73 Investment Plan for Europe
| Committee's assessment
| Politically important |
| Committee's decision | (a) Cleared from scrutiny (by Resolution of the House on 24 March 2015) (b) Cleared from scrutiny
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| Document details | (a) Proposal for a Regulation on an EU investment fund (b) European Court of Auditors Opinion of a proposal for a Regulation on an EU investment fund
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| Legal base | (a) Articles 172, 173, 175(3) and 182(1) TFEU; co-decision; QMV (b) —
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| Department
Document numbers
| HM Treasury
(a) (36605), 5112/15 + ADD 1, COM(15) 10
(b) (36768), 6541/15, —
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Summary and Committee's conclusions
73.1 In November 2014 the Commission published a Communication
suggesting a three part plan to promote investment in the EU economy,
an "Investment Plan for Europe". In January the Commission
published this proposal for a Regulation to create a European
Fund for Strategic Investments and a European Investment Advisory
Hub, so enabling the Commission to implement and deliver its Investment
Plan for Europe jointly with the European Investment Bank. The
Commission also published a Draft Amending Budget for the 2015
EU budget to provide finance for the new bodies this year. These
documents were cleared from scrutiny in the previous Parliament
after debate in European Committee B in March.[ 505]
73.2 The Government has now given us a full account
of the adoption of the proposed Regulation and the next steps
for the European Fund for Strategic Investments
73.3 In March the European Court of Auditors presented
this Opinion of the proposed Regulation creating the legal framework
for the Commission's investment plan. On the basis of its
views it suggested specific changes to the Commission's proposed
Regulation.
73.4 The Government, whilst noting that many of the
Court's concerns were addressed in negotiations, has told us that
in the interests of good policy making it welcomed the input by
the Court and looked to ensure its opinions were taken into account
by the Commission, Council and European Parliament.
73.5 We are grateful for the Government's account
of where matters now stand in relation to the European Fund for
Strategic Investments.
73.6 As for the European Court of Auditors' Opinion,
while noting its utility, we clear the document from scrutiny.
Full
details of the documents:
(a) Proposal for a 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; (b) European
Court of Auditors Opinion No. 4/2015 (pursuant to Article 287(4)
of the Treaty on the Functioning of the European Union (TFEU))
concerning the proposal for a Regulation on the European Fund
for Strategic Investments and amending Regulations (EU) No. 1291/2013
and (EU) No. 1316/2013: (36768), 6541/15, —.
Background
73.7 In November 2014 the Commission published a
Communication suggesting a three part plan to promote investment
in the EU economy:
· a
European Fund for Strategic Investments (EFSI), to mobilise €315
billion (£226 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.
73.8 In January the Commission published a proposal
for a draft Regulation, document (a), to create the legal framework
for the first two strands of its investment plan, that is, a EFSI
and a European Investment Advisory Hub, so enabling the Commission
to implement and deliver the investment plan jointly with the
European Investment Bank (EIB). The EFSI would be supported by
an EU guarantee fund, providing a maximum EU guarantee of €16
billion (£11.5 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
Commission also published a Draft Amending Budget for the 2015
EU budget to provide finance for the new bodies this year. Our
predecessor Committee recommended that these three documents be
debated in European Committee B and that debate took place on
24 March.[ 506]
The new document
73.9 In March the European Court of Auditors (ECA)
presented its Opinion of the proposal for a Regulation creating
the legal framework for the Commission's investment plan, document
(b). It outlined general comments about the Commission's proposal
before suggesting specific changes to the text.
73.10 The ECA examined the proposed governance arrangements
of the EFSI:
· recalling
that these reflect a dual scheme, with the Commission directly
responsible for the management of the funds of the EU guarantee
only, while the EIB governing bodies would be responsible for
the actual investment of the funds;
· saying
that this choice should not undermine the Commission's full responsibility
in implementing the EU budget; and
· suggesting
that, for transparency, all agreements between the Commission
and EIB should be published.
73.11 The ECA discussed the proposal to leave to
an agreement between the Commission and the EIB a number of matters
it viewed as essential aspects, including establishing the EFSI
as a separate guarantee facility within EIB accounts, its governance
and internal audit arrangements and assessment of its performance.
