41st Report of Session 2010-12 - European Scrutiny Committee Contents

5 Co-financing of the structural measures for agriculture and fisheries




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



COM(11) 484

Draft Regulation amending Council Regulation (EC) No 1198/2006 on the European Fisheries Fund 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 base(a) Articles 42 and 43 TFEU; co-decision; QMV

(b) Article 43(2) TFEU; co-decision; QMV

Documents originated1 August 2011
Deposited in Parliament(a) 4 August 2011

(b) 5 August 2011

DepartmentEnvironment, Food & Rural Affairs
Basis of consideration(a) EM of 6 September 2011

(b) EM of 5 September 2011

Previous Committee ReportNone
To be discussed in CouncilShortly
Committee's assessmentPolitically important
Committee's decisionNot cleared; further information requested


5.1 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), whilst Council Regulation (EC) No 1198/2006 performs a similar function in relation to the European Fisheries Fund (EFF). In each case, the Regulation specifies that support should be provided through programmes which receive part of their funding 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 (and for the outermost regions and the smaller Aegean Islands), as compared with 50-55% for other regions. This means that the national contribution can range from 50% to as little as 20%.

The current proposals

5.2 However, the Commission points out that the current economic crisis is putting increased pressure on national financial resources, and that, in order to ensure the smooth implementation of the programmes under these two Regulations, it is necessary to ease the burden on those Member States currently experiencing financial difficulties.

5.3 It has therefore proposed that the rate of EU co-funding should be increased for those Member States — Ireland, Portugal, Greece, Romania, Latvia and Hungary — which have had financial assistance made available through the European Financial Stabilisation Mechanism established in May 2010 (or the assistance made available by other euro-area Member States before the Mechanism was set up), or the EU Balance of Payments Facility for non-euro members.[31] In the case of the EAFRD, this would increase the EU budget share to 95% in the convergence regions and to 85% elsewhere (reducing the Member States contribution to 5% and 15% respectively), whilst, in the case of the EFF, the rate of co-financing would be increased by up to 10 percentage points. However, the arrangement would cease to apply once a Member State no longer receives financial assistance under the EU's financial support mechanism.

5.4 It is estimated that the first of these changes could increase payment appropriations by €90 million in 2011 and €470 million in 2012, but the Commission says that, as the total budget envelope for the EAFRD remains unchanged, there will be a corresponding decrease in payments at the end of the period. The same principle would apply in relation to the EFF, though the sum involved would be more modest, amounting to €20 million in 2012.

The Government's view

5.5 We have received Explanatory Memoranda of 6 September 2011 and 5 September 2011 respectively from the Minister of State for Agriculture and Food at the Department for Environment, Food & Rural Affairs (Mr Jim Paice) and from Parliamentary Under-Secretary for Natural Environment and Fisheries (Mr Richard Benyon). In each case, they point out that the proposal to reduce national co-financing rates for those Member States currently experiencing economic difficulties would have no direct impact of the delivery of the respective programmes in the UK. They add that the Government supports delivering environmental public benefits and boosting economic growth and competitiveness in the EU, including in those Member States struggling most to make use of available EU support for growth-enhancing projects, whilst pointing out also that the scarcity of public resources places a premium on ensuring value for money and sound financial management. The Ministers also say that the UK supports the principle of co-financing and sound budget management, that co-financing creates the right set of incentives to ensure proper ownership of these programmes by Member States, and that it will engage constructively to ease the implementation of EU funds in a way which is effective properly targeted and avoids undue pressure on the EU budget.

5.6 However, in its comments on the proposal relating to the EAFRD, the Government has drawn attention to the possibility of the Commission being asked to submit a draft amending budget if the payment appropriations entered in the 2012 budget are insufficient to cover expenditure, and it stresses that any approach should respect the UK's objective of achieving real budgetary restraint at EU level in 2012 and 2013, and over the next Multi-Annual Financial Framework (2014-2020).


5.7 We note the Government's desire to help struggling Member States make the best use of EU funds to stimulate economic growth and competiveness, and we understand that the changes proposed by the Commission are intended to be cost-neutral, and that they would not alter the overall allocation of the funds in question to each Member State over the whole programming period. However, as with the similar proposal[32] relating to the Structural and Cohesion Fund programmes, we also detect a degree of ambivalence in its approach to the Commission's proposals, and in particular the possible implications for expenditure in 2012 and the UK's wider objectives in relation to EU budgetary restraint.

5.8 In light of these concerns, we would like the Minister to provide a clearer indication of the Government's position on the Commission's proposals, and their implications for its objective of achieving an EU budget freeze in 2012. In the meantime, we are holding the two proposals under scrutiny.

31   This arrangement would also apply in future to any Member State receiving financial assistance under the Treaty establishing the European Stability Mechanism (signed in July 2012, but not yet in force). Back

32   (33065) 13400/11: see chapter 3. Back

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