Documents considered by the Committee on 19 April 2017 Contents

4Funds to help Member States affected by natural disasters

Committee’s assessment

Politically important

Committee’s decision

Cleared from scrutiny; further information requested

Document details

Proposal for a Regulation amending Regulation (EU) No 1303/2013 as regards specific measures to provide additional assistance to Member States affected by natural disasters

Legal base

Article 177 TFEU, QMV, Ordinary Legislative Procedure

Department

Business, Energy and Industrial Strategy

Document Number

(38330), 15058/16, COM(16) 778

Summary and Committee’s conclusions

4.1Recent earthquakes in Italy have had a devastating effect on the region, causing death, displacement and substantial physical and cultural damage. The Commission proposal would allow the European Regional Development Fund (ERDF) to support reconstruction operations and provide that such operations could be financed fully from the ERDF, without the need for national co-financing. Normally the ERDF co-finances projects alongside national funding, with the proportion of ERDF and national funding varying according to the wealth of a particular region.

4.2The UK and other Member States have asserted the importance of the principle of national co-financing. In our scrutiny, we have expressed sympathy with the Commission’s approach but we agree too that co-financing is an important principle for EU structural funding and there is a risk that this new proposal—however well intended—could start to erode the principle.

4.3According to the Minister for Small Business, Consumers and Corporate Responsibility (Margot James) a compromise has been reached among Member States establishing an ERDF financing rate of up to 90%. There would be no limit on the proportion of the national ERDF allocation that could be used for disaster recovery, although the funding could only be used in defined circumstances. Given that the compromise is consistent with the principle of co-financing, the Government wishes to support the compromise. The Minister seeks scrutiny clearance in order that the UK is able to vote in favour of the proposed General Approach at Council on 25 April.

4.4We remain sympathetic to the Commission’s objective of supporting Member States affected by natural disasters. Equally, we welcome the efforts being made to reach a compromise that is consistent with the principle of co-financing. As the approach being taken by the Government is in line with our views, we are content to release the proposal from scrutiny. We trust that this will allow the Government to engage constructively as the negotiations move towards conclusion.

4.5We are mindful that discussions with the European Parliament are yet to begin. While we have released the proposal from scrutiny, we expect the Government to update us on progress.

Full details of the documents

Proposal for a Regulation amending Regulation (EU) No. 1303/2013 as regards specific measures to provide additional assistance to Member States affected by natural disasters : (38330), 15058/16, COM(16) 778.

Background

4.6In order to provide additional assistance to Member States affected by natural disasters, the Commission proposed the introduction of a new option (“priority axis”) under the European Regional Development Fund with a co-financing rate of up to 100%. Further information was set out in our Report of 11 January 2017.3 In that Report, we expressed our understanding of the wish to support Member States affected by natural disasters and we noted that the proposal did not require any amendment to the agreed 2014–2020 financial framework.

4.7In our most recent Report of 15 March 2017,4 we noted the Commission’s defence of its proposal and welcomed the efforts that the Government was making to put forward alternative solutions to achieve a similar objective but without sacrificing the important principle of co-financing. We retained the proposal under scrutiny and looked forward to a further update as negotiations progressed.

Minister’s letter of 28 March 2017

4.8The Minister explains the progress of negotiations and the Government’s position in the following terms:

“The Structural Measures Working Party, comprising Member State representatives and the European Commission, considered an alternative proposal submitted by the UK and other Member States to alter the Commission’s 100% ERDF co-financing proposal at its meeting of 16 March 2017. The alternative proposal supported by the UK allowed for a ‘top up’ of 10% in the co-financing rate (e.g. from 60% to 70%) and a ceiling of 5% of the national ERDF allocation which could be used for disaster recovery purposes, limiting the overall amount used with higher co-financing rates and therefore maintaining a strong national incentive for good governance. The Commission held firm on its proposal of 100% ERDF co-financing, arguing that the counter proposal was overly complex and provided relatively small benefits in terms of the amount of national funding saved compared with standard co-financing rates. The Commission also argued that ERDF projects can already be funded using 100% ERDF co-financing at project level. This is technically correct, but omits the fact that the co-financing rate has to be balanced out across a grouping of projects.

“On 22 March the Presidency provided a new compromise proposal. This proposal states that an ERDF co-financing rate of up to 90% should be permitted but does not include the 5% ceiling on the total amount of the national ERDF allocation used for disaster recovery purposes. However, as the proposal is consistent with the principle of co-financing, ensuring that 100% ERDF co-financing would not be permissible, and could only be used in defined circumstances which reduce the chances of a large percentage of national allocations being devoted to these purposes, I am seeking clearance for the UK to vote in favour of this compromise at General Affairs Council on 25 April.”

Previous Committee Reports

Thirty-fifth Report HC 71-xxxiii (2016–17), chapter 2 (15 March 2017) and Twenty-fifth Report HC 71-xxiii (2016–17), chapter 1 (11 January 2017).


3 Twenty-fifth Report HC 71-xxiii (2016–17), chapter 1 (11 January 2017).

4 Thirty-fifth Report HC 71-xxxiii (2016–17), chapter 2 (15 March 2017).




21 April 2017