twenty-seventh report of session 2013–14€¦ · the eu’s common security and defence policy...

HC 83-xxiv Published on 23 December 2013

by authority of the House of Commons London: The Stationery Office Limited

House of Commons

European Scrutiny Committee

Twenty-seventh Report of Session 2013–14 Documents considered by the Committee on 11 December 2013, including the following recommendations for debate:

The manufacture, presentation and sale of tobacco and related products The EU’s Common Security and Defence Policy European Semester: Annual Growth Survey Macroeconomic imbalances European Defence

Report, together with formal minutes

Ordered by The House of Commons to be printed 11 December 2013

£14.50

Notes

Numbering of documents

Three separate numbering systems are used in this Report for European Union documents:

Numbers in brackets are the Committee’s own reference numbers.

Numbers in the form “5467/05” are Council of Ministers reference numbers. This system is also used by

UK Government Departments, by the House of Commons Vote Office and for proceedings in the House.

Numbers preceded by the letters COM or SEC or JOIN are Commission reference numbers.

Where only a Committee number is given, this usually indicates that no official text is available and the

Government has submitted an “unnumbered Explanatory Memorandum” discussing what is likely to be included

in the document or covering an unofficial text.

Abbreviations used in the headnotes and footnotes

EC (in “Legal base”) Treaty establishing the European Community

EM Explanatory Memorandum (submitted by the Government to the Committee)*

EP European Parliament

EU (in “Legal base”) Treaty on European Union

GAERC General Affairs and External Relations Council

JHA Justice and Home Affairs

OJ Official Journal of the European Communities

QMV Qualified majority voting

RIA Regulatory Impact Assessment

SEM Supplementary Explanatory Memorandum

TEU Treaty on European Union

TFEU Treaty on the Functioning of the European Union

Euros

Where figures in euros have been converted to pounds sterling, this is normally at the market rate for the last

working day of the previous month.

Further information

Documents recommended by the Committee for debate, together with the times of forthcoming debates (where

known), are listed in the European Union Documents list, which is published in the House of Commons Vote

Bundle each Monday, and is also available on the parliamentary website. Documents awaiting consideration by

the Committee are listed in “Remaining Business”: www.parliament.uk/escom. The website also contains the

Committee’s Reports.

*Explanatory Memoranda (EMs) can be downloaded from the Cabinet Office website:

http://europeanmemoranda.cabinetoffice.gov.uk/.

Letters sent by Ministers to the Committee relating to European documents are available for the public to

inspect; anyone wishing to do so should contact the staff of the Committee (“Contacts” below).

Staff

The staff of the Committee are Sarah Davies (Clerk), David Griffiths (Clerk Adviser), Terry Byrne (Clerk Adviser),

Leigh Gibson (Clerk Adviser), Peter Harborne (Clerk Adviser), Paul Hardy (Legal Adviser) (Counsel for European

Legislation), Joanne Dee (Assistant Legal Adviser) (Assistant Counsel for European Legislation), Hannah Finer

(Assistant to the Clerk), Julie Evans (Senior Committee Assistant), Jane Lauder (Committee Assistant), Beatrice

Woods (Committee Assistant), John Graddon (Committee Assistant), and Paula Saunderson (Office Support

Assistant).

Contacts

All correspondence should be addressed to the Clerk of the European Scrutiny Committee, House of Commons, 7

Millbank, London SW1P 3JA. The telephone number for general enquiries is (020) 7219 3292/5465. The

Committee’s email address is [email protected]

European Scrutiny Committee, 27th Report, Session 2013–14 1

Contents

Report Page

Meeting Summary 3

Documents for debate

1 DH (34587) The manufacture, presentation and sale of tobacco and related products 5

2 FCO (35417) The EU’s Common Security and Defence Policy 8

Annex: the Committee’s letter of 11 December 2013 to the Minister for Europe 14

3 HMT (35532) (35535) European Semester: Annual Growth Survey 16

4 HMT (35533) Macroeconomic imbalances 29

5 MOD (35234) European Defence 34

Documents not cleared

6 FCO (35595) CSDP: the EU’s comprehensive approach to external conflict and crises 38

Documents cleared

7 BIS (34615) Financial reporting and auditing 41

8 DEFRA (25001) Implementation of the Aarhus Convention 44

9 DFID (35488) Policy Coherence for Development 46

10 DFT (34123) Emissions reductions from passenger cars 52

11 FCO (35603) (35604) Further amendments to EU restrictive measures against the Syrian regime 56

12 HMT (35232) (35259) (35319) (35320) EU General Budgets 60

13 HO (35448) Firearms and the internal security of the EU 62

Annex: Priorities and tasks 66

14 HO (35455) (35460) Croatia’s accession to the EU/Switzerland Agreement on the Free Movement of Persons 67

Documents not raising questions of sufficient legal or political importance to warrant a substantive report to the House

15 List of documents 71

2 European Scrutiny Committee, 27th Report, Session 2013–14

Formal minutes 73

Standing Order and membership 74


Meeting Summary

This week the Committee considered the following documents:

European defence industry, European External Action Service and the EU’s Common Security and Defence Policy

The Committee considers this week a linked set of documents which have been under scrutiny for some time, relating to a Communication on the European defence industry and Reports by the High Representative (Baroness Ashton) on the European External Action Service and the EU’s Common Security and Defence Policy. The Committee has made its position clear in previous Reports: that the EEAS review and the related defence sector Communication should be debated prior to the 17 December General Affairs Council and the subsequent “Defence” European Council, and that the outcome of that Council should be debated, based on the High Representative’s proposals on CSDP and with the benefit of the Council Conclusions. We express concern at the Government’s refusal to schedule a debate on the EEAS within the timescale recommended in our Report of 20 November. On the European defence industry Communication, despite the short timescale, we now recommend that a debate be urgently scheduled in European Committee before the December European Council. The High Representative’s CSDP Report is recommended for debate on the floor of the House immediately after the Christmas recess.

Regulation of tobacco and related products

The Committee returns to the Draft Directive this week, as expected. The document will be debated in European Committee on Monday, and in advance of that debate the Committee reports an updating letter from the Minister, which is available here. We note that negotiations are only likely to be concluded if the Council and European Parliament are able to reach a compromise on Article 18, on the regulation of non-tobacco Nicotine-Containing Products (NCPs), such as e-cigarettes, and on the scope for more stringent domestic tobacco control measures under Article 24, and comment that the Minister does not state in terms whether the UK would be willing to abandon the recommendation made by the UK’s Medicines and Healthcare products Regulatory Agency (MHRA) to regulate non-tobacco Nicotine-Containing Products as medicines; nor does she set out the minimum safeguards the Government would seek to ensure appropriate and proportionate regulation of these products. We trust that she will be in a position to do so in the forthcoming debate.

We also make clear that we expect Parliament to be informed of any substantial amendments to the Commission’s original proposal which emerge from the trilogue negotiations by means of a Supplementary Explanatory Memorandum accompanied by a new depositable text, with sufficient time for Parliament to consider and if necessary, debate it before it is formally agreed by the Council.


European Semester: Annual Growth Survey, draft Joint Employment Report and Alert Mechanism Report

This Commission Communication on the Annual Growth Survey, the draft Joint Employment Report and the Alert Mechanism Report begin the 2014 cycle of the European Semester. A series of overarching and country specific documents from the Commission will follow, and the process culminates in examination of the overall and country-specific situations by the European Council. The Annual Growth Survey sets out the Commission’s priorities for action at national and EU level over the next 12 months to support economic growth and employment. It is accompanied by two reports, the draft Joint Employment Report and the Commission Staff Working Document An overview of progress in implementing the Country Specific Recommendations by Member States. It is also accompanied by a Commission Report on single market aspects of jobs and growth, which we will consider next week. We also consider the related Commission Alert Mechanism Report on macroeconomic imbalances. We recommend that all these documents be debated together in European Committee before the relevant functional Councils consider them in preparation for the March 2014 European Council.


1 The manufacture, presentation and sale of tobacco and related products

(34587) 18068/12 + ADDs 1–7 COM(12) 788

Draft Directive on the approximation of the laws, regulations and administrative provisions of the Member States concerning the manufacture, presentation and sale of tobacco and related products

Legal base Article 114 TFEU; co-decision; QMV Department Health Basis of consideration Minister’s letter of 9 December 2013 Previous Committee Reports HC 83-xxxiii (2013–14), chapter 1 (4 December 2013);

HC 83-xx (2013–14), chapter 1 (6 November 2013); HC 83-xiii (2013–14), chapter 1 (4 September 2013); HC 83-viii (2013–14), chapter 5 (3 July 2013); HC 83-vi (2013–14), chapter 1 (19 June 2013); HC 83-v (2013–14), chapter 5 (12 June 2013); HC 86-xxx (2012–13), chapter 3 (30 January 2013)

Discussion in Council No date set Committee’s assessment Legally and politically important Committee’s decision Recommended for debate in European Committee C

(decision reported on 4 September 2013)

Background and previous scrutiny

1.1 The draft Directive would replace the existing regulatory framework for tobacco products, which has been in force for more than a decade, and introduce a number of changes which are intended to take account of scientific, market and international developments, including the entry into force of the World Health Organisation Framework Convention on Tobacco Control in 2005. Our earlier Reports provide a detailed overview of the draft Directive and its scrutiny history.1

1.2 At our meeting on 4 September 2013, we recommended the draft Directive for debate in European Committee C. At the time, the European Parliament was expected to approve a negotiating mandate for trilogue discussions at its plenary session in September. In the event, the plenary vote was postponed until October. The Parliamentary Under-Secretary for Public Health (Jane Ellison) wrote to us shortly afterwards setting out the European Parliament’s position on key aspects of the draft Directive. Our Twenty-second Report, agreed on 6 November, provides further details. The Minister subsequently confirmed that the debate would take place on 16 December and briefly described the main issues being discussed in trilogue negotiations. She alluded to the efforts being made to reach an acceptable compromise on non-tobacco nicotine-containing products (such as e-

1 See headnote.


cigarettes) on which the Council and European Parliament have staked out different positions, but added that she was unable to provide any detail on possible compromises at this stage “due to the sensitive nature of the negotiations”. She promised to write again after trilogue discussions on 3 December to inform us of any further provisional compromises reached by the parties and indicated that negotiations were expected to conclude by the end of the year, with formal approval of the outcome anticipated in the new year.

1.3 Whilst recognising the sensitivity of the negotiating process, we considered it imperative that Parliament should have further information on the scope of the compromises being considered and some indication of how the continuing and significant differences in approach towards the regulation of e-cigarettes would be bridged in advance of the debate on 16 December.

The Minister’s letter of 9 December 2013

1.4 The Minister (Jane Ellison) tells us that trilogue negotiations are progressing “in a positive direction” and that the Government is making headway towards securing its goal of a proportionate outcome that meets the UK’s public health objectives. She indicates that a provisional agreement has been reached on the removal of misleading tar, nicotine and carbon monoxide yields on cigarette packets and on more stringent reporting requirements for characterising flavours (such as menthol). On the latter, she adds:

“While both the Council and EP agree that characterising flavours should be banned, the two texts take different approaches to achieve this objective, including the EP wanting a five-year transition for menthol flavour while the General Approach text envisages a 3 year transition for all flavours which have a certain market share. The UK supports the General Approach text but a compromise will have to be reached and discussions about the length and application of the transition periods are continuing in Trilogue. The most important thing is that characterising flavours will be prohibited.”

1.5 The Minister reiterates the Government’s position that non-tobacco Nicotine-Containing Products (NCPs) should be regulated as medicines and expresses disappointment that the European Parliament (EP) has advocated a different regulatory approach. She continues:

“We have continued to push for the regulation of NCPs as medicines during the Trilogue negotiations. However, it is very important to the EP that NCPs that do not make a medicinal claim should not be regulated as medicines and the EP has reaffirmed this position in recent Trilogue negotiations. We are working with other Member States to establish whether Council is ready to move away from the General Approach text to achieve a compromise.

“Specifically, we are carefully considering if it would be possible to secure a proportionate compromise with the European Parliament whereby e-cigarettes are regulated so that they are not appealing to children and this emerging market is monitored and we are also seeking a final text whereby Member States will be able to


set an age of sale for e-cigarettes. This possible compromise is still being discussed in Trilogue.

“At this time, it is too early to speculate on the outcome of negotiations but it is possible that an alternative to medicines regulation for those NCPs that do not make a medicinal claim with a number of safeguards built in may result.”

