1 Investment plan for Europe
| Committee's assessment
| Politically important |
| Committee's decision | Not cleared from scrutiny; for debate in European Committee B
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| Document details | (a) Commission Communication about promoting investment in the EU
(b) Draft Regulation on an EU investment fund
(c) Draft Amending Budget concerning that fund
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| Legal base | (a) —
(b) Articles 172, 173, 175(3) and 182(1) TFEU; co-decision; QMV
(c) Article 314 TFEU; co-decision; QMV
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| Department
Document numbers
| HM Treasury
(a) (36540), 16115/14, COM(14) 903
(b) (36605), 5112/15 + ADD 1, COM(15) 10
(c) (36607), 5317/15, COM(15) 11
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Summary and Committee's conclusions
1.1 In November 2014 the Commission published this Communication
suggesting a three part plan to promote investment in the EU economy.
In January, when we last considered this document, we had from
the Government a very brief account of its stance on the matter
at the December 2014 European Council and answers to some of the
questions we had asked previously (and to one we had not asked).
We said that we were disappointed that the Government had rather
carelessly failed to address, even cursorily, some of these points.
As for the debate recommendation we had foreshadowed previously
we said we were postponing consideration of that until we had
the draft Regulation on a proposed European Fund for Strategic
Investments for scrutiny. But in that connection we asked to have
soon an answer to our earlier 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.
1.2 We now have under scrutiny this draft Regulation,
which would create the legal framework for the first two strands
of the investment plan set out in the Commission's Communication,
that is, the European Fund for Strategic Investments and a European
Investment Advisory Hub, so enabling the Commission to implement
and deliver the investment plan jointly with the European Investment
Bank. We also have under scrutiny this Draft Amending Budget for
the 2015 EU budget to provide finance for the new bodies this
year.
1.3 The Government tells us that it is supportive
of both the draft Regulation and the Draft Amending Budget, particularly
noting that the draft Regulation would be fully financed within
the Multiannual Financial Framework 2014-2020 and the Draft Amending
Budget would have a budget neutral impact.
1.4 We think that the time is now right for the
debate recommendation we have foreshadowed previously. Accordingly
we recommend that the three documents be debated in European Committee
B. We suggest that in the debate Members might explore:
· the
likelihood of a leverage ratio of 1:15 from use of the European
Fund for Strategic Investments;
· whether
drawdowns from the EU budget for the EU guarantee 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 other EU guarantees;
· what
the suggested fast-tracking of the draft Regulation might mean
for national parliamentary scrutiny; and
· what
financial consequences there might be for the UK.
Full details of
the documents: (a)
Commission Communication: An investment plan for Europe:
(36540), 16115/14, COM(14) 903; (b) Draft Regulation on the European
Fund for Strategic Investments and amending Regulations (EU) No.
1291/2013 and (EU) No. 1316/2013: (36605), 5112/15 + ADD 1, COM(15)
10; (c) Draft Amending Budget No. 1 to the General Budget 2015
accompanying the draft Regulation on the European Fund for Strategic
Investments and amending Regulations (EU) No. 1291/2013 and (EU)
No. 1316/2013: (36607), 5317/15, COM(15) 11.
Background
1.5 In November 2014 the Commission published this
Communication, document (a), 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 ( to be known
as the European Investment Advisory Hub or EIAH); and
· a wider
package of reforms to improve the investment climate, including
action to remove barriers in the single market and improve regulation.
1.6 When in December 2014 we first 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 of a number points.
1.7 In January we had from the Government a very
brief account of the Government's stance at the December 2014
European Council and answers to some of the questions we had asked
(and to one we had not asked). We said that, although we recognised
that some points could not be fully clarified until the Commission
brought forward its implementing proposals, we were disappointed
that the Government had rather carelessly failed to address, even
cursorily, some of the points we had raised previously.
1.8 As for the debate recommendation we had foreshadowed
previously we said we were postponing consideration of that until
we had the draft Regulation on the proposed EFSI for scrutiny.
