Forty-eighth Report of Session 2010-12 - European Scrutiny Committee Contents

16 Co-financing of structural measures for agriculture



COM(11) 481

Draft Regulation amending Council Regulation (EC) No 1698/2005 as regards certain provisions relating to financial management for certain Member States experiencing or threatened with serious difficulties with respect to their financial stability

Legal baseArticles 42 and 43 TFEU; co-decision; QMV
DepartmentEnvironment, Food & Rural Affairs
Basis of considerationMinster's letters of 15 November and 30 November 2011
Previous Committee ReportHC 428-xxxvi (2010-12), chapter 5 (14 September 2011)
To be discussed in CouncilSee para 16.8 below
Committee's assessmentPolitically important
Committee's decisionCleared


16.1 Council Regulation (EC) No 1698/2005 sets out the basis on which financial assistance is provided for rural development under the European Agricultural Fund for Rural Development (EAFRD). Part of the funding comes from the EU and part from Member States, in accordance with the principle of co-financing, with the maximum EU financial contribution being of the order of 75-80% for regions eligible under the Convergence Objective, as compared with 50-55% for other regions.

16.2 The Commission was concerned that, in order to ensure the smooth implementation of the programmes in question, the burden on Member States currently experiencing financial difficulties needed to be eased, and it therefore proposed in August 2011 that the rate of EU co-funding should be increased for those Member States which have had financial assistance made available through the European Financial Stabilisation Mechanism, or the EU Balance of Payments Facility for non-euro members. This would increase the EU budget share to 95% in the convergence regions and to 85% elsewhere, and, whilst the Commission estimated that this could increase payment appropriations by €470 million in 2012, it said that, as the total budget envelope would remain unchanged, there would be a decrease in payments at the end of the period.

16.3 As we noted in our Report of 14 September 2011, the Government supports the principle of co-financing and sound budget management, and was willing to ease the implementation of EU funds in a way which was properly targeted and avoided undue pressure on the EU budget. However, it also drew attention to the possibility of the Commission being asked to submit a draft amending budget if the payment appropriations entered in the 2012 budget were insufficient, and it stressed that any approach should respect the UK's objective of achieving real budgetary restraint at EU level.

16.4 We commented that, as with a similar proposal[91] relating to the Structural and Cohesion Fund programmes, there appeared to be a degree of ambivalence in the Government's approach, and we asked for a clearer indication of its position on the implications which the proposal — and a corresponding proposal[92] on the European Fisheries Fund (EFF) — would have for achieving an EU budget freeze in 2012.

Minister's letters of 15 November and 5 December 2011

16.5 We received from the Minister of State for Agriculture and Food at the Department for Environment, Food & Rural Affairs (Mr James Paice) a letter of 15 November 2011 stating that the UK considered this to be a temporary derogation, which would only be available for eligible Member States until the end of 31 December 2013, and that it had requested Commission and Council declarations on budgetary impact and co-financing in 2014-20 similar to those provided on the Structural and Cohesion Funds (SCF). He added that this position had been supported by a number of other Member States, and that there had been informal indications that the Commission would be looking to amend its proposal. He also said that he did not expect this to affect final negotiations on the 2012 EU budget, and that ensuring this was a temporary derogation and limiting eligibility should reduce any possible increase.

16.6 When we considered this at our meeting on 23 November 2011, we took the view that the Minister's letter was helpful up to a point, but, as it was based on "indications" rather than hard evidence, we felt it would be premature to make a further Report to the House or to clear the document until we had received confirmation of the actual position. However, as DEFRA officials had indicated that the UK was likely to come under pressure in the Council the following week to agree these arrangements, our Chairman replied saying that, if the position should by then have been clarified to the Government's satisfaction, we would not want to prevent it from giving its agreement, but he asked for a further update when the position had been established more clearly.

16.7 We have now received a letter of 30 November 2011 from the Minister, in which he says that the Commission has accepted all the UK's points, namely that:

  • the decisions made on the proposal should mirror — as far as possible — those for the SCF and European Fisheries Fund (EFF);
  • the proposal should be a temporary derogation from the existing co-financing rules;
  • it should only be made available for eligible Member States until the end of 31 December 2013, mirroring the SCF and EFF proposals; and

He adds that it has also received similar Commission and Council declarations on budgetary and co-financing in 2014-20 to those appended to the SCF proposal.

16.8 The Minister says that the proposal, with the inclusion of the UK's amendments has been agreed by other Member States and by the Commission. It has since been agreed at the trilogue as a first reading deal, and will be returning for final Council agreement.


16.9 We are grateful to the Minister for this further information, and we are now content to clear the document.

91   (33065) 13400/11: see HC 428-xxxvi (2010--12) chapter 3 (14 September 2011) and HC 428-xxxvii (2010-12) chapter 11 (12 October 2011). Back

92   (33075) 13407/11: see chapter 17. Back

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Prepared 15 December 2011