7 Investment plan for Europe
| Committee's assessment
| Politically important |
| Committee's decision | Not cleared from scrutiny; further information requested
|
| 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
7.1 This Commission Communication suggests a plan
to promote investment in the EU economy. The plan would have three
strands:
· a European Fund for Strategic Investments,
to mobilise €315 billion (£247 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.
7.2 The Commission calls on the European Council
to endorse the plan at its 19-20 December meeting.
7.3 The Government's initial comments to us about
the plan are relatively positive, albeit nuanced.
7.4 We may well want to recommend that Members
be given an opportunity to debate this proposed plan. However,
we will not decide on that until we have had an account from the
Government of the outcome of the European Council discussion of
the Commission's ideas. In addition to that account, we would
like to have also the Government's assessment as to:
· the likelihood of a leverage ratio
of one to 15 from use of the European Fund for Strategic Investments;
· whether drawdowns from the EU Budget
for the Fund would be a reasonable use of the programmes concerned;
· whether the European Investment Bank'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 fast-tracking of the draft Regulation
on the European Fund for Strategic Investments might mean for
national parliamentary scrutiny; and
· what financial consequences there might
be for the UK.
7.5 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
7.6 In his presentation to the European Parliament
in July the President of the new Commission, Mr Jean-Claude Juncker,
said:
"My first priority as Commission President
will be to strengthen Europe's competitiveness and to stimulate
investment for the purpose of job creation. We need smarter investment,
more focus, less regulation and more flexibility when it comes
to the use of public funds [available at EU level]. This should
allow us to mobilise up to €300 billion in additional public
and private investment in the real economy over the next three
years. The focus of this additional investment should be in the
areas of infrastructure, notably broadband and energy networks,
as well as transport infrastructure in industrial centres; education,
research and innovation; and renewable energy and energy efficiency.
A significant amount should be channelled towards projects that
can help the younger generation back to work."
The document
7.7 This Commission Communication sets out ideas
for realising the Commission President's ambition to mobilise
€315 billion (£247 billion) for investment in the EU
economy. The Commission's plan would have three strands:
· a European Fund for Strategic Investments;
· a pipeline of investment projects and
investment "Hub"; and
· a wider package of reforms to improve
the investment climate, including action to remove barriers in
the single market and improve regulation.
The European Fund for Strategic Investment (EFSI)
7.8 The Commission proposes creation of an EFSI,
a new €21 billion (£16.47 billion) fund, linked to the
European Investment Bank (the EIB), which would aim to mobilise
at least €315 billion (£247 billion) of additional investment
finance in the EU over three years (2015-17). The €21 billion
(£16.47 billion) would consist of a €16 billion (£12.55
billion) EU guarantee, 50% of which would be paid in from the
EU Budget, and an EIB contribution of €5 billion (£3.92
billion) from its own resources. The EU Budget's €8 billion
(£6.28) contribution would be drawn from the Connecting Europe
Facility, €3.3 billion (£2.59 billion), Horizon 2020,
€2.7 billion (£2.12 billion) and the budget margin,
€2 billion (£1.57 billion).
7.9 Member States would also be given the opportunity
to contribute capital to the Fund directly. The Commission says
that "in the context of the assessment of public finances
under the Stability and Growth Pact, the Commission will take
a favourable position towards such capital contributions to the
Fund".
7.10 The Commission says that:
· the EFSI is expected to have a risk profile
aimed to help pull in additional private finance to riskier investment
projects that might otherwise struggle to be funded;
· the leverage ratio would be one to 15,
that is, every €1 (£0.78) in the Fund would catalyse
a total of €15 (£11.76) investment;
· the EFSI would support long-term investment
projects of European significance — 75% of the Fund would
go to them and the other 25% would go to SMEs and Mid-Caps;
· the new fund would be set up "as
a partnership between the Commission and the EIB";
· it would be within the EIB Group —
set up as an EIB trust fund, with its own set of investment criteria;
and
· in addition to mobilisation of money by
the EFSI it would be possible to increase the use of innovative
financial instruments (loans, guarantees, and equity) in domestic
EU spending through the European Structural and Investment Funds.
An EU pipeline of investment projects and investment
Hub
7.11 The second strand of the plan relates to the
ongoing work on identification of an EU investment pipeline, through
a joint EIB/Commission/Member State Investment Taskforce. This
seeks to identify viable projects of particular added value across
the EU, which should help unlock private investment in these projects.
The Commission:
· is clear that not every project in the
pipeline should or would be funded — rather, it would allow
public and private investors to access relevant and transparent
information on viable projects;
· suggests that over time this could lead
to a system of "European certification" for viable projects,
to be used by the EIB and national promotional banks to attract
investment; and
· the pipeline would only be an indicative
list of projects at this stage, as the EIB has not done the due
diligence in terms of project selection or assessment that would
be required.
7.12 The Commission also puts forward the idea of
an investment advisory Hub to provide support for project development,
building on the expertise of the Commission, EIB, and national
promotional banks. It would provide technical assistance for project
structuring, innovative instruments, and public-private partnerships.
It would be developed by the EIB Group.
