9 European Globalisation Adjustment Fund
| Committee's assessment
| Politically important |
| Committee's decision | Not cleared from scrutiny; further information requested
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| Document details | Ten draft Council Decisions to authorise payments from the European Globalisation Adjustment Fund to Poland, Belgium (four), Germany, Greece (two) and France
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| Legal base | Article 12(3) of Regulation (EC) No. 1927/2006 (based on Article 159 TEC) and (Article 15(4) of Regulation (EU) No. 1309/2013 (based on Article 175 TFEU), in conjunction with point 13 of the Interinstitutional Agreement of 2 December 2013 on budgetary discipline, on cooperation in budgetary matters and on sound financial management; co-decision; QMV
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| Department
Document numbers
| HM Treasury
(a) (36617), 5523/15, COM(15) 13; (b) (36618), 5525/15, COM(15) 9; (c) (36619), 5529/15, COM (14) 725; (d) (36620), 5532/15, COM(14) 735; (e) (36621), 5534/15, COM(14) 734; (f) (36622), 5537/15, COM(14) 726; (g) (36646), 5893/15 +ADD 1, COM(15) 40; (h) (36648), 5895/15 + ADD 1, COM(15) 37; (i) (36659), 6121/15, COM(15) 47; (j) (36683), 6562/15, COM(15) 68
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Summary and Committee's conclusions
9.1 The European Globalisation Adjustment Fund, established
in 2006, was designed to provide support for workers made redundant
as a result of major structural changes in world trade patterns
due to globalisation. The Government does not apply for finance
from this fund. (It opposed its renewal in 2013, an opposition
we endorsed.) There is a fairly steady stream of successful applications
from other Member States.
9.2 In February, we considered draft Decisions to
approve applications from Poland, Belgium (four), Germany and
Greece (two) for contributions from the Fund. Noting that we do
not normally report substantively on European Globalisation Adjustment
Fund applications we said, however, that we had become increasingly
concerned about the steady stream of applications assessed by
the Commission as eligible for assistance from the fund. Accordingly,
we took the opportunity to ask the Government a number of questions
about its policy towards applications for use of the fund and
its view as to its value for money. Meanwhile these documents
remained under scrutiny.
9.3 The Government now gives us helpful responses
to some of our questions.
9.4 The new document, a draft Decision to approve
a French application for assistance from the Fund, raises similar
issues as the earlier documents. The Government comments in familiar
terms, including saying that:
· it is essential that EU expenditure is
closely scrutinised on the basis of value for money; and
· in line with this approach, it will seek
to ensure that all fund criteria have been respected in proposals
for assistance.
9.5 We are grateful to the Government for, insofar
as it goes, its response to our questions. However it has not
addressed our questions as to what extent the Government's efforts
to ensure that all Fund criteria are respected have resulted in
limits to or even rejections of applications by the Council and
whether these efforts are supported by any other Member States.
9.6 Accordingly, we repeat those questions. We
will not consider these proposals again until answers to those
questions have been received. Meanwhile the documents remain under
scrutiny.
Full details of the documents:
(a) 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 and sound
financial management (application EGF/2013/009 PL/Zachem from
Poland): (36617), 5523/15, COM(15) 13; (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 and sound financial management
(application EGF/2013/011 BE/Saint-Gobain Sekurit from Belgium):
(36618), 5525/15, COM(15) 9; (c) 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 and sound financial management (application
EGF/2013/007 BE/Hainaut steel (Duferco-NLMK) from Belgium): (36619),
5529/15, COM(14) 725; (d) 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 and sound financial management (application
EGF/2014/011 BE/Caterpillar): (36620), 5532/15, COM(14) 735; (e)
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 and sound
financial management (application EGF/2014/012 BE/Arcelor/Mittal):
(36621), 5534/15, COM(14) 734; (f) 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 and sound financial management (application
EGF/2014/014 DE/Aleo Solar: (36622), 5537/15, COM(14) 726; (g)
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 and sound
financial management (application EGF/2014/015 GR/Attica Publishing
activities): (36646), 5893/15 + ADD 1, COM(15) 40; (h) 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 and sound financial
management (application EGF/2014/018 GR/Attica Broadcasting):
(36648), 5895/15 + ADD 1, COM(15) 37; (i) Draft Decision on the
mobilisation of the European Globalisation Adjustment Fund (application
EGF/2014/016 IE/Lufthansa Technik): (36659), 6121/15, COM(15)
47; (j) Draft Decision on the mobilisation of the European Globalisation
Adjustment Fund (application EGF/2014/017 FR/Mory-Ducros): (36683),
6562/15, COM(15) 68.
Background
9.7 The European Globalisation Adjustment Fund (EGF),
established in 2006 for the period 2007-13, was 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 renewed for the 2014-20
budgetary period by Regulation (EU) No. 1309/2013 (the EGF Regulation),
which sets out the rules governing the use (mobilisation) of the
EGF. The annual budgetary ceiling for the EGF is €150 million
(£120 million) in 2011 prices.
9.8 The Government does not apply for finance from
this Fund. (It opposed its renewal in 2013, an opposition we endorsed.)
There is a fairly steady stream of successful applications from
other Member States.