1.6 The Minister refers to earlier correspondence concerning Article 24, which determines the amount of flexibility Member States will have to maintain or introduce more stringent national tobacco control measures, and notes:

“Both the [Council] General Approach and the EP texts move in the right direction in this regard, as compared to the Commission’s starting proposal. Both texts introduce some flexibility but in different ways. The General Approach text envisages Member State flexibility with regard to introducing more stringent rules in relation to additives and standardisation of packaging, where it is justified and proportionate in line with the Treaty. By contrast, the domestic flexibility envisaged in the EP text in relation to areas covered by the Directive is broader in scope. However, the EP text retains the power for the Commission to approve or reject such domestic measures, which was removed in the General Approach text.

“The final text of Article 24 is now even more relevant given the Government’s announcement in November to take regulation-making powers to introduce standardised packaging. An independent review of the evidence for the public health benefits of standardised packaging is also underway. The Government will make a final decision on this policy once it has received the report of the review.”

1.7 The Minister indicates that the Government continues to support the version of Article 24 contained in the Council’s General Approach. She undertakes to write again when she has further information on compromises provisionally agreed with the European Parliament, including on Article 18 on non-tobacco Nicotine-Containing Products.

Conclusion

1.8 We thank the Minister for writing to us in advance of the debate in European Committee C with further information on the progress of trilogue negotiations. We note that negotiations are only likely to be concluded if the Council and European Parliament are able to reach a compromise on Article 18, on the regulation of non-tobacco Nicotine-Containing Products (NCPs), and on the scope for more stringent domestic tobacco control measures under Article 24. The Minister does not state in terms whether the UK would be willing to abandon the recommendation made by the UK’s Medicines and Healthcare products Regulatory Agency (MHRA) to regulate non-tobacco Nicotine-Containing Products as medicines; nor does she set out the minimum safeguards the Government would seek to ensure appropriate and proportionate regulation of these products. We trust that she will be in a position to do so in the forthcoming debate.

1.9 We wish to make clear that we expect Parliament to be informed of any substantial amendments to the Commission’s original proposal which emerge from the trilogue


negotiations by means of a Supplementary Explanatory Memorandum accompanied by a new depositable text. This text will be subject to the usual scrutiny procedures, including our scrutiny reserve, and we expect Parliament to have sufficient time to consider and if necessary, debate it before it is formally agreed by the Council.

2 The EU’s Common Security and Defence Policy

(35417) — —

High Representative’s Report: Baroness Ashton’s Report on the Common Security and Defence Policy ahead of the December 2013 European Council Discussion on Defence

Legal base — Deposited in Parliament 28 October 2013 Department Foreign and Commonwealth Office Basis of consideration Minister’s letter of 4 December 2013 Previous Committee Report HC 83-xx (2013–14), chapter 12 (6 November 2013) Discussion in Council 18 November 2013 Foreign Affairs Council Committee’s assessment Politically important Committee’s decision For debate on the floor of the House

Background

2.1 The context is set out in our previous Report. It is against that background that, both before and since the advent of the Lisbon Treaty, the EU has developed its Common Foreign and Security Policy (CFSP) and Common Security and Defence Policy (CSDP).2 The key articles are, respectively, Article 24 TEU and Article 42 TEU.

2.2 At its meeting 8 December 2008, the European Council said in paragraph 30 of its Conclusions:

“The European Council states its determination to give, by means of the attached declaration, a fresh impetus to the European Security and Defence Policy. Compliant with the principles of the United Nations Charter and the decisions of the United Nations Security Council, this policy will continue to develop in full complementarity with NATO in the agreed framework of the strategic partnership between the EU and NATO and in compliance with the decision-making autonomy and procedures of each. To this end, the European Council shares the analysis of the report on the implementation of the European Security Strategy of 2003 and endorses the declarations adopted by the Council, which agree on new goals for strengthening and optimising European capabilities in the years ahead and

2 See http://eeas.europa.eu/cfsp/ for full background.


emphasise the EU’s desire to work for the cause of international peace and security, while making a tangible contribution to the security of its citizens.”3

2.3 Our predecessor Committee considered the declaration referred to therein and other related documents — including the then High Representative’s Review of the 2003 European Security Strategy4 — at its meeting on 26 January 2009. The December 2008 European Council adopted both a Declaration on the enhancement of European Security and Defence Policy (ESDP), on strengthening capabilities,5 and a Statement on strengthening international security.6

2.4 Given the major implications of these documents for the EU’s ESDP, particularly with regard to the question of planning capability, and the need to avoid duplication with NATO, the then Committee recommended them for debate. That debate took place on 30 March 2009, at the end of which the Committee resolved:

“That the Committee takes note of European Union Documents No. 16686/08, French Presidency Report on European Security and Defence Policy, and No. 17104/08, Report on the Implementation of the European Security Strategy—Providing Security in a Changing World; welcomes the French Presidency’s report and the High Commissioner’s review; and supports the Government’s position that UK and European security are enhanced by action coordinated at an EU level.” 7

2.5 The upcoming 19–20 December European Council discussion on defence is thus the first opportunity in five years for Heads of State and Government to agree the strategic direction of the EU’s Common Security and Defence Policy (CSDP).

2.6 In his letter and Explanatory Memorandum of 28 October 2013, the Minister for Europe (Mr David Lidington) said that at the European Council in December last year the UK played a leading role in setting the agenda, which is made up of three “clusters”:

— Cluster 1: Increase the effectiveness, visibility and impact of CSDP;

— Cluster 2: Enhance the development of capabilities;

— Cluster 3: Strengthen Europe’s defence industry.

2.7 Based on these three clusters, Baroness Ashton was tasked with bringing forward proposals that will guide discussions at the December Council. They were welcomed by the Minister as “a positive basis for further recommendations to the European Council”.

3 The Council Conclusions and the Declaration at Annex 2 of those Conclusions is available at:

http://register.consilium.europa.eu/pdf/en/08/st17/st17271-re01.en08.pdf.

4 See http://www.consilium.europa.eu/ueDocs/cms_Data/docs/pressData/en/esdp/104631.pdf for the full text of the Secretary General/High Representative’s Report on the Implementation of the European Security Strategy — Providing Security in a Changing World.

5 See http://www.consilium.europa.eu/ueDocs/cms_Data/docs/pressData/en/esdp/104676.pdf for the full text

6 See http://www.consilium.europa.eu/ueDocs/cms_Data/docs/pressData/en/esdp/104674.pdf for the full text.

7 The record of the debate is available at: http://www.publications.parliament.uk/pa/cm200809/cmgeneral/euro/090330/90330s01.htm ((Gen Co Deb, European Committee B, 30 March 2009, cols. 3-40).


2.8 He noted that the report included “a wide range of moderate but targeted proposals that collectively would improve the delivery and impact of CSDP” that “broadly reflect UK priorities for the European Council, resulting from active UK engagement in shaping the Council’s agenda and influencing EU thinking ahead of the Report”. In particular, the report’s recommendations “support four key objectives for the UK, which we believe would help advance the development of CSDP in line with UK policy”. The Minister’s comments were supplemented by a detailed analysis, point-by-point, of the three “clusters (see Annex 3 of our previous Report).

2.9 Looking ahead, he noted that the next major step would be the meeting of Foreign and Defence Ministers at the Foreign Affairs Council (FAC) on 18–19 November 2013 where he expected European Council President Van Rompuy to set out his proposals based on Baroness Ashton’s report, possibly in the form of draft Conclusions. If necessary, there might also be further discussions at the FAC on 16 December 2013, ahead of the 19–20 December European Council itself: “As soon as possible after the Council, we will inform Parliament of the outcomes in the usual way taking into account that the House will have risen at that time.”

2.10 Looking further ahead, into 2014, the Minister said:

“The UK-hosted 2014 NATO Summit8 together with the December Council discussion on defence provides a unique opportunity to reinforce the role of NATO as well as ensure that the EU plays a complementary and reinforcing role. NATO is the cornerstone of our security. No other organisation can offer the same level of deterrence or high-end military capability for Europe’s safety. We want strong commitments at the December Council to ensure that those European nations who are members of both organisations step-up and assume a greater share of their responsibilities both in NATO and through the EU. This will prepare the ground for a successful NATO Summit and make the EU a more effective partner to NATO.”

2.11 Finally, the Minister said that he would update the Committee on further developments following the November Foreign Affairs Council.

Our assessment

2.12 As well as the EU High Representative’s (Baroness Ashton) review of the European External Action Service (EEAS),9 we also considered in our previous Report the closely-related Commission Communication designed to improve the competitiveness of the European defence technological and industrial base (EDTIB),10 and indicated that we were minded, at the appropriate moment, to recommend both of them for debate. Likewise this report from the High Representative.

2.13 The best moment in this instance was likely to be sometime early in 2014, once we knew the nature of the December European Council conclusions. As the Minister made clear, this was likely to be the beginning of a longer process of discussion and negotiation

8 Which will take place at the Celtic Manor, Newport in autumn 2014. 9 See (35271) — at chapter 10 of our previous Report.

10 See (35234)12773/13 at chapter 14 of our previous Report.


which, the Minister’s constraining endeavours notwithstanding, was likely to continue to include efforts to take the development of CFSP and ESDP in directions with which the Government was unhappy.

2.14 That the House would know nothing of what was likely to be discussed by the European Council once again underlined the need for such European Council Conclusions to be subject to some form of prior scrutiny — an issue that we took up in our Report on the scrutiny of European business in the House. For the moment, the House was at least much better informed than it was five years ago.

2.15 In the immediate future, we looked forward to hearing again from the Minister after the November meetings of the FAC and of the FAC in “defence ministers” formation.

2.16 In the meantime, we retained the HR’s report under scrutiny.11


2.17 The Minister says:

“Draft proposals based on Baroness Ashton’s report were issued to Member States on the 15th October ahead of the November FAC by the European External Action Service. Following long and detailed discussions, a revised text was presented to the FAC on the 18th November with Dr Andrew Murrison, Minister for International Security Strategy at the Ministry of Defence and I present. Whilst we were content with the vast majority of the text at that time, we did not agree it since one of the proposals did not fit with our vision for an open, competitive defence market. However, following further negotiations at senior official level, a satisfactory agreement was reached and formally endorsed at the Education, Youth and Culture Council on the 25th of November.”

2.18 The Minister encloses a copy of the November FAC Conclusions with his letter,12 and says that they reflect UK priorities:

“We have successfully protected all of our red lines including the prevention of an EU Operational Headquarters, and the Commission owning and operating military capabilities. The November FAC Conclusions are likely to be endorsed at the December European Council, where Heads of Government will set out their strategic vision for European defence.”

2.19 The Minister then sets out the Government’s CSDP objectives for the Council and outlines the progress that he says the November FAC made towards them, as follows:

“Firstly, we want the European Council to focus the EU’s role on where it complements, not competes, with NATO. It should do this through effective and coherent use of the full spectrum of EU tools for tackling conflict and its causes through the Comprehensive Approach. Close coordination and cooperation with

11 See headnote: HC 83-xx (2013–14), chapter 12 (6 November 2013).

12 The Council Conclusions, which run to 37 paras over 13 pages, are available at: http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/EN/foraff/139719.pdf.


NATO and other partners is essential in ensuring CSDP activity is targeted where it is best placed to act and adds value where others cannot, as it is doing in the Horn of Africa, Western Balkans and the Sahel. The FAC Conclusions provide strong direction to the EU institutions – including the Commission and the External Action Service - to work together in a coherent and joined-up way to improve the EU’s response to conflict prevention, crisis management and stabilisation. The FAC Conclusions also include commitment for closer engagement with partners, including NATO, the UN, African Union and others.

“Secondly, we want the Council to agree a package of measures to improve the operational delivery and value for money of CSDP. The FAC Conclusions include a range of practical initiatives to take this forward, including improving civilian CSDP management and procurement and better harnessing Member States’ civilian expertise and capabilities. It also commits to further work to consider how the EU could contribute more effectively to border security and capacity building activities, cooperation on cyber resilience while clearly respecting Member States’ competence, and preparing a framework for a new EU maritime security strategy. We have made clear that the UK would veto expansion of CSDP institutions or extension of EU competence into defence.

“Thirdly, we want the European Council to commit EU Member States to continue to invest in defence and help ensure Europe has the capabilities required to address security threats, whether through the EU or NATO. The FAC Conclusions set out key measures to address this, including through progressing cooperative projects under the EU’s Pooling and Sharing’ initiative and commitment to greater transparency in Member States’ defence planning, ensuring both go forward in close coordination with NATO’s existing processes including the Smart Defence Agenda and using to their full effect NATO’s well established planning process and common standards.

“Fourthly, the European Council should focus on improving the competitiveness of the European defence industrial and technological base, encouraging innovation while minimising bureaucracy and boosting economic growth. The FAC Conclusions reflect these priorities and include initiatives to: encourage full implementation of the existing Defence Directives, while respecting legitimate national security interest; support SMEs, through promoting market-driven regional networks and increased participation in supply chains; and allow better access to European Commission Research and Development funding in the dual-use sector. We have made clear our opposition to proposals that could allow the Commission to develop or own its own dual-use military assets or capabilities, distort the market, interfere with exports or increase the burden on industry. We will continue to reinforce our red lines as discussions continue next year.”

