this list of "awaiting action". I cannot find anything. It may be that I am missing it. I am asking you to help me to find it. Mr Handley: I am not saying they are necessarily decisions still awaited by the Council or Parliament. What I am saying is that we are in a phase of implementation - which is to say that it now forms part of the ongoing implementation that forms part of the Commission's activities in 2004.
Q44 Mr Davis: Could you write to us afterwards - since you obviously do not know - and specify what these actions are that are awaiting implementation? I am increasingly sceptical, having listened to your explanation. However, I want to be fair to you and to give you the opportunity to explain in detail to us, very specifically, what is awaiting implementation and covered by "Continue action against international terrorism". Mr Handley: Certainly.
Q45 Mr Heathcoat-Amory: Could I turn to your sustainable growth ambitions? The background to this, of course, is very sombre. The European Union suffers from low growth and high unemployment. There is a lot of evidence that the gap between Europe and the rest of the world is actually widening, to our disadvantage. It is obviously very important, therefore. When I read what are called your "Key initiatives", it starts by saying, "To reinforce the effective delivery of the strategic policy goals". Frankly, I think that this is Euro-waffle. It does not actually mean anything. Can I turn to what this might mean in practical terms to, say, a small businessman in my constituency trying to achieve sustainable growth? He, I think, would be worried by this programme, because there is a reference to a number of initiatives which could impact on his costs very directly. Just to take one example, there is a plan for a draft directive on the prevention of violence at work. This is fairly typical. It is obviously a very good idea - who could be against efforts to reduce violence at work? To a businessman, however, this means more paper, more consultation, more interference, more legal liability, when he or she is struggling to maintain competitiveness in a very difficult world trading environment. Do you have representations to the effect of saying, "No, we don't want this"? Obviously you have social pressures on you. You have groups that you fund always wanting to do more, particularly in the social field. Is there a countervailing force that says, "Haven't we got enough regulations and red tape?". The European Council frequently makes reference to a deregulatory initiative, and the Prime Minister of our country has often referred to this in the House of Commons, in terms of Council conclusions. However, it never seems to feed through to the Strategic Planning and Co-ordination Unit of the Commission, if I may say so - who have this wonderful machine for generating more initiatives. On the ground, amongst people who are trying to deliver sustainable growth, I think that this causes further despair. Can you comment on that? Mr Servoz: Perhaps I may say, if you will excuse the humour, I think prevention of violence at work does not necessarily mean less productivity. I think you will agree with me that if you succeed in preventing violence at work, the productivity will probably go up. I do not think that employers should therefore necessarily be against preventing violence at work. That said, on a more serious note I would say that what the Commission is putting forward is a proposal for sustainable growth. It means that the Commission, when it proposes what to do on the Lisbon Agenda, has to reconcile three dimensions. One is the economic growth; another is indeed the social dimension; and then there is the environmental dimension. All of these mean concrete proposals concerning the three dimensions, and they have to be reconciled and worked together. This is the way the Commission has put forward its proposal in the context of the Lisbon Agenda, which has been approved by the European Council and by the European Parliament. Regarding deregulation, I am sure that you are familiar with the Better Lawmaking Initiative which the Commission has taken. It concerns a number of issues, including impact assessment. This initiative has been subject to an agreement between the three institutions and will very shortly be implemented between the three institutions. I think that this goes the way, not necessarily of deregulating but of better regulation.
Q46 Mr Heathcoat-Amory: The impact assessment does not seem to stop anything. We have had examples in this Committee whereby the cost outweighs the benefit, but it has still gone ahead. The other problem is that your cost assessments often differ from those carried out by British government departments. We dealt with an example in this Committee last month. This is all making regulations perhaps more user-friendly, but it does not stop them. My question to you was, do you seek representation from small business organisations of a genuinely representative kind arguing against a lot of this happening at all? Otherwise, we are simply winding the handle again and there will be more regulation at the cutting edge of the European economy, which will further increase our costs, possibly cause further job losses, and certainly do nothing to aid this sustainable growth which we are on about. I am not sure that you have completely answered my question. Mr Servoz: In fact, better regulation does not mean stopping legislation. It means better regulation in the sense of preparing legislation better. This is what impact assessment in particular is about. It is trying better to define what is the impact on the stakeholders, and looking at subsidiarity and proportionality in a way which has never been done before. So I think that this is what it means. Better regulating, better preparing legislation - not necessarily stopping regulation. In terms of contacts with small businesses, the Commission receives a lot of remarks and observations from small businesses, from organisations representing employees, representing trade unions, also representing employers. This is something that the Commission is living and breathing every day. In fact, it is really part of the legislative process in the Commission.
