Sixteenth Report of Session 2012-13 - European Scrutiny Committee Contents


3   European Globalisation Adjustment Fund

(34211)

13483/12

COM(12) 462

Commission Report on the activities of the European Globalisation Adjustment Fund in 2011

Legal base
Document originated4 September 2012
Deposited in Parliament10 September 2012
DepartmentWork and Pensions
Basis of considerationEM of 22 September 2012
Previous Committee ReportNone
Discussion in CouncilNone planned
Committee's assessmentPolitically important
Committee's decisionNot cleared. For debate in European Committee B, together with the draft Regulation to continue the European Globalisation Adjustment Fund, already recommended for debate[11]

BACKGROUND

3.1  The European Globalisation Adjustment 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.

3.2  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 1,000 to 500; and
  • extension of the period of support, from 12 to 24 months.

Temporary derogations, to run to 31 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.

3.3  The 2006 Regulation establishing the EGF requires the Commission to send to the Council and the European Parliament, before 1 July each year, a quantitative and qualitative report on the activities of the fund in the previous year.

THE DOCUMENT

3.4  This Report is that for 2011. It contains information on applications submitted, decisions adopted or requests refused and actions funded, including the winding-up of financial contributions made. While not intended for this purpose, this information will be used also in negotiations on the proposal for the new EGF in the next Multiannual Financial Framework (which we have recommended for debate in European Committee B).[12]

3.5  In its overview of the year the Commission says that:

  • it received 26 applications for contributions from the EGF, in contrast to 31 in 2010;
  • the Budgetary Authority (the Council and European Parliament) took 22 decisions to draw on the EGF, with a total of €128.2 million (£100.5 million), which was 54.1% higher than for 2010;
  • four final reports were received in 2011 from Member States following completed implementation;
  • it submitted a proposal to extend the June 2009 temporary crisis derogation;[13] and
  • it proposed a continuation of the EGF in the period 2014-20.[14]