A package of reforms to improve the investment
environment
7.13 The third strand of the package is a set of
measures to provide regulatory predictability, removing barriers
to investment and reinforcing the single market. The Commission:
· highlights that much can be done at national
level, for example, through implementation of national structural
reforms, but should also include EU level measures;
· focusses on the need for better regulation,
including reducing unnecessary regulatory burdens, and improving
business conditions, in particular for SMEs;
· talks about avoiding gold plating or creating
additional burdens when transposing EU law into national law;
· says that it will "further strengthen
its overall approach to better regulation in 2015 and give it
fresh impetus", stepping up efforts under REFIT[27]
and ensuring that proposals for simplifying EU law happen in practice;
· outlines plans for the creation (over
time) of a Capital Markets Union to reduce fragmentation in EU
financial markets, which would include adopting the draft Regulation
on European Long Term Investment Funds,[28]
reviving high quality securitisation markets, improving the availability
of credit information on SMEs, exploring with the private sector
the development of a cross-EU private placement market and reviewing
the Prospectus Directive; and
· outlines a wider set of measures that
are designed to make the most of the Single Market and eliminate
barriers to investment across the EU and which would include the
full implementation of the Third Energy Package, resolving barriers
to investment in the transport sector, developing the Digital
Single Market, action on Services and Product Markets, reducing
barriers to research and innovation and engaging with international
partners to promote open investment flows.
7.14 At various points in the Communication the Commission
issues requests to the European Council as follows:
"The European Council is invited to endorse
the setting up of the European Fund for Strategic Investments,
and commit to a more effective use of the European Structural
and Investment Funds, notably through an overall doubling of the
use of financial instruments. The legal proposal necessary for
the European Fund for Strategic Investments should be dealt with
in fast-track procedure by the European Parliament and the Council,
as the EU legislator, to be in force by June 2015."
"The European Council is invited to endorse
the proposal to set up a pipeline of projects at EU level and
to strengthen technical assistance through an investment advisory
'Hub', to be in place by June 2015."
"The European Council is invited to endorse
the overall approach and the European Parliament and the Council,
as the EU legislator, should ensure swift adoption of the forthcoming
legislative measures that are necessary to improve the regulatory
environment for investment."
"The Commission invites the European Council
of 18-19 December 2014 to endorse the Plan, with all its strands.
It calls on the European Parliament and the Council, as the EU
legislator, to fast-track the necessary legislative measure to
ensure that the European Fund for Strategic Investments becomes
operational by June 2015, and to follow up swiftly on the other
aspects of the Plan."
The Government's view
7.15 In his Explanatory Memorandum of 9 December
the Financial Secretary to the Treasury (Mr David Gauke) says
that:
· the Government considers that it is in
everyone's interest to see stronger economic growth in the EU;
· it welcomes, therefore, the focus in the
Commission Communication on reforms to raise growth prospects
across the EU and the emphasis on increasing private sector investment;
· in particular, specific steps on structural
reforms to complete the single market and improve the investment
climate are essential for the EU's competitiveness and prosperity;
· the Government welcomes that the Commission
states that the proposed action can be funded "within the
current Multi-Annual Financial Framework for the EU budget for
2014-2020" — this is an important principle;
· it also wants to ensure that the proposals
protect the financial soundness of the EIB;
· there remains, however, a lack of detail
in the Commission's document on the precise financing arrangements;
and
· the Government will be seeking further
detail from the Commission in the forthcoming discussions.
7.16 The Minister tells us that:
· the Government has participated in the
work of the EIB/Commission-led Investment Taskforce to identify
an indicative pipeline of investment projects of EU significance;
· Member States contributed initial indicative
lists of projects which could benefit from investment at the EU
level;
· the Government proposed a pipeline of
up to £60 billion of investment in 2015-17 that could be
eligible for support based on clear robust criteria that it would
aim to see used at the EU level;
· it considers that a rigorous project selection
process is needed for the EU pipeline, focused on project viability
and value for money; and
· in principle, the Government supports
the idea providing technical assistance in project design, but
it will need to see more detail on how the proposed "investment
hub" will work before reaching a final position on this matter.
7.17 The Minister comments that:
· the Government is pleased that the plan
includes measures to improve the business environment and investment
climate;
· this plan cannot rely on financing alone,
especially at a time when fiscal consolidation remains a priority
across the EU;
· the EU needs to focus on getting capital
markets working again and improving access to finance;
· the Government welcomes the intention
to take forward work on a Capital Markets Union, improve the regulatory
environment and remove barriers to a proper functioning single
market;
· these are vital to create the right investment
climate and increase growth across the EU; and
· the Government calls on the Commission
to take ambitious action in these areas, alongside its work on
the new Fund and Investment Pipeline.
7.18 The Minister also comments that the Government
will need to see the draft Regulation to establish the EFSI in
order to judge the precise financial implications, particularly
in the context of the Commission suggestions that the proposed
action can be financed within the current Multi-Annual Financial
Framework and that the €5 billion of EIB funds will come
from existing EIB resources.
7.19 Finally, on timetabling the Minister says that,
following discussions at the 9 December ECOFIN Council, the Commission
Communication will be discussed at the 19-20 December European
Council and that the Commission says that a draft Regulation for
the EFSI will be published in January 2015, with a view to entry
into force in June 2015.
Previous Committee Reports
None.
27 See REFIT. Back
28
See (35168) 12044/13 + ADDs 1-2: Fourteenth Report HC 83-xiv
(2013-14), chapter 14 (11 September 2013) and Second Report HC
219-ii (2014-15), chapter 15 (11 June 2014). Back
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