But in that connection we asked to have soon an answer to our
earlier 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.
1.9 Meanwhile the Communication remained under scrutiny.
The new documents
1.10 This draft Regulation, document (b), would create
the legal framework for the first two strands of the investment
plan set out in the Commission's Communication, that is, the EFSI
and the EIAH, so enabling the Commission to implement and deliver
the plan jointly with the European Investment Bank (EIB). (As
for the third strand, a wider package of reforms to improve the
investment climate, the Commission has published a set of actions
in its 2015 Work Programme.[1])
1.11 The draft Regulation would establish the EFSI,
supported by an EU guarantee fund, providing a maximum EU guarantee
of €16 billion (£12.5 billion) for EIB financing and
investment operations to support the development of infrastructure
and investment in the EU as well as for small and medium size
enterprises. The intention is that the appropriations required
by this proposal would be fully financed within the Multiannual
Financial Framework 2014-2020. The draft Regulation would require
the Commission to conclude an agreement with the EIB on the establishment
of the EFSI. Amongst the matters the EFSI Agreement would contain
are:
· provisions
governing the establishment of the EFSI, within the EIB, as a
distinct, clearly identifiable and transparent guarantee facility
and separate account managed by the EIB;
· the
amount and terms of the financial contribution which would be
provided by the EIB through the EFSI;
· the
terms of the funding which would be provided by the EIB through
the EFSI to the European Investment Fund;[2]
and
· the
governance arrangements concerning the EFSI.
1.12 The Commission proposes that:
· in
order to mitigate any potential impact on the EU budget, the EU
guarantee fund would, in the first instance, meet the obligations
of the guarantee in an event of default;
· the
EU guarantee fund would reach an adequate level which, based on
experience of the nature of these investments, is determined to
be 50% (the target amount) of the EU's maximum guarantee obligation;
· from
2016 onwards, payments from the EU budget would gradually build
up the endowment of the EU guarantee fund to reach the initial
target amount of €8 billion (£6.2 billion) — the
EIB would also contribute €5 billion (£3.9 billion)
to the fund;
· the
EU guarantee fund should reach the initial €8 billion target
amount by 2020 with payments of €500 million (£389 million)
in 2016, €1 billion (£779 million) in 2017, €2
billion (£1.6 billion) in 2018 and €2.25 billion (£1.8
billion) in both 2019 and 2020;
· of the
€8 billion in payments, €6 billion (£4.7 billion)
would be reallocated within Sub-Heading 1a of the EU Budget (in
particular €3.3 billion (£2.6 billion) from the Connecting
Europe Facility[3] and
€2.7 billion (£2.1 billion) from Horizon 2020[4]);
· a further
€2 billion (£1.6 billion) would be funded by making
use of the Unallocated Margin including the Global Margin for
Commitments;
· in order
to reallocate the budget within Sub-Heading 1A, limited amendments
to Regulation (EU) Nos. 1316/2013, establishing the Connecting
Europe Facility, and 1291/2013, establishing Horizon 2020;
· the
EU guarantee fund would, were defaults to occur, cover the associated
costs in the first instance;
· the
overall maximum EU guarantee would be reduced by the value of
the default and the EU budget would then be required to return
the EU guarantee fund to the target amount (50% of the maximum
EU guarantee);
· should
the EU budget be required to replenish the EU guarantee fund to
the target amount, the relevant amount would be paid in annual
tranches during a maximum period of three years starting on year
n+1;
· the
EU guarantee fund would be directly managed by the Commission;
and
· where
the EU guarantee fund was holding a surplus above the target amount,
this amount could be held in the fund or returned to the EU general
budget.