2.20 More generally, the Minister then says of the forthcoming European Council:

“Given the ongoing security challenges that Europe, our partners and our allies are confronting, the European Council is an opportunity to improve European capacity in a way that supports and coordinates with NATO. A strong signal from the December European Council showing that Europe is serious about investing in


defence and taking responsibility for its security will provide an important milestone towards next year’s UK hosted NATO Summit in South Wales.

2.21 Finally, the Minister says that as soon as possible after the European Council, the Government “will inform Parliament of the outcomes in the usual way taking into account that the House will have risen at that time.”

Conclusion

2.22 We are grateful to the Minister for this further information. However, we are disturbed by the way in which the Government has responded to our endeavours to ensure that this process is effectively scrutinised.

2.23 The Committee’s intention has long been plain:

— that the EEAS Review, and the related Commission Communication 12773/13, Towards a More Competitive and Efficient Defence and Security Sector, should be debated prior to the 17 December GAC and the subsequent “Defence” European Council — so that the Government could outline, be questioned on and debate the elements that it would be seeking to have included in, and excluded from, the relevant Conclusions; and

— that the outcome of the “Defence” European Council should be debated afterwards, based on the HR’s proposals on CSDP, and with the benefit of the actual Council Conclusions.

2.24 That is why in our Report of 20 November on the EEAS review we recommended that it be debated on the Floor of the House prior to December 17; and why, in our Report of 6 November, we asked the Minister for International Security Strategy at the Ministry of Defence (Dr Andrew Murrison) to provide additional information in time for a separate debate to be held on the defence sector Communication.

2.25 However, the Minister for Europe wrote to us on 4 December to say:

— with no explanation as to why, that a debate on the Ashton EEAS review will not be possible before the Christmas recess;

— that he will, however, request that the debate takes place early in the New Year; and

— that he feels that “this issue warrants detailed discussion on a range of technical issues” and so “suggests that the debate take place in Committee rather than on the Floor of the House.”

2.26 At the same time, as we note in our separate chapter in this Report on the defence industry Communication, we did not hear from Dr Murrison until the end of November, which has thus jeopardised the prospect of that debate also being held in line with the Committee’s clear intentions.

2.27 As we have said in response to the Minister for Europe, the Government was aware of the Committee’s request as long ago as 20 November, and it is hard to escape the


conclusion that a worrying pattern is emerging here: of Committee recommendations for floor debates being ignored with no satisfactory reason given.13

2.28 With regard to this CSDP report from the HR, we now recommend that it be debated on the floor of the House, after the end of the Christmas recess.

2.29 Before that debate takes place, we would like the Minister to send us a copy of the relevant part of the European Council Conclusions, and his assessment of the extent to which they meet his objectives.

Annex: the Committee’s letter of 11 December 2013 to the Minister for Europe

The Committee has asked me to respond to your letter of 4 December 2013 concerning its most recent Report, of 20 November, on the HR’s review of the European External Action Service (EAS).

You will recall that I wrote to you on 28 November, expressing the Committee’s regret that, despite recommending a debate on the Floor of the House on the Joint Commission/HR Communication on a comprehensive approach on Syria, the Government had determined that the debate should be held in European Committee. The Committee is accordingly even more disturbed by your suggestion that the HR’s review should also be debated in European Committee, thus once again contradicting the Committee’s recommendation. As I said in my letter of 28 November, the Committee does not recommend Floor of the House debates lightly. You seem to regard the Review as dealing only with “technical issues”. In the first place, many “technical issues” are regularly debated on the Floor. Moreover, in this particular instance, the Review covers matters that are far from “technical”, as you yourself noted in your original Explanatory Memorandum, viz:

• the continuing pressure for the EEAS to have a role in providing consular assistance, notwithstanding this being a Member State competence;

• ensuring that defence engagement remained primarily the responsibility of individual Member States in the face of, e.g., attempts to establish a formal network of military and civilian security experts in EU delegations;

• any threat of wider competence creep on the part of the EEAS, thus endangering its role, of complementing and supporting — and not replacing — national diplomatic services.

The Committee drew attention to others in its most recent Report. You say that you share the Committee’s concerns about proposals for the increased involvement of the European Parliament in CFSP, and now they “will not feature in the General Affairs Council conclusions of 17 December 2013. But this is a very broad statement.

13 The Chairman’s letter to the Minister is at the annex to this chapter of our Report,


Moreover, increasing the EP’s involvement is an impulse that will not go away: this is why the matter of the HR’s “declaration of political accountability” needs discussing. The thrust in the HR’s paper contrasts strongly with the absence of any proposals on strengthening the involvement of the proper custodians of CFSP, namely national parliaments.

An important and relevant area is that of EUSRs: yet you still do not say if the EUSR review is to be deposited in the House. We again ask you to do so. The Committee’s intention has long been plain:

• that this EEAS Review, and the related Commission Communication 12773/13, Towards a More Competitive and Efficient Defence and Security Sector, should be debated prior to the 17 December GAC and the subsequent “defence” European Council — so that the Government could outline, be questioned on and debate the elements that it would be seeking to have included in, and excluded from, the relevant Conclusions; and

• that the outcome of the “defence” European Council should be debated afterwards, based on the HR’s proposals on CSDP, and with the benefit of the actual Council Conclusions.

The Government was aware of the Committee’s request as long ago as 20 November, and it is hard to escape the conclusion that a worrying pattern is emerging here: of Committee recommendations for floor debates being ignored with no satisfactory reason given.

The Committee would be grateful for your comments, and for confirmation that a debate on the HR’s review of the EEAS will be arranged on the Floor of the House immediately the House returns from the Christmas recess.


3 European Semester: Annual Growth Survey

(a) (35532) 15803/13 COM(13) 800 (b) (35535) 16348/13 COM(13) 801

Commission Communication: Annual Growth Survey 2014 Draft Joint Employment Report accompanying the Communication from the Commission on Annual Growth Survey 2014

Legal base — Documents originated 13 November 2013 Deposited in Parliament 20 November 2013 Department HM Treasury Basis of consideration EM of 3 December 2013 Previous Committee Report None Discussion in Council Economic and Financial Affairs; Employment, Social

Policy, Health and Consumer Affairs; Competitiveness; Environment; Education; Youth; Culture and Sport; Justice and Home Affairs and General Affairs Councils before the European Council in March 2014

Committee’s assessment Politically important Committee’s decision For debate in European Committee B, together with

an accompanying Commission Report on a single market for growth and jobs and the Alert Report Mechanism for 2014

Background

3.1 In March 2010 the Commission proposed a “Europe 2020 Strategy”, to follow on from the Lisbon Strategy. This strategy is aimed at promoting smart, sustainable and inclusive economic growth. It was endorsed by the March 2010 European Council. During the latter half of 2010 the Council adopted, in the context of the Europe 2020 Strategy, broad guidelines for the economic policies of the Member States and the EU and guidelines for the employment policies of the Member States, together the “Europe 2020 integrated guidelines”.

3.2 On the basis of two Commission Communications, Reinforcing economic policy coordination and Enhancing economic policy coordination for stability, growth and jobs: tools for stronger EU economic governance, and of the Van Rompuy Task Force report, Strengthening economic governance in the EU, the June, September and October 2010 European Councils considered and endorsed measures to increase coordination of EU


economic governance, including strengthening the Stability and Growth Pact and introducing a “European Semester”.

3.3 The European Semester is an EU-level framework for coordinating and assessing Member States’ structural reforms and fiscal/budgetary policy and for monitoring and addressing macroeconomic imbalances. It attempts to exploit the synergies between these policy areas by aligning their reporting cycles, which would tie together consideration of National Reform Programmes (reports on progress and plans on structural reforms, under the Europe 2020 Strategy) and Stability and Convergence Programmes (reports on fiscal policy, under the Stability and Growth Pact).

3.4 The European Semester cycle begins with an Annual Growth Survey by the Commission, followed by a series of overarching and country specific documents from the Commission and culminating in examination of the overall and country-specific situations by the European Council.

3.5 The Annual Growth Survey is accompanied this year by a Commission Report: A single market for growth and jobs: an analysis of progress made and remaining obstacles in the Member States — contribution to the Annual Growth Survey 2014.14

3.6 An element of the European Semester process is the Macroeconomic Imbalances Procedure (MIP). The MIP is a mechanism designed to identify and, if necessary, correct harmful macroeconomic imbalances across the EU, which were a key cause of the current sovereign debt crisis. The first stage of the MIP is publication by the Commission of an annual Alert Mechanism Report. The Alert Mechanism Report for the 2014 cycle is dealt with elsewhere in this Report.15

The documents

3.7 The Commission’s Annual Growth Survey (AGS) 2014, document (a), sets out the Commission’s priorities for action at national and EU level over the next twelve months to support economic growth and employment. The AGS 2014 is accompanied by two reports: the draft Joint Employment Report, document (b), and a Commission Staff Working Document: An overview of progress in implementing the Country Specific Recommendations by Member States.16 The Commission sets out the same five reform priorities as last year, as shown in the following paragraphs, but “is proposing to adapt their implementation to the changing economic and social circumstances” described in its introduction.

Priority 1: Pursuing differentiated growth-friendly fiscal consolidation

3.8 The Commission:

• notes that progress in fiscal consolidation is noticeable at country level, with a number of Member States having already reached sound budgetary positions;

14 (35534) 16171/13 on which we will be reporting shortly.

15 See (35533) 15808/13: chapter 4.

16 See http://ec.europa.eu/europe2020/pdf/2014/csrimpl2014_swd_en.pdf.


• considers that debt levels in many Member States remain high and therefore continues to advocate growth friendly fiscal consolidation;

• favours expenditure led consolidation, while recognising the importance of an efficient, growth friendly mix of fiscal measures;

• considers that the Stability and Growth Pact is the right framework for pursuing differentiated fiscal consolidation;

• says, within this context, that it is important for Member States to protect and promote longer term investment in education, research, energy and climate action and to reinforce the effectiveness of employment services; and

• considers action on improving tax compliance important.

Priority 2: Restoring normal lending to the economy

3.9 The Commission:

• considers that financial conditions have improved in the past year, but recognises that lending conditions for businesses have not yet returned to normal;

• says that important steps have been taken at EU level to restore lending to the economy;

• considers that a Banking Union is a core element of this for eurozone stability and the functioning of the single market;

• thinks that, at national level, Member States should closely monitor private debt and financial risks such as real estate bubbles; and

• says that Member States should also promote alternatives to bank financing, such as venture capital, SME bonds and alternative stock markets.

Priority 3: Promoting growth and competitiveness for today and tomorrow.

3.10 The Commission:

• notes a rapid pace of restructuring due to crisis-related adjustment processes and structural reforms in the Member States;

• considers that Member States should prioritise implementing their European Semester Country Specific Recommendations;

• recommends a focus on new sources of growth and competitiveness in knowledge-intensive and high productivity activities;

• recognises that individual Member States will need to sequence reforms according to national situations but stresses the need to open services markets; and

• sees increasing resource efficiency and decreasing dependence on external energy to be important elements of the EU’s growth strategy.


Priority 4: Tackling unemployment and the social consequences of the crisis.


• highlights the risk of unemployment becoming increasingly structural, with potentially significant negative impacts on growth;

• considers immediate priority should be given to reforms that increase participation in the labour market;

• emphasises the role of the social partners in the design and implementation of appropriate policy responses to the issues of an aging workforce and a gender gap in the labour market;

• suggests that to improve employability and support access to jobs, Member States should reduce the tax wedge on labour, reduce early school-leaving, improve life-long learning, facilitate the transition from education to work, and implement ‘youth guarantee’ schemes;

• says social protection systems should address access to health services, childcare, housing and energy supply; and

• suggests that the link between social assistance and activation measures should be strengthened, for instance through ‘one-stop shops’.

Priority 5: Modernising public administration.


• recognises ongoing efforts to improve efficiency gains through increasing co-operation between different layers of administration in several Member States;

• considers there is potential to reduce the administrative burdens on businesses;

• notes the progress at EU level of streamlining and simplifying legislation through the ongoing regulatory fitness and performance programme; and

• considers increased cooperation between tax administrations as central to fighting tax fraud and evasion.

