Documents considered by the Committee on 22 November 2017 Contents

11Research Fund for Coal and Steel (RFCS)

Committee’s assessment

Politically important

Committee’s decision

Not cleared from scrutiny; waiver granted; further information requested; drawn to the attention of the Business, Energy and Industrial Strategy Committee

Document details

Proposal for a Council Decision amending Decision 2003/76/EC establishing the measures necessary for the implementation of the Protocol, annexed to the Treaty establishing the European Community, on the financial consequences of the expiry of the ECSC Treaty and on the Research Fund for Coal and Steel

Legal base

The rules concerning de-commitments are provided in Article 4 of Council Decision 2003/76/EC; special legislative procedure (consent); QMV

Department

Business, Energy and Industrial Strategy

Document Number

(39007), 11947/17, COM(17) 452

Summary and Committee’s conclusions

11.1The European Coal and Steel Community (ECSC) was dissolved in 2002, when the 1951 Treaty of Paris expired. However, the assets of the ECSC were used to establish a Research Fund for Coal and Steel (RFCS) to support research projects in these sectors. Each year around €55 million is made available to universities, research centres and private companies to fund projects which cover, variously, coal and steel production processes; application, utilisation and conversion of resources; safety at work; environmental protection and reducing CO² emissions from coal use and steel production.

11.2Available RFCS funding is falling due to the combination of the security principle that governs the management of the assets of the European Coal and Steel Community in liquidation, which effectively requires the Commission to invest the ECSC’s former assets in such a way as to maintain “a high degree of security and stability over the long-term”, and diminishing returns from bond markets, which are, in part, driven by the European Central Bank’s quantitative-easing programme.

11.3This is leading to a situation where the critical level of funding for organising an annual call for proposals may not be met. The budgetary envelope of the RFCS programme is predicted to decrease from an estimated €46M (£42M) in 2017, to €27M (£25M) in 2018, to between €14M and €18M (£13M to £17M) in 2019.

11.4The adoption of the proposed revision will authorise the recycling of all the de-commitments (including the amounts recovered) made in the RFCS research programme since 2003 which have been returned to the assets of the ECSC in liquidation and represent a possible complementary funding for the RFCS research programme of €40.3 M (£37M). It will also provide an extra funding of about €5M (£4.6M) per year. This would maintain, for a certain period, an acceptable level of funding of Coal and Steel research projects while waiting for a change in monetary policy and an increase of asset returns on public bonds markets.

11.5The Parliamentary Under-Secretary of State for the Department of Business, Energy and Industrial Strategy (Lord Prior) states that the amendment is consistent with UK policy supporting the UK manufacturing sector, and the steel sector in particular, and adds that the RFCS is a valuable mechanism to enable funds to be channelled to UK steel companies for R&D work. The Minister adds that research of this kind is the principal method by which UK steel companies can maintain a competitive advantage.

11.6On 20 November the Minister of State for the Department of Business, Energy and Industrial Strategy (Claire Perry) wrote to request that the Committee clear the file in advance of COREPER in early December followed by the decision being made in Council soon thereafter. The Minister states that the Commission Legal Service has clarified that de-commitments from the Fund remain allocated to the RFCS and could not be returned to the general budget. The Presidency has reworded one passage of the text to remove any ambiguity. The UK is content with the proposed text and will support it in Council.

11.7We thank the Government for its account of the proposed Decision, which will provide bridging funding to ensure that resources are available to continue to support research in the coal and steel sectors. The Government considers that research like that funded by the EU Research Fund for Coal and Steel (RFCS) is “the principal method by which UK steel companies can maintain a competitive advantage” and observes that the proposal is “consistent with UK policy supporting the UK manufacturing sector, and the steel sector in particular”.

11.8UK steel supports this proposal, which will mean that UK steel companies will have access to increased R&D funding. We note that there is one steel production company in Scotland and three steel production companies in Wales that could benefit from the increased funding for R&D this proposal will provide. The synopsis of RFCS projects for the 2015–17 period61 shows that a range of UK institutions are prominently involved in many projects, with Exeter University, the Steel Construction Institute LBG and Nottingham University all co-ordinating individual RFCS co-financed projects, and many other UK individuals and organisations participating in other projects.

11.9Given that the RFCS only provides financial assistance to entities within the territory of an EU Member State, we conclude that the UK will no longer be able to participate in it fully once it has left the European Union, unless the UK’s withdrawal agreement were to provide otherwise. Given the Government’s assessment that research of this kind is the principal method by which UK steel companies can maintain a competitive advantage, we consider the question of the UK’s continued participation in the RFCS or its replacement by an equivalent UK fund to be of local importance to the sector.

11.10We therefore ask the Minister to clarify:

11.11We request a response to these questions by 12 December 2017. We grant the Government a waiver to support the proposal at the December meeting of Council at which it is considered. In the meantime we retain this proposal under scrutiny and draw it to the attention of the Business, Energy and Industrial Strategy Committee.

