5 Investment plan for Europe
| Committee's assessment
| Politically important |
| Committee's decision | Not cleared from scrutiny; further developments awaited
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| Document details | Commission Communication about promoting investment in the EU
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| Legal base | —
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| Department
Document numbers
| HM Treasury
(36540), 16115/14, COM(14) 903
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Summary and Committee's conclusions
5.1 In November 2014 the Commission published this Communication
suggesting a plan to promote investment in the EU economy. When
in December 2014 we considered this document we had before us
the Government's relatively positive, albeit nuanced, initial
comments about the plan. However, we postponed further consideration
of the document pending an account from the Government of the
outcome of the forthcoming European Council discussion of the
Commission's ideas and the Government's assessment of a number
points.
5.2 We are grateful for the information, such as it is, we
are now given. Although we recognise that some points cannot be
fully clarified until the Commission brings forward its implementing
proposals, we are disappointed that the Government rather carelessly
fails to address, even cursorily, some of the points we raised
previously.
5.3 As for the debate recommendation we have foreshadowed previously
we are postponing consideration of that until we have the draft
Regulation on the proposed European Fund for Strategic Investments
for scrutiny. But in that connection we should like an answer
soon to our question as to the Government's assessment of what
the Commission's suggestion of fast-tracking that draft Regulation
might mean for national parliamentary scrutiny.
5.4 Meanwhile the document remains under scrutiny.
Full details of the documents:
Commission Communication: An investment plan for Europe:
(36540), 16115/14, COM(14) 903.
Background
5.5 In November 2014 the Commission published this
Communication suggesting a plan to promote investment in the EU
economy. The plan would have three strands:
· a
European Fund for Strategic Investments (EFSI), to mobilise €315
billion (£245 billion) for investment;
· a
pipeline of investment projects and investment advisory "Hub";
and
· a
wider package of reforms to improve the investment climate, including
action to remove barriers in the single market and improve regulation.
5.6 When in December 2014 we considered this document
we had before us the Government's relatively positive, albeit
nuanced, initial comments about the plan. We noted that we might
well want to recommend that Members be given an opportunity to
debate this proposed plan. However, we said that we would not
decide on that until we had an account from the Government of
the outcome of the forthcoming European Council discussion of
the Commission's ideas. In addition to that account, we asked
to have also the Government's assessment as to:
· the
likelihood of a leverage ratio of 1:15 from use of the EFSI;
· whether
drawdowns from the EU Budget for the Fund would be a reasonable
use of the programmes concerned;
· whether
the European Investment Bank (EIB)'s involvement in the plan poses
any risk to its credit standing;
· what
additional risk the plan might pose for the EU's Guarantee Fund;
· what
the suggested fast-tracking of the draft Regulation on the EFSI
might mean for national parliamentary scrutiny; and
· what
financial consequences there might be for the UK.
5.7 Meanwhile the document remained under scrutiny.
The Minister's letter of 12 January 2015
5.8 The Financial Secretary to the Treasury (Mr David
Gauke) first comments that:
· as
the Prime Minister made clear at the December 2014 European Council,
at a time of low growth in the EU, the Government supports a focus
on ways to encourage investment;
· it
is important that the approach is comprehensive;
· while
use of EIB lending backed by a guarantee will feature as part
of that, more important is structural reform to improve the environment
for investment and deliver the necessary focus on drawing in private
investment;
· the
Government is clear that this will not be delivered if greater
investment is not supported by, among other factors, urgent structural
reform; and
· many
details of the investment plan remain unclear and the Government
expects more clarification when the Commission publishes an implementing
proposal shortly.
5.9 The Minister then addresses a number, but not
all, of the questions we asked and one we did not ask. First,
in relation to the likelihood of a leverage ratio of 1:15 from
use of the EFSI, he says that:
· the
Government cannot at this stage speculate on the likelihood on
delivering this suggested ratio;
· it
can be noted, however that the EIB's 2012 capital increase targeted
€180 billion (£140 billion) total investment, leveraging
1:18 capital to total investment; and
· the
EIB expects to reach this target during the course of 2015.
5.10 Turning to the use of drawdowns from the EU
Budget for the EFSI the Minister says that the Commission has
yet to set out the proposed composition and profile of the EU
Budget contributions to be made, so it is not possible to provide
further detail at this stage. As for any risk for the EIB's credit
standing the Minister says that:
· the
Government is clear that it is important that the EIB maintains
its AAA rating and it will expect any new lending opportunities
to be constantly reviewed so as to optimise the EIB's volume-risk
trade-off and value-added to the markets, whilst remaining attentive
to the maintenance of the AAA rating; and
· the
financial robustness of the EIB is a high priority for the UK,
as it is at the very core of the EIB's business model and is the
fundamental basis of its ability to lend at favourable conditions.
5.11 The Minister says "You ask about the pipeline
of investment projects to make use of the Fund. Delivery of the
proposed overall investment target of €315bn will be highly
dependent on the ready availability of robust, investment-worthy
projects which can make use of the Fund-backed EIB lending and
attract other sources of investment". Notwithstanding that
we did not ask about this we note that the Minister tells us that:
· the
Government has submitted a strong list of pipeline projects, linked
to the National Infrastructure Plan (NIP) it publishes annually,
which sets out plans for delivery of UK infrastructure, with a
clear pipeline of planned investment;
· the
UK's NIP enabled the Government to be on the front foot in proposing
over £60 billion of investment that could be eligible for
support from the proposed EFSI; and
· the
EIB and Commission Task Force Report highlights the UK's NIP and
approach of producing a clear, rigorous pipeline across all infrastructure
sectors as an exemplar.
5.12 The Minister does not address our questions
about what additional risk the investment plan might pose for
the EU's Guarantee Fund, what financial consequences there might
be for the UK from EU budgetary involvement in the plan and, immediately
and importantly, what the suggested fast-tracking of the draft
Regulation on the EFSI might mean for national parliamentary scrutiny.
Previous Committee Reports
Twenty-seventh Report HC 219-xxvi (2014-15), chapter
7 (17 December 2014).
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