2 EU Structural and Cohesion Fund
programmes
| (34954)
10148/13
COM(13) 301
| Draft Regulation amending Council Regulation (EC) No. 1083/2006 as regards certain provisions relating to financial management for certain Member States experiencing or threatened with serious difficulties with respect to their financial stability and to the decommitment rules for certain Member States
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| Legal base | Article 177 TFEU; co-decision; QMV
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| Document originated | 21 May 2013
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| Deposited in Parliament | 30 May 2013
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| Department | Business, Innovation and Skills
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| Basis of consideration | EM of 18 June 2013
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| Previous Committee Report | None
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| Discussion in Council | No date set
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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
2.1 Council Regulation 1083/2006 sets out the rules governing
the EU's Structural Funds (the European Regional Development Fund
and the European Social Fund) and Cohesion Fund. The purpose
of the Funds is to strengthen economic, social and territorial
cohesion, and to reduce disparities in levels of development across
the EU. The Funds help to finance programmes developed at a national
and regional level which seek to promote sustainable economic
growth, competitiveness, employment and social inclusion while
also improving the quality of the environment.
2.2 The provision of assistance from the Funds
is intended to supplement, not replace, public expenditure by
Member States and is subject to the principle of co-financing.
The 2006 Regulation sets ceilings for the amount of co-financing
that the EU Funds may provide, ranging from 50% to 85% of eligible
expenditure. This means that the national contribution to each
programme can range from as much as 50% to as little as 15%.
2.3 In December 2011, the 2006 Regulation was
amended to create a temporary derogation from the application
of the co-financing ceilings for Member States experiencing liquidity
problems and receiving financial support from the EU as a result
of the economic and financial crisis. It allows Member States
to request an increase of 10% in the EU co-financing rate if:
- they are receiving financial
assistance under the European Financial Stabilisation Mechanism[7]
(or from other euro States before the Mechanism entered into force)
or under the Treaty establishing the European Stability Mechanism;
or
- they are experiencing balance of payments difficulties,
and thus receiving medium term financial assistance in the form
of a loan or other financing facility.[8]
2.4 The amended 2006 Regulation makes clear that
the derogation from the usual EU co-financing rules for Structural
and Cohesion Fund programmes is only available for statements
of expenditure submitted by 31 December 2013, and that the temporary
increase in the EU co-financing rate for qualifying Member States
does not affect the total amount of EU Structural and Cohesion
Fund payments made to each Member State during the current programming
period (2007-13).
The draft amending Regulation
2.5 The purpose of the draft amending Regulation
is to enable the Commission to continue to make payments in line
with the higher EU co-financing rate to Member States for as long
as they are in receipt of EU financial assistance under the afore-mentioned
support mechanisms. This would entail two changes to the 2006
Regulation.
2.6 First, the temporal limitation on the application
of the higher EU co-financing rate (currently stated to be the
end of 2013) would be removed. This means that the EU could continue
to apply a higher co-financing rate to certified expenditure submitted
later than 2013 until the overall payments ceiling for the Member
State in question for the 2007-13 financing period has been reached.
2.7 Second, under the 2006 Regulation, EU Structural
and Cohesion funding is subject to the principle of "automatic
decommitment" if it has not been used within a certain period
of time (usually two years from the date on which the budget commitment
for a particular operational programme was made). The draft amending
Regulation would seek to introduce greater flexibility by extending,
for a further year, the period in which expenditure claims in
respect of budget commitments made in 2011 and 2012 can be submitted
(to 2014 and 2015 respectively) in order to reduce the risk of
automatic decommitment for certain Member States (notably Romania
and Slovakia). The end date (31 December 2015) for submitting
expenditure for the 2007-13 programming period would, however,
remain unchanged.
2.8 The Commission emphasises that the changes
it has proposed are intended to ensure smooth implementation of
Structural and Cohesion Fund programmes at a time when fiscal
consolidation has placed a particular strain on national finances.
The total financial allocation for Member States for the 2007-13
programming period would not be affected.