Full details of the documents

Proposal for a Council Decision amending Decision 2003/76/EC establishing the measures necessary for the implementation of the Protocol, annexed to the Treaty establishing the European Community, on the financial consequences of the expiry of the ECSC Treaty and on the Research Fund for Coal and Steel: (39007), 11947/17 COM(17) 452.

Background62

11.12In the early 1990s, a debate including all interested parties was launched on the future of the European Coal and Steel Community Treaty (ECSC) signed in 1951 and due to expire in 2002. The Amsterdam European Council in 1997 invited the Commission to put forward proposals to ensure that revenues from ECSC reserves would be used for research within the sectors related to coal and steel.

11.13The Council of Ministers eventually reached an understanding on all issues regarding the activities to be carried out after the expiry of the ECSC Treaty. The legal basis of the Research Programme of the Research Fund for Coal and Steel is currently outlined in the Council Decision 2008/376/EC of 29 April 2008, published in the Official Journal of 20 May 2008 ref. OJ L 130/7.63

11.14Through a Council Decision on 27 February 2002, the Member States instead agreed to use those assets to establish the RFCS to support research in the coal and steel sectors, previously one of the roles of the ECSC. The Research Fund for Coal and Steel (RFCS) is a self-sustaining fund, which supports R&D in the coal and steel sectors. Every year around € 55 million (€ 47.7 million for 2015) is made available to universities, research centres and private companies to fund projects.

11.15The RFCS programme is managed by the European Commission and the following committee and groups established to assist the Commission as defined by a Council decision:

11.16Financial assistance from the RFCS is restricted to EU Member States. Article 13 of Council Decision 2008/376/EC on the adoption of the Research Programme of the fund states that:

“Any undertaking, public body, research organisation or higher or secondary education establishment, or other legal entity, including natural persons, from third countries shall be entitled to participate on the basis of individual projects without receiving any financial contribution under the Research Programme, provided that such participation is in the Community’s interest.”64

Explanatory Memorandum

11.17The Parliamentary Under-Secretary of State for the Department of Business, Energy and Industrial Strategy (Lord Prior), in an explanatory memorandum submitted on 20 September 2017, provides a thorough account of the situation, explaining that the proposal effectively allows money that has previously been allocated to projects, but not used, to be made available. Unused money generally comes from projects that are completed but have not spent their allocated money.

11.18The Minister adds that the proposal will help the RFCS to deal with an expected reduction in funding due to the poor return its investments have made due to EU-wide quantitative easing action which has reduced returns on public bonds markets.

11.19The Minister states that the proposal:

“…is consistent with UK policy supporting the UK manufacturing sector, and the steel sector in particular, and that the RFCS is a valuable mechanism to enable funds to be channelled to UK steel companies for R&D work.”

11.20He adds:

“Research like that funded by the RFCS is the principal method by which UK steel companies can maintain a competitive advantage.”

11.21The paragraph on Brexit implications is the by-now familiar legal boilerplate:

“On 23 June 2016, the EU referendum took place and the people of the United Kingdom voted to leave the European Union. The government respected the result and triggered Article 50 of the Treaty on European Union on 29th March 2017 to begin the process of exit. Until exit negotiations are concluded, the UK remains a full member of the European Union and all the rights and obligations of EU membership remain in force. During this period the Government will also continue to negotiate, implement and apply EU legislation.”

11.22Lord Prior concludes:

“To that end, we agree with the Commission that the RFCS programme is complementary to other Union instruments that can be used to support the adaptation of the steel industry at several levels. These include the European Fund for Strategic Investments, the European Structural and Investment Funds, Horizon 2020 with the Public-Private Partnership ‘SPIRE’ (Sustainable Process Industry through Resource and Energy Efficiency) and the European Social Fund. It is also consistent with the Union support to the competitiveness of the steel industry which is among the objectives of the RFCS research programme.”

11.23The Minister also observes that:

Letter from the Minister of 20 November 2017

11.24On 20 November the Minister of State for the Department of Business, Energy and Industrial Strategy (Claire Perry) wrote to ask the Committee to clear the file from scrutiny so that Ministers can participate fully in Council.

11.25The Minister explains that some Member States expressed concerns in Working Groups that the recycled money could be used for other purposes outside the remit of the RFCS, which could reduce future funding. The Commission Legal Service subsequently clarified that de-commitments from the Fund remained allocated to the Fund and could not be returned to the general budget, so all recycled money must be used by and within the RFCS for its stated purpose. To remove any ambiguity, the Presidency has made some minor changes to the text of the proposal.

11.26The Minister states that the Government and other Member States are content with this clarification. She states that the file will move to COREPER in early December, before being presented to Council as soon as possible thereafter. She therefore requests that the Committee lift the scrutiny reserve. The proposal is subject to subsequent consent from the European Parliament under the special legislative procedure.

Previous Committee Reports

None.


62 European Commission, RFCS—About




28 November 2017