Examination of Witnesses (Questions 90-99)
25 FEBRUARY 2004
JOHN HEALEY
MP AND MR
KRIS ROMANSKI
Q90 Chairman: Minister, thank you for
coming back to us. The last time you were here very briefly because,
as the Committee will recall, we adjourned because of the good
news you brought us; we may detain you a little longer this time.
Can we get two bits of good news in a row from the Treasury? Let
us try. The new scheme which you said you aimed to implement on
1 April: leaving aside any delays that may occur once the application
has been received by the Commission, in order to ensure that State
aid approval is in place by 1 April, the application needed to
be submitted by 1 January. It was not in fact submitted until
5 January. As details of the proposed new scheme were announced
in the pre-Budget statement on 10 December, why was this not possible?
John Healey: I remain at the moment
quite pleased with the progress we are making with the Commission.
The contact that we had with the Commission did not start after
the pre-Budget report's confirmation of the policy change in the
scheme that we were seeking to put in place. We had done a reasonable
amount of groundwork in the latter half of 2003 with the Commission,
so they were prepared and well primed when we submitted our 41-page
State aid application and have subsequently come back with a series
of factual questions they want answered, which we are due to go
back to them very shortly on. I have asked officials to try and
follow that up with a face-to-face meeting with the Commission
to see what we can do to accelerate progress and the process of
getting the State aid application clearance that we need.
Q91 Chairman: When do you think that
meeting may happen? Is it in diaries?
John Healey: It is not in dairies
yet, but our next formal step is to supply the Commission with
the information that they have formally asked for. We will do
that very shortly, and at the same time we will be looking to
fix a date in the diaries when the discussion that may sweep up
any outstanding issues can take place.
Q92 Chairman: Are you confident that
the proposed extension will ultimately be accepted by the Commission?
John Healey: It is a rash UK Minister
that makes any confident predictions about the way the Commission
works or the speed at which it works, but I believe, based on
the initial conversations and discussions we had last year, on
the fact that we have a sound case, with good empirical evidence
that we can derive from the Symonds Report—and some from
this Committee and other sources—we have good evidence,
a sound case and strong arguments and, on that basis, if the process
is rational and fair, we should be set with a fair wind.
Q93 Chairman: Obviously, there has to
be consultation with the other representatives of the Member States.
Speaking for myself, I can only see one other Member State that
would want to have any form of input, and that is the Irish. Did
we talk to the Irish government about it in the process of trying
to assess with the Commission the likelihood of success?
John Healey: We have had quite
a lot of dealings with the Irish government in terms of the implementation
and some of the enforcement issues that this Committee has also
been very concerned about, so the Irish government is pretty well
versed with the regime that we have introduced in the UK, with
the current relief scheme in Northern Ireland and with the proposals
that we are now looking to try and put in place with this new
relief scheme specifically for Northern Ireland.
Q94 Chairman: They have not given any
signs of trying to block it in the Commission?
John Healey: I have had no information
or indication that they are likely to have a problem with it.
Q95 Chairman: Mr Romanski, who is an
old friend, can reply about technical matters at any stage. Have
you been involved in the consultation with the Irish?
Mr Romanski: No, but there has
been no suggestion that the Irish government would want to intervene.
Q96 Chairman: The other concern we have
is the delay that there will be in introducing the new scheme
which might be caused by waiting for EU State aid approval. As
we understand it, the way you agreed to a phased introduction
was that there would be only 20% imposed this year, going up annually,
and therefore it is due to go up on 1 April. Are you still planning
to do that?
John Healey: As you say, Mr Chairman,
the design and the operation of the scheme, without any changes,
will mean that on 1 April the 80% relief—the 20% level—will
be moved to 60% relief and a 40% level. I quite understand the
concern the Committee has, and it is shared by the Government
and the industry. We want to try and settle this matter of State
aid clearance for the new scheme as quickly as we can, and before,
to allow us to have a seamless transition, because the level of
the relief that we are looking for under the new scheme is at
80%, which is of course the current level. If we get an indication
that the State aid clearance will not be forthcoming in time,
or will not be confirmed in time, what I plan to do is to seek
permission from the Commission to freeze the current relief scheme
as it is at the moment, but I should be clear with the Committee
that that does have State aid implications of its own. It would
require such a decision from the Commission, and of course, it
would be a freezing of the 80% relief only on processed products,
which of course is different to the detail of the scheme that
we are seeking for the future, which would be an 80% relief on
processed products and on aggregates as well.
Q97 Chairman: That is fully understood,
but the craziest situation of all would be if you put it up to
60% on 1 April because you do not have final approval—which
you will not get, let us face it. You are not expecting final
approval by 1 April; nothing in the Commission moves at that speed.
John Healey: Expectations or confidence
is a difficult call in dealing with the Commission but, as I said
earlier to the Committee, I think the quality of the groundwork,
the nature of the evidence, and the strength of our case means
that we are set fair and, all other things being equal, I am reasonably
confident that we should be able to clinch this.
Q98 Chairman: If you do it in time, that
is fine, but our concern is that if you do not, the bureaucracy
involved in moving it to 60% on 1 April and back to 80% some months
later would make the whole thing completely crazy.
John Healey: It would be less
than desirable. In a sense, it underlines the reason that we are
making such efforts at the moment to try and secure it.
Q99 Chairman: I understand all of that,
but presumably, if you were to freeze it, the Commission cannot
actually stop you doing it pending the final answer, can they,
any more than they were able to stop you giving the derogation
of the relief last year?
John Healey: We could only give
the derogation of the relief last year because we obtained specific
legal clearance through the State aid application process from
the Commission. If we were to breach the terms of the scheme that
they agreed and gave us the State aid clearance upon, then I guess
technically we would be breaking the legal rules that the European
Commission set and that we as a Member State have signed up to,
so we do not have that degree of freedom of action or decision,
regrettably, in these circumstances.
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