The ECA said that the terms of the agreement would have significant
implications concerning the provision and use of the guarantee.
73.12 The ECA examined the interaction between the
proposed Regulation and the Financial Regulation, which governs
management of the EU's finances:
· noting
that the specific provisions of the Financial Regulation would
not apply to the EU guarantee or fund;
· noting
that there was no clear explanation for this;
· saying
that it was unclear to what extent the EIB's own rules would enforce
fundamental principles set by the Financial Regulation; and
· suggesting
that any derogations to the Financial Regulation provisions should
be fully justified.
73.13 The ECA said that:
· to
avoid legislative loopholes, essential elements of the proposed
Regulation should remain in the hands of the Council and the European
Parliament and be covered in the Regulation itself; and
· if a
delegation of power was necessary, it should be limited to non-essential
elements.
73.14 The ECA expressed some concern around the measurement
of performance of the new instruments against the intended objectives:
· saying
that accountability seems focussed on outputs rather than outcomes
and impacts;
· asking
whether the Commission and EIB reports would be complementary;
· asking
whether the Commission would include the EFSI in its annual evaluation
report on the EU's finances, in particular whether it had met
the objectives of job creation and private finance leveraged;
· saying
that due dates for all stipulated reporting should be set; and
· noting
that there was no accountability for the EFSI's Steering Board
and EIB governing bodies before the budgetary authorities.
73.15 In relation to provision of an EU guarantee,
the ECA suggested that:
· there
should be limits to the extent of potential liabilities on the
EU budget, with in particular a ceiling for EIB expenses and explicit
immunity for the Commission against legal claims by EFSI beneficiaries;
and
· the
legal form and functioning of the guarantee fund should be clarified.
73.16 Noting that creation of the EFSI was deemed
to respond to urgent need and that therefore it had not been validated
by an ex-ante evaluation, the ECA suggested that the Commission
should use the upcoming mid-term review of the Multiannual Financial
Framework to assess the progress achieved by the EFSI and should
take any corrective measures needed.
73.17 The ECA requested changes to its audit mandate
included in the draft Regulation. It said that:
· the
wording put forward by the Commission could be restrictive; and
· the
Regulation should fully take into account the ECA's role to audit
the legality, regularity, and sound financial management of all
revenue and expenditure of the EU, including all aspects of the
EFSI.
73.18 On the basis of these preceding comments the
ECA then suggested specific changes to the Commission's proposed
Regulation. It said that it remained available to provide further
input in the legislative process if necessary.
The Government's view of the new document
73.19 In his Explanatory Memorandum of 27 May 2015
the Financial Secretary to the Treasury (Mr David Gauke), noting
that the Opinion related to the Commission's original proposed
Regulation, told us that many of the ECA's concerns were addressed
in subsequent negotiations. He continued that in the interests
of good policy making the Government welcomed the input by the
ECA and had looked to ensure its opinions are taken into account
by the Commission, Council and European Parliament.
The Minister's letter of 25 June 2015
73.20 The Minister writes to update the Committee
on the outcome of negotiations on the EFSI Regulation, which was
formally adopted by the European Parliament on 24 June and by
Council on 25 June.
73.21 The Minister first recalls that the Government
priorities in the negotiations were to establish the EFSI within
the existing EU Budget, to ensure the EFSI's credibility to private
sector investors and to ensure the mechanism is flexible and able
to respond to the diverse range of investment needs across Member
States. He then comments that:
· overall
the Government believes the final text delivers its objectives,
and this is a view shared by Member States, who unanimously supported
the Regulation in COREPER;
· some
compromises were necessary, however, to secure the European Parliament's
agreement; and
· notably
these included facilitating a role for the European Parliament
in vetting the candidate for the EFSI's Managing Director and
agreement to use €1 billion (£719 million) from the
margin within the Multiannual Financial Framework to reduce the
reallocations from high value added areas of Heading 1 of the
Budget.
