9 European Globalisation Adjustment Fund
| Committee's assessment
| Politically important |
| Committee's decision | (a) Not cleared from scrutiny; further information requested; (b) Cleared from scrutiny
|
| Document details | (a) Draft Decision to allow the Commission to draw on the European Globalisation Adjustment Fund for technical assistance; (b) Draft Decision to award Greece money from the European Globalisation Adjustment Fund
|
| Legal base | Article 175; co-decision; QMV
|
| Department | HM Treasury
|
Summary and Committee's conclusions
9.1 The European Globalisation Adjustment Fund (EGF) is designed
to provide support for workers made redundant as a result of major
structural changes in world trade patterns due to globalisation,
in situations where these redundancies have a significant adverse
impact on the regional or local economy. In addition to Member
States' ability to apply for support from the Fund, the Commission
may apply annually for finance for "technical assistance",
its own activities in connection with the Fund, of up to 0.5%
of the annual expenditure ceiling.
9.2 The draft Decision, document (a), is to agree
a Commission request for €330,000 (£264,495) from the
EGF for technical assistance purposes. This equates to approximately
0.21% of the annual maximum amount of the EGF. The draft Decision,
document (b), is to approve a Greek request for EGF support, in
relation to the bankruptcy of a manufacturer in the food products
sector and consequent redundancies.
9.3 On the assumption that the Government is carefully
monitoring the seemingly straightforward case for EGF funding
for Greece, we clear that draft Decision, document (b), from scrutiny.
9.4 However, we are unclear as to whether the
Government thinks that the activities the Commission is proposing
as technical assistance are justified and value for money. So
before considering that draft Decision, document (a), we should
like further comment from the Government. Meanwhile the document
remains under scrutiny.
Full details of
the documents: (a) Draft Decision on the
mobilisation of the European Globalisation Adjustment Fund (EGF/2014/000
TA 2014 — Technical assistance at the initiative of the
Commission): (36167), 11321/14, COM(14) 366; (b) Draft Decision
on the mobilisation of the European Globalisation Adjustment Fund,
in accordance with Point 13 of the Interinstitutional Agreement
of 2 December 2013 between the European Parliament, the Council
and the Commission on budgetary discipline, on cooperation in
budgetary matters and on sound financial management (application
EGF/2014/001 EL/Nutriart): (36168), 11322/14, COM(14) 376.
Background
9.5 The European Globalisation Adjustment Fund (EGF)
is designed to provide support for workers made redundant as a
result of major structural changes in world trade patterns due
to globalisation, in situations where these redundancies have
a significant adverse impact on the regional or local economy.
It was established in 2006 and has been renewed for the 2014-20
budgetary by Regulation (EU) No. 1309/2013 (the EGF Regulation),
which sets out the rules governing the use (mobilisation) of the
EGF.
9.6 The annual budgetary ceiling for the EGF is €150
million (£120 million) in 2011 prices. In addition to Member
States' ability to apply for support from the Fund, the Commission
may apply annually for finance for "technical assistance"
of up to 0.5% of the current ceiling.
The documents
9.7 The draft Decision, document (a), is to agree
a Commission request for €330,000 (£264,495) from the
EGF for technical assistance purposes. This equates to approximately
0.21% of the annual maximum amount of the EGF.
9.8 The Commission's justification for the application
is that expenditure is required for four activities. (It says
that there is no need for funds for a fifth activity, evaluations,
in 2014.) The first activity is monitoring and data gathering:
· the
Commission would use the funds for collecting data on EGF applications
received, paid and wound up and measures proposed and implemented;
· specifically,
the money would be for external expertise to improve and secure
the functionalities of the EGF database in accordance with the
findings of the Commission's Internal Audit; and
· the
cost of these items is estimated at €20,000 (£16,030).
9.9 Secondly, for information:
· some
expenditure would be to increase the general accessibility of
information on the EGF, with measures including expansion and
regular update of the EGF website, production of guidance and
information on the new EGF Regulation, print and online publication
of EGF ex-post evaluation and coverage of the EGF in various Commission
publications and audio-visual activities; and
· costs
of all these items are estimated at €20,000 (£16,030)
in 2014, due to time limitations, and are expected to rise significantly
in 2015.
