European Scrutiny Committee Contents


74 Growth and Stability Pact: statistical data

(a)

(31339)

6559/10

COM(10) 53

(b)

(31479)

8300/10

Draft Council Regulation (EU) No … amending Regulation (EC) No 479/2009 as regards the quality of statistical data in the context of the excessive deficit procedure


Opinion of the European Central Bank of 31 March 2010 on a proposal for a Council Regulation amending Regulation (EC) No 479/2009 as regards the quality of statistical data in the context of the excessive deficit procedure

Legal base(a) Article 126(14) TFEU; consultation; unanimity

(b) —

Document originated(b) —
Deposited in Parliament(b) 25 May 2010
DepartmentHM Treasury
Basis of considerationMinister's letter of 18 June 2010 and EM of 7 July 2010
Previous Committee Report(a) HC 5-xiv (2009-10), chapter 2 (17 March 2010)

(b) None

Discussion in Council8 June 2010
Committee's assessmentPolitically important
Committee's decisionCleared

Background

74.1 The Stability and Growth Pact adopted by the Amsterdam European Council in June 1997 emphasised the obligation of Member States to avoid excessive government deficits, defined as the ratio of a planned or actual deficit to gross domestic product (GDP) at market prices in excess of a "reference value" of 3%.[318] Each year the Council of Economic and Finance Ministers (ECOFIN) issues an Opinion on the updated stability or convergence programme of each Member State.[319] These Opinions, which are not binding on Member States, are based on a recommendation from the Commission. The economic content of the programmes is assessed with reference to the Commission's current economic forecasts. If a Member State's programme is found wanting, it may be invited by ECOFIN, in a Recommendation, to make adjustments to its economic policies, though such Recommendations are likewise not binding on Member States. This whole procedure is essentially the Pact's preventative arm.

74.2 On the other hand, the Pact also endorsed a dissuasive or corrective arm involving action in cases of an excessive government deficit — the excessive deficit procedure provided for in Article 126 TFEU and the relevant Protocol. This procedure consists of Commission reports followed by a stepped series of Council Recommendations (the final two steps do not apply to non-members of the eurozone). Failure to comply with the final stage of Recommendations allows ECOFIN to require publication of additional information by the Member State concerned before issuing bonds and securities, to invite the European Investment Bank to reconsider its lending policy for the Member State concerned, to require a non-interest-bearing deposit from the Member State concerned whilst its deficit remains uncorrected, or to impose appropriate fines on the Member State concerned.

74.3 The Commission's economic forecasts and recommendations related to the Pact, and therefore the Council's subsequent decisions, depend on economic and financial statistics from the Member States. In January 2010 the Commission published a report about Greek Government deficit and debt statistics. The report was broadly factual but delivered highly critical assessments of the Greek statistical system. It identified two main problems which have had effects on debt and deficit reporting over the past few years, most notably in the context of the excessive deficit procedure:

  • statistical weaknesses and unsatisfactory technical procedures in the Greek statistical institute, the NSSG, and in the several other services that provide data and information to the NSSG, including the General Accounting Office and the Ministry of Finance; and
  • inappropriate governance — poor cooperation and lack of clear responsibilities between institutions, diffuse personal responsibilities and ambiguous empowerment of officials and absence of written instruction and documentation.

This poor practice had led to severe irregularities in the reporting of debt and deficit statistics under the excessive deficit procedure.

74.4 The Commission's overall assessment was that the current set-up of the Greek statistical system "does not guarantee the independence, integrity and accountability of the national statistical authorities" and it outlined a list of broad goals which Greece should aim to achieve:

  • clarifying and "personalising" the responsibilities of the different statistical entities involved;
  • respecting the European Statistics Code of Practice;[320] and
  • making the NSSG independent, through the revision of the current law on statistics.

However, it did not outline any explicit next steps.[321]

74.5 The generality of statistical production in the EU is governed by the Statistics Regulation, Regulation (EC) No 223/2009, which provides guidelines on the quality of EU statistics. However production of statistics in relation to the excessive deficit procedure is governed by a narrower provision, Regulation (EC) No 479/2009.