Q47 Mr Cash: On the question of sustainable growth, the question of whether or not an individual country's economic management will be within the control of that country is rather an essential question. It is somewhat tied up with, for example, the single currency. It also has a huge bearing on levels of employment and the generalities of a social agenda. In practice, however, do you not agree - particularly with this Constitution, which is currently with the Intergovernmental Conference - that economic management should be the first priority and should be given back to the Member States? Mr Servoz: I think what the draft Treaty establishing the Constitution is doing, and what the actual law of the Union is doing, is establishing the close co-ordination between the economies of the Member States and the economies of the Union at large. This is what the Commission participates in and intends to continue. Mr Marshall: Could we move on to a number of general issues?
Q48 Mr David: One of the big issues looming on the horizon is the future of cohesion policy, regional policy. I notice on page 15 in annex 2, tucked away, there is a reference to a "Draft regulation for the new Structural Funds post-2006". Given that there will be discussions and the publication of a document on the draft regulation, would it not be better to wait for agreement on a new Financial Perspective? For obvious reasons, you cannot decide how something will be spent until you can say how much you are going to spend. Mr Servoz: The answer is yes, this is what the Commission will do. The Political Framework on the Financial Perspectives should be adopted in the weeks to come, and a Third Cohesion Report will be adopted after that.
Q49 Mr David: What is the timescale for the agreement on the Financial Perspective? Mr Servoz: The timescale for the adoption of the Financial Perspectives proposal is 2005, but that is the detailed proposal. What the Commission is putting forward now is the Political Framework, which describes the objectives, the instruments, and the financial envelopes. After that, there will be proposals for each of the sectors, including cohesion. These proposals will come in the spring of next year and then there will be the negotiation with Council, which hopefully will reach an end, I would say, at the end of 2004 or, more probably, at the beginning of 2005.
Q50 Mr David: You take my point? As I understand it, a regulation is something which is fairly detailed. It is not necessarily simply a cohesion report. There is a great deal of disagreement at the moment between national governments on the shape of regional policy. You might be engaging in a great deal of work, only to find at the end of the day that it has all been to no effect. Mr Servoz: That should not be the case. The communication which the Commission is preparing now sets not only political objectives but also detailed proposals for reform on the cohesion policy. It is clear that the detailed legislative proposals which will come afterwards will have to reflect these political orientations very closely. So I do not think that there would be a situation where the Third Cohesion Report, in its fine detail, could depart from the framework which will have been established before.
Q51 John Robertson: The list of proposed measures includes one on the prevention of violence at work. Why should there be a European directive for this? Is this not an area for subsidiarity? Mr Handley: There is no presumption that there will be a directive on this. Like most measures in the social area, there is a multi-step process which is of consulting social partners. So what is being announced here is the opening of such a consultation with social partners on violence in the workplace. We have published a first assessment of the scope of this exercise, indicated our intention to talk to a wide range of stakeholders, and that the options that might be considered range from merely sensibilisation or publicity campaigns about the issue, through to possible agreements between social partners and, only as a last possibility, actually doing a directive or some other form of legislation. This is a good example of where a problem is being allowed time to be properly examined, for various parties to make their views known, before any decision is made on whether indeed any action at the European Union level is necessary to complement the actions already undertaken by Member States. Subsidiarity and proportionality, therefore, will also be taken fully into account.
Q52 John Robertson: Would this be a case then of looking at best practice and trying to get the best for everybody, rather than actually imposing something on them? Mr Handley: As I said in the earlier answer, there is no presumption at this stage that new legislation is required. It may well involve asking the Member States what strategies they have in place and what they have found works or does not work. So, yes, best practice would certainly have its role to play. Mr Marshall: I fear that you may have set a hare running here, because both Mr Cash and Mr Heathcoat-Amory want to follow this up. Q53 Mr Cash: I want to ask a very simple question under this general set of questions that we have. Is the European Commission completely and totally against the idea of the repatriation of fisheries policy? Mr Servoz: The answer is that this is not what the Commission has proposed in its reform of the fishery policy. Mr Cash: That does not answer my question. Are you against it? Mr Marshall: They do not have a view. It is the Member States that determine what is in the Treaty.
