The Chairman: Does a member of the European Scrutiny Committee wish to make a brief statement about the decision to refer the relevant documents to this Committee?

Mr. David S. Borrow (South Ribble) (Lab): Thank you, Mr. Russell. I am pleased to attend the Committee under your chairmanship, having been asked by the European Scrutiny Committee to explain to this Committee why the documents have been referred to it for debate.

From 1 January 2007, all pre-accession assistance has been delivered by the instrument for pre-accession assistance, the IPA. It is available to the candidate countries, which are Turkey, Croatia and Macedonia, and to the pre-candidate countries, which are Albania, Bosnia and Herzegovina, Montenegro, Serbia and Kosovo, all of which are deemed by the European Council to have a European perspective.

IPA assistance helps to strengthen democratic institutions and the rule of law, reform public administration, carry out economic reform, promote respect for human rights, support the development of a civil society, advance regional co-operation and contribute to sustainable development and poverty reduction. Between 2007 and 2013, €11.5 billion—equivalent to £10.92 billion—will be provided through the IPA. The multi-annual indicative financial framework, or MIFF, sets out how that assistance will be allocated, based on the needs of the beneficiary countries. Commission communication 17210/08 updates the current 2007-09 IPA MIFF to include the period 2010-12. It includes a tabular breakdown of allocations for the period 2007-12 by country and component.

The Commission’s IPA annual report for 2007—Document No. 15620/08—outlines how the money allocated to IPA 2007 will be spent in the beneficiary countries. It also sets out the mechanisms for monitoring and evaluation. No monitoring of IPA projects was carried out in 2007, as the IPA 2007 programmes were generally adopted only at the end of the year and implementation started only in 2008.

The Committee noted that there should be sufficient evidence regarding IPA performance by then for the next annual report to be analytical as well as descriptive and to demonstrate whether the mechanisms now in place for ensuring and monitoring effective delivery are working. The Committee felt that the importance of ensuring that they work as intended is highlighted by the experience in Romania and, particularly, in Bulgaria, where some €700 million of post-accession funding has been suspended after Commission fraud investigations.

That experience has been the subject of three debates in this Committee in the past year, revolving around the Union’s, and the Government’s, commitment in practice to conditionality—the things that each country must do before accession, which in the case of Bulgaria and Romania was trumped by political consideration.

In both countries, Commission progress reports indicate that much remains to be done—not only to pass laws, but to implement them properly, especially with regard to an effective and independent judiciary and a public administration that has demonstrated that it can and will tackle corruption and organised crime before accession takes place. Progress reports on the candidate and pre-candidate countries show that they are beset by the same problems. That includes Croatia, which in some EU quarters is being talked of as being ready to accede at the end of 2009. At stake is €11.5 billion, and since that was first agreed the economic crisis has materialised.

Although the Council and the Government have endorsed the Commission’s enlargement strategy, opinion in individual member states varies on prospective new members. Some are less than fully committed to Turkish membership. Conversely, some might be more willing than others to finesse the conditionality elements that should be fulfilled prior to membership in the case of Croatia or Serbia.

In view of the experience hitherto, the controversy over the next stage of enlargement, the sums involved, and the economic challenges and budgetary pressures facing the Union, the Committee felt that a debate based on the process underpinning the documents would be appropriate.

The Parliamentary Under-Secretary of State for International Development (Mr. Michael Foster): I am delighted to be here under your chairmanship, Mr. Russell, and hope that the point away from home at Blackburn finds you in fine form.

The European Scrutiny Committee has requested that we examine the 2007 IPA annual report and the MIFF for 2010-12. I am delighted to have the opportunity to discuss them with the Committee. The annual report under discussion is the first from the new financial instrument that covers the western Balkans and Turkey. The IPA has replaced the five different instruments previously used by the Commission to provide assistance and aims to help countries on their path to EU membership. The total IPA budget is €11.47 billion, covering 2007-13, so it is essential that we continue to hold the Commission to account on how it spends the money.

As the IPA is new, not much of the 2007 IPA has been spent yet. That fact is evident in the 2007 annual report, which is mainly a descriptive document. The Commission is now implementing the last year of the previous instruments. I welcome the Committee’s continued focus on and interest in the previous instruments, which are still paying out taxpayers’ money.

The ISPA——instrument for structural policies for pre-accession—annual report is also part of the debate and it makes sobering reading. It is evident that Croatia’s performance in managing ISPA funds has fallen short of what is required. We made that point in Council discussions last week and we will continue to keep a critical eye on remaining ISPA projects that are still being implemented.