The Government's view
2.9 The Minister for Business and Enterprise
(Michael Fallon) says that seven Member States — Ireland,
Cyprus, Portugal, Greece, Romania, Latvia and Hungary —
are currently receiving EU financial assistance and so would qualify
for the higher EU co-financing rate should they request it. He
continues:
"The Commission's proposal to extend the period
of reduced national co-financing rates for those Member States
currently experiencing economic difficulties would have no direct
impact on delivery of, or budgets for, Structural Funds programmes
in the UK. Only those Member States that are currently part of
or have had financial assistance through the European financial
stability mechanism, or the EU Balance of Payments Facility would
qualify under this proposal.
"The Government supports boosting economic growth
and competitiveness in the EU, in particular in those Member States
struggling most to make use of available EU support growth-enhancing
projects. At the same time, the scarcity of public resources places
a premium on ensuring value for money and sound financial management.
The Commission's proposals should therefore retain proper incentives
to focus EU spending on high added-value and effectively managed
projects and ensure available funding is set at an appropriate
level. Such an approach should be in light of the UK's budgetary
priorities for both the next Multiannual Financial Framework (2014-20)
and the Annual Budgets within this."
2.10 The Minister notes that the extension of
the period in which a higher EU co-financing rate may be applied
in some Member States will increase payment appropriations across
the EU by €484 million in 2014, at a cost to the UK of around
€61 million. Similar costs are likely to arise in 2015.
There will, however, be no change to the overall allocation of
Structural and Cohesion Funds to Member States for the 2007-13
and 2014-20 programming periods. He adds:
"With regard to accounting for any costs associated
with the Commission's proposal, the Government notes that Council's
position in February 2013 set the overall limits in commitments
and payments for the 2014-20 period. As the PM has said in his
post- February 2013 European Council statement to Parliament,
'...Council has said it is prepared to accept some flexibilities
about how spending is divided between different budget years and
different areas of spending, but we are absolutely clear that
this must be within the framework that the member states have
now agreed.'
"However, the Government notes that the proposal
includes measures that will increase the 2014 payment pressures
and we have yet to receive the Commission's 2014 Annual Budget
proposal."
2.11 Turning to the changes proposed to the rules
on automatic decommitment, the Minister notes that Conclusions
agreed by the European Council in February 2013 on the EU's Multiannual
Financial Framework for 2014-20 invited the Commission to explore
practical solutions to mitigate the risk of automatic decommitment
of Structural and Cohesion Fund payments for Romania and Slovakia
for the 2007-13 programming period. This is because their future
allocation of Structural and Cohesion Funds is to be capped at
110% of their level in real terms for the 2007-13 programming
period. The changes proposed by the Commission would only affect
the timescale for automatic decommitment of annual budget commitments
for Structural and Cohesion Fund expenditure in 2011 and 2012
in these two countries and are intended to improve their capacity
to absorb the available funding.
2.12 Although the Commission has not estimated
the budgetary impact of the changes on automatic decommitment,
it has suggested that there could be a net positive impact on
total payment appropriations in future years linked to the reduced
decommitment risk.
2.13 The Minister makes clear that the changes
proposed by the Commission will not affect the level of commitment
allocations across the EU's Multiannual Financial Framework or
for each budget year. Although there is broad support for the
draft amending Regulation amongst Member States, a number (including
the UK) have raised concerns about a possible increase in payment
pressures in 2014 and the absence of any estimate of the budgetary
impact of the changes proposed on automatic decommitment.
Conclusion
2.14 We note that there appears to be broad
support for the objectives underlying the changes proposed by
the Commission coupled with a concern that their implementation
could increase short term pressures on the EU budget. As the
Commission has not yet presented its proposal for the 2014 Annual
Budget, we intend to hold the draft amending Regulation under
scrutiny and ask the Minister to report back to us when the budgetary
implications are clearer.
7 See OJ No. L 118, 12.05.2010, p.1. Back
8
See OJ No. L 53, 23.02.2002, p.1. Back
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