3.13 The accompanying Commission Staff Working Document provides an overview of each Member State’s implementation of the Country Specific Recommendations. For the UK the Commission:

• recognises the Government’s actions on fiscal consolidation, as well as the actions taken to improve access to credit;

• notes the package outlining a pipeline of £100 billion investments in public infrastructure and reforms to stimulate private sector investment;


• remains concerned about youth unemployment and the potential impacts of measures aimed at boosting demand for housing, in the absence of an adequate supply response; and

• notes that no action has been taken (or is being planned) on the taxation recommendations in the Country Specific Recommendations.

3.14 On Belgium the Commission comments that:

• it has made progress in consolidating its public finances, stabilising its banking sector, curbing inflationary pressures and improving the functioning of the labour market; and

• further measures will, however, be needed to safeguard public finances in the long-term, reform retail and professional services and match education outcomes and labour market requirements.

3.15 The Commission says that:

• Bulgaria has made significant strides to improve the sustainability of its public finances and fiscal framework; and

• it needs, however, further structural reforms to improve its regulatory, administrative and judicial systems which act as a constraint on the economy.

3.16 For the Czech Republic, the Commission notes that:

• the budget deficit has fallen bringing an end to the excessive deficit procedure, but the quality of the fiscal consolidation should be improved; and

• fighting corruption and increasing participation in the labour force remain priorities.

3.17 On Denmark the Commission says that:

• it has introduced measures to address the risks posed by high levels of household debt;

• a Productivity Commission is currently analysing the weak productivity growth in the economy and the potential contribution of non-optimal competition levels of the services sector; and

• important reforms have been carried out to increase employment but further efforts are needed to assist those at the margins of the labour market.

3.18 The Commission notes that:

• in 2012, Germany ran a small fiscal surplus, but further public investments in research and education are recommended;

• Germany has strengthened the regulatory and supervisory framework in the financial sector, but needs to take further measures to support consolidation in the banking sector;


• there has been progress in reducing long-term unemployment, but more could be done to get rid of disincentives to second earners; and

• similarly, only marginal reforms have been carried out to open up service sectors.

3.19 On Estonia the Commission:

• says that it can be described as having an economy with a sound fiscal position, which is outperforming the EU average in GDP growth and where the labour market has recovered quickly from the 2008–09 crisis; and

• emphasises that special attention will be required to ensure that education outcomes better match labour market needs.


• Ireland’s GDP growth is forecast to be weak this year (0.3%), but fiscal targets are still expected to be met;

• the deleveraging and restructuring of domestic banks has progressed well and a comprehensive assessment of banks’ balance sheets is due to be carried out shortly ahead of the upcoming Single Supervisory Mechanism stress test; and

• the government continues to implement structural reforms, but some issues remain work in progress.

3.21 In relation to Greece the Commission comments that:

• it has continued to make progress;

• recapitalisation of the four core banks has been completed and major reforms in the areas of labour market, healthcare and public financial management implemented; and

• further reforms are needed, particularly to increase the effectiveness of the public revenues system and reform of public administration.

3.22 For Spain the Commission notes that:

• it is committed to correct its excessive deficit by 2016 and has reformed its pension system;

• the financial sector programme is on track, proposals to improve the internal market have been submitted to Parliament and reform of professional services is under way; and

• it is also taking steps to reform its public administration and continues to implement active labour market policies with a focus on improving employment for young people.



• notes France as having made significant consolidation efforts but states that planned measures mainly focus on the revenue side;

• acknowledges measures to improve competitiveness and steps taken to improve the functioning of the labour market; but

• emphasises that further reforms are needed to reduce the cost of labour.

3.24 The Commission notes that, although Croatia has achieved some progress, important fiscal and structural challenges remain, and that there were no Country Specific Recommendations, as Croatia was not an EU member at the time they were issued.

3.25 For Italy the Commission says that:

• its fiscal consolidation efforts since 2011 have corrected the excessive deficit, but public debt remains a major burden;

• a targeted asset quality review was conducted to strengthen the banking sector;

• while some measures have been taken to improve growth and competitiveness, further work is needed;

• in 2012 a reform was adopted to address rigidity and segmentation in the labour market, but implementation is slow; and

• high unemployment among youth and women remains of high concern.

3.26 The Commission comments that Cyprus has made good progress on fiscal consolidation and banking sector reform in light of a difficult economic situation, but more can be done on unemployment, growth and competitiveness.

3.27 The Commission notes that:

• Latvia undertook a deep fiscal consolidation which enabled it to reduce the government deficit from 8.1% of GDP in 2010 to 3.1% in 2012 and exit the excessive deficit procedure in June 2013; and

• privatisation of several banks is on track and financial supervision has been strengthened.


• although Lithuania exited the excessive deficit procedure in June, its progress towards meeting its medium-term objectives was below the minimum requirements;

• it has much room to increase its tax revenues; and

• it has improved its competitiveness due to substantial wage reduction and improvements in non-price competitiveness.

3.29 For Luxembourg the Commission says that:


• it has made progress in its fiscal consolidation, but further efforts will be needed to ensure the long-term sustainability of public finances; and

• it needs measures to improve the wage-setting system and diversify the structure of the economy.

3.30 On Hungary the Commission notes that:

• the budget deficit has fallen, allowing it to exit the excessive deficit procedure, but risks remain;

• good progress on reducing foreign exchange debt and improving SME access to credit; and

• more can be done to enhance the business environment and increase participation in the labour force.


• sustainability of Malta’s public finances in the long-term remains challenging;

• the ongoing increases in the retirement age introduced to reform the pension system are too gradual; and

• measures have been taken to address shortcomings in the transport sector and to increase the employment rate of women.

3.32 In relation to the Netherlands the Commission comments that:

• its measures to improve the functioning of pension funds should be expected to reduce fiscal subsidies to the system, while supporting the employability of old workers; and

• further reforms are necessary to address significant structural distortions in the housing market and to increase the growth potential of the economy.

3.33 On Austria the Commission says that:

• it has successfully reduced its general government deficit, but the overlapping responsibilities between federal, regional and local levels represent a challenge that needs to be addressed;

• regarding restructuring of (partially) nationalised banks, further action is needed and budgetary risks need to be closely monitored; and

• further efforts are needed to facilitate competition and the provision of services.

3.34 For Poland the Commission:

• says that it has made insufficient effort on fiscal deficit reduction;

• recognises some progress on competitiveness, education, unemployment and the energy sector; but


• suggests more can be done.

3.35 In the case of Portugal the Commission comments that:

• fiscal consolidation has progressed over the past three years;

• public sector reforms continue to show benefits;

• banks have significantly improved capital ratios and are in a good position to weather short periods of uncertainty and cope with a potential further deterioration in asset quality;

• structural reforms are well advanced and important progress has been made in the areas of judiciary, network industries, housing, services and regulated professions; and

• further progress is still needed in the transport sector.


• although Romania exited the excessive deficit procedure in June, it faces challenges in maintaining fiscal sustainability and tax compliance;

• measures to strengthen the financial sector have been undertaken;

• it faces important competitiveness challenges due to low productivity and inadequate investment in research and development; and

• weak administrative capacity limits the absorption of EU funds.

3.37 For Slovenia the Commission notes that:

• the fiscal framework is undergoing further changes after a constitutional amendment setting the basis for the general government budget balance/surplus rule was adopted this year;

• the Bank of Slovenia has initiated an independent asset quality review and stress testing exercise covering 70% of the banking sector; and

• certain positive trends in judicial efficiency have continued.

3.38 According to the Commission:

• Slovakia embarked on an intensive consolidation effort, but since this effort also relies on one-off measures, it will need to be replaced by more structural measures in the future;

• it needs to strengthen institutions, human capital, innovative capacity and the business environment and to address the challenge of supporting more knowledge-based growth; and

• it has yet to act on enhancing social inclusion of marginalised communities.


3.39 On Finland the Commission says that:

• public finances have been overall sound, but the worsening of the economic climate has made it difficult to achieve the expected results in terms of moving towards the medium-term budgetary objective;

• on growth and competitiveness, it has introduced various measures to address the challenges that threaten the country’s competitive position; and

• success depends on the details of the reform, which have not been published so far.

3.40 For Sweden the Commission comments that:

• some measures have been implemented over the past years which have contributed to the stabilisation of household debt, although at a high level;

• while Sweden is a top performer according to most research and development indicators, it faces a number of challenges that could threaten the country’s competitive position in the medium-term; and

• the labour market is generally performing well but there are groups with weak attachment on the labour market, notably youth and people with a migrant background, which the government is taking steps to address.

3.41 The Commission asserts that the economic situation in the eurozone remains challenging, noting that:

• coordination of economic policies in the eurozone needs to be further strengthened;

• Member States are invited to strengthen further the focus on a growth friendly fiscal policy anchored in a medium term fiscal framework;

• further progress towards a Banking Union, which needs to be completed urgently, is being made;

• there is a large divergence in performance regarding structural reform; and

• the stability of the Economic and Monetary Union necessitates ambitious action by Member States to ensure the proper functioning of labour markets.

3.42 The draft Joint Employment Report (JER) for 2014, document (b), accompanies the AGS — it takes stock of employment reforms in Member States and expands on the key employment messages contained in the AGS. The document:

• presents a difficult employment situation in many Member States, including in the eurozone, and outlines priorities for relevant reforms;

• recognises progress on UK reforms, for example, the Youth Contract, improvements to childcare and parental leave, traineeships and apprenticeships;


• focuses on progress in areas particularly difficult to reform for other Member States, for example, wage indexation, undeclared work, and barriers to longer working lives; and

• includes for the first time a “Social and Employment Scoreboard”.

3.43 This scoreboard presents a small set of headline indicators covering unemployment rate, youth unemployment rate, household disposable income, the risk of poverty and inequality. The indicators are taken from the Joint Assessment Framework EU2020 for tracking/monitoring on Employment Guidelines.17 The Commission justifies the inclusion of this scoreboard as early warning of potential social and employment “spill-over” effects that could threaten the smooth functioning of the Economic and Monetary Union.

The Government’s view

3.44 The Economic Secretary to the Treasury (Nicky Morgan) comments first on the AGS 2014, document (a), saying that the Government broadly welcomes it and the Commission’s continued focus on fiscal consolidation, promoting economic growth and employment. She comments further that:

• structural reforms at EU level are an essential complement to the reform efforts of individual Member States;

• the Government supports the five priority areas identified in the AGS; and

• it welcomes the emphasis on regulation, whether the provenance of future regulation is the EU or national governments.

3.45 On the Commission Staff Working Document giving an overview of each Member State’s implementation of the Country Specific Recommendations, which accompanies the AGS, the Minister says that:

• the Government supports the Commission’s emphasis on moving forwards with fiscal consolidation and structural reforms, although it believes it is too early to assess the implementation of many of the Country Specific Recommendations;

• the Government’s economic plan is designed to equip the UK to succeed in a global race, to secure a stronger economy and a fairer society and to help people who aspire to work hard and get on;

• this strategy is restoring the public finances to a sustainable path and the deficit has been reduced by a third as a percentage of GDP in the three years from 2009–10; and

• the UK is seen as a relative safe haven, with interest rates remaining near historical lows and in line with other core economies, helping keep interest payments lower for households, businesses and the taxpayer.

17 See http://ec.europa.eu/social/main.jsp?langId=en&catId=89&newsId=972&furtherNews=yes.


3.46 The Minister continues that the Government does not agree with several of the key factual assertions in the Commission’s assessment of the UK’s implementation of the Country Specific Recommendations, saying that:

• while the Government agrees that “The fiscal consolidation strategy is being implemented and is moving in the right direction”, it does not agree that “the average pace has slowed over the period”;

• the UK’s average pace of consolidation is not slowing over the period — total discretionary consolidation in nominal terms over the period 2010–11 to 2015–16 is in line with plans announced in the 2010 Budget;

• there is £130 billion of total discretionary consolidation now planned by 2015–16 compared with £128 billion under 2010 Budget plans;

• furthermore, the latest IMF forecasts show a consistent 1% of GDP annual improvement in the primary balance over 2013, 2014 and 2015;

• while the Government agrees that “Net exports have started to contribute positively to growth”, it does not agree that “this was due to a large fall in imports as opposed to a rebound in exports”;

• from 2008 to 2012 (the five years of the indicator), export growth has added 0.8% of growth, while imports falling has added 0.2% to growth — so the positive net trade contribution over the period is driven more by exports than by imports;

• the Government disagrees with the assertion that the UK has “the highest at-risk-of-poverty rate for lone parent households in the EU28,” as this is factually incorrect;

• according to the EU’s own Eurostat statistics for single parents with dependent children the rate for the UK is 33.5% (2011, the latest figures available);

• this is lower than the EU 28 Average of 34.6%, and the UK scores better than Germany, Spain and France on this measure; and

• the Government also objects to the Commission’s comments that the UK is not doing enough to support housing supply — the Government has liberalised the planning system, creating the right market conditions to support developers and is directly providing affordable housing.