The Court of Auditors report on ISPA, which is a more general evaluation covering six years of implementation, is more positive and concludes that ISPA funding demonstrated an increase in EU standards. I welcome that, particularly the Commission’s response to the Court’s criticisms. The Commission acknowledged the shortcomings identified by the Court and has improved procedures and project preparations for the IPA.

Finally, I welcome the Commission’s increased focus on aid effectiveness in the western Balkans and Turkey. We worked closely with it in preparing a donor conference last October at which, for the first time, all donors in the region and all beneficiary countries agreed that the relevant principles of the Paris declaration on aid effectiveness should guide donor co-ordination in the western Balkans and Turkey. There is a follow-up event next week in Tirana to check on progress. We are closely involved and expect that, through those processes, we can improve not just the IPA, but all aid through the western Balkans and Turkey.

The Chairman: We now have until half-past 5 for questions to the Minister. I should point out that that is not a target to reach, but rather a time that we shall not exceed. I remind Members that questions should be brief and that it is open to Members, subject to my discretion, to ask related supplementary questions together.

Mr. Philip Dunne (Ludlow) (Con): It is a great pleasure to serve under your chairmanship, Mr. Russell. I apologise to the Minister: as the shadow Minister has been detained, he will have to make do with the Whip.

The Minister referred to the €11.47 billion programme over the life of the project. What impact will the recession—which is affecting all countries in Europe, including all the potential accession countries—have on that programme? To what extent will the recession have an impact on the ability of candidate and pre-candidate countries to obtain the set conditions for accession?

Mr. Foster: It is difficult to get a full picture of how the global downturn is affecting all those countries; it varies according to circumstance. We have identified two groups from the countries under discussion. The first consists of countries where the crisis is already producing an impact. In Croatia, for example, in the third quarter of 2008, gross domestic product growth was down to 1.6 per cent. year on year, compared with 3.4 per cent. in the second quarter of that year. In Serbia, growth was still sustained last year, but it has been slowing down. The currency reflects that slow-down and is sliding.

There is a lagged impact on the second group of countries. The current economic performance of countries such as Bosnia and Herzegovina, Albania, Macedonia, Montenegro and Kosovo still involves relatively high growth, but we anticipate that there will be an impact in the near future. Such countries depend heavily on remittances from more developed and wealthier EU nations, and when those remittances start to dry up, there will obviously be a direct impact on spending and consumption in the dependent countries.

On overall aid, I assure the Committee that the United Kingdom’s trajectory towards the gold standard target of 0.7 per cent. of gross national income for overseas development assistance is being maintained. We will hit that target by 2013, as agreed with our EU partners, although I understand that one or two member states have doubts about whether they can afford to meet it. However, the UK’s commitment towards the share of the €11.47 billion will continue and that target will be met.

Mr. Dunne: I thank the Minister for that answer. May I move on to a separate set of questions on the issue of conditionality versus timetable? I apologise for my unfamiliarity with the bundle of documents under discussion, but it is one of the largest bundles that I have ever had to contend with.

The conclusion of the European Scrutiny Committee report, on page 165 of the bundle, makes it clear that the intention is for the IPA to change from date-based accession to conditionality. In light of that, will the Minister explain why, on page 157, in the explanatory memorandum on the European Community document, submitted by the Department for International Development on 12 November 2008, the Minister of State for International Development notes that Croatia

What is this Minister’s assessment of that? Is Croatia on course to meet the conditions by that time?

Furthermore, does not the explanatory memorandum directly contradict this Minister’s views, as expressed on page 159, where he states that it is

this is the key bit—

Mr. Foster: The hon. Gentleman is absolutely right to highlight my position, which is set out in my letter to the European Scrutiny Committee. One of the improvements made since the accession of countries such as Bulgaria and Romania is that there is no longer a target date to determine entry and the speed at which countries must progress. As there is no target date for Croatia, it is important that it meets its obligations in terms of raising its standards and, through our assistance, raising its capacity to achieve that. That, not a target date, should be the determining factor of whether a country accedes to the EU.

Mr. Dunne: I am grateful to the Minister for that response. How will he approach the criteria for fulfilling conditionality? Will it be a case of, “100 per cent. and you’re in, less than 100 per cent. and you’re not”? These are quite complicated criteria that will, or will not, need to be met, and I am not certain whether the documents under discussion contain much clarity, so how will it work?

Mr. Foster: The Commission merely advises on whether a country should accede to the EU while the Council makes the ultimate decision, which requires unanimity. If it helps, I will certainly write to the hon. Gentleman on the details of how the Council might look at whether the conditions for Croatia have been met, and on what the Commission can advise in terms of conditionality. The Commission just advises; the unanimous decision of the Council will determine whether a country accedes to the EU.

Richard Younger-Ross (Teignbridge) (LD) rose—

Mr. Dunne rose—