Q54 Mr Heathcoat-Amory: Can I return to this example of violence at work? You are really, by implication, admitting Mr Robertson's point that any action would breach the subsidiarity principle. You are still saying that it is nevertheless a good idea to consult, to talk about it, to launch an initiative. Can you not see, however, that at the level of the small or medium-sized business this is another threat, if you like, another possibility, another thing that they may have to comply with eventually? So they feel that they must get involved in this. It all takes time; it all takes money. That is what businesspeople complain about. Discussions are going on that could well affect their costs in the long term. They have had a lot of experience of where simple ideas are first dreamt up, then they become proposals, then they become legislation and then they become legally binding. They feel obliged therefore to take an interest in this. A huge great consultation document will thump onto the desk of a small businessman, which he feels obliged to read and to respond to. This is completely unrealistic. It will not happen. They do not have people to do this. In practice what you are doing, therefore, is talking to other people, stakeholders - which are often your own sponsored interlocutors, to give you a sort of social dialogue - but it cuts out the people who will eventually be involved in this. That is what creates the cynicism and, frankly, hostility amongst a lot of small businesspeople as to what in fact you are planning here. If there is no realistic prospect of it ever leading to a directive, why do it at your level? It is a national concern. We are all concerned about violence in the workplace. That is what we are elected to deal with. What has it got to do with you? Mr Servoz: The answer is that the Commission is talking to different lines of interest, which includes the social partners, the trade unions, the employees and the employees' organisations. Obviously they have a strong interest in pushing this matter forward. The Commission has to act on the requests that it receives, not only from the small businesses but also from the employees. That said, as my colleague has explained, there is a process which is a consultative process. Then, after this process, a decision is made at the political level whether the matter should be transformed into legislation. We are far from that, however. I think that it is only fair that the Commission represents the various aspects and the consequences that it has around it.
Q55 Angus Robertson: May I move on to the rather large policy area of justice and home affairs? In the Work Programme the Commission says that there should be further progress on this policy area, to respond to the demands of citizens and also to the European Council's political goals. What are the Commission's specific priorities in this area for 2004 and looking to the future? Mr Handley: One very major concern is to ensure that by 1 May next year we can say, and the European Council can say, that we have completed what we set out to do in the agenda agreed at the Tampere European Council in 1999. We want to take stock of how far its objectives have been achieved, and this is really a task for the June 2004 European Council under the Irish presidency. We also want to launch a debate with the council about where we go from here. The overall objective is to create a European area of freedom, security and justice, but this is not something that is achieved overnight. The idea would be possibly to have a second phase in the Tampere programme, to be agreed some time either towards the end of next year or shortly afterwards in 2005. Of course, in the context of the next Financial Perspective the whole area of citizenship, the rights of citizens and protecting them against security threats and so forth, will play an important part. This is therefore a set of issues in European Union activity which is set to continue forward for some years to come. The Tampere Agenda is the main, central concern for the European Union next year. In more specific areas, as you are aware, this year's Thessaloniki European Council issued a whole series of proposals and reports relating to asylum, immigration, and so forth. There is a follow-up that is proceeding for a number of these. For example, next year we have been asked to produce for the European Council before June a report on a more orderly and better-managed manner of dealing with the arrival of people from outside the Union who are in need of international protection. That is one such thing. We are also coming forward shortly with some proposals on a return programme. Basically, there are areas of activity which you can see in the Work Programme list for next year which relate to most of the strands of the Tampere Agenda.
Q56 Angus Robertson: You talk about something which might be quite significant - the launch of a debate with the Council on this future agenda. Is there any chance of a sneak preview of any thoughts you have about what you want to be the main strands of that debate? Mr Handley: At this stage it is a little premature, partly because we are in the closing stages of President Prodi's Commission, and there is a certain amount of handover and fresh thinking that might be required when the new Commission comes in the autumn of next year. Certainly this Commission understands that more will need to be done after 2004's deadline for the current Tampere Agenda, but there is a role also for the next Commission in trying to define that future strategy.
Q57 Mr Davis: What are the demands of the citizens in this field? Mr Handley: We have seen since 11 September that there is a greater awareness of the interconnectedness of the European countries in dealing with the problems of terrorism - movement of terrorists for example. We have also seen concerns in a number of European Member States about immigration flows. A number of these things are common to so many Member States that they suggest that there is a need for the European Union to become more actively involved in trying to get some common practices throughout the European Union.
Q58 Mr Davis: There might be concerns in a number of Member States and a number of member governments on this issue, but I have yet to hear any citizens of this country make demands, as you say, for action by the European Union. How do you quantify these demands? You are responding to these demands. We had a discussion about terrorism before. I have looked again at this section on justice and home affairs, and I cannot see anything here. Which of these items is responding to the demands of citizens? Mr Handley: The European Commission does consult citizens. We have a regular six‑monthly survey called the Eurobarometer, where there is a whole battery of questions which are designed to identify trends in the thinking of European citizens over time. You will normally find towards the top of these lists concerns such as peace, security, good quality of environment, jobs. Many of the basic concerns of citizens which you as parliamentarians see on a day-to-day basis with your constituents are also expressed by citizens in these surveys of attitudes towards Europe. It is clear, therefore, that we are not operating in a policy vacuum. We are consulting on a good sample basis, to see what it is that citizens expect of the European Union - which is not to be seen as acting as replacing national governments but in a complementary relationship.