1.13 The Commission's draft Regulation would establish
a governance structure for the EFSI as follows:
· a
Steering Board to determine the strategic orientation, the strategic
asset allocation and the operating policies and procedures, including
the investment policy of projects that EFSI could support and
the risk profile of the EFSI;
· members
of the Steering Board to be appointed by the contributors to the
EFSI — in the first instance the only contributors would
be the EU and the EIB;
· the
number of members and votes within the Steering Board to be allocated
on the basis of the respective size of contributions, either in
cash or guarantees;
· where
Member States, or other parties, wished to contribute to the EFSI
the number of members and votes within the Steering Board to be
reallocated based on the new respective size of contributions;
· the
Steering Board to strive for consensus, but with, where necessary,
the Board taking a decision by simple majority; and
· no decision
of the Steering Board to be adopted if the Commission or the EIB
were to vote against it.
1.14 The draft Regulation would establish an Investment
Committee, consisting of six independent market experts and a
Managing Director, responsible for examining potential operations
and approving the support for operations. It would require projects
to be selected on their own merits, without any sectorial or geographic
pre-established allocation, so as to maximise the value added
of the EFSI.
1.15 The draft Regulation would provide for:
· establishing,
by building on existing EIB and Commission advisory services,
an EIAH to provide advisory support for investment project identification,
preparation and development;
· the
EIAH to act as a single technical advisory hub (including on legal
issues) for project financing within the EU, including project
structuring, use of innovative financial instruments and use of
public-private partnerships; and
· the
EIAH to be primarily funded from existing envelopes for EIB technical
assistance under existing EU programmes, with, if necessary, additional
funding of up to €20 million (£15.58 million) annually.
1.16 During the course of a financial year the Commission
presents Draft Amending Budgets (DABs) proposing increases or
reductions for revenue and expenditure in the current EU general
budget. Draft Amending Budget No.1 for the 2015 EU budget (DAB
1/2015), document (c), which accompanies the draft Regulation
and the budgetary impact of which is neutral, would:
· create
the budgetary structure for provisioning of the EFSI and possible
calls on the EU guarantee;
· budget
appropriations for provision of advisory support for investment
project identification;
· make
necessary changes to the budget nomenclature; and
· make
corresponding expenditure reallocation for the year 2015, totalling
€1.36 billion (£1.05 billion) in commitment appropriations
and €10 million (£7.7 million) in payment appropriations,
which would be required by the establishment of the EFSI.
1.17 A more detailed summary of the individual adjustments
made by DAB 1/2015 is as follows:
Proposed changes to the budget nomenclature
· DAB
1/2015 would create three new budget articles to accommodate the
budgetary implications of the establishment of the EFSI —
two articles which would mirror the existing structure of the
guarantee fund for external actions and a third article to include
the EU contribution to the financing of the EIAH;
· the
DAB therefore proposes inclusion of the following new lines in
the budget nomenclature: Guarantee for the European Fund for Strategic
Investments (EFSI), Provisioning of the EFSI Guarantee Fund and
European Investment Advisory Hub (EIAH);
Reallocation of commitment appropriations for
provisioning the guarantee fund in 2015
· the
DAB would reallocate €1.35 billion (£1.05 billion) in
commitment appropriations, required to provision the EU guarantee
fund in 2015, to the new budget article 'Provisioning of the Guarantee
Fund';
· this
reallocation would be sourced from the Connecting Europe Facility,
for €790 million (£615.3 million), Horizon 2020, for
€54.5 million (£42.5 million) and the Joint Undertaking
for the International Thermonuclear Experimental Reactor (ITER)
and the Development of Fusion Energy, for €490 million (£381.7
million);
· the
proposed reallocations from the Connecting Europe Facility and
Horizon 2020 take into account proposals prepared under these
programmes so that activities already planned for 2015 would not
be undermined;
· with
regard to the reallocation proposed from the Joint Undertaking
for ITER and the Development of Fusion Energy, delayed commitment
appropriation needs and the postponed signature of contracts,
makes this possible;
· the
Commission intends the ITER reduction in 2015 be offset by an
equivalent increase in the ITER financial programming over the
period 2018-2020, with an equivalent reduction of Horizon 2020
commitment appropriations for the period 2018-2020;
Funding the EIAH
· the
DAB would budget €10 million (£7.7 million) in both
commitment and payment appropriations on the new budget article
for the EIAH;
· these
amounts would be offset through a corresponding reduction of the
ITER budget in commitments and payments; and
· they
would be given back to ITER through an equivalent reduction of
Horizon 2020 appropriations for the period 2018-2020.
