6 Financial information on the European
Development Fund
| Committee's assessment
| Politically important |
| Committee's decision | Cleared from scrutiny
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| Document details | Commission Communication: Financial information on the European Development Fund
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| Legal base | —
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| Department | International Development
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Summary and Committee's conclusions
6.1 This Communication outlines the financial implementation of
the 8th, 9th and 10th EDFs (European Development Fund) for 2013
and provides updated forecasts of EDF commitments, payments, and
contributions for 2014 to 2015. It aims to help Member States
assess and forecast future EDF payment amounts in order to plan
and forecast national budgets.
6.2 The Minister (Lynne Featherstone) noted that
the Commission's forecast does not revise overall Member State
contributions for 2014 and so does not change DFID budgets for
EDF contributions in 2013/14. The proposed level of Member State
contributions in 2014, €3,250 million is thus the same figure
as proposed in the last Communication of October 2013.[6]
The UK's forecast for 2014 annual contributions thus remains
at €479,40 million.
6.3 The Minister nonetheless notes some Member State
concern over the forecasted balance at the end of 2014, and says
that the question of the additional €44 million in question
will be revisited when the Commission produce their "more
robust" October forecast.
6.4 She notes that, though the commitments forecast
for 2014 is slightly higher than the forecast last October, it
still remains substantially lower than previous years.
6.5 Although generally content with the Communication,
the Minister has nonetheless been "strong in our support
of the importance of good financial discipline"; encouraged
the Commission to ensure that payments are not in excess of those
budgeted, and that Member States receive timely and comprehensive
explanations for any excesses of payments; and "continues
to press" the Commission for improved forecasting. She is
accordingly reassured that the Commission has an action plan in
place to strengthen financial management and control systems,
and has committed to presenting regular progress updates to Member
States. She also notes that EDF 11, which runs from 2014-2020,
includes commitments for the Commission to increase the forecasting
period for Member States' contributions from two to four years,
to minimise variations in Member States' annual contributions,
and to manage balances in the EDF account more closely to ensure
that funds, and any interest earned, will remain in Member State
accounts until needed.
6.6 Although no major questions arise, we are
drawing this Communication and the Minister's assessment to the
attention of the House because of the importance of the European
Development Fund and thus of its effective financial management
by the Commission.
6.7 The Minister also suggests that there is a
wrinkle that needs ironing out (see paragraph 6.16 below), which
we look forward to her addressing when she submits the further
Commission Communication in the autumn.
6.8 In the meantime, we clear this Commission
Communication from scrutiny.
Full
details of the documents:
Commission Communication: Financial information on the European
Development Fund: (36149), 10929/14, COM(14) 350.
Background
6.9 The European Development Fund (EDF) supports
actions in the African, Caribbean and Pacific (ACP) countries
and the Overseas Countries and Territories (OCTs) in the following
areas:
— economic
development;
— social and human development; and
— regional cooperation and integration.
6.10 The EDF consists of several instruments:
— grants
managed by the Commission;
— risk capital and loans to the private
sector, managed by the European Investment Bank under the Investment
Facility; and
— the FLEX mechanism, which seeks to remedy
the adverse effects of instability of export earnings.
6.11 It is concluded for a multi-annual period (usually
five years) and is implemented within the framework of an international
agreement between the European Community and the partner countries.
The 10th EDF (2008-2013) is governed by the ACP-EC partnership
agreement (signed in 2000 and revised in 2005) and the amended
Overseas Association Decision.
6.12 The 10th EDF has a budget of €22,682 million:
— €21,966
million to the ACP countries (97% of the total);
— €286 million to the OCTs (1% of
the total);
— €430 million to the Commission as
support expenditure for programming and implementation of the
EDF (2% of the total).[7]
The Commission Communication
6.13 In accordance with Article 7(3) of the Internal
Agreement[8] and Articles
57(3) and (4) of the 10th EDF Financial Regulation,[9]
the Commission presents in this document estimates of commitments,
payments and contributions for the period 2014 and 2015, taking
into account the forecasts of the European Investment Bank (EIB)
concerning the Investment Facility.
The Minister's Explanatory Memorandum of 2 July
2014
6.14 The Parliamentary Under-Secretary of State at
the Department for International Development (Lynne Featherstone)
explain that the Communication aims to help Member States assess
and forecast future EDF payment amounts in order to plan and forecast
national budgets. She notes that this is a preliminary forecast,
and that the Commission provides "a more robust forecast"
annually in October.