9.9 In February we considered documents (a)-(i),
draft Decisions to approve applications from Poland, Belgium (four),
Germany and Greece (two) for contributions from the Fund. The
Government commented to us on these proposals in familiar terms,
including saying that:
· it is essential that EU expenditure is
closely scrutinised on the basis of value for money; and
· in line with this approach, it would seek
to ensure that all fund criteria have been respected in proposals
for assistance.
9.10 Noting that we do not normally report substantively
on EGF applications we said, however, that we had become increasingly
concerned about the steady stream of applications assessed by
the Commission as eligible for assistance from the fund. Accordingly,
we took the opportunity to ask the Government:
· to what extent its efforts to ensure that
all fund criteria are respected have resulted in limits to or
even rejections of applications by the Council;
· whether these efforts are supported by
any other Member States;
· whether there is any evidence that multinational
companies, such as Caterpillar, choose to implement redundancies
within the EU, rather than elsewhere, because of the availability
of support for redundant workers from the fund;
· what significance might be attached to
the apparent differences in the cost per redundant worker in different
cases; and
· whether the Government is satisfied that
continued use of the fund is value for money.
9.11 Meanwhile these documents remained under scrutiny.
The new document
9.12 The new draft Decision, document (j), is to
approve an application from France for a contribution from the
EGF. Case EGF/2014/017 FR/Mory-Ducros relates to 2,513
redundant workers in the courier services and freight transport
sector who will benefit from support with a proposed EGF contribution
of €6,052,200 (£4,404,791) — 50% of the total
budget. The Commission accepts the French authorities' justification
for the application, that is:
· the EU market for courier services and
freight transport has undergone serious disruption as a result
of major structural changes in world trade patterns due to globalisation;
· according to Eurostat, road haulage in
vehicles weighing more than 3.5 tonnes declined by 13.7% in the
EU, and by 21% in France between 2007 and 2012;
· the decrease in volumes to be transported
has been exacerbated by the increase in various associated costs
(for example, wages), in turn leading to a steady deterioration
of operating margins;
· this has been followed by a series of
bankruptcies in the road and haulage sector in France, estimated
by the Bank of France to have increased by 35% annually from 2007
to 2013; and
· Mory-Ducros, to which this application
pertains, arrived at a loss of €80 million (£58.22 million)
in 2012, and an estimated loss of €82 million (£59.68
million) in 2013, leading to the company's bankruptcy and closure
in November 2013 and widespread redundancies.
9.13 The Commission says 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 Minister's letter of 9 March 2015
9.14 The Financial Secretary to the Treasury (Mr
David Gauke) now responds to our questions about the EGF, first
saying that:
· it is the Government's first priority
to ensure that EU expenditure does not exceed agreed ceilings;
· in addition to ensuring that expenditure
is consistent with the Multiannual Financial Framework (MFF) deal
secured in 2013, the Government is committed to continue to work
hard to limit EU spending, reduce waste and inefficiency, and
ensure that where EU funds are spent they deliver the best possible
value for money for taxpayers;
· as part of this, it is essential that
expenditure is closely scrutinised on the basis of value for money;
· the Commission is responsible for the
thorough examination of each application, ensuring both that compliance
with all relevant provisions of the EGF Regulation; and
· based on the information provided by the
Commission, the Government seeks to ensure that all Fund criteria
are respected.
9.15 On the question of whether the Government considers
the Fund value for money, the Minister says that:
· the Government has been consistently clear
that the EU Budget should be focused on initiatives which are
clearly targeted, have good implementation rates and for which
there is a genuine case for investment being made at an EU rather
than national level;
· although expenditure is consistent with
the MFF deal, the Government continues to be of the view that
the EGF does not fulfil these criteria;
· indeed, although it succeeded in substantially
reducing the size of the EGF for this MFF period compared to the
previous one, and in pushing down the co-financing rate to a single
rate of 60% (the European Parliament had wanted three rates of
60, 70 and 80%), in June 2013 the UK voted against the Council's
agreed position to extend the EGF for the current MFF period on
the grounds of its significantly extended scope; and
· as a matter of principle the Government
continues not to vote in favour of individual EGF applications.
9.16 Turning to what significance might be attached
to the apparent differences in the cost per redundant worker in
different cases, the Minister comments that:
· in accordance with the EGF Regulation
the Fund provides a financial contribution for a package of active
labour market measures, which must be specified in the application,
aimed at reintegrating those affected into sustainable employment
either within or outside their initial sector of activity; and
· the packages of measures are tailored
to the needs of the individual employees and, as a result, will
be different from case to case, in turn producing the differences
in the cost per worker.
9.17 Finally, in relation to whether there is any
evidence that multinational companies choose to implement redundancies
within the EU, rather than elsewhere, because of the availability
of support for redundant workers from the Fund, the Minister says
that:
· he is not aware of any such evidence;
· applications to the Fund are, however,
for Member States and have to meet strict eligibility criteria
to be successful; and
· it seems unlikely that companies would
be certain that an application would be made or that the eligibility
criteria would be met ahead of deciding whether to implement redundancies.
The Government's view of the new document
9.18 In his Explanatory Memorandum of 9 March 2015
the Minister says in familiar standard text that:
· the Government has been clear that it
wants to see real budgetary restraint in the EU;
· 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 is committed to continue
to work hard 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.
9.19 Clearly the comments in the Minister's letter
apply also to this proposal.
Previous Committee Reports
Thirty-fourth Report HC 219-xxxiii (2014-15), chapter
10 (25 February 2015).
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