Select Committee on European Union Fortieth Report

EU EXTERNAL RELATIONS BUDGET: UPDATE AND OUTLINE PLANS FOR 2006 (11734/05, 5834/06, 5835/06, 5836/06, 5837/06, 6297/06)

Letter from Rt Hon Hilary Benn MP, Secretary of State, Department for International Development to the Chairman

  In your letter to me of 20 October 200[56], you asked that the Committee be kept generally informed of the ongoing discussions on the future structure of the external relations budget. I thought it would be useful to provide an update and outline our plans for 2006 at the conclusion of the UK Presidency of the EU. This is a joint letter with the FCO and has been agreed with HMT.

  The overall agreement on the Financial Perspectives reached at the December Council in Brussels included a Global Partner (External Actions) budget over the seven years 2007-2013 of €50.1 billion / £32.24 billion (the figure proposed by the Luxembourg Presidency in June). Although over 15% less than the Commission's opening 2004 proposal, the `budget will increase by about 4.3% annually from €6.28 billion / £4.3 billion in 2007 to reach €8.07 billion / £5.53 billion by 2013. At the same time, Council agreed to establish a 10th European Development Fund (EDF) to provide assistance to the African, Caribbean and Pacific countries for six years from 2008. The figure to be allocated of €22,682 million (£15,544 million) is separate from, and additional to, the Global Partner budget figure. The EDF will remain an inter-governmental fund.

  Discussions throughout the UK Presidency focused on the draft regulations for the European Neighbourhood and Partnership Instrument (ENPI), Pre-Accession Instrument (IPA), the Development Co-operation and Economic Co-operation Instrument (DCECI) and the Stability Instrument (SI). Steady progress was made in discussions, both on the specific language for each regulation and on cross-cutting issues. The IPA, ENPI and SI are all now fairly well advanced, but there are in each case some difficult sticking points still to be resolved, in consultation with the European Parliament.

  The UK Presidency presented a redraft of the DCECI that was well received by all parties. This puts a stronger emphasis than earlier versions on poverty reduction as the central aim of the instrument and the use of best development practice. The UK redraft helped change the European Parliament's earlier position of rejecting the proposal: the Parliament is now in the process of introducing amendments to the text.

  While it was originally intended that questions of nuclear safety be included in the Stability Instrument, it was subsequently decided that they should be covered in a separate instrument, drawing on the Euratom Treaty as their legal base. An Instrument for Nuclear Assistance is accordingly under preparation. I anticipate that the appropriate Regulation will be ready for adoption at around the same time as the others.

  In addition to the new instruments, the Humanitarian Aid Instrument will continue: we look forward to further discussion on this under the Austrian Presidency. We have argued against retaining Macro Financial Assistance as a separate policy instrument on simplification and rationalisation grounds, since its functions could be absorbed into the geographical regulations. It seems though that such an instrument will feature also under the next Financial Perspective.

  A number of issues which apply to the Global Partner budget heading as a whole remain to be resolved, including the question of financial provision between the instruments. The debate on relative shares can only be finalised once the European Parliament has endorsed the overall budget and the Global Partner heading budget itself. We also need decisions on the numbers and relative scope of the instruments. Discussions so far have focused on the six instrument architecture proposed by the Commission in early 2004. But it seems fairly clear that there will need to be some adjustments to reflect the direction of the negotiations as laid out above; and also, for example, to respect the distinct nature of Common Foreign and Security Policy arrangements. Our position (and that of many other Member States) remains that the simplification and rationalisation of the current budget structure is integral to a more effective budget structure.

  Agreeing an appropriate role for the Parliament and Council in setting policy priorities for external funding will be a major challenge in the months to come. This makes it difficult to predict when any of the Regulations will go to Council. It is also important that policy commitments entered into during 2005 are fully reflected in the new external Regulations, including the November 2005 Council Conclusions on the Orientation Debate and the European Consensus on Development signed by the Council, the Commission and the European Parliament on December 20th. They provided considerable clarity on the overarching objective of EU aid—reducing poverty—and guidance about a rational allocation of resources of development resources. They also invited the Commission and the European Investment Bank to investigate the role of loans and grants in middle income countries.

  We will support the Austrian Presidency in their efforts to finalise the draft regulations for the external actions instruments, building on the foundations provided by the decisions taken in Brussels in December last year.

