Select Committee on European Scrutiny Thirty-Seventh Report

30 European Agricultural Guidance and Guarantee Fund: Guarantee Section



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COM(06) 512

Thirty-fifth Financial Report on the European Agricultural Guidance and Guarantee Fund (EAGGF), Guarantee Section — 2005

financial year

Legal base
Document originated20 September 2006
Deposited in Parliament28 September 2006
DepartmentEnvironment, Food and Rural Affairs
Basis of considerationEM of 8 October 2006
Previous Committee ReportNone
To be discussed in CouncilNo date set
Committee's assessmentPolitically important
Committee's decisionCleared


30.1 Council Regulation (EEC) No. 1258/99[74] on the financing of the Common Agricultural Policy requires the Commission to submit each year a financial report on the administration of the Guarantee Section of the European Guidance and Guarantee Fund (EAGGF) during the preceding financial year. This is the thirty-fifth such report, and covers the 2005 financial year, which ran from 16 October 2004 to 15 October 2005.

The Commission report

30.2 Like the most recent reports, it comprises a short written summary, together with certain key tables. More detailed material — which, prior to the 1995 report, had also been included — is now contained in a separate Commission working document.

30.3 The work of the EAGGF is described under the following seven main headings:

i)  Budget procedure;

ii)  Management of appropriations;

iii)  Implementation of the budget;

iv)  Control measures;

v)  Clearance of accounts;

vi)  Relationship with the European Parliament and the European Court of Auditors; and

vii)  Basic rules governing the Guarantee Section, and amendments made in 2004.

30.4 On budget procedure, the report details the various steps following the drawing up of the preliminary draft budget for 2005 by the Commission in May 2004. As a consequence of the enlargement of the Community the previous year, this proposed appropriations for the Guarantee Section of the EAGGF totalled €50,675 million, with €43,534 million for traditional market expenditure under sub-head (a) and €6,841 million for sub-head (b) covering rural development expenditure. The report also notes that, after interventions by the Council and then the European Parliament, and the letter of amendment adopted by the Commission itself, the appropriations (including a carry-over from 2004) in final adopted budget in December 2004 for the Guarantee Section totalled €49,725 million, comprising €42,835 million for sub-head (a) and €6,890 million for sub-head (b). However, the first of these figures was subsequently decreased to €42,185 million (and the total to €49,075 million).

30.5 On the management of appropriations, the report notes that there was a non-automatic carry-over from 2004 to 2005 of €49 million. The Commission also applied a correction of €28.8 million to Member States due to late payment of aid to recipients.

30.6 The Commission's analysis of budget implementation shows that total market expenditure under the Guarantee Section in 2005 was €42,101 million, representing an under-spend of €735 million of the initial appropriations available, with an over-spend on plant products, but shortfalls on milk, pigmeat, audit, and policy strategy and coordination. There was also a shortfall on rural development and accompanying measures, where expenditure totalled €6,845 million, €44 million below the available appropriations. As in recent years, the major item of expenditure arose on direct aid for arable products (€17,146 million), with other important areas being beef at €8,176 million, milk at €2,755 million, and olive oil at €2,311 million.

30.7 In the section dealing with control measures, the report refers briefly to the work carried out in connection with the Integrated Administration and Control System (IACS), olive oil agencies, and the part-financing of tighter controls by Member States.

30.8 The Report notes that, during the 2005 financial year, the Commission adopted three clearance of accounts decisions, resulting in the exclusion of €635 million from Community financing. It also notes that, although the 2003 accounts of all six paying agencies in the UK[75] had been disjoined[76] because the Commission had reservations about the audit sampling methodology employed by the National Audit Office (NAO), the accounts of four of those agencies[77] were subsequently cleared following further discussion, and that the Commission has since confirmed that it is now content with those of the remaining two agencies[78] (though formal clearance has yet to be given). The accounts of all six UK paying agencies for 2004 have been cleared.

30.9 On relations with the European Parliament and the Court of Auditors, the report notes that, together with the Council, the Parliament forms the Community's budgetary authority, and is one of the Commission's most important partners, whilst the Court's purpose is to audit the Community accounts. It also notes that the Court produced during 2005 an annual report for the 2004 financial year, and three special reports relating to various aspects of CAP expenditure.[79]

30.10 On the basic rules governing the EAGGF Guarantee Section, the report lists all the base regulations.

The Government's view

30.11 In his Explanatory Memorandum of 8 October 2006, the Minister for Sustainable Farming and Food at the Department of Environment, Food and Rural Affairs (Lord Rooker) refers to the process whereby the previous problems over the clearance of the accounts of the UK paying agencies had been resolved, but says that, as this is a retrospective report, there were no other policy implications.


30.12 Since the document is an essentially factual report on earlier expenditure, produced for the information of the Council, we are clearing it. Nevertheless, it does touch upon a number of important issues, and — as in previous years — we therefore think it right to draw it to the attention of the House.

74   OJ No. L 160, 26.6.99, p.103. Back

75   Rural Payments Agency (RPA), Scottish Executive Environment and Rural Affairs Department (SEERAD), Forestry Commission (FC), Countryside Council for Wales (CCW), Department of Agriculture and Rural Development in Northern Ireland DARD) and National Assembly for Wales (NAW). Back

76   Not cleared. Back

77   RPA, SEERAD, FC and CCW. Back

78   DARD and NAW. Back

79   These were on forestry measures within rural development policy, the management of the European Anti-Fraud Office (OLAF), and the verification of agri-environment expenditure on rural development. Back

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