17 Financial management
| (a)
(33576)
18940/11
+ ADDs 1-2
COM(11) 914
(b)
(34042)
11765/12
—
|
Draft Regulation on the Hercule III programme to promote activities in the field of the protection of the European Union's financial interests
European Court of Auditors Opinion No. 3/2012 on a draft Regulation on the Hercule III programme to promote activities in the field of the protection of the European Union's financial interests
|
| Legal base
| (a) Article 325(4) TFEU; co-decision; QMV
(b) —
|
| Department
| HM Treasury
|
| Basis of consideration
| Minister's letter of 13 January 2014
|
| Previous Committee Reports
| (a) HC 428-xlix (2010-12), chapter 10 (1 February 2012), HC 86-x (2012-13), chapter 3 (17 July 2012) and HC 86-xxxix (2012-13), chapter 9 (24 April 2013)
(b) HC 86-x (2012-13), chapter 3 (17 July 2012) and HC 86-xxxix (2012-13), chapter 9 (24 April 2013)
|
| Discussion in Council
| 10 December 2013
|
| Committee's assessment
| Politically important
|
| Committee's decision
| Cleared |
Background
17.1 The Hercule programme was established
by Council Decision No. 804/2004/EC as an instrument dedicated
to fighting fraud, corruption and any other illegal activities
affecting the financial instruments of the EU. It brings together
three activities (technical assistance, anti-fraud training and
assistance for the European Lawyers' Association) into one structured
programme and is administered by the European Anti-Fraud Office
(OLAF). In 2007 the programme was extended to cover the period
2007-13 (as Hercule II). In 2011, the Commission and OLAF carried
out an informal consultation with stakeholders, especially in
Member States' operational services and Commission services and
EU bodies, to evaluate the implementation of the Hercule II programme
and to provide ideas for future objectives. The feedback was positive
and stakeholders made suggestions for future activities, technical
matters and simplification, which the Commission took into consideration
in its impact assessment on whether to continue with the programme
or not.
17.2 As the legal base for Hercule II
was to expire at the end of 2013, the Commission considered that
a replacement should ensure the continuity of EU support for the
various activities to gather better information, carry out studies
and provide training or technical and scientific assistance in
the fight against fraud. So in December 2011 it presented this
draft Regulation, document (a), to extend the programme (as Hercule
III) to cover the period from 2014-20, accompanied by the conclusions
of OLAF's report on the implementation of the Hercule II programme
and an impact assessment. The new programme would continue to
place specific emphasis on the fight against cigarette smuggling
and counterfeiting to reflect the Commission's legal obligations
stemming from agreements with four international tobacco manufacturers.[79]
17.3 The ECA must be consulted for its
formal Opinion prior to the adoption of financial management Regulations
and anti-fraud legislation. Document (b) is the ECA's Opinion
on the draft Regulation. It is based not only on the proposal
itself but also on an "intermediate" review of the achievements
of the Hercule II programme and the Commission's impact assessment.
17.4 When we last considered these documents,
in April 2013, we heard that:
· the Government saw the ECA
Opinion as a useful input into any decision on the future of the
Hercule III programme;
· the Presidency had now confirmed
that the Commission was committed to providing an independent
evaluation of the full impact of the programme by the end of 2014;
· the Government looked forward
to seeing this report, which it hoped would go some way to providing
the comprehensive evaluation it had previously called for;
· the Government still believed
that an ECA Special Report on the effectiveness of programmes
such as Hercule might well be a useful supplement to existing
reports, although this would need to be re-assessed once it had
evaluated the Commission's report, in order to avoid unnecessary
duplication;
· the Commission had suggested
that the reorganisation of OLAF would establish synergies that
should result in cuts to administrative costs, which the Government
would welcome;
· on an issue of compensatory
reductions elsewhere in the 2014-20 Multiannual Financial Framework
(MFF), the Government was waiting for the Commission to give an
updated view on individual programme spending, so further detail
was not available at that stage;
· in relation to the proposed
increase in the maximum co-financing rate for grants for technical
support, the Government was particularly pleased that the ECA,
in its Opinion, suggested that the rate should be 50% to reflect
the provisions of the legal base of the programme, which required
joint Member State and EU responsibility;
· this should ensure that EU
and national interests were evenly balanced;
· in the ECA's view, 80% should
be a maximum rate only in exceptional cases;
· in the Council's official-level
discussions, the Government was successful in building a blocking
minority of like-minded allies (Denmark, Austria, France, Germany,
the Netherlands, Finland and Sweden) against the proposed co-financing
rate for the programme and had asked that discussion on the rate
should be considered in light of the ECA's Opinion; and
· the Government understood
that the Presidency would issue a compromise text with a further,
more in-depth discussion anticipated at the next working group
meeting.
17.5 We looked forward to a further
report of developments, particularly in relation to the matter
of compensatory reductions. Meanwhile the documents remained under
scrutiny.[80]
The Minister's letter of 13 January 2014
17.6 The Economic Secretary to the Treasury
(Nicky Morgan) writes now to tell us that following discussions
the Presidency issued a compromise proposal on 29 October 2013,
which included:
· a new setting out of the
operational objectives of the programme;
· indicative allocation of
funds for eligible actions (including technical assistance and
training) permitted to be financed under the programme, set out
in an annex to the Regulation;
· a requirement for an independent
mid-term evaluation report, by 31 December 2017, on the achievement
of the objectives of all the actions, results and impacts of the
programme, the effectiveness and efficient use of resources in
the programme's implementation, and its added value to the EU
— all these will inform any decision on the renewal, modification
or suspension of activities under the programme;
· a new requirement for all
participating countries and other beneficiaries to provide the
Commission with all the data and information necessary to increase
transparency and accountability of the programme; and
· a power granted to the Commission
within the financial envelope to use delegated acts, as detailed
in relation to the envelope and the indicative amounts allocated
to each action.
17.7 The Minister says that:
· in the most recent Council
working group discussions, the Commission's proposal to increase
the maximum co-financing rate for grants for technical support
from 50% to 80% (or 90% in exceptional and duly justified cases)
received sufficient support from a qualified majority of Member
States;
· the UK, along with Finland
and Sweden, continued to oppose this proposal;
· the Government notes that
the revised Presidency proposal for the overall financing envelope
for the programme is currently set at €105 million (£87.54
million) in current prices, a reduction from €110 million
(£91.71 million) on the current programme and in the original
Commission proposal;
· the final compromise text
was agreed at COREPER on 13 November 2013 and then formally approved
by the ECOFIN Council on 10 December 2013, with the UK opposed
on both occasions; and
· the complete finalisation
by jurist-linguists is now on-going and it is expected that the
measure will go to the European Parliament plenary for approval
this month.
17.8 Turning to our question about
compensatory reductions achieved in funding for other programmes
over the next MFF period the Minister, reminding us that the MFF
deal was given consent by the European Parliament on 19 November
2013 and was formally adopted by the Council on 2 December 2013,
says that:
· Heading 1A, the section of
the budget that covers research and innovation, including this
programme, is increasing by over a third;
· However, as she has reported,
within this heading the financial envelope for the proposed Hercule
III currently stands at €105 million representing a cut on
the previous MFF and the Commission's initial proposal; and
· the Government is encouraged
by this.
Conclusion
17.9 We are grateful to the Minister
for this account of the final outcome on the draft Regulation
and now clear the documents.
79 Philip Morris International, Japan Tobacco
International, Imperial Tobacco Limited and British
American Tobacco. Back
80
See headnote. Back
| 