5 February 2006

Letter from the Chairman to Gareth Thomas MP, Parliamentary Under-Secretary of State, Department for International Development

  Thank you for your Explanatory Memoranda which Sub-Committee C considered at its meeting on 16 March. The Sub-Committee agreed to clear the documents from scrutiny. The documents were cleared, however, on the basis that we share the many concerns expressed by you in the memoranda and urge you to press for the further details which you state are necessary for the proper implementation of these programmes.

  We consider that the general themes of the programmes are sound. In particular we are happy to see the specific attention being paid to both food security and democracy and human rights, each of which should inform all the Commission's development assistance programmes. However, we also consider that all five documents are poorly written, lacking in detail and incapable of being applied in any measurable or objective manner. The Commission should give further consideration to redrafting these communications prior to their being agreed by the Council. We hope that you will support this proposal.

  We also recognise that these programmes are an attempt by the Commission to simplify and realign its thematic programmes in the light of the newly agreed budget lines contained within the Financial Perspective 2007-2013. However, we fully agree with you that it is unclear how these programmes will be implemented in line with the budget, and ask that you write to inform us of the budget allocations for each programme once they have been approved. It is imperative that such allocations take place in an open and transparent manner.

  On each of the specific programmes we would like to add the following additional specific comments:

  Investing in people—We consider that insufficient attention has been paid to women's rights within these programmes as a whole, and that it should not be simply one aspect of this programme on human and social development. In particular, women's rights should be emphasised more strongly within the programme on democracy and human rights given that women suffer unduly in those states with poor records on human rights and governance.

  Non-state actors—We agree that further consideration ought to be given to the Commission's wide definition of non-state actors (para 11, EM). Support for development NGOs ought to take priority over support for political foundations, universities and local authorities.

  Environment—We agree with the point made in your explanatory memorandum that care is needed to ensure that an integrated approach does not detract from the need to ensure that geographical support is given to priority environmental issues reflected in country plans (para 11, EM). We also urge you to ensure that any EU support for the management of natural resources takes full account of international guidelines.

  Food security—We welcome the focus of the programme on transition and fragile states, and the necessary transition from relief to development assistance (para 14, EM). However, we would like to see these issues being linked to the establishment of the UN's Peacebuilding Commission (PBC): a guarantee of food security by the EU in post-crisis situations would be of great assistance to the work of the PBC.

  Democracy and human rights—We agree that the EU's valuable work in election monitoring should be funded through a separate budget (para 20, EM) in order that it does not affect the overall budget allocations between the various programmes. We are, however, concerned about your proposal for a contingency reserve to facilitate emerging opportunities and to deal with emergencies (para 15, EM): we consider that this would bypass all the usual rules for ensuring that funds are correctly spent and, at the very least, would need to be closely monitored and kept under review.

  We ask to be kept fully informed on the outcome of these programmes at the forthcoming discussion at the 10-11 April General Affairs and External Relations Council. Should the programmes be amended, we ask that you submit the amended versions along with a commentary on the specific changes made.

20 March 2006

Letter from Rt Hon Hilary Benn MP to the Chairman

  On 16 March 2006, your Committee discussed the Communication on External Actions through Thematic Programmes under the Future Financial Perspectives 2007-2013 (FP) and the five specific thematic Communications as per above. Your Committee cleared all Communications for scrutiny on the basis that I press for more clarity on the issues raised in my EM. Similarly, you asked me to inform you of the budget allocations for each programme once decided.

  There has been some development since I last wrote. On February 16, Council decided in Coreper to pursue a line of negotiations with the European Parliament based on including all current geographic and thematic regulations into the DCECI—the new Development Instrument. Promoting simplicity and effectiveness in the management of EC external spend underpinned this decision. We supported this line.

  Following this, the Austrian Presidency prepared procedural Council Conclusions on the seven specific thematic Communications plus the global one. These Conclusions simply took note of the respective Communications and invited the Commission and Member States to integrate these as appropriate into the new external action instruments, including the DCECI. The Conclusions were adopted by the Environment Council on 9 March. A copy of the Conclusions is attached (not printed).

  The Presidency then brought forward proposals on how to include these regulations into the DCECI. They were briefly discussed in Council working groups. It is our understanding that discussions on the Communications as part of the DCECI will replace any discussions and adoption of the specific thematic Communications in Council. We plan to raise concerns spelled out in our respective EMs in the context of these discussions.

