Select Committee on European Union Fortieth Report


Letter from Rt Hon John Reid MP, Secretary of State for Defence, Ministry of Defence to the Chairman

  The next European Defence Agency (EDA) Steering Board meeting is due to take place on 7 March. I am committed to improving the transparency of EDA-related business, and in particular the Ministerial level meetings of its Steering Board. I would therefore like to take this opportunity to inform you of the main items I expect to be discussed at this meeting. I also enclose for your information the draft agenda and draft papers that have been circulated by the EDA (not printed). The final papers for this meeting will not be issued by the Agency until some time after 24 February, thus I am not able to provide these to you at present.

  The first item on the Agenda will be an administrative point on the auditing arrangements for the EDA's accounts. Similar to the situation that arose last year, the Agency is once again asking to derogate from its Financial Regulations. Instead of establishing a college of auditors consisting of six auditors from participating member's states, the EDA is requesting that two auditors are reappointed from the 2005 college and one additional auditor is appointed from a third participating member states. We have received this proposal late in the day and my official's are currently considering it. I am therefore unable at this stage to tell you whether we will be able to accept this.

  The main substantive discussion at the Steering Board will be European Defence Research and Technology, on the basis of the discussion paper at annex (though this paper may be amended following discussion by officials on 24 February).

  The paper first puts forward an idea for a particular model (the "ACARE" model), which could be used to derive R&T programmes from capability needs. Although the EDA have suggested a programme of research, in the area of Force Protection, I will wish to see other options considered as well. I will look forward to receiving proposals for a programme of research, but without prejudice at this stage on whether we will decide to become involved in any research in this area with EDA partners. I will also want to ensure that we properly understand how EDA proposes to adopt the ACARE model to ensure that it is suitable for the defence environment.

  The other main issue will be an EDA suggestion for a novel way of funding R&T. This has potential attractions but the details of this approach need to be developed. I intend to agree that this idea should be developed for further consideration by the Steering Board in May.

  I will support an EDA suggestion of an examination of the technologies that will be important in the future but will insist that this is firmly based on the EU's emerging Long Term Vision of its capability needs. I intend to ask for a better explanation of the role and possible composition of the European Defence Science and Technology Advisory Board that they have proposed.

21 February 2006

Letter from the Chairman to Rt Hon John Reid MP

  Thank you for your letter dated 21 February which Sub-Committee C considered at its meeting on 2 March.

  The members of the Sub-Committee would like to express their gratitude for the improved level of communication on matters concerning the European Defence Agency (EDA) which your letter represents. It is extremely helpful to be alerted to issues which are due to be considered by the Steering Board prior to its meetings.

  With reference to the proposed derogation by the EDA from the Financial Regulations, we believe that this is a sensible way of proceeding prior to the review of those Regulations which is due to take place at the end of 2006. We agree that a simplified procedure for the appointment of the College of Auditors would be appropriate for the EDA subject to satisfactory proposals being brought forward.

  With respect to European Defence Research and Technology, we fully support the idea of increased collaboration between participating Member States. It is important that such collaboration receives the funding necessary to ensure that it is effective and worthwhile. However, collaboration should be built up gradually as particular projects are identified.

  We therefore agree with the idea that there should be a pilot project for R&T on the ACARE model which would demonstrate the value of collaboration. It is likely that early collaborative projects would be relatively small-scale in order to encourage participation. However, once suitable projects have been identified, participating Member States should be prepared to give those projects their full support.

  We do not believe that the EDA should be provided with a significant R&T budget to spend as it wishes, but collaborative projects need to be properly funded and the EDA should have control over the spending of those funds where that would ensure the most efficient means of delivery. There is, accordingly, some value in the EDA's proposed "middle-way" for funding of R&T and the EDA should be encouraged to prepare more concrete proposals on this basis.

  More generally, we also consider that business spending on R&T should be taken into consideration when making decisions on funding. The significant sums spent by the defence industry cannot be overlooked when dealing with R&T.

  We look forward to hearing the outcome of the 7 March Steering Board and hope that our comments will be taken into consideration.

6 March 2006

Letter from Rt Hon John Reid MP to the Chairman

  You will be aware that the Ministerial Steering Board for the European Defence Agency (EDA) met in Innsbruck on 7 March 2006. I wrote to you on 21 February with the agenda, draft papers and an outline of the likely points of discussion. I was grateful for the comments that were received from the House of Lords select Committee on the European Union.

  I would now like to inform you of the outcome of this meeting and to provide copies of the papers that were considered at this meeting (not printed). These differ slightly from the papers I sent to you before the meeting as they were updated and reissued prior to the Steering Board.

  The administrative decision on the derogation from the EDA's financial regulations, which I informed you of in my previous letter, was not tabled at this meeting. Following official-level consultation with the National Audit Office, I was happy to agree to the EDA's proposals for a reduced College of Auditors this year. However, due to the short timescales involved, other member states were not in a similar position. The proposal was not therefore placed on the Agenda for agreement at the Steering Board but will instead be dealt with under a written procedure.

  One item, which came as a late addition to the Steering Board Agenda, was for agreement to authorise the Head of the Agency to make the Administrative Arrangement between the EDA and the Norwegian MoD effective through the exchange of letters. The Norwegian Administrative Arrangement was agreed at Council on 27 February in accordance with Article 26 of the Joint Action establishing the Agency. I was therefore content for the exchange of letters to take place. This will enable Norway to collaborate with Member States through the Agency to improve European capabilities and will enable the transfer of Norway's ad hoc R&T projects from the Western European Armaments Organisation to the EDA.

  However I also expressed my regrets that a similar outcome has not so far been achieved for Turkey, as there is currently no consensus in Council to agree their Administrative Arrangement. Turkey plays an important part in ESOP, in Bosnia and in Battlegroups, and I believe it can make a major contribution to European capability development. I therefore urged member states to progress this issue as quickly as possible in the hope it can be resolved by the time of the next Defence Ministers' GAERC in May.

  The main substantive discussion at the Steering Board was European Defence Research and Technology, on the basis of a paper produced by the EDA. I have attached the paper that was considered at the meeting. This is a slightly amended version from the paper that I attached to my letter of 21 February.

  With respect to the EDA's "middle way" funding mechanism, I made clear that the UK did not need a new funding mechanism to encourage us to spend on R&T. We already spend more than other partners on defence R&T and would continue to look for opportunities to collaborate with others in the EDA. I said if the new funding mechanism allowed countries that invested less in R&T to do more, then the UK was prepared to consider it. The EDA will now work up detailed proposals for the new funding mechanism. This will be presented at the May Steering Board, at which time Ministers will be able to decide whether or not they wish to use this mechanism to fund R&T projects.

  I supported the proposal for the EDA to conduct a pilot exercise to derive from capability needs an R&T programme suitable for joint investment. I did, however, caution that the UK is already well advanced nationally in the suggested capability field of force protection, which may make it difficult for the UK to participate on joint projects within this area. As an alternative, I suggested that logistics may be a better area to focus on in order to work up suitable concrete proposals to allow joint investment. The EDA will now proceed with the pilot exercise to ensure that their proposals are well advanced by the May Steering Board and completed by the and of June.

  Finally, l agreed that the Agency should develop, by the May Steering Board, a roadmap for achieving an agreed European R&T strategy and priorities. I also gave my consent for the EDA to commission a study of the impact of Defence R&T on the wider economy. However, I felt that the EDA proposals for an Advisory Board were somewhat underdeveloped. This proposal will therefore be parked for the time being, while the EDA tackles other priority areas that I have detailed above.

15 March 2006

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