74.6 In February 2010 the Commission proposed a draft Regulation, document (a), to amend Regulation (EC) No 479/2009 to give power to Eurostat to undertake a monitoring visit to a national statistical authority or finance ministry in cases where there appear to be problems with the quality of that Member State's statistical data relating to government debt or deficit figures. When the previous Committee considered this matter it did not clear the document but said that while the purpose of the draft Regulation seemed unexceptionable, it had noted that, although the Government supported the thrust of the proposal, it had a number of issues to deal with during negotiations, related both to subsidiarity and proportionality and to staff for Eurostat's new power. Before considering the proposal further it asked to hear about negotiating progress on these issues. It asked also for as prompt a response as possible, given the eight-week timeframe for national parliaments under the Subsidiarity Protocol.[322]

The new document

74.7 In its Opinion, document (b), on the draft Regulation the European Central Bank:

  • notes that it is supportive of the Commission proposals, but believes that the list of information that could be required from a Member State should be more exhaustive and that Eurostat should have full access to the most up-to-date and relevant information held by national statistical authorities;
  • states that it would be helpful to have examples of scenarios that would require special monitoring visits by Eurostat;
  • suggests that the current definition of "government deficit" used to report deficits under the excessive deficit procedure should be brought into line with international statistical standards, so making it much harder for a country to misreport or manipulate its true deficit figures by clouding them with financial transactions; and
  • believes that the Commission should have more time to assess the data that it receives from Member States, with four weeks rather than one to look at the figures, by aligning submission deadlines with reporting deadlines under Regulation (EC) No 2223/96 on EU national and regional accounting.

The Government's view

74.8 In his letter the Commercial Secretary to the Treasury (Lord Sassoon), noting the previous Committee found the basic purpose of the draft Regulation, document (a), unexceptional, says that the Government shares this view and believes that, in light of the problems in Greece, such EU level checks are necessary to ensure that any possible irregularities with statistical data of this kind can be swiftly identified and remedied. Turning to our predecessors' comments about the subsidiarity and proportionality of the original Commission proposals the Minister reports that there has been considerable progress in the negotiations on this proposal. He notes that a revised text of the proposal, which he sends us, has improvements to the original draft:

  • there is now a limitation on the type of data to which Eurostat may have access — the original proposals sought to extend the scope of this information beyond the statistical domain, whereas the revised text provides that Eurostat should only be able to request "relevant statistical information", limited to that strictly necessary to check compliance with international statistical rules;
  • the revised text contains a non-exhaustive list of criteria by which the quality of a Member State's national statistics could be judged — whilst Eurostat has discretionary power to examine other factors outside this list, it provides a very clear indication of the standards expected from a Member State and allows for some flexibility on the part of the Member State, for example by stating that revisions to the debt or deficit figures should not necessarily give cause for concern unless these revisions are frequent, sizeable and without clear explanation;
  • there is a new provision in the recitals that confirms the need for Eurostat to respect existing EU provisions on the independence of national statistical authorities when undertaking audit visits to Member States;
  • the revised text now differentiates between the routine biannual "dialogue" visits that are already made by Eurostat to Member States to check methods used to generate excessive deficit statistics and the audit visits (defined as "methodological visits" in the draft Regulation); and
  • the text now requires Eurostat to inform the Committee on Monetary, Financial and Balance of Payments, a statistical committee composed of the Member States' government and central bank statistical experts, prior to making audit visits and to provide updates on visits to the Economic and Financial Committee.

The Minister adds that UK officials have made it clear throughout the negotiations that the Government would expect the Commission and Eurostat to keep the number of staff working on these audits to a minimum and, in the interests of budget neutrality, to use existing Commission or Eurostat personnel rather than bidding for new resources.

74.9 The Minister says that, overall, the Government believes that the agreed amendments are satisfactory, as they:

  • provide helpful clarification of the scope of the audit visits;
  • limit the amount of information that may be required from Member States, which satisfies concerns about the subsidiarity and proportionality of these visits;
  • make clearer the amendments to Regulation (EC) No 479/2009; and
  • contain helpful references to the importance of both Eurostat and the Member State respecting EU rules on confidentiality of statistical data in the course of the audits.