9.10 Next, for creation of a knowledge base/application
interface:
· the
Commission would use the finance to continue its work to simplify
the EGF application and reporting process for Member States;
· this
would involve setting up an electronic application form and standardised
procedures for EGF applications and standardisation of final reports
produced by Member States; and
· the
cost of these items is estimated at €100,000 (£80,150).
9.11 Lastly for administrative and technical support:
· the
Expert Group of Contact Persons of the EGF, with one member from
each Member State, would be holding two meetings (end of 2014/first
half of 2015), the estimated cost of which would require expenditure
of €70,000 (€56,105);
· in
addition, the Commission would organise networking among the Member
States, with two seminars of EGF implementing bodies in the Member
States around the same dates, focusing on issues arising with
the interpretation of the new EGF Regulation, particularly as
regards the possible inclusion of NEETs (those 'Not in Education,
Employment or Training') in the measures; and
· this
is estimated to require €120,000 (£96,180) expenditure.
9.12 The draft Decision, document (b), is to approve
a Greek request for EGF support, Application EGF/2014/001 EL/Nutriart.
The application concerns a manufacturer, Nutriart, in the food
products sector and redundancies in the period 16 July-16 November
2013. 508 workers have been targeted for support (a coordinated
package of eligible personalised services aimed at reintegrating
the redundant workers into employment) and the proposed EGF assistance
is €6,096,000 (£4,885,944), which is 60% of the total
costs of the package.
9.13 The Commission accepts Greece's justification
for EGF resources:
· the
food products sector has been seriously affected by the global
financial and economic crisis;
· since
2008 Greek GDP has decreased by 25%, public consumption by 21%
and private consumption by 32%, whilst unemployment increased
by 21%;
· to
deal with foreign debt payments, the Greek government has increased
taxes, streamlined public expenditure and decreased public employees'
salaries;
· meanwhile,
wages in the private sector have also decreased in an attempt
to increase the competitiveness of the Greek economy;
· there
are also thousands of enterprises which have closed down, contributing
to a sharp increase in unemployment;
· an
immediate effect of the reduced income has been a decrease in
household consumption, which has been declining since the beginning
of the economic crisis (falling by 9% in 2012 compared to 2011);
· due
to the drop in purchasing power of Greek households, demand for
products other than basic staples plummeted;
· in
particular the demand for sweet bread products and pastry, which
Nutriart specialised in, declined by 41% in 2013 compared to 2008;
· this
decline in demand had a direct impact on the turnover of Nutriart,
which dropped from €79 million (£63 million) in 2010
to €20 million (£16 million) in 2012; and
· the
reduction in turnover which resulted from the drop in consumption,
combined with delays in payments from Nutriart's buyers and unpaid
bills resulted in Nutriart filing for bankruptcy and the subsequent
redundancies.
9.14 The Commission argues that after a thorough
examination of the application and in accordance with all applicable
provisions of the EGF Regulation, the conditions for a financial
contribution from the EGF are met.
The Government's view
9.15 In her Explanatory Memorandum of 9 July 2014,
the then Financial Secretary to the Treasury (Nicky Morgan), reiterating
its familiar statement that the Government has been clear that
it wants to see real budgetary restraint in the EU over the coming
years, says that:
· reform
of EU spending is a long-term project, but recent action taken
by the Government, including the European Council agreement on
the 2014-20 Multiannual Financial Framework, delivers important
progress;
· this
secured a very substantial reduction in the size of the EGF over
the period 2014-20;
· the
Government will continue to work to limit EU spending, reduce
waste and inefficiency and deliver the best possible deal for
taxpayers;
· as
part of this, it is essential that EU expenditure is closely scrutinised
on the basis of value for money; and
· in
line with this approach, the Government will seek to ensure that
all EGF criteria have been respected in proposals for EGF assistance.
Previous Committee Reports
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