73.22 The Minister comments further that:
· the
Government ensured that the EIB remains at the centre of the plan,
with governance arrangements and decision making processes that
are free from political interference;
· crucially,
it ensured the recruitment of the Investment Committee (the experts
who will decide on the application of the guarantee) will be independent
of politics, with no role for the European Parliament —
this ensures that projects will be selected on merit which is
crucial to securing credibility with investors;
· on financing,
the maximum liability on the EU budget from the guarantee to the
EIB remains unchanged at €16 billion (£11.5 billion);
· however,
the European Parliament wanted all €8 billion (£5.75
billion) of the paid-in Guarantee Fund to be financed from the
margin;
· in negotiations,
the Council secured agreement that the financing of the guarantee
fund will still be primarily from reallocations;
· however,
it was agreed to utilise an additional €1 billion (£719
million) of the margin to reduce the amount of reallocation required
from high value added programmes in Heading 1a;
· in particular,
it was agreed to completely protect the European Research Council
(ERC), Marie Sklodowska-Curie actions and 'Spreading Excellence'
programmes; and
· this
is a good outcome, as UK Universities and other research institutions
have historically benefitted from a substantial share of these
research programmes — for example the UK received 22.3%
of the budget available for ERC grants in the last Multiannual
Financial Framework.
73.23 The Minister continues that:
· the
final deal respects the need to maintain flexibility, while providing
transparency on the eligibility criteria;
· the
Regulation itself now specifies more detail on the sectors eligible
to benefit from the EFSI and the available instruments, while
retaining a broad scope;
· the
European Parliament asked for specific Member State and sectoral
concentration quotas — the Government believed this was
inappropriate as it could suggest projects were being selected
to meet a quota, not on the basis of merit;
· the
agreed compromise was to avoid "excessive concentration"
of investment, with the Steering Board setting "indicative"
limits — the government thinks this allows for the necessary
flexibility, and does not undermine the principle that projects
are selected on merit. Further, it ensures that smaller research
projects are not crowded out by larger infrastructure projects;
· to ensure
transparency and consistency in the assessment of projects, the
compromise deal also introduces a 'Scoreboard', which the Investment
Committee will use to assess projects against the objectives of
the Regulation and which will be adopted by delegated act;
· the
European Parliament wanted the EFSI to be permanent from the outset;
and
· in the
final compromise, the investment period is time-limited to four
years, with a fundamental evaluation of the performance of the
EFSI against its objectives after three years — if the venture
proves successful, a decision may be taken to extend the provision
of guarantees.
73.24 The Minister says that:
· the
focus now is to promote the EFSI in the UK and ensure that both
private and public sector projects have access to the necessary
information to make the most of the opportunities on offer;
· at the
same time, it is crucial that the UK continues to build on its
increasingly successful record in accessing more traditional EIB
and European Investment Fund (EIF) financing — for example,
the EIB lent a record €7 billion (£5 billion) in the
UK in 2014, an increase of 20% compared to 2013, which itself
was a 56% increase over 2012, and in 2014 the UK's SMEs received
20% of EIF activity, more than all other Member States;
· the
Government has adopted a more strategic approach to EIB engagement,
including by stepping up coordination both within Government,
and between the UK authorities and the EIB;
· this
includes ensuring that projects across the UK are well placed
to take advantage of the EFSI, and that the EIB has a clearer
picture of potential investment opportunities within the UK; and
· the
Government looks forward to welcoming Commissioner Katainen's
'roadshow' to the UK on 16 July and sees it as another opportunity
to raise awareness of what the EFSI has to offer.
Previous Committee Reports
Thirty-fifth Report HC 219-xxxiv (2014-15), chapter
2 (4 March 2015), Thirty-second Report HC 219-xxxi (2014-15),
chapter 1 (4 February 2015), and Thirtieth Report HC 219-xxix
(2014-15), chapter 5 (21 January 2015).
505 (36540) 16115/14, (36605) 5112/15 + ADD 1, (36607)
5317/15: see Twenty-seventh Report HC 219-xxvi (2014-15), chapter
7 (17 December 2014), Thirtieth Report HC 219-xxix (2014-15),
chapter 5 (21 January 2015), Thirty-second Report HC 219-xxxi
(2014-15), chapter 1 (4 February 2015), Thirty-fifth Report HC
219-xxxiv (2014-15), chapter 2 (4 March 2015) and Gen Co Debs,
European Committee B, 24 March 2015, cols 3-18. Back
506 Ibid. Back
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