Documents considered on 11 September 2013 - European Scrutiny Committee Contents

10 European aid to the most deprived ~



+ ADDs 1-2

COM(12) 617

Draft Regulation of the European Parliament and of the Council on the Fund for European Aid to the Most Deprived

Legal baseArticle 175(3) TFEU; co-decision; QMV
DepartmentWork and Pensions
Basis of considerationMinister's letter of 29 August 2013
Previous Committee ReportHC 86-xxii (2012-13), chapter 3 (5 December 2012)
Discussion in CouncilNo date set
Committee's assessmentPolitically important
Committee's decisionNot cleared; further information requested

Background and previous scrutiny

10.1 Since 1987, the EU has operated an EU Food Distribution Programme which uses surplus public intervention stocks of agricultural products to provide food aid to the most deprived. Participation is voluntary but has risen in recent years to include 20 Member States (but not the UK). The Programme is being phased out by the end of 2013 because the range and quantity of products in intervention stocks has diminished, and there is limited scope for Member States to supplement them with food purchases on the open market.

10.2 The draft Regulation would establish a new Fund for European Aid to the Most Deprived ("the Fund"), with a proposed budget of €2.5 billion for the period 2014-20, to alleviate poverty and material deprivation in the EU by supporting national schemes for the distribution of food products and the provision of basic consumer goods for the personal use of homeless people or children. Unlike the Food Distribution Programme, which is a measure based on the EU's Common Agricultural Policy, the new Fund is an EU cohesion policy instrument. Its objective is to promote social cohesion by alleviating poverty, thereby contributing to the poverty reduction target established by the European Council in June 2010 as part of the Europe 2020 Strategy. This seeks to lift at least 20 million people out of the risk of poverty and social exclusion by 2020.

10.3 Member States would be responsible for establishing objective criteria to determine which individuals, families or households qualify as "most deprived" and for selecting partner organisations at national level to distribute food and basic consumer goods. The Fund would be managed in the same way as other EU cohesion instruments, using a shared management model. Member States may choose to focus on one or more of the three types of material deprivation within the scope of the Fund: food deprivation, homelessness, or the material deprivation of children. The allocation of resources between Member States would be based on population data provided by Eurostat indicating the proportion suffering from severe material deprivation[30] and living in households with very low work intensity.

10.4 The Commission believes that EU action is justified for two reasons. First, poverty reduction and social inclusion are essential elements of the sustainable growth agenda set out in the Europe 2020 Strategy. It estimates that nearly one quarter (116 million) of Europeans are at risk of poverty or social exclusion and approximately 40 million suffer from severe material deprivation at a time when Member States are struggling to provide the social investment needed to prevent further social fracture. It suggests that the Fund would provide direct material assistance for approximately 2.1 million people each year, but would have a multiplier effect extending its reach to at least 4.2 million people (roughly 10% of those experiencing severe material deprivation throughout the EU). Second, the goal of social inclusion (which is an integral part of EU cohesion policy and features in the general objectives of the EU Treaties) necessitates action by the EU because the economic and financial crisis has diminished the ability of some Member States to maintain adequate levels of social expenditure.

10.5 There are two further imperatives which explain the Commission's desire to act. The first is the perception that the EU shares responsibility for the austerity measures being implemented in many EU Member States and has, as a result, forfeited the confidence of ordinary citizens in its ability to ensure an adequate level of social protection. The second is the Commission's desire for a high visibility EU instrument, capable of providing direct material assistance to those worst affected by rising levels of poverty and social exclusion, to mitigate negative perceptions of its contribution to the economic and financial crisis. Existing EU cohesion instruments (notably, the European Social Fund and the European Regional Development Fund) focus primarily on labour activation measures and skills and training to generate growth and jobs. By contrast, the new Fund would provide emergency assistance to those who are furthest from the labour market.

10.6 The Government questioned whether the draft Regulation complied with the principle of subsidiarity and considered that its objectives could be sufficiently achieved by Member States acting on their own. The Minister for Employment (Mark Hoban) suggested that the Fund would lead to heavy and costly administrative burdens for Member States and partner organisations and that the European Social Fund should remain the principal EU tool for tackling poverty, with a specific focus on helping disadvantaged people to gain employment. He added that the Government intended to work with other like-minded Member States to oppose the adoption of the draft Regulation.

10.7 We shared the Government's subsidiarity concerns and our recommendation that a Reasoned Opinion should be sent to the Presidents of the EU institutions was endorsed by the House on 18 December 2012. A further four Reasoned Opinions were issued by the Danish and Swish Parliaments, the German Bundestag and the House of Lords, insufficient to meet the threshold required to trigger a formal review of the proposal under the Protocol on the application of the principles of subsidiarity and proportionality.

10.8 Notwithstanding the Government's intention to oppose the draft Regulation, we asked the Minister to reconsider his decision not to initiate a consultation as we thought that the views of stakeholders could help to establish a more robust evidence base against which to assess the potential benefits or costs of EU action. We also requested further information on the costs and administrative burdens associated with participating in the Fund, given that the draft Regulation would allow Member States to implement it through the structures already established for their European Social Fund programmes. Finally, we asked for progress reports on the negotiations.

The Minister's letter of 29 August 2013

10.9 The Minister (Mark Hoban) says that initial discussions have enabled the Commission to clarify the scope of the Fund and the budget. He continues:

"First, on the scope of the proposal, a Member State would be able to use the Fund to support food aid for the most deprived people, and/or basic consumer goods for homeless people, and/or basic consumer goods for children. Second, on the budget, the allocation that a Member State receives would not be additional funding, but would be taken from its structural funds allocation (therefore a Member State's structural fund allocation would be reduced by the amount it receives from the Fund)."

