Select Committee on European Union Fortieth Report


Letter from Ed Miliband MP, Parliamentary Secretary, Cabinet Office to the Chairman

  I am writing to update your Committee on progress on the Explanatory Memorandum submitted on 18 July 2005 by Mr John Hutton, then Minister for the Cabinet Office and Chancellor for the Duchy of Lancaster, on the Solidarity Fund—document 8323/05 COM(05) 108: Draft Regulation establishing the European Union Solidarity Fund + ADD 1 (Commission staff working paper: impact assessment) .

  The current Solidarity Fund was introduced in December 2002 with the aim of providing support in a spirit of solidarity to member states and candidate countries in the event of major natural disasters that have serious effects on living conditions, the natural environment or the economy. The current Regulation sets a high threshold for claims of damage at either over €3 billion (£2.058 billion) or 0.6 per cent of Gross National Income for uninsured losses. There is also an exception to allow claims if a region is affected by an extraordinary disaster affecting a major population in that region with serious lasting effects.

  The new Proposal from the Commission would lower the threshold to €1 billion (£0.686 billion) or 0.5 per cent of gross national income and remove the exception for regions. It would also widen the scope from natural disasters to include technological and industrial disasters, marine pollution, public health threats and acts of terrorism.

  During the UK and Austrian Presidencies this proposal has been discussed at seven meetings of Financial Counsellors. Approval of the proposals would require a Qualified Majority Voting in the Council and it has become clear during the discussions that there is no majority for the changes sought by the Commission. Some member states want no change; some would like to widen the scope but leave the ceilings unchanged; others would want the ceilings changed to reflect their specific national concerns. The European Parliament for its part has delivered a largely positive Opinion.

  On the question of widening the scope, there have been some initial exchanges but since the Commission and some Member States have so far insisted that the ceilings and scope must be taken as a package the discussions have been brief.

  In the discussions, the UK has taken the line that there is a clear need for a reasonably high ceiling to ensure there is no incentive for countries not to invest in measures to respond to and reduce the impact of disasters, including taking steps to insure against their effects. The present Solidarity Fund works well in assisting smaller and poorer countries whilst ensuring that larger and better off member states will normally fall below the threshold. On the issue of extending the scope of the Solidarity Fund beyond natural disasters to include industrial or technological disasters, the UK has also noted that the Solidarity Fund should not be extended to areas that undermine the incentives to undertake preventive action and contingency planning or lead to under-insurance.

  Under the recently signed Inter Institutional Agreement on the EU budget it was agreed that the Solidarity Fund will continue as now to be financed "off budget" by one-off agreements of the budgetary authority rather than be allocated a budget as the Commission had wished.

  The latest position, therefore, is that in the absence of a qualified majority the current Solidarity Fund Regulation which has no expiry date will continue as early impressions are that the Solidarity Fund will not be one of their priorities. Should there continue to be no qualified majority, the current Solidarity Fund Regulation will remain unchanged for the new Financial Perspective 2007-13.

  I hope your Committee finds this update helpful. Should there be further developments I shall, of course write to you.

13 July 2006

Letter from the Chairman to Ed Miliband MP

  Thank you very much for your letter of 13 July updating the Committee on Explanatory Memorandum 8323/05 on the Solidarity Fund. This was considered by Sub-Committee A at their meeting on 25 July. The Sub-Committee noted your belief that negotiations were deadlocked and decided to maintain the scrutiny reserve.

  I enclose a copy of a letter I sent to you on 25 October 2005[15] (not printed) on this dossier to which I have not received a reply. May I draw your attention to the following in this letter to which the Committee would appreciate your response.

  Firstly, the Committee were concerned to know whether the Solidarity Fund has demonstrated any added value since the initial payments were made in the aftermath of the flooding in central Europe in 2002.

  Secondly, we asked where the money allocated to the Fund but not spent has gone.

   Finally, we expressed our view that there was some justification in extending the Fund to include public health threats. What is your analysis of the proposals to expand the Fund?

25 July 2006

15   Correspondence with Ministers, 45th Report of Session 2005-06, HL Paper 243, p 58. Back

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