3.6  In more detail the Commission reports:

  • its case for renewal of the temporary provisions and the European Parliament's support for the measure;
  • efforts to improve the decision-making process for the EGF;
  • it received 26 applications for contributions from the EGF, in contrast to 31 in 2010;
  • the 26 applications together targeted 16,870 redundant workers, ranging from 153 to 1,517 workers per case, with three applications targeting more than 1,000 workers and six targeting fewer than 500;
  • the total amount requested was €77.5 million (£60.8 million), ranging from €1.1 million (£882,000) to €6.8 million (£5.4 million), with an average of €3 million (£2.3 million);
  • the amounts proposed per worker varied from slightly above €1,200 (£941) to over €19,000 (£14,895);
  • the applications were submitted by ten Member States — Austria, Denmark, Germany, Italy, the Netherlands, Portugal, Spain, Sweden, and for the first time, Greece and Romania;
  • the applications related to 20 sectors of the economy (eight of which were sectors which had not been presented in an EGF application before — road transport, tobacco, social work, ICT services, warehousing and storage, motorcycles, metalworking and pharmaceuticals), covering most frequently construction (four applications) and automotive, electronic equipment and metalworking (two applications each);
  • of the 26 applications, 20 were to support workers made redundant as a direct result of the global financial and economic crisis ('crisis-related'), with the remaining six cases to respond to major structural changes in world trade patterns due to globalisation ('trade-related');
  • applying for EGF support was made a lot easier by the temporary 'crisis derogation';
  • the Budgetary Authority (the Council and European Parliament) took 22 decisions to draw on the EGF (five relating to applications made in 2011, 16 relating to applications received in 2010 and one from 2009);
  • these targeted 21,213 redundant workers in 12 Member States, with a total of €128.2 million (£100.5 million) paid from the EGF (25.6% of the maximum annual amount available to the EGF);
  • this was 54.1% higher than for 2010 (€83.2 million (£65.2 million));
  • in 2011, payment appropriations for the EGF were sourced differently from in the past, minimising the use of ESF funds (which complements the EGF);
  • €47.6 million (£37.3 million) was credited to the EGF budget line at the beginning of the year and a further €50 million (£39.76 million) was added in an amending budget;
  • four final reports were received in 2011 from Member States following completed implementation — two cases in Belgium, one in Sweden and one in Ireland;
  • these show that in these cases 45% of targeted workers (2,352 of 5,228) had found new jobs or were self-employed, 10.9% were in education and training and the remaining 44.1% were unemployed or inactive for personal reasons;
  • these are the first completed cases under the revisions allowing for an extended 24-month implementation period and 65% co-financing;
  • these results were hampered by the reduced absorption capacities of local and regional labour markets as a direct consequence of the global financial and economic crisis;
  • the figures relate to a snap-shot in time and usually increase following the end of the EGF period — especially in the medium term if those workers continue to be supported through Member States' own expense or with the help of the European Social Fund;
  • feedback from the three Member States indicates increased self-confidence and employability of targeted workers following EGF implementation — the Member States reported an ability to act more flexibly and innovatively to assist lower-skilled and harder-to-help jobseekers;
  • twenty final reports on completed EGF cases had been received up to December 2011, since the EGF started, out of 97 applications;
  • the limited results so far received are inadequate to draw firm conclusions on the added value of EGF support for redundant workers;
  • up to 0.35% of the EGF resources available can be used for technical assistance in the form of, for example, information and administrative support, monitoring, audit, control and evaluation activities — €483,868 (£379,328) was actually used for these purposes;
  • five EGF cases were wound up in 2011, all of which had 12 month implementation periods with a co-financing rate of 50%;
  • one EGF contribution was returned in full by the Spanish authorities in 2011, totalling €382,200 (£299,626);
  • budget implementation varied from 4.7% to 29.6%, with unspent funds to be returned to the EU Budget totalling €27.6 million (£21.7 million);
  • this may be due to a lack of accurate and informed planning, including overestimating the number of workers wishing to participate, and or the numbers opting for more expensive schemes;
  • there may have been delays in implementation and Member States may not have taken advantage of the flexibility to move money between budget items;
  • when comparing the 40 final reports available up to July 2012, the Commission found that 24 months implementation helped Member States to plan more realistically, implement more quickly, and re-budget as necessary;
  • an analysis of trends over the period January 2007 to December 2011 considered 97 applications, of which 66 were related to the global financial crisis under the temporary derogation and eligible for 65% of EGF funding;
  • the number of trade-related applications remained consistent at six per year since 2009;
  • the Netherlands and Spain submitted the highest number of applications (16 each), followed by Italy (12) and Denmark (eight);
  • seven Member States had still not applied, including the United Kingdom;
  • Italy requested EGF assistance for the largest number of workers (13,910 in 12 applications), followed by Spain (12,806 in 16 applications) and Ireland (9,835 in six applications);
  • €414.9 million (£325.3 million) was requested from the EGF in this period, with Italy requesting the highest amount (€66.2 million (£51.9 million)) followed by Ireland (€60.6 million (£47.5 million)) and Denmark (€49.9 million (£39.1 million) in eight applications);
  • the average amount of funding per worker was highest in Austria at around €15,000 (£11,759), followed by Denmark with €10,000 (£7,840) — Lithuania, Slovenia and the Czech Republic requested less than €1000 (£784) per worker;
  • whilst 32 sectors were identified for EGF assistance, the majority of them were in manufacturing - automotive (14), textiles (10), printing (nine) and machinery and equipment (eight);
  • over 19,000, or 21.7% of the total number of workers, were targeted in the automotive sector, textiles, at just over 11,000 workers (12.6%) was second, with construction third with nearly 7000 workers (7.8%);
  • the mid-term evaluation of the EGF assessed the impact of the EGF in more detail, covering 15 EGF cases in 12 Member States; and
  • it found that, after 12 months of EGF support, 42% of targeted workers had found new jobs, with numbers increasing in the medium term — a positive result, bearing in mind the type of worker targeted and the disadvantaged regions the EGF supports.[15]

THE GOVERNMENT'S VIEW

3.7  The Minister for Employment, Department for Work and Pensions (Mr Mark Hoban), comments that:

  • as a report on the activities of an EU instrument, this report does not in itself have any implications;
  • the Government has, however, made clear that it opposes extension of the EGF into the next Multiannual Financial Framework period primarily on the grounds that it is an inefficient instrument for managing those at risk of unemployment, or made unemployed, as a result of large redundancies;
  • the Government believes that the EGF was intended to be time-bound and sees no case for its extension, with other instruments such as the European Social Fund being more suitable for improving the capacity of national institutions and programmes to manage labour market shocks;
  • moreover, the Government has been clear that it wants to see real policy results and budgetary restraint in the EU over the coming years, as well as the longer term, in order to avoid unaffordably high costs to the UK and 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; and
  • as part of this, it is essential that EU expenditure is closely scrutinised on the basis of value for money.