10.10 The Minister highlights three main issues in the negotiations:

  • whether the participation of Member States in the Fund should be mandatory or voluntary;
  • the scope of the Fund; and
  • allocations to Member States.

10.11 He indicates that the UK and like-minded Member States explored two ways in which participation in the Fund could be made voluntary:

"The first would have given Member States the option to retain their allocations within their structural funds programmes instead of supporting food aid or basic consumer goods. The second would have divided the Fund's budget among Member States who opted to participate in the Fund (without reducing the structural funds allocations of Member States which did not participate). There was no consensus among Member States on either of these, and both were opposed by the European Commission. The most recent discussions indicate there is a qualified majority for a mandatory Fund, and the Lithuanian Presidency is taking forward negotiations on this basis."

10.12 Turning to the scope of the Fund, the Minister explains:

"[T]he main issue has been whether it should be made more flexible so that a Member State could use the Fund to support social inclusion measures for the most deprived rather than food aid or consumer goods. This would enable a Member State to align the Fund with the delivery of social inclusion measures under the European Social Fund, and use it to address the causes rather than the symptoms of poverty. The most recent discussions have indicated considerable support among Member States for broadening the scope of the Fund, and the Lithuanian Presidency plans to consider this further in September. The UK has supported broadening the scope if the Fund is to be mandatory. The Commission has indicated that it is willing to consider broadening the scope."

10.13 On allocations to Member States, the Minister says that the Commission produced a first simulation in July, based on the two indicators — severe material deprivation and households with very low work intensity — set out in Article 6(3) of the draft Regulation. He continues:

"The simulation also capped allocations at 2% of a Member State's structural and cohesion funds allocation, so that no Member State would see a disproportionate reduction in its allocation. The simulation was based on an EU budget of €2.5 billion over seven years from 2014-2020 and produced a UK allocation of €205.7 million over seven years following the application of the cap. The Commission also produced a second simulation which incorporated an additional indicator on the number of people at risk of poverty after social transfers. This produced a UK allocation of €158.1 million. There will be further discussion of the allocations methodology in September. Because of the impact on our structural funds allocation, the UK will support adjustments to the methodology which reduce the UK allocation from the Fund.

"With the Multi-annual Financial Framework for 2014-2020 it has been agreed that the budget for the Fund will be €2.5 billion, with the option to increase this by up to €1 billion if individual Member States wish to allocate more of their structural funds to the Fund.[31] Therefore once the Commission has allocated the €2.5 billion among all Member States, each Member State will have the option to receive a share of the additional €1 billion (on the basis that this will then be taken from its structural funds allocation). The UK does not intend to seek a share of the additional €1 billion. The methodology for allocating the additional €1 billion will also be discussed in September."

10.14 The Minister notes that the European Parliament supports a mandatory Fund and has rejected amendments that would have made participation voluntary. It also supports the option to increase the Fund by up to €1 billion and is seeking a stronger focus on food aid and a greater role for partner organisations in implementing the Fund. Member States have expressed concern that the EP's amendments would increase administrative burdens and introduce greater prescription.

10.15 The Minister expects the Lithuanian Presidency to produce a compromise text later in September and to seek agreement to a general approach at the Employment and Social Policy Council on 15 October. He undertakes to provide a further update before then.

10.16 Finally, the Minister explains why he has not undertaken a consultation on the draft Regulation as well as the basis for the Government's concerns regarding the costs and administrative burdens associated with participating in the Fund:

"We have not conducted a consultation on the proposal as our focus has been on challenging the principle of the Fund and seeking to make it voluntary. We do not wish to raise expectations about how much money will be available from the Fund, or what it could be spent on. If the scope is broadened to include social inclusion measures, then it might be appropriate to consider delivering it alongside the European Social Fund, in which case Local Enterprise Partnerships and their partners could have a role in identifying local needs and priorities.

"We remain concerned about the administrative burden of delivering the Fund, even if European Social Fund systems were used, although this would depend on the scope of the Fund. European Social Fund systems have been set up to procure and deliver employment, training and social inclusion provision. If the scope were limited to the distribution of food and basic consumer goods, our initial assessment is that this would require different processes which could involve additional administrative burdens particularly in relation to the evidence that would be required from delivery organisations to support claims for reimbursement of costs."


10.17 We thank the Minister for his informative letter. We share the Government's disappointment that participation in the Fund will be mandatory for all Member States, not least because their differing capacity to provide adequate levels of investment to support social cohesion at national level, and the absence of any discernible cross-border dimension, would appear to undermine the case for a uniform approach across the EU.

10.18 If the Fund is to be mandatory, we agree that the Government should seek to mitigate the impact that participation in the Fund will have on the UK's allocation of EU Structural Funds for 2014-20 and to preserve the flexibility to utilise these Funds according to national, regional and local needs and priorities. We look forward to receiving a further update, in light of any compromise text produced by the Presidency. Meanwhile, the draft Regulation remains under scrutiny.

30   Severe material deprivation is measured in terms of the inability to afford at least four of the following: payment of rent, mortgage or utility bills; adequate heating; coping with unexpected expenses; eating meat or protein every second day; taking one week's annual holiday away from home; purchasing any one of the following: a colour TV, car, telephone, or washing machine. Back

31   This commitment is set out in a draft Council Declaration issued on 27 June 2013 which says that, in addition to the €2.5 billion already agreed for the Fund for European Aid to the Most Deprived, "Member States may decide to increase their allocations by up to €1 billion on a voluntary basis". See Back

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Prepared 8 October 2013