7 European Globalisation Adjustment Fund
| (32962)
12122/11
COM(11) 336
| Draft Regulation amending Regulation (EC) No 1927/2006 on establishing the European Globalisation Adjustment Fund
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| Legal base | Article 175 TFEU; co-decision; QMV
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| Document originated | 10 June 2011
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| Deposited in Parliament | 29 June 2011
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| Department | Work and Pensions
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| Basis of consideration | EM of 19 July 2011
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| Previous Committee Report | None
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| To be discussed in Council | 1 December 2011
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| Committee's assessment | Politically important
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| Committee's decision | Not cleared; further information requested
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Background
7.1 The European Globalisation Fund (EGF) has been in operation
since January 2007 and was introduced to provide support for workers
affected by large scale redundancies occurring as a result of
shocks due to globalisation and trade shifts. It provides one-off,
time limited individual support, geared directly to redundant
workers, so that they are able to find new jobs as quickly as
possible. Expenditure from the fund is allowed only for active
labour market policies, including training measures. It must not
be used for activities that are ordinarily carried out by public
employment services or are receiving other EU funding, for example,
through the European Social Fund. It cannot finance the restructuring
of companies or sectors. At a practical level, Member States have
to apply to the EGF on a case-by-case basis, with each application
subject to agreement by the Council and the European Parliament.
7.2 The EGF was amended in June 2009, in response
to the financial crisis, through a mix of permanent and temporary
changes to improve take up. Permanent revisions included:
- reduction of the qualifying
number of redundancies, from 1000 to 500; and
- extension of the period of support, from twelve
to 24 months.
Temporary derogations, to run to 30 December 2011,
were:
- enlargement of the scope of
the EGF to cover redundancies caused by the impact of the global
financial and economic crisis; and
- an increase in the maximum contribution from
the EGF (the co-financing rate) from 50% to 65%, thus reducing
the direct match-funding from applicant Member States.
The document
7.3 With this draft Regulation the Commission proposes
an extension of the temporary derogations until 31 December 2013,
the end of the current EGF implementing Regulation and of the
Multi-Annual Financial Perspective for 2007-2013. The Commission:
- asserts that the consequences
of the financial and economic crisis are still being seen in labour
markets and, therefore, the derogations are still needed;
- cites its latest Economic Forecast (Spring 2011)
on prospects for labour market recovery for 2011 and 2012 being
worse than the projections in autumn 2008, which underpinned the
2009 amendment;[35]
- predicts that further job losses due to closure
of enterprises should be expected to continue for a certain time;
- notes that recovery in employment normally lags
that of GDP;
- says that its consultation of Member States in
2010 found that there was support for extending the temporary
derogation and confirmed that the easements, and especially the
increased maximum contribution from the EGF, are the primary factor
in increased applications to the fund;
- records that applications have grown significantly
— from 18 applications for €75.72 million (£67.06
million) under the original Regulation to 28 for €131.70
million (£116.63 million), 75% related to the crisis, in
2009, 31 for €132.50 million (£117.34 million), 87%
related to the crisis, in 2010 and five published applications
in 2011 so far; and
- says that the proposed extension of the derogations
does not prejudge the future for the EGF beyond the end of 2013
and the next Multi-Annual Financial Framework.
7.4 The present legislation provides for a review,
on the basis of a mid-term evaluation, of the EGF before the end
of 2011. The evaluation is not yet ready, but the draft Regulation,
for which there is no impact assessment, was tabled in June 2011
to allow time for negotiations to be completed before the current
derogations expire.
The Government's view
7.5 The Minister of State, Department for Work and
Pensions (Chris Grayling) says that the Government believes that
the EGF can play a useful role in responding to the consequences
of globalisation, especially in the more disadvantaged areas of
the EU. The Minister continues that:
- the Government has, however,
sought to ensure that measures supported under the EGF do not
undermine the incentive to reform both national labour markets,
institutions and policies or overlap with other EU funding streams
such as the European Social Fund;
- to date, the UK has not made an application to
the fund, relying instead on existing support for large scale
redundancies, including through Jobcentre Plus — and the
European Social Fund has been able to respond quickly to set appropriate
measures in place to assist those affected;
- if the EGF had been used, the response would
have been delayed significantly and it is not possible to use
European Social Fund and EGF for the same individuals;
- the Government has been clear that it wants to
see real budgetary restraint in the EU over the coming years,
as well as the longer term, in order to avoid unaffordably high
costs to UK taxpayers;
- to deliver this goal, the Government is committed
to continue to work hard to limit EU spending, reduce waste and
inefficiency, and ensure that where EU funds are spent they deliver
the best possible value for money for taxpayers;
- as part of this, it is essential that EU expenditure,
including on the EGF, is closely scrutinised on the basis of value
for money;
- these criteria continue to inform the Government's
position in the Council's Budget Committee on Member State applications,
on which decisions are made by QMV;
- while the EGF offers some benefit to Member States
with poor labour market structures, the Government believes there
is scope to reform arrangements for disbursing aid currently provided
by the EGF and will closely scrutinise future proposals for the
EGF in the context of negotiations on the next Multi-Annual Financial
Framework;
- the Government notes that most other Member States
provisionally support extension of the existing derogations; and
- it believes that there may be some amongst the
EU budget disciplinarians that will put the position of their
finance ministry on the co-financing rate because of its cost
to the EU Budget.
7.6 The Minister tells us that the Government has
not yet formed a final negotiating position and will be using
the time before substantive negotiations to seek further information,
including to:
- establish whether the derogations
are still required to respond to the current economic situation
and the prospects for the next two years, that is whether applications
can reasonably establish a link to the global crisis that began
in 2008;
- address the question of whether the derogations
are compatible now with the objectives of the Europe 2020 Strategy,
including in terms of encouraging reform and making social spending
efficient — for example, how many workers get new jobs through
the EGF, and at what cost, compared with standard activity of
employment services and other active labour market measures; and
- reflect the Government position on the EU Budget,
especially since the EGF draws from unspent and uncommitted funds
that would otherwise be returned to Member States.
Conclusion
7.7 We have been aware for some time, from considering
the steady stream of EGF applications, of the interplay between
the Government's wish not to obstruct other Member States' efforts
to help redundant workers through use of the EGF and its budgetary
concerns. So we fully understand the Government's intention to
establish its position on the draft Regulation on the basis of
fuller information. In this context we note that the proposal
has been presented without the benefit of either the mid-term
review of the EGF or an impact assessment. And we observe that
the Commission's comment that "a vast majority of responding
Member States" wished the derogations to continue is disingenuous
— many Member States have accessed the EGF under the 2009
criteria and might be fully expected to advocate their continuance.
7.8 Before considering this draft Regulation further
we should like to hear:
- whether the Government thinks
it sensible to continue with the proposal in the absence of the
mid-term review or an impact assessment; and
- more generally, what its formed position on
the proposal is.
Meanwhile the document remains under scrutiny.
35 See http://ec.europa.eu/economy_finance/publications/european_economy/forecasts_en.htm.
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