3.47 Turning to the draft JER, document (b), the Minister says that:

• the Government welcomes the continued focus on major labour market challenges across the EU, including progress with implementing Country Specific Recommendations;

• it disagrees with the automatic inclusion of non-eurozone Member States in the Social and Employment Scoreboard in the JER, which it considers are a distraction from the main messages of the report; and


• it recalls that, in line with the October European Council conclusions, “the strengthened economic policy coordination and further measures to enhance the social dimension in the Euro area are voluntary for those outside the single currency.”

Conclusion

3.48 The Annual Growth Survey, document (a), is one important document in the opening stage of the 2014 European Semester. So we recommend that it be debated in European Committee B, together with the other important document, the Alert Mechanism Report, dealt with elsewhere in this Report.18 We recommend also that the documents accompanying the Annual Growth Survey, the draft Joint Employment Report, document (b), and the Report on a single market for growth and jobs,19 be included in the debate.

3.49 This debate should take place before the relevant functional Councils consider the documents in preparation for the March 2014 European Council.

18 Op cit.

19 Op cit.


4 Macroeconomic imbalances

(35533) 15808/13 COM(13) 790

Commission Report: Alert Mechanism Report 2014 (prepared in accordance with Articles 3 and 4 of Regulation (EU) No. 1176/2011 on the prevention and correction of macroeconomic imbalances)

Legal base — Document originated 13 November 2013 Deposited in Parliament 20 November 2013 Department HM Treasury Basis of consideration EM of 3 December 2013 Previous Committee Report None Discussion in Council Early 2014 Committee’s assessment Politically important Committee’s decision For debate in European Committee B, together with

the Annual Growth Survey 2014 and associated documents

Background

4.1 In March 2010 the Commission proposed a Europe 2020 Strategy, to follow on from the Lisbon Strategy. This strategy is aimed at promoting smart, sustainable and inclusive economic growth. It was endorsed by the March 2010 European Council. During the latter half of 2010 the Council adopted, in the context of the Europe 2020 Strategy, broad guidelines for the economic policies of the Member States and the EU and guidelines for the employment policies of the Member States, together the Europe 2020 integrated guidelines.

4.2 On the basis of two Commission Communications, Reinforcing economic policy coordination and Enhancing economic policy coordination for stability, growth and jobs: tools for stronger EU economic governance, and of the Van Rompuy Task Force report, Strengthening economic governance in the EU, the June, September and October 2010 European Councils considered and endorsed measures to increase coordination of EU economic governance, including strengthening the Stability and Growth Pact and introducing a “European Semester”.

4.3 The European Semester is an EU-level framework for coordinating and assessing Member States’ structural reforms and fiscal/budgetary policy and for monitoring and addressing macroeconomic imbalances. It attempts to exploit the synergies between these policy areas by aligning their reporting cycles, which would tie together consideration of National Reform Programmes (reports on progress and plans on structural reforms, under the Europe 2020 Strategy) and Stability and Convergence Programmes (reports on fiscal policy, under the Stability and Growth Pact).

4.4 An element of the European Semester process is the Macroeconomic Imbalances Procedure (MIP). The MIP is a mechanism designed to identify and, if necessary, correct


harmful macroeconomic imbalances across the EU, which were a key cause of the current sovereign debt crisis. The Regulation on enforcement measures to correct excessive macroeconomic imbalances in the eurozone, Regulation (EU) No. 1174/2011, and the Regulation on the prevention and correction of the macroeconomic imbalances, Regulation (EU) No. 1176/2011, creating the procedure, form part of the so-called “six pack” of legislation for improving EU economic governance.

4.5 The first stage of the MIP is publication by the Commission of an annual Alert Mechanism Report, which is based on assessing Member States against a “scoreboard”. The scoreboard comprises macroeconomic indicators, which monitor the potential development of problematic external and internal imbalances. The role of the Alert Mechanism Report is to identify which Member States may have macroeconomic imbalances. This is based on an economic reading of the scoreboard, which takes into account additional macroeconomic indicators. If a Member State is deemed at risk, the Commission conducts a more detailed assessment contained within an in depth review (IDR).

4.6 There are three alternative outcomes following the publication of IDRs. First, the Commission might find that none of the indicators that exceed their threshold represents a macroeconomic imbalance within a country and no further action would be taken at this point.

4.7 Secondly, the Commission might identify that one or more of the indicators that exceed their threshold represent an imbalance, but that none are deemed to be “excessive”. Under this scenario, the Commission would propose non-binding recommendations under Article 121(2) TFEU, the same legal basis as country specific recommendations issued as part of the European Semester. These recommendations would be to address the identified imbalances under the “Preventive Arm” of the procedure and would need to be agreed by Council approval through QMV. They would subsequently be made public under Article 121 (4) TFEU.

4.8 Thirdly, if the Commission considers that an “excessive” imbalance exists, it would propose, subject to Council approval by QMV, placing the Member State in an “Excessive Imbalances Procedure”. This would involve more stringent requirements, which could, in the case of non-compliance by eurozone Member States, result in escalating sanctions up to and including a non-refundable fine of 0.1% of GDP. For non-eurozone countries non-compliance would not lead to sanctions, but it would be made public.

4.9 The European Semester cycle begins with an Annual Growth Survey by the Commission, followed by a series of overarching and country specific documents from the Commission and culminating in examination of the overall and country-specific situations by the European Council. The Annual Growth Survey for the 2014 cycle is dealt with elsewhere in this Report.20

20 See (35532) 15803/13: chapter 3.


The document

4.10 The Alert Mechanism Report (AMR) 2014 and accompanying documents are the first stage in the EU level Macroeconomic Imbalances Procedure (MIP). The centrepiece of the AMR is the scoreboard, in which each Member State is assessed against 11 macroeconomic indicators that monitor the potential development of problematic external and internal imbalances based on data for 2012, although certain indicators are assessed with historical data over a number of years.

4.11 The indicators designed to monitor external imbalances are current account balance, net international investment position, real effective exchange rate, export market share and unit labour cost index. The indicators monitoring internal imbalances are growth rate of financial liabilities, house prices, private sector credit flow, private sector debt, public sector debt and unemployment. Each indicator has a threshold value. For example, any Member State with public sector debt higher than 60% of GDP exceeds the threshold for that indicator. For certain indicators, there are more restrictive thresholds for eurozone countries, increasing the possibility of them exceeding the threshold.

4.12 In the AMR 2014 the Commission:

• recognises that most Member States improved their imbalances in the past year;

• presents short country-specific analysis of all Member States excluding payment assistance programme countries — Cyprus, Greece, Ireland and Portugal and Romania are already under enhanced economic surveillance as part of their assistance programmes and are therefore not subject to IDRs; and

• includes a new table of social indicators as auxiliary indicators, which are not measured against any thresholds.

4.13 In the AMR the UK is shown as having exceeded threshold values for the same three indicators as last year — those relating to general government debt, private sector debt and the change in export market shares. The AMR includes a short country-specific commentary on the UK, in which the Commission:

• considers that there was gradual improvement towards the end of 2012 in relation to export performance, although structural challenges remain;

• notes that, although private sector debt remains in excess of the Commission’s indicator threshold, a slow deleveraging process is underway, even though an increase in house prices may impact this;

• notes that, in terms of public debt, the deficit is forecast to fall, but points to slower than expected progress on fiscal consolidation due to temporary factors such as the disruption in oil production and unfavourable conditions in trading partners; and

• points to ongoing balance sheet repair in the financial sector, meaning that bank liabilities are not likely to experience rapid growth.

4.14 The Commission concludes that the UK, along with Belgium, Bulgaria, Croatia, Denmark, Finland, France, Germany, Hungary, Italy, Luxembourg, Malta, Netherlands,


Spain, Slovenia, and Sweden will have IDRs conducted. These reviews are scheduled to be published in spring 2014.

4.15 Annexed to the AMR is a Commission Staff Working Document Technical Changes to the Scoreboard and Auxiliary Indicators.21 This document presents adjustments that could be considered for some of the scoreboard indicators, with a focus on the real effective exchange rate, and the private sector debt and credit flows. It also presents proposed changes for auxiliary indicators such as inward FDI stocks, export performance compared with advanced economies and terms of trade.

4.16 Another Staff Working Document Statistical Annex is also annexed to the AMR.22 It contains historical scoreboards, country specific scoreboards and indicator specific scoreboards.


4.17 The Economic Secretary to the Treasury (Nicky Morgan) says that:

• the Government takes note of the publication of the AMR and supports the MIP as a means of strengthening its understanding of macroeconomic risks, particularly in the eurozone;

• the Government does not support the inclusion of social auxiliary indicators in the AMR, which it considers undermine the focus of the Mechanism on preventing harmful macroeconomic imbalances; and

• the Government notes that the October European Council conclusions recognised that “The strengthened economic policy coordination and further measures to enhance the social dimension in the Euro area are voluntary for those outside the single currency.”

4.18 The Minister continues that:

• the Government notes that the UK has been found to exceed the threshold for the same three indicators as in the 2013 AMR and will be subject to an IDR by the Commission;

• the analysis set out in the AMR represents the first stage in the Commission’s assessment of Member States;

• exceeding the threshold values for one or more indicators does not mean that an imbalance or excessive imbalance is present; and

• the Government also considers that it will be important for the Commission to take into account the historical context behind the indicators where Member States have exceeded pre-determined thresholds.

21 See http://ec.europa.eu/europe2020/pdf/2014/mipsb2014_swd_en.pdf.

22 See http://ec.europa.eu/economy_finance/economic_governance/documents/alert_mechanism_report_2014_statistical_annex_en.pdf.


4.19 The Minister comments further that:

• the Government’s economic plan is designed to equip the UK to succeed in a global race, to secure a stronger economy and a fairer society and to help people who aspire to work hard and get on;

• this strategy is restoring the public finances to a sustainable path and the deficit has been reduced by a third as a percent of GDP in the three years from 2009–10;

• the UK is seen as a relative safe haven, with interest rates remaining near historical lows and in line with other core economies, helping keep interest payments lower for households, businesses and the taxpayer;

• the Office for Budget Responsibility’s (OBR) March forecast showed the UK economy rebalancing over the forecast period; and

• an updated forecast from the OBR is presented with the Autumn Statement.

4.20 Finally, the Minister reminds us that the UK is not subject to sanctions under the MIP or at any point in the European Semester.

Conclusion

4.21 The Alert Mechanism Report is one important document in the opening stage of the European Semester. So we recommend that it be debated in European Committee B, together with the other important document, the Annual Growth Survey, and associated document dealt with elsewhere in this Report.23 This debate should take place before the relevant functional Councils consider the documents in preparation for the March 2014 European Council.

23 Op cit.


5 European Defence

(35234) 12773/13 + ADD 1 COM(13) 542

Commission Communication: Towards A More Competitive and Efficient Defence and Security Sector

Legal base — Department Defence Basis of consideration Minister’s letter of 28 November 2013 Previous Committee Reports HC 83-xx (2013–14), chapter 14 (6 November 2013)

and HC 83-xiii (2013–14), chapter 23 (4 September 2013)

Discussion in Council 18-19 December 2013 Defence European Council Committee’s assessment Politically important Committee’s decision For debate in European Committee B before the

December European Council

Background

5.1 The Commission begins this Communication with two quotations.

“The world needs a Europe that is capable of deploying military missions to help stabilise the situation in crisis areas. ...We need to reinforce our Common Foreign and Security Policy and a common approach to defence matters because together we have the power, and the scale to shape the world into a fairer, rules based and human rights’ abiding place.”24

“The Council reiterates its call to retain and further develop military capabilities for sustaining and enhancing the CSDP. They underpin the EU’s ability to act as a security provider, in the context of a wider comprehensive approach [and] the need for a strong and less fragmented European defence industry to sustain and enhance Europe’s military capabilities and the EU’s autonomous action”.25

Our initial assessment

5.2 We reported on this Commission Communication in September, and the full background is set out in the Report under reference.

5.3 It seemed likely to us that this Commission Communication would warrant debating before the December European Council. Although some of the specific proposals might be welcome, other proposals and calls for “a strategic approach covering all aspects of military

24 European Commission President Jose Barroso’s “State of the Union 2012 Address”, 12 September 2012, available at

http://europa.eu/rapid/press-release_SPEECH-12–596_en.htm.