  The EP Development Committee adopted their report on the DCECI on March 21. They rejected the approach adopted by the Council for the thematic regulations. We anticipate that high-level political negotiations will be needed to move this dossier further.

  We will write again once there is more progress. It is our wish to keep you as informed as possible, but I hope you share my view that this is a complex process where the outcome is sometimes difficult to anticipate.

24 April 2006

Letter from Rt Hon Hilary Benn MP to the Chairman

  Following my letters of 5 February and 24 April, we have set out to provide you with regular updates as regards to the ongoing discussion on the Development Instrument (DCECI) of the next EC Financial Perspective (FP) 2007-2013. As you are well aware, negotiations on this Instrument have been complex and are still a way from conclusion.

  On 3 May, the Committee of Permanent Representatives (COREPER) decided to present the European Parliament (EP) with a "package deal" for the external instruments under the next FP to advance these negotiations. This involved an approval of the four instruments on which the text has already been agreed—Stability Instrument, European Neighbourhood and Partnership Instrument (ENPI), Instrument for Pre-accession Assistance (IPA) and Instrument for Nuclear Assistance (INA)—together with a Development Instrument split into four: one instrument for cooperation with developing countries; one for cooperation with industralised countries; one instrument for democracy and human rights; and one instrument regrouping the other thematic programmes. The Development Instrument would then be based soleley on TEC article 179, the development article of the Treaty.

  This deal was seen as going some way towards meeting the EP's request to keep separate ll the current 16 regulations, which would be regrouped under th eDCECI in the Commission's proposal. We supported this deal as a constructive compromise and way forward. Despite our support for the principle of reducing the number of instruments to a minimum, we see sense in creating a new instrument for managing cooperation with industralised countries, as separate from cooperation with developing countries, and in raising the political visibility of democracy and human rights through a further separate instrument.

  On 18 May, however, the European Parliament voted in Plenary for the "Mitchell report", which effectively suggests retaining all current regulations plus the DCECI, and introduced a total of 117 amendments to the Commission's initial proposal. Formally, this becomes the EP's first reading report, a copy of which is attached for your information.

  Essentially the EP report suggests:

    —    To retain the current legislative structure of the EC budget for development spending, involving a total of 16 regulations plus the DCECI, to safeguard the EP's current role in setting policies for thematic and geographic programmes;

    —    A DCECI basedon TEC 179, developing countries only, all aid classified as ODA and with clear barries to other external instruments;

    —    A strong focus on poverty reduction and the MDGs as the overarching aim for the Instrument, based on development best practice, with active involvement of civil society in all stages;

    —    A greater involvement of the EP in the management of Community aid programmes, including in the stages of design, approval, reviews and suspension:

    —    A call-back mechanism allowing the EP to object to country/region and thematic strategy papers and ask for adoption through co-decision;

    —    Added measures of control against fraud, irregularities and human rights abuses;

    —    Sectoral spending targets in the programmes.

  Without doubt, this will take us into the second reading as Council will not be disposed to endorse some of the key demands put forward by the EP. While we welcome the EP's wish to turn this into a true Development Instrument, forcused on development priorities, developing countries and best practice—in fact many of the EP's amendments build on the ideas we put forward during our 2005 EU Presidency—we support the COREPER position for a rationalised budget structure involving fewer regulations. Also, we do not support the EP's demands for more involvement in the management of Community aid, at the same time as Member States are ready to step back and extend more autonomy to the Commission.

  The next step will be to agree a Council Common Position on the EP 1st reading report. Ideally, this should be designed as a compromise text acceptable to both the EP and Council, thereby allowing for a rapid 2nd reading agreement. To do this, the Austrian Presidency is holding parallel negotiations with both parties. We await the outcome of these negotiations but it is possible that discussions on a Common Position will fall into the Finnish Presidency.

  I will keep you informed of future movements on this dossier and will forward you a copy of the Council Common Position when it merges. It is also possible that negotiations continue over the summer and during Parliamentary recess. We will discuss with your Clerks on how best to keep you informed during this period.

26 June 2006

56   Correspondence with Ministers, 45th Report of Session 2005-06, HL Paper 243, p 293. Back

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