Q59 Mr Davis: You are talking round it. Tell me, what specifically are the demands of the citizens of the European Union in this field? You have given me all this information. What are the demands? What are your conclusions from these surveys, the Eurobarometers, and God‑knows-what? I am asking you what you think are the demands. Mr Servoz: The demands are quite clear. For example, enlargement has provoked a demand for more security regarding the management of borders. That is a demand which has been expressed by citizens quite clearly. The Commission, with the Council and Parliament, has acted upon it. Likewise, immigration/asylum is clearly an issue where there is a demand from the citizen and where clearly Member States alone would not be in a position to react in an effective manner any longer. This is clearly a matter where Member States have to work together, with the help of the Commission. Again, there is a demand from the citizen and a demand that action be taken at the European level - which does not mean the Commission. It is also the Member States together. Mr Davis: You are still not answering the question. You are just going round it. Re-read it when you get the transcript and then respond to us in writing. What are the demands? It is no good saying "immigration/asylum". What is the citizen asking you to do with immigration and asylum? Think about it and come back to us, please.
Q60 Mr Heathcoat-Amory: Could I turn to the reform of the budget system? Your Work Programme refers to a proposal for a Council decision on the system of the EC's own resources. It is known from the Budget Commissioner responsible that she is hostile to the United Kingdom's rebate. She has repeated that recently. Of course, without the rebate our net contribution would go up from an average of about £31/2 billion a year to perhaps twice that. So this is a sensitive issue. Could you tell us what your thinking is behind the reform of the budget and whether the Commission will be bringing forward proposals, perhaps to cure the more general problem of very large net contributions from states which are not necessarily the most prosperous? Mr Servoz: I would first say that I do not think that the Budget Commissioner is against the UK rebate. I think her point is that the situation today demands something else. What she is thinking about is a generalised compensation mechanism which would be available for all Member States who find themselves in an excessive contribution position. The UK rebate was agreed in 1984, if my memory serves me well, at a time when only the UK was in this unfavourable position. The situation today is that you have at least four or five Member States who are net contributors. We know, based on some simulations, that this situation will affect even more Member States after enlargement. Clearly, there is an issue where some action is required. The idea of Mrs Schreyer is that there should be a generalised compensation mechanism, which would be triggered as soon as the excess in contribution reached a certain threshold of GNP.
Q61 Mr Bacon: I would like to ask about tax harmonisation. When the last-but-one COSAC met, Mr Connarty attended it. He told me that two items had been discussed in the paper - I think a Commission paper, Financial Perspectives from 2007. One was the budget rebate; the other was tax harmonisation. What is the Commission's attitude to tax harmonisation? Mr Handley: There are two issues here. One is following on from the previous discussion about how future European Union spending might be financed in the context of the next Financial Perspective, and that is what I am detecting from your question. There is also the second aspect of European Union policy on tax harmonisation.
Q62 Mr Bacon: Can you repeat what you have just detected? I am not sure that you have detected correctly, but I want to be clear about what you think you have detected. How spending is what? Mr Handley: The question that you put suggests to me that you are situating yourself in the discussions about the future Financial Perspective, and how European Union activity would be financed. Mr Bacon: You used the word "spending". I certainly did not mention spending. My question is about tax harmonisation. You may know that we are having the Queen's Speech soon. When the Queen addresses the House of Commons and the Lords, she says, "My Lords, ladies and gentlemen". When she starts talking about money, she stops talking to the Lords and she says, "Members of the House of Commons" - that is us, only us - "estimates for the public services will be laid before you". She says that for a very good reason, because we have sole control over taxation. It was wrested from people who were unelected and unaccountable a long time ago. In fact, we had a civil war about it. I am quite keen that we retain control of taxation and that it will not be handed over to those who are unaccountable and whom we cannot get rid of. My question is not about spending. I already know, and Mr Heathcoat-Amory mentioned it earlier, that the European Union cannot account for how it spends its money and that, for the ninth year in a row, we read in the papers today, the accounts have been qualified. Mr Marshall: Do you have a question?
