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

7 European Globalisation Adjustment Fund



COM(11) 336

Draft Regulation amending Regulation (EC) No 1927/2006 on establishing the European Globalisation Adjustment Fund

Legal baseArticle 175 TFEU; co-decision; QMV
Document originated10 June 2011
Deposited in Parliament29 June 2011
DepartmentWork and Pensions
Basis of considerationEM of 19 July 2011
Previous Committee ReportNone
To be discussed in Council1 December 2011
Committee's assessmentPolitically important
Committee's decisionNot cleared; further information requested


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.


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.  Back

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