6.15 The Minister also points out that:
— Member
State contributions agreed in the 2013 calendar year, to be paid
in future years, totalled €3,200 million, of which €2,950
million is managed by the Commission and €250 million by
the EIB;
— the UK's share of the 10th
EDF is 14.82%;
— the Commission and EIB have requested
total contributions from Member States for 2014 of €3,250
million, of which €3,144 million will be managed by the Commission
and €106 million by the EIB;
— the UK share will be €479,40 million
(£389,80 million);
— the Commission and EIB have requested
total contributions from Member States for 2015 of €3,600
million, of which the UK share would be €533,52 million (£433,81
million);
— if the 11th EDF has been ratified by
all Member States by 2015, the UK share would be 14.68% which
equates to €528,48 million; and
— the EIB's forecasts for 2014 include
final payments from the 9th EDF
(2003-2007), with the UK's share of the 9th
EDF being 12.69%.
The Government's view
6.16 The Minister comments as follows:
"This updated EC[10]
forecast does not revise overall Member State contributions for
2014 and so does not change DFID budgets for EDF contribution
in 2013/14. The proposed level of Member State contributions in
2014, €3,250 million (£2,643 million) is the same figure
as proposed by the last Communication from the EC (EM 15454-13
& 15457-13 7 November 2013).
"There will, however, be a change to the
third payment of 2014. The EIB have cancelled their call for the
third instalment of €44 million (£35,78 million) for
2014. Due to an increase in EC payments for 2013 and 2014 over
those forecast in October 2013, the EC have noted an increase
in treasury needs and have asked for the amount cancelled by the
EIB to be transferred to the EC. This means that whilst the final
request to Member States remains unchanged overall, the split
between the EC and the EIB is different, at €3,144 million
(£2,556 million) for the EC and €106 million (£86,19
million) for the EIB. This amount is relatively small, and the
request is legal: it is allowed for in the 11th EDF Internal Agreement
and has been done in the past.
"Member States expressed concern that the
EC was not demonstrating good financial discipline. However, given
expected payments are higher than predicted, the forecasted balance
in their accounts is lower at the end of 2014 than deemed prudent
and it was decided that the EC should have the necessary cash
reserves to avoid any liquidity issues. The EC proposed that they
would return to the question of the additional €44 million
(£35,78 million) in their October forecast, and could reduce
Member State contributions at a later stage if deemed appropriate.
"The commitments totalling €2,571 million
(£2,090 million) forecast for 2014 are slightly higher than
the €2,320 million (£1,886 million) forecast in October,
but still remain substantially lower than previous years. This
can be explained by the fact that it is unclear when EDF11 will
be ratified, and thus when commitments can be made from 11th EDF
funds. The €2,320 million (£1,886 million) commitments
take into account the use of a bridging fund, composed of decommitments
from previous EDFs and unused 10th EDF funds at 31/12/2013. The
final figure available for this bridging transitional facility
is not yet known, but it will not reach the normal level of commitments,
though funds will remain available for priority programmes."
6.17 The Minister goes on to say:
"The UK is content with the proposed communication,
but continues to press the EC for improved forecasting. In response
to the most recent European Court of Auditor's report on activities
of the 8th, 9th and 10th EDFs, we are reassured that the EC has
an action plan in place to strengthen financial management and
control systems, and they have committed to presenting regular
progress updates to Member States. The UK also worked hard to
strengthen EDF financial management as part of negotiations of
the 11th EDF which runs from 2014-2020. We secured legal commitments
for the EC to increase the forecasting period for Member States'
contributions from two to four years, to minimise variations in
Member States' annual contributions, and to more closely manage
balances in the EDF account to ensure that funds, and any interest
earned, will remain in Member State accounts until needed.
"We have been strong in our support of the
importance of good financial discipline. In Council Working Group
the UK encouraged the EC to ensure that payments are not in excess
of those budgeted, and that Member States receive timely and comprehensive
explanations for any excesses of payments. However, we are satisfied
with the legality and necessity of the €44 million (£35,78
million) additional funding to the EC in 2014, and will reassess
Member State contributions in Council Working Group in October."
6.18 The Minister concludes by noting that, Member
States having discussed and supported this Communication in Council
Working Group 16 June 2013, she expects approval to be sought
in Council in July 2014.
Previous Committee Reports
None.
6 (35426) 15454/13. Back
7
See http://ec.europa.eu/europeaid/how/finance/edf_en.htmfor
full information. Back
8
Internal Agreement between the Representatives of the Governments
of the Member States, meeting within the Council, on the financing
of Community aid under the multiannual financial framework for
the period 2008 to 2013 in accordance with the ACP-EC Partnership
Agreement and on the allocation of financial assistance for the
Overseas Countries and Territories to which Part Four of the EC
Treaty applies: OJ No. L 247, 9.9.06, p32. Back
9
Council Regulation (EC) No. 215/2008. Back
10
European Commission. Back
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