3.8  The Minister, saying that the Government therefore welcomes this annual report on implementation of the EGF, continues that it raises, however, a number of issues that cause concern, including:

  • the poor return on EGF investments — while a small number, the four final reports submitted in 2011 are part of a trend of low reintegration rates. This data represents an improvement in raw terms over that reported for 2010 (where only 20% of workers had found employment). However, the headline figures mask differences between cases — an Irish application led to only 557 of 2,589 identified workers finding employment;
  • the lack of quantitative data to back up the Commission's claims that EGF interventions lead to greater employment in the medium to long term (beyond a case's 12 or 24 month intervention period), or that the EGF is the primary driver for obtaining employment amongst targeted workers;
  • the low number of applications from, and subsequent grants to, the newer Member States over the lifetime of the EGF for which data has been provided suggests that EGF support is skewed away from those labour markets with weaker structures for reintegrating workers suffering redundancies. The significant discrepancy in the amount of funding requested per worker across applications in 2011 suggests widely different support packages on offer both within and between Member States;
  • whilst the number of trade-related applications has remained consistent over the years, the temporary derogation for crisis-related applications has led to a sharp increase in their number which place a greater drain on EU resources;
  • a draft amending budget and global transfer were both required to fund the EGF to the tune of more than 100% of the appropriations credited to its budget line at the beginning of 2011 — this indicates poor financial forecasting by the Commission and that the original allocation of funds to the EGF fails to provide an adequate constraint on in-year spending; and
  • the low rate of implementation of EGF assistance — in the five cases wound up in 2011, the implementation rates varied from between 4.7% and 29.6%, revealing a concerning lack of adequate forecasting and management of the personalised services by Member States.

3.9  The Minister comments that:

  • the Government regards these findings as deeply concerning, not least given the disappointingly low number of workers being returned to work and the growth in spending from the EGF with, despite six fewer applications in 2011, a 54.1% increase in requested funding; and
  • the Government has noted also, in Explanatory Memoranda relating to EGF applications, the lack of adequate time for parliamentary scrutiny of the large number of proposals, although the return to original terms on co-financing and trade-related criteria could result in a dip in applications, given past trends.

3.10  The Minister concludes that the Government will closely scrutinise future proposals for the EGF in the context of negotiations on the draft Regulation for the EGF for the period 2014-2020 and on the next Multiannual Financial Framework.

CONCLUSION

3.11  Although, as the Minister notes, this report does not in itself have any direct policy implications, it is extremely relevant to consideration of the continuation of the EGF into the next Multiannual Financial Framework period. We share the Government's doubts about this prospect, which are reinforced by this document. So we recommend that the document be debated with the draft Regulation to continue the EGF in the period 2014-2020, which we have previously recommended for debate in European Committee B.[16]


11   (33256) 15440/11 + ADDs 1-3: see HC 428-xlii (2010-12), chapter 11 (23 November 2011) and HC 86-x (2012-13), chapter 1 (17 July 2012). Back

12   IbidBack

13   (32962) 12122/11: see HC 428-xxxvi (2010-12), chapter 7 (14 September 2011), HC 428-xxxviii (2010-12), chapter 8 (19 October 2011), HC 428-xlii (2010-12), chapter 10 (23 November 2011), HC 428-xlvii (2010-12), chapter 12(18 January 2012) and HC 428-lii (2010-12), chapter 19 (29 February 2012). Back

14   Op cit. Back

15   See http://ec.europa.eu/social/keyDocuments.jsp?type=0&policyArea=0&subCategory=0&country=0&year=0&advSearchKey=evaluationemployment&mode=advancedSubmit&langId=en. Back

16   Op cit. Back


 
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