25 19 November 2012 Foreign Affairs Council Conclusions on Military Capability Development. See http://www.consilium.europa.eu//uedocs/cms_data/docs/pressdata/EN/foraff/133560.pdf.


and non-military security” and for “a wider political debate on the implementation of relevant provisions of the Lisbon Treaty” were potentially more controversial.26 However, before taking a definitive view, we sought the Opinion of the Defence Committee on the significance of the Communication, in accordance with Standing Order No. 143 (11). The Commission Communication was also retained under scrutiny.27

5.4 The Defence Committee’s Opinion is set out in full in our most recent Report. It concluded thus:

“The Committee therefore agrees with your Committee’s provisional conclusion that the document warrants further debate in advance of the December European Council, and we share your Committee’s broader concerns about the implications of some of the document’s specific proposals.”

Our assessment

5.5 In view of our colleagues’ Opinion, we were more minded than ever to recommend this Commission Communication for debate. But in the first instance we asked the Minister to tell us about the outcome thus far of the discussions that, in August, he said the Government proposed to have with the Commission and other Member States prior to the December European Council, “to ensure that our areas of concern are properly addressed and that UK interests are fully taken into account when taking forward any of these actions”.

5.6 We asked to have this information no later than 15 November, so that it could be taken into account in deciding if a debate was indeed warranted, prior to the discussion at the December European Council.

The Minister’s letter of 28 November 2013

5.7 The Minister begins by offering his apologies that his response is later than requested:

“Unfortunately, communication problems, possibly technical, between your Committee’s clerks and this Department meant the first we were aware of your request was 25 November: I have endeavoured to provide a response as quickly as possible.”

5.8 The Minister then continues thus:

“Since the publication of the Communication, we have continued to take a firm but positive approach with the Commission. We have welcomed those elements that complement our own growth agenda such as the focus on the internal market, attempts to encourage less efficient industry to leave the defence market and proposals relating to the support of SMEs. Where we have concerns, which revolve around issues such as national sovereignty, duplication and interference with

26 Article 42 TEU, which is the underpinning of the proposals in the Commission Communication, is reproduced at

Annex 1 of our previous Report.

27 See headnote: HC 83-xiii (2013–14), chapter 23 (4 September 2013).


exports, we have taken a firm line and have used a number of channels to ensure the Commission are well aware of those issues.

“We have held a number of discussions on the Communication with the Commission and Member States in the lead up to December Council. Of particular note, the Secretary of State for Defence set out our concerns to the Commission when they presented their Communication at the NATO Ministerial Informal in Vilnius in September. Minister for Defence Equipment, Support and Technology and FCO Minister for Europe also wrote to the Commissioners Barnier and Tajani, the joint owners of the Communication, to set out our concerns and invite them to a bilateral meeting. These concerns were then further expanded upon by a letter sent to senior Commission officials that was also sent to key Member State foreign and defence ministries to ensure that the UK position was well known across the EU.

“We have also strongly represented the UK position in the Letter of Intent (LoI)28 forum where we were able to broadly agree red lines and areas where we would need to seek more detail from the Commission on its intent.

“Whilst we have been unable to establish a meeting with the Commission at Ministerial level before the December European Council, officials from the FCO, BIS and the MOD met with senior Commission officials in London on 8 November to re-enforce our key messages. The topic also featured in the Secretary of State for Defence’s meeting with Jean-Yves Le Drian, the French Minister of Defence, on 28 October. Most recently, in the EU Foreign Affairs Council held on the 18/19 November, we were able to work with our partners to ensure the Conclusions clearly stated that any Commission activity on the Communication would be taken forward in consultation with Member States.

“We are encouraged that the Commission seems to be taking many of our messages on board. It has been keen to stress that it sees the December meeting as the start of a consultation process and that it would not look to push proposals that Member States were not happy with. In particular, in relation to specific UK concerns, Commission officials were keen to reassure us that it would not duplicate the activities of military organisations in the fields of airworthiness and standardisation, it would not look to take action in the area of exports if Member States were not happy and that Member States would be consulted fully in developing its proposed Preparatory Action on CSDP research. In addition, on its proposals for a pre-commercial procurement scheme, there would be no active Commission involvement beyond funding (they wouldn’t own IPR for example), it would be civil-focused and open to all to Member States. And, importantly, Commission officials responded positively when we stressed the importance of establishing a formal Commission/Defence Ministries mechanism to oversee implementation.

“That said, there are many areas of the Communication where we still have concerns. To this end, we have repeatedly made clear our opposition to the Commission owning or operating military or related dual-use capabilities, our concerns over

28 France, Germany, Italy, Spain, Sweden and UK.


intervention in government to government sales, any incentives which might distort the defence market or impede our industry’s ability to work with essential non-EU suppliers. And it continues to support proposals which we believe could lead to unnecessary regulatory interference in the defence market. We are therefore continuing to work hard — across Government and with our international partners, including through the LoI and the European Defence Agency — to challenge robustly these areas and ensure that UK interests are fully taken into account both in preparations for the December Council, for example through the 18–19 November Foreign Affairs Council and the 2–3 December Competitiveness Council, as well as in taking forward any of the Commission actions post-December.”

Conclusion

5.9 With regard to the Minister’s delay in responding, we note that: a copy of the Committee’s report was forwarded to his Department immediately after the Committee’s meeting on 6 November.

5.10 With regard to the substance of the Minister’s letter, it is plain that the Government’s sustained campaign has had some success. However, although the Minister is careful not to point fingers, we find it extraordinary that, throughout this period, it was not possible to (as he diplomatically puts it) establish a meeting with the Commission at Ministerial level before the December European Council.

5.11 Moreover, as he says more bluntly, there are many areas of the Communication where he still has concerns; and they are substantial: from the Commission owning or operating military or related dual-use capabilities, over intervention in government to government sales, to incentives that might distort the defence market or impede UK industry’s ability to work with essential non-EU suppliers; and other proposals that the Commission continues to support which he believes could lead to unnecessary regulatory interference in the defence market.

5.12 Although time is now short, we consider it imperative that this Communication is debated in European Committee before the December European Council meeting, so that the House can find out more detail about the areas of the Communication about which the Minister remains concerned, and express its own views.

5.13 We so recommend. In the meantime, the Communication remains under scrutiny.


6 CSDP: the EU’s comprehensive approach to external conflict and crises

(35595) — —

Draft Joint Communication: The EU’s comprehensive approach to external conflict and crises

Legal base — Deposited in Parliament 29 November 2013 Department Foreign and Commonwealth Office Basis of consideration EM of 9 December 2013 Previous Committee Report None Discussion in Council 19–20 December 2013 “Defence” European Council Committee’s assessment Politically important Committee’s decision Not cleared; further information requested

Background

6.1 There is nothing specific about the notion of the EU’s comprehensive approach on its website. However, a study by the DCAF,29 aimed at contributing to the ongoing discussion on the comprehensive approach at EU level, offers an overview of the development of this concept from the adoption of the European Security Strategy (ESS) to the entry into force of the Lisbon Treaty. It includes an assessment of the architecture and mechanisms created in the post-Lisbon phase, looking in particular at the organization and functioning of the European External Action Service (EEAS), with a view to setting the institutional and policy framework for the current implementation of the comprehensive approach, especially in the field of crisis management. The analysis of the effective operationalisation of this concept on the ground is conducted through two main case studies: the EU’s engagement in the Sahel region and the Horn of Africa.30

The draft Joint Communication

6.2 The document sets out the High Representative and European Commission’s ideas for how the EU could take a more comprehensive approach to its external relations policies and actions — bringing the collective weight of the EU’s diplomatic, economic, development, civilian and military tools together in a coherent manner and in coordination with other actors. It notes that whilst the Comprehensive Approach is not a new concept, the ideas and principles governing it have yet to become systematically

29 The Geneva Centre for the Democratic Control of Armed Forces — DCAF — is an international foundation “whose

mission is to assist the international community in pursuing good governance and reform of the security sector”, by providing “in‐country advisory support and practical assistance programmes, develops and promotes norms and standards, conducts tailored policy research, and identifies good practices and recommendations to promote democratic security sector governance”.

30 The study itself is available at http://www.dcaf.ch/Publications/The-EU-s-Comprehensive-Approach-to-Crisis-Management.


embedded as the guiding principle for EU external action across all areas, in particular in conflict prevention and crisis management.

6.3 In his Explanatory Memorandum of 9 December, the Minister for Europe (Mr David Lidington) says that this document — produced jointly by the High Representative for Foreign and Security Policy and the European Commission, without Member State consultation — is currently under inter-service consultation, has been shared on an informal basis with the Government, and is therefore subject to change. The Minister expects the final version to be released in advance of the European Council (Defence) on 19 and 20 December 2013 and could be available prior to the FAC (Development) on the 12 December 2013; full discussion of the document is, he says, likely in early 2014 with Council Conclusions agreed at the Foreign Affairs Council at that time.

6.4 In the meantime, the Minister says that: given its relevance to the December European Council, it is likely that there will be some level of discussion prior to the Council; he has therefore chosen to submit an Explanatory Memorandum at the earliest opportunity; and, subject to changes in the final publication, he will update the Committee as required.


6.5 The Minister describes the Comprehensive Approach as a UK priority and particularly welcomes the importance placed on it in Baroness Ashton’s recent EEAS review paper. Thus far, the analysis and recommendations are, he says, broadly in line with UK thinking:

“It focuses on better working practices and coordination, avoiding proposals that would cross our red-lines on institutional growth or re-structuring.”

6.6 The Minister says that the following proposals particularly align with UK thinking:

— “Focussing on all stages of the cycle of a conflict or crisis, including in particular, conflict prevention;

— “Ensuring responses are context specific;

— “Developing common strategic vision for regions/countries;

— “Better using Delegations as a focus to support coherence on the ground and encouraging co-location where appropriate;

— “Drawing on the strength of all available instruments;

— “Focussing on improved coordination between all EU actors;

— “Better coherence between long term objectives and short term action; and

— “Establishing stronger links between the Commission and EEAS, including better use of the HRVP’s dual-hatted role to enhance coherence.”

6.7 However, the Minister then says:

“We do have some concerns. The paper does not give much detail on how the proposed actions will be taken forward or their implementation monitored. Nor


does it give adequate attention to the importance of partnerships and in particular the role of NATO. We will strengthen these areas through Council Conclusions in the New Year and thereafter.”

Conclusion

6.8 The 19–20 December European Council discussion on defence is the first opportunity in five years for Heads of State and Government to agree the strategic direction of the EU’s Common Security and Defence Policy (CSDP). The agenda is centred on three “clusters”:

— Cluster 1: Increase the effectiveness, visibility and impact of CSDP;

— Cluster 2: Enhance the development of capabilities; and

— Cluster 3: Strengthen Europe’s defence industry.

6.9 Elsewhere in this Report we deal with the three principal documents that will inform the European Council debate:

— a report from the HR on the EU’s Common Security and Defence Policy;

— a Joint Communication, Towards a More Competitive and Efficient Defence and Security Sector; and

— the HR’s review of the European External Action Service (EEAS) to which the Minister refers.31

6.10 We are accordingly grateful to the Minister for the initiative that he has taken. We have recommended all three of these documents for debate: the latter two prior to the European Council and the first early in the New Year, after the relevant European Council Conclusions have emerged.

6.11 We consider that this further Joint Communication, once agreed, will be relevant to the debates on the High Representative’s Reports on the EU’s Common Security and Defence Policy and the EEAS. Before then, however, we would be grateful if the Minister would deposit the final version, together with any further views he may have, depending on the extent to which it differs from this draft.

6.12 In the meantime, we shall retain the document under scrutiny.

31 See (35417) —: chapter 2 and (35234) 12773/13: chapter 5.


7 Financial reporting and auditing

(34615) 5213/13 + ADD 1 COM(12) 782

Draft Regulation establishing a Union programme to support specific activities in the field of financial reporting and auditing for the period 2014–20

Legal base Article 114 TFEU; co-decision; QMV Department Business, Innovation and Skills Basis of consideration Minister’s letters of 28 May and 4 December 2013 Previous Committee Report HC 86-xxx (2013–14), chapter 2 (30 January 2013) Discussion in Council See para 7.8 below Committee’s assessment Politically important Committee’s decision Cleared; further information awaited

Background

7.1 According to the Commission, the global nature of capital markets means that harmonisation of reporting and audit rules at global level is essential, and it says that this is why the EU decided in 2002 to adopt international accounting standards (IFRS), rather than introduce its own set of requirements. It also suggests that, with more countries moving to adopt IFRS, Europe will need to speak with one voice in order to be heard, and it notes that the European Financial Reporting and Accounting Group (EFRAG) has gradually taken on the role of providing technical input in this area.

7.2 In 2009, Decision No. 716/2009/EC was adopted, establishing a Programme with a budget of €38.7 million for the period 2010–13 to support specific activities relating to financial services, financial reporting and auditing. However, this will end in December 2013, and, as we noted in our Report of 30 January 2013, the Commission has put forward this draft Regulation, which aims to renew it for 2014–20, with funding of €58 million32 being made available from the EU budget for three bodies (the IFRS Foundation, EFRAG and the Public Interest Oversight Board (PIOB)). In addition, funding of €4 million would be provided in administrative expenditure for the Internal Market and Services Directorate.