The Government's view
1.18 In his Explanatory Memorandum of 28 January
2015 on the draft Regulation the Financial Secretary to the Treasury
(Mr David Gauke) says that the Government welcomes the focus in
the Commission Communication on reforms to raise growth prospects
across the EU and the emphasis on increasing private sector investment.
He comments, in relation to the three pillars of the investment
plan, that, in particular, the Government welcomes specific steps
on structural reforms to complete the single market and improve
the investment climate which are essential for the EU's competitiveness
and prosperity.
1.19 The Minister tells us that:
· the
Government, alongside all other Member States, has participated
in the preparatory work of the EIB/Commission-led Investment Taskforce
to identify an indicative pipeline of investment projects;
· as part
of this process it proposed an indicative pipeline of up to £60
billion of investment in 2015-17 that could potentially be eligible
for support based on clear robust criteria that the Government
would aim to see used at the EU level; and
· the
Government considers that a rigorous project selection process
is needed for the EU pipeline, focused on project viability and
value for money.
1.20 In relation to the draft Regulation, the Minister
comments further that:
· the
Government supports the establishment of both the EFSI and EIAH;
· it welcomes
the Commission statement that the "appropriations required
by this proposal are to be fully financed within the Multiannual
Financial Framework 2014-2020", which is an important principle;
· the
Commission assesses that while grant financing from the Connecting
Europe Facility and Horizon 2020 would be reduced, the multiplier
effect generated by the EFSI would allow for a significant overall
increase of investment in the policy areas covered by those two
existing programmes;
· the
Commission says that once the target amount is reached the EU
guarantee fund and its profits would cover the costs of default;
and
· a further
€8 billion (£6.2 billion) remains as callable and would
be met, in the first instance, from within the EU budget.
1.21 The Minister tells us that the Government is
consulting the British Business Bank and the Green Investment
Bank.
1.22 The Minister also tells us that:
· the
Government is represented at the Council's 'Ad-Hoc Working Party
on EFSI' that is currently examining this proposal further; and
· the
Commission has set out its expectation that the Council and the
European Parliament should agree on the text by June so that the
EFSI could be operational by mid-2015.
1.23 In his second Explanatory Memorandum of 28 January
2015, on the DAB, the Minister repeats his paragraphs in support
of the draft Regulation, the comments about the Government's welcome
for the DAB having a budget neutral impact and that the draft
Regulation being fully financed within the Multiannual Financial
Framework 2014-2020 is particularly relevant to the DAB itself.
1.24 The Minister also says that:
· based
on the adopted 2015 EU budget, the UK's post-abatement financing
share of EU expenditure will be approximately 11.8%;
· it is
not possible to calculate the exact amounts yet, as the amount
will depend on actual budgetary outturns;
· the
Council's Budget Committee first discussed this DAB on 20 January;
and
· negotiation
of the DAB is expected to be taken forward in parallel with the
draft Regulation.
Previous Committee Reports
Twenty-seventh Report HC 219-xxvi (2014-15), chapter
7 (17 December 2014) and Thirtieth Report HC 219-xxix (2014-15),
chapter 5 (21 January 2015).
1 (36589), 5080/15 + ADDs 1-4: Thirty-first Report
HC 219-xxx (2014-15), chapter 1 (28 January 2015). Back
2
See http://www.eif.org/. Back
3
See http://eur-lex.europa.eu/legal-content/EN/LSU/?uri=CELEX:32013R1316. Back
4
See http://ec.europa.eu/programmes/horizon2020/en/what-horizon-2020. Back
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