Q63 Mr Bacon: I am asking about taxation. What is the European Commission's attitude to tax harmonisation? Mr Handley: Then I think that there are still two aspects to this. The first aspect is, in the next year's Work Programme does the Commission have any plans for harmonised taxes? The answer to that is no. In the context of the next Financial Perspective are there such proposals? Equally, at this stage, we are not talking about specific policies, so the answer is also no. However, in the context of the next Financial Perspective, we are engaged in an internal debate about what the Community should do in the future, where it should get its revenue from, and how it should spend it. That is why I raised the question at the beginning of my response to you. In that context, we have an obligation to produce a report by next year on what is called the "own resources system", which is how the European Union collects its revenue - which is partly directly from Member States, partly from taxation, partly from customs tariffs, et cetera. In that context, we are also looking at whether that system of own-resources collection of revenue from the EU should be reformed. We are doing so on the basis of principles which will be very familiar to this House: accountability; direct link between the citizen and the level of taxation that is being funded. These are all issues which will be explored for the first time in this general political communication, which Mr Servoz has explained is shortly to be presented by the Commission, and furthermore in the report for the middle of next year. Q64 Mr Bacon: When you said "accountability", were you also referring to the accounts? Mr Handley: No, I was referring to it in the political context.
Q65 Mr Cash: As you increase functions, that means powers and duties. Inevitably, they have to be paid for. Under the draft Constitution, it is quite clear that there will be an obligation on the Union to provide the resources that are necessary in order to fulfil its objectives. Can you tell me how that can be done in relation to the expansion of all these functions without introducing a tax system? Mr Servoz: There is already a tax system, in a way. The system we have is a system where the resources of the Community are in fact a tax which is paid by Member States. One of the questions which will have to be raised in the Financial Perspectives is whether there should be a more direct link between citizens and the Community. What I mean by that is that, instead of paying 20 per cent VAT on a product, citizens will know that they pay, for example, 15 per cent for their national government and 5 per cent for Europe. I hasten to add that the amount will be the same, just like today. It is only a question of visibility for citizens - only that. The amounts will not be increased.
Q66 Mr Cash: You cannot close the gap between the expanding functions and the current resources available without increasing the tax system, and to be fair it would have to be harmonised. Mr Servoz: I am not sure it needs to be harmonised. However, I think you are right on the point that, with increasing functions should come more resources, and therefore probably the need to examine how you can fund these needs - which, by the way, normally include tax. Mr Cash: As we say in England, "It won't grow on trees".
Q67 Mr Connarty: There is one major omission from the talk about the budgets. It does seem as though the most important thing - the reform of the Common Agricultural Policy, in other words the way you spend the money - is not firmly on the agenda. It seems to me - coming from the fact that I was at the Helsinki conference, which was mainly Commission and Treasury officials and one or two of us politicians sneaked in - that all of this work has been ongoing for some time within the Directorate General. That is, the idea of having a Euro tax or a Euro element to the taxation paid. My main concern, however, is the fact that if you do not change the way you spend the money, then the very good analogy given by one of your Commissioners comes to mind. He saw the rebate to one country like a house with a broken window: all you were doing was turning up the heating. It appears that you are going to introduce a system where lots of other countries turn up each radiator, instead of fixing the main problem, which is to spend efficiently. In other words, reform the Common Agricultural Policy. Then you may be able to bring some taxation down for the citizens. Mr Handley: Last year the Commission presented a very major mid-term review of the Common Agricultural Policy. This was something it was required to do under the current Financial Perspective, as agreed in Berlin. That was essentially designed to introduce much more discipline into the Common Agricultural Policy, to prepare the Common Agricultural Policy for enlargement, and to bring it up to date in terms of contribution to sustainable development and getting away from the culture of farmers just getting subsidies. It is really a question of modernising the market and also making it less distorting as far as international trade is concerned. This was the subject of a major review last year. At the beginning of this year, the legislative proposals on that subject were brought forward, and the Agriculture Council in the middle of this year was approved. It has major financial implications for agricultural policy for the coming years. It takes us through to 2013. By and large, therefore, that reform which you are calling for has been achieved. Mr Connarty: It is a total fudge. Q68 Mr Marshall: Could I thank both of you for your time and the way that you have answered all the questions that have been put to you? You were both here, I believe, in October of last year. This is the second time you have appeared before the Committee. I suppose, if you are both in the same positions next year, you will be doing a repeat act. Mr Servoz: I will not forget to bring my briefing on hallmarking next time. Mr Marshall: It is au revoir rather than goodbye. We have roamed over a large area of the EU policy and Mr Bacon has even introduced some civil war history of 300 years ago. I shudder to think what might be on the agenda next year! Could I thank you for your attendance and the way you have answered the questions. Also, I would remind you of the commitment that you have given, Mr Handley, to write at least two letters on two topics raised by Mr Davis. Thank you very much indeed. |