Noting that the Office for National Statistics has been closely involved in the negotiations on the proposal, and is in full agreement with the Presidency revised text, the Minister comments further that:

  • the Statistics Authority has the statutory objective for independent monitoring and assessment of all official statistics produced in the UK, including data on the national debt and deficit;
  • the Office for National Statistics is committed to the production of high quality, independent statistical data, and would be happy to explain its methodologies or revisions to data to Eurostat; and
  • the Government therefore believes that the quality of UK national debt and deficit statistics is extremely high and that it is unlikely that Eurostat would find it necessary to make an audit visit to the UK.

74.10 The Minister tells us that:

  • at the 8 June 2010 ECOFIN Council a general approach on the revised text was agreed by a qualified majority vote;
  • as Parliament had not yet been able to complete scrutiny of the proposal the Government retained its scrutiny reserve and abstained from voting;
  • a statement in the minutes of the Council was laid to clarify an abstention by the UK on the grounds that its position had not yet been cleared by Parliament;
  • the Government is, however, satisfied with the content of the final text; and
  • the final draft Regulation will be formally adopted at a forthcoming Council meeting once the European Parliament has issued its opinion and is expected to enter into force this autumn.

The Minister adds that he regrets that the Committee did not have sufficient time to complete scrutiny on this document prior to an agreement being reached at Council.

74.11 In his Explanatory Memorandum on the European Central Bank's Opinion, document (b), the Minister says that:

  • the Government agrees with the bank's Opinion that the original Commission proposals needed to be amended to include examples of situations that could require a monitoring visit by Eurostat;
  • the final text was amended to include criteria which could trigger a monitoring visit;
  • the Government broadly agrees that Eurostat should have access to any data that is necessary and relevant to conduct the investigation, but feels that Eurostat should work on the basis of published audited reports and other records held within the national statistical authority or finance ministry, where available, rather than requiring direct access to other bodies;
  • the Government does not, however, agree with the bank's view that this draft Regulation should be used to re-examine the definition of "government deficit", which is a complex legal issue — the aim of the amendments to Regulation (EC) No 479/2009 is to deter Member States from manipulating statistical information and to establish a mechanism to identify and resolve possible problems with the quality of statistical data on debts and deficits; and
  • the Government believes, therefore, that the issue of how government deficit is defined in EU legislation is less urgent and can be examined at a later opportunity, if the Commission or Member States believe it is necessary to make changes.

Conclusion

74.12 We note that the amendments to the draft Regulation, document (a), meet earlier concerns about subsidiarity and proportionality and now clear the document. And we note also the Government's abstention from the vote on the draft Regulation, so avoiding a breach of the scrutiny reserve resolution. However we are concerned that the (previous) Government failed to meet our predecessors' request for as prompt a response as possible, given the eight-week timeframe for national parliaments under the Subsidiarity Protocol. We trust that when there is the possibility of subsidiarity issues arising the Government will, for the future, react more quickly in relation to the eight-week timeframe.

74.13 As the European Central Bank's Opinion, document (b), is overtaken by the conclusion of the Council's consideration of the draft Regulation we also clear this document.






318   This obligation does not apply to Member States, including the UK, whilst they remain outside the eurozone, but they are required to endeavour to avoid excessive deficits. Back

319   The 16 Member States (Austria, Belgium, Cyprus, Germany, Greece, Finland, France, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain) that have adopted the euro have Stability Programmes, whereas the other 11 Member States (including the UK) produce Convergence Programmes. Back

320   (26595) 9461/05: see HC 34-ii (2005-06), chapter 5 (13 July 2005), HC 34-viii (2005-06), chapter 18 (2 November 2005) and HC 34-xiv (2005-06), chapter 20 (11 January 2006). Back

321   (31253) 5175/10 + ADDs 1-6: see HC 5-x (2009-10), chapter 10 (9 February 2010). Back

322   See headnote. Back


 
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