7.3 We noted that the Government agrees with the overall strategic aim of the proposal, but had said that, whilst it recognises the important roles of the organisations in this area, and supports their continued funding in principle, it questioned whether a blanket increase in their budgets was justified in the current austerity climate, and therefore proposed to ask the Commission to explain what consideration it had given to prioritising outcomes, and to linking funding accordingly. It added that the UK and other Member States had expressed concern about the proposed role of EFRAG, and that it would also wish to consider the proposed delegation to the Commission of the power to select new

32 €32.22 million would be for the IFRS Foundation; €23.51 million for EFRAG; and €2.27 million for the Public Interest

Oversight Board.


beneficiaries for the Programme (and to ask the Commission to explain how it will consider if bodies merit funding).

7.4 We commented that, since the document would essentially extend for a further period a programme which had been in force since 2009, it did not raise any significant new issues, but we also noted the points on which the Government had expressed concern. We therefore decided to hold the document under scrutiny, pending further developments.

Minister’s letters of 28 May and 4 December 2013

7.5 We next received a letter of 28 May 2013 from the Minister for Employment Relations and Consumer Affairs (Jo Swinson) indicating that the Commission had said that it was conducting a review of IFRS in the EU, and had appointed a Special Adviser (Philippe Maystadt) to focus on the role of bodies such as EFRAG. She also reported that the European Parliament’s Committee on Economic and Monetary Affairs had suggested a number of amendments, and said that she would write again when the impact of these developments was clearer.

7.6 We have now received from the Minister a further letter of 4 December 2013. She says that the Maystadt review has recommended that EFRAG should continue to have a role, but that its governance arrangements should be transformed, including a number of detailed recommendations to improve stakeholder representation and influence, in particular at board level, thus making it appropriate to consider the provision of funding over the 2014–20 budget period. (She also notes that, whilst not directly relevant to this proposal, the report considers other issues related to the EU’s influence in the development of IFRS and its approach to their adoption.)

7.7 The Minister notes that the European Parliament has brought forward a number of amendments, some of which (such as the deletion of provisions for the Commission to use delegated acts in relation to future beneficiaries of the funding programme) the Government supports, whilst it is strongly opposed to others (such as the imposition of detailed conditions on the funding of the IFRS Foundation). She adds that other Member States share these views which have been the subject of intense discussions between the Presidency and the Parliament, as a result of which the proposal has been amended to:

• remove the ability of the Commission to use delegated acts to determine future recipients of funding within the budget period, so that, if it considers it appropriate to fund a new body (even the direct successor of a current recipient), it will need to put forward a proposal;

• require the Commission to provide annual reports to the Council and the European Parliament on the activities of the IFRS Foundation and the PIOB;

• require the Commission to provide the Council and the Parliament with reports on the activities of EFRAG, and, in particular, the progress with its reform programme;

• limit the period for which funding will be made available to EFRAG, pending evidence of its implementing governance reforms in line with recommendations of the Maystadt report, with the Commission bringing forward a proposal for


continued funding for the remainder of the budget period — though this is subject to satisfactory progress with the Group’s reform programme, and the precise length of the initial funding period is still subject to negotiation (but unlikely to exceed three years);

• reduce the budget envelope accordingly;

• restrict the Commission’s funding to the PIOB to €300,000 a year if the funding it receives from the International Federation of Accountants exceeds two-thirds of its total annual funding (thus reflecting the expectation that the PIOB will be effective in achieving its objective of diversifying its funding base for the future); and

• insert a clause enabling the Commission to fund the recipient bodies from 1 January 2014, regardless of the date of adoption, thereby acknowledging the delay in securing agreement to this proposal, and avoiding a reduction in the amount available to each body in 2014.

7.8 The Minister observes that the provisions on the Commission’s power to use delegated acts, and on the levels of funding proposed, reflect the points made by the UK on the original text, and that negotiations on the proposal are now drawing to a close, with the Commission being keen to secure agreement as soon as possible to remove uncertainty and avoid disrupting the funding of the recipient bodies. She adds that, if agreement is reached, it is possible that the proposal will be considered by the Council later this month, and expresses the hope that the information she has provided will enable us to release the proposal from scrutiny.

Conclusion

7.9 As we have noted previously, this proposal would essentially extend for a further period arrangements which have been in force since 2009, and our main reason for holding it under scrutiny was to await further information about the points on which the Government had expressed concern. Although the Minister’s most recent letter suggests that there are still one or two loose ends to be tied up, it would appear as though the fear that the Commission would be able to use delegated acts to determine future recipients of funding has been removed, and that adjustments will be made to the budgetary envelope which reflect the points made by the UK and other Member States. In view of this, and the prospect of an imminent agreement in the Council, we are now clearing the document, but we would be glad if the Government could inform us of the eventual outcome.


8 Implementation of the Aarhus Convention

(25001) 14154/03 COM(03) 624

Draft Directive on access to justice in environmental matters

Legal base Article 175(1)EC; co-decision; QMV Department Environment, Food and Rural Affairs Basis of consideration Minister’s letter of 27 November 2013 Previous Committee Reports HC 42-i (2003–04), chapter 7 (3 December 2003), HC

42-xxxvii (2003–04), chapter 4 (17 November 2004) and HC 38-vii (2004–05), chapter 2 (2 February 2005)

Discussion in Council Not applicable Committee’s assessment Legally and politically important Committee’s decision Cleared

Background

8.1 The UNECE Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters (the Aarhus Convention) was signed by the European Community and Member States in June 1998, and, on 3 December 2003, a previous Committee reported to the House two proposals which had arisen from that decision, drawing attention to a number of concerns which had been expressed. Although they were subsequently able to clear one of the documents in November 2004,33 they continued to hold under scrutiny this draft Directive — which seeks to ensure that rights governing access to justice are granted in a uniform manner in all Member States — as the concerns raised had not been dealt with.

8.2 In particular, the Commission had proposed that, where acts or omissions of public authorities are considered to contravene environmental law, they should be subject to administrative or judicial (but not criminal) review proceedings, but it would be for the Member State concerned to decide whether cases of this kind should be heard by a judicial authority or by another independent or impartial body. Likewise, in cases involving acts or omissions by private persons, it would be for Member States to ensure that members of the public meeting criteria laid down in national law should have access to environmental proceedings.

8.3 The UK’s concern was that this approach was at variance with the provisions of the Convention, in that it appeared to undermine the discretionary power of the Courts, implying that their only discretion would be to determine whether a legal person met the criteria for recognition as a qualified entity (in which case that person would have a right to be heard, even if the court believed there was no case to be considered), whereas the UK believed that they should be able to look at a wide range of issues, such as the seriousness of

33 See (25009) 14152/03: HC 42-xxxvii (2003–04), (17 November 2004), chapter 4.


the case, or whether another avenue of appeal existed. It also believed it was vital that the Directive should preserve their procedural power to ensure that, even where a party (including a qualified entity), has legal standing, access to all stages of environmental proceedings would not be granted automatically. In view of this, the UK’s aim during any negotiations would be to ensure that the Directive did not compromise its capacity to determine such procedural matters, and that it avoided the possibility of unnecessary litigation on matters outside the scope of the Convention.

8.4 It was therefore decided to keep this document under scrutiny, in order to establish how far the UK’s concerns were shared by the other Member States, and the then Government was asked to provide updates on the progress of any further discussions in the Council.

Subsequent developments

8.5 Since then, we have received a series of updates from successive Ministers, indicating that most Member States were opposed to the proposal, but that, although it seemed unlikely to progress further, the Commission had yet to formally withdraw it. However, we have now received a letter of 27 November 2013 from the Parliamentary Under-Secretary for Water, Forestry, Rural Affairs and Resource Management (Dan Rogerson), indicating that the Commission announced in its most recent Work Programme that it intends to withdraw the proposal, citing a lack of effective progress, and that it will now consider alternative methods of ensuring that the EU meets its obligations under the Aarhus Convention. In view of this, he expresses the hope that the proposal can now be cleared from scrutiny.

Conclusion

8.6 As this proposal is — at last — to be withdrawn, we are now releasing it from scrutiny, as requested by the Minister.


9 Policy Coherence for Development

(35488) 15646/13 SWD(13) 456

Commission Staff Working Paper: EU 2013 Report on Policy Coherence for Development

Legal base — Document originated 31 October 2013 Deposited in Parliament 8 November 2013 Department International Development Basis of consideration EM of 26 November 2013 Previous Committee Report None; but see (33616) 18787/11: HC 428-I (2010–

12), chapter 14 (8 February 2012); (30920) 13468/09 HC19-xxviii (2008–09), chapter 9 (21 October 2009) and (28929) 13135/07 HC 41-xxxv (2006–07), chapter 8 (17 October 2007); also see (26496) 8137/05; (26497) 8138/05; and (26498) 8139/05: HC 34-v (2005–06), chapter 4 (12 October 2005)

Discussion in Council 12 December 2013 “development” Foreign Affairs Council

Committee’s assessment Politically important Committee’s decision Cleared

Background

9.1 Policy Coherence for Development (PCD) recognises that aid alone cannot address the needs of the developing world; that there is a need for greater coherence in policies across sectors that affect developing countries, with policy in areas like agriculture, trade, investment, migration and others having a profound impact on developing countries, yet often working at cross-purposes. According to its website:

“The EU seeks to take into account development cooperation objectives in non-development policies. The EU recognizes that some of its policies can have a significant impact outside of the EU and that either contributes to or undermines its development policy. The EU therefore seeks to minimise contradictions and to build synergies between policies other than development cooperation that have an impact on developing countries, for the benefit of overseas development .”34

9.2 The policy framework that serves as a reference for this report was set in 2005, as part of the package of measures adopted to accelerate progress towards the Millennium Development Goals35 — in particular Commission Communication 8137/05: “Policy

34 See http://ec.europa.eu/europeaid/what/development-policies/policy-coherence/ for further discussion of PCD.

35 The Millennium Development Goals (MDGs) are eight goals to be achieved by 2015 that respond to the world’s main development challenges. The MDGs are drawn from the actions and targets contained in the Millennium Declaration that was adopted by 189 nations and signed by 147 heads of state and governments during the UN


Coherence for Development: accelerating progress towards attaining the Millennium Development Goals” 36 — and the European Consensus on Development.37

9.3 The 2007, 2009 and 2011 PCD reports are discussed in our earlier Reports under reference.38

9.4 Most recently, in considering the 2011 Report, the Committee noted that one of the key outcomes envisaged in the then recent key Communication setting out a widespread “Agenda for Change” in EU development policy was “improved Policy Coherence for Development, including through new thematic programmes that build synergies between global interests and poverty eradication”. As such, there was no difference of view between the Commission and the then Minister (Mr Stephen O’Brien) on the need for continued improvement in this crucial area of development policy. We therefore asked that, when the Minister submitted the 2013 Report, he should revisit the issues he had identified in his Explanatory Memorandum and let the Committee know to what extent they had been successfully addressed over the next two years.

The 2013 Report on Policy Coherence for Development

9.5 This fourth biennial report covers the period 2011–13. Contributions were received from Member States, Commission services and the European External Action Service (EEAS). The report aims to feed into the debate on PCD and development “beyond aid,” but presents no new Commission initiatives or proposals. Rather, it records progress and developments on cross-cutting PCD issues and presents thematic issues organised around the five “global challenges” upon which the EU’s approach to PCD is centred: trade and finance; climate change; food security; migration; and security.

9.6 The report shows that, although the EU has made progress on PCD at both European and Member State level, there is still room for progress on impact assessments, evaluation, monitoring and reporting. The main challenge remains the issue of measuring: baselines, targets and PCD targeted research are necessary in order to translate commitments into concrete results.

9.7 In her Explanatory Memorandum of 26 November 2013, the Parliamentary Under-Secretary of State at the Department for International Development (Lynne Featherstone) notes what she describes as the many positive developments recorded over the last two years in efforts to address the five PCD challenges as follows:

Millennium Summit in September 2000. The eight MDGs break down into 21 quantifiable targets that are measured by 60 indicators: Goal 1: Eradicate extreme poverty and hunger; Goal 2: Achieve universal primary education; Goal 3: Promote gender equality and empower women; Goal 4: Reduce child mortality; Goal 5: Improve maternal health; Goal 6: Combat HIV/AIDS, malaria and other diseases; Goal 7: Ensure environmental sustainability; Goal 8: Develop a Global Partnership for Development.

See http://www.un.org/millenniumgoals/poverty.shtml for full information.

36 Which we considered on 12 October 2005, see headnote, and which was debated in European Standing Committee B ; The EU contribution to achieving the UN Millennium Development Goals on 3 November 2005.

37 Joint Statement of December 2005 by the Council, Member States meeting, the European Parliament and the European Commission — The European Consensus on Development — which is available at http://ec.europa.eu/europeaid/what/development-policies/european-consensus/index_en.htm.

38 See headnote.


“Trade and finance: the report notes that EU has concluded and continues to negotiate a series of bilateral free trade agreements and that the revised Generalised Scheme of Preferences focuses trade preferences on the developing countries most in need. The EU and Member States have considerably increased their Aid for Trade (i.e. aid that supports trade related needs) in recent years. In addition, the EU has issued policies on Corporate Social Responsibility (CSR) and Intellectual Property Rights (IPR), and formulated an action plan to strengthen the fight against tax fraud and tax evasion;

“Climate change: the report states that the EU is the largest contributor of climate finance (i.e. financing aimed at promoting climate change mitigation and adaptation) to developing countries and that the EU (including its newer Member States) has outperformed on its emission reduction target for the first commitment period under the Kyoto Protocol;

“Food security: the report states that the area of agriculture and food security is the area where EU work on PCD is the “most advanced,” citing the elaboration of reform proposals for the Common Agricultural Policy after 2013 as a positive example of taking into account development objectives and the views of development stakeholders. The report also states that the major reform to the Common Fisheries Policy agreed in 2013, and the series of bilateral Fisheries Partnership Agreements being negotiated by the Commission, will promote sustainable fishing practices and good governance in developing country waters;

“Migration: the report admits that progress in the area of migration remains uneven. The EU has made significant efforts to promote PCD in policy dialogues on migration with non-EU countries, but Member States’ understanding of migration and development issues tend to vary significantly and, as a result, approaches to PCD on migration differ widely;

“Security: the report states that progress has been made in recent years to address fragility in EU development cooperation. It notes, for example, that the EU is a key stakeholder in the New Deal for Engagement in Fragile States and that progress has been made in promoting coherence between development and security in Common Security and Defence Policy missions, including in the Horn of Africa.”

9.8 The Minister recalls that the most recent Council Conclusions on PCD (adopted in May 2012):39

“reaffirmed the EU’s political commitment to the promotion of PCD and expressed the belief that PCD is essential for the EU’s credibility as a global actor and that the EU should take a lead role. It also highlighted the role of the EEAS and EU Delegations in keeping PCD issues on the agenda in regular dialogue with partner countries. In addition, the Council called on the Commission to lead work on a more evidence-based approach informed by independent assessments and on improving coordination mechanisms and implementation within the EU institutions and with Member States.”

39 Available at http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/EN/foraff/130225.pdf.


9.9 The Minister also notes that a growing number of Member States have introduced legal commitments to PCD in their domestic legislation.

“Eight reported that they have a law or a government decree obliging governments and public administrations to pursue the objective of PCD. In March 2013, Belgium adopted a new Law on Development Cooperation that identifies PCD as one of six overarching objectives. Luxembourg and Denmark have also recently adopted similar PCD commitments.

“PCD awareness and implementation has progressed significantly in Member States in the past two years. PCD has not only remained a political priority but has had heightened political interest, in part due to its relevance in the discussions on the post 2015 development agenda. With growing importance in international debate, the increase in national reporting exercises, the emergence or extension of international “development-friendliness” indexes and pressure from civil society, the attention given to PCD has been growing.”


9.10 The Minister welcomes the EU institutions’ and other Member States’ efforts to improve the coherence of EU policies that affect developing countries. She describes PCD as central to the move away from concentrating on aid alone as a means to address poverty reduction, towards focusing on enablers of development such as trade or investment policy. The report, she says, provides a comprehensive record of the progress that has been made in promoting and achieving policy coherence at both the EU and Member State levels, which she regards as an important tool for monitoring progress on PCD across the EU and a useful summary of best practices implemented by the EU institutions and Member States.

9.11 The Minister then comments as follows:

“The context for UK development cooperation has changed considerably in the past decade. Stronger leadership in developing countries, a growing awareness of the importance of engaging in fragile states, and increased emphasis on results and the need to be accountable to the UK public are just some of the trends which have transformed the way DFID carries out its business. One important component of these changes is a move within the development community away from concentrating on aid alone to address poverty reduction, towards focusing on policies – for example trade and investment policy – that are real enablers of development. In some circles, this is known as the “beyond aid” agenda; in others, the “policy coherence” agenda. In the UK, we have described it as “getting our own house in order” to help deliver development.

“The UK is committed to ensuring our domestic policies have a positive impact abroad – to complement our aid efforts. The UK’s Presidency of the G8 this year focused on “getting our own houses in order” with regard to issues around tax, trade and transparency, in order to promote growth. DFID worked closely with other government departments to ensure that the policies and commitments agreed in the Summit declaration and Communiqué recognised the implications for developing


countries and made the most of the potential benefits. The result was a package of principles and commitments made by the G8 at Lough Erne that will help developing countries to raise revenues from trade, taxes and natural resources, so that they can fund their own development.

“In addition, the Global Partnership for Effective Development Cooperation,40 which the UK co-chairs with Nigeria and Indonesia, will help countries take action to improve the impact of their policies and aid on development, now and beyond 2015. The UK will continue to promote the relevant recommendations in the High Level Panel Report on the Post 2015 Development Agenda, including illustrative Goal 12, to create a global enabling environment that encourages substantial new flows for development, better integrates resources by engaging the talents of new partners from civil society and the private sector and uses new approaches.

9.12 The Minister then looks at the issues highlighted by her predecessor in his Explanatory Memorandum concerning the 2011 EU PCD report (c.f. paragraph 9.4 above):

“We welcome the efforts that have been made in this year’s report towards providing evidence of how PCD implementation can demonstrate development results, especially the inclusion of independent assessments on PCD (e.g. the findings and recommendations of peer reviews conducted by the Organisation for Economic Cooperation and Development (OECD)) and Member States’ efforts to measure the impact of PCD. Nonetheless, the report correctly recognises that the main challenge for EU progress on PCD remains the issue of measuring and the lack of PCD-targeted research. A good evidence base is fundamental for the credibility of PCD. As positive steps in this direction, the Commission has launched thematic case studies on biofuels, trade and migration, and is working closely with civil society organisations, the OECD and research institutions.

“Progress has been made in the last two years on internal coordination between EU institutions. For example, the EEAS, in consultation with Commission services, is leading on the drafting of a Communication on a “Comprehensive Approach” to EU external action (i.e. integrating elements of military action, diplomacy, development cooperation and humanitarian aid), which is due to be published this year. In addition, the nexus between security and development has been discussed recently in the Council working group on development and will feature on the agenda at the December European Council. Progress has also been made on EU policy on resilience (i.e. combining short-term humanitarian responses with longer-term development work aimed at building up a country’s, and its population’s, resilience to shocks): the Commission’s Communication was discussed at the October 2012 Foreign Affairs Council, and Council Conclusions were agreed by the May 2013 Foreign Affairs Council.

40 The Global Partnership helps nations, business and organisations work better together to end poverty. It brings

governments, private companies, civil society and others together to ensure funding, time and knowledge produce maximum impact for development. The Global Partnership is led by three co-chairs: Armida Alisjahbana, Minister for National Development Planning, Indonesia; Justine Greening, Secretary of State for International Development, United Kingdom; and Ngozi Okonjo-Iweala, Minister of Finance, Nigeria.

See http://www.undp.org/content/seoul_policy_center/en/home/presscenter/articles/2012/03/26/busan- partnership-for-effective-development-cooperation/ for full information.


“The UK and other Member States have also pushed for greater coordination in the EU’s work on the post 2015 development agenda (i.e. the successor to the Millennium Development Goals). The Commission Communication “A decent life for all: Ending poverty and giving the world a sustainable future” (adopted in February 2013) represents a joint effort by the Commission Directorates-General for development (DG DEVCO–EuropeAid) and environment (DG ENV). Meanwhile, a joint Council working group, composed of members of the working groups on development, the United Nations and environment, has been set up to ensure that Council discussions on post 2015 are adequately joined up.

“We have a regular dialogue with EU officials on proposals for supporting climate and sustainable energy in the 2014–2020 MFF, including on specific programmes and on how the Commission expects to mainstream climate and energy throughout its external development programming. There is on-going high level engagement between DFID and Commission policy officials on supporting sustainable energy access.

“The Commission adopted its Communication on “Maximising the Development Impact of Migration: The EU contribution for the UN High-level Dialogue and next steps towards broadening the development-migration nexus” in July 2013. In the working level negotiations on the related Council Conclusions, the UK successfully pushed for inclusion of a commitment to integrate migration aspects into development policies “where relevant to achieving development outcomes and consistent with aid effectiveness commitments.” Those Conclusions set out the EU’s position at the UN High-level Dialogue on Migration and Development, held on 3–4 October 2013.

“There has been further progress in joining up work on trade, agriculture and development. In addition to the developments outlined in paragraph 3, the EU adopted amendments to the Accounting and Transparency Directives promoting transparency in the extractive and forestry industries and has established an Export Help Desk providing information on EU import markets to assist developing country exporters. In response to the Commission’s issuing of a Communication on “A renewed EU strategy 2011–14 for Corporate Social Responsibility” in October 2011, and other international initiatives, the Government is presently developing a Framework for Action on Corporate Responsibility (FACR), which is due to be launched in December. In June 2013, the EU agreed to abolish the production quotas that limit domestically produced sugar. The UK supports this further step in reforming the CAP as it will push the price of sugar down for consumers. However, the fall in price may adversely affect developing country sugar cane exporters. This is why we are working to ensure that the Adaptation Measures Sugar Programme (AMSP), which provides EU funding to Africa, Caribbean and Pacific (ACP) sugar exporters, is delivering effective support to help the ACP countries adapt to EU reforms and increase the competitiveness of their sugar sectors. It is particularly important that the AMSP has an impact by 2017, when the sugar reforms will take effect. ACP sugar producers, as well as sugar producers from the non-ACP Least Developed Countries, still retain their preferential Duty Free Quota Free access to the EU market.”


9.13 Finally, the Minister says that she understands that the Presidency is seeking agreement on Council Conclusions to be adopted at the upcoming Foreign Affairs Council (Development) on 12 December.

Conclusion

9.14 As the Minister says, “a good evidence base is fundamental for the credibility of PCD”: whereas, still, “the main challenge for EU progress on PCD remains the issue of measuring and the lack of PCD-targeted research”.

9.15 We should therefore be grateful if, in two years time, when submitting the next PCD report, she would summarise what the 2013 “development” Council Conclusions have to say on this Report, assess the extent to which the Commission and EEAS have done what they have been asked to do, and pay particular attention to the progress made on the key issues of measuring and PCD-targeted research.

9.16 In the meantime, we now clear this Commission Staff Working Document.

10 Emissions reductions from passenger cars

(34123) 12733/12 + ADDs 1–3 COM(12) 393

Draft Regulation amending Regulation (EC) No. 443/2009 to define the modalities for reaching the 2020 target to reduce carbon dioxide emissions from new passenger cars

Legal base Article 192(1) TFEU; co-decision; QMV Department Transport Basis of consideration Minister’s letter of 3 December 2013 Previous Committee Reports HC 86-xii (2012–13), chapter 7 (12 September 2012)

and HC 83-xvi (2013–14), chapter 6 (9 October 2013)Discussion in Council See para 10.12 below Committee’s assessment Politically important Committee’s decision Cleared

Background

10.1 Because of the large (and increasing) contribution which carbon dioxide from vehicles makes to overall emissions of greenhouse gases, the EU has taken a number of measures to address this. In particular, Regulation (EC) No. 443/2009 specifies that the average specific emissions for the EU fleet of new passenger cars41 should comply fully

41 Category M1, as defined in Annex II of Directive 2007/46/EC, with a mass not exceeding 2,610kg.


with a target of 130g/km from 2015, and 95g/km as from 2020 (with certain additional measures producing a further reduction of 10g/km). It also:

• sets individual targets for manufacturers enabling them to apply these to the average of the emissions for all new cars they register in the EU in each calendar year;

• applies an “eco-innovation” credit up to 7g/km for new emission-saving technologies, and allows super-credits where vehicles emitting less than 50g/km may be counted as multiples of their actual sales;

• allows different manufacturers to form, for a period up to five years, a pool, which would be treated as if it was one manufacturer;

• requires a manufacturer which fails to meet its target to pay an excess emissions premium; and

• allows certain derogations for smaller, independent manufacturers and niche manufacturers.

10.2 The Regulation required the Commission to review the position by 1 January 2013, and it duly put forward in July 2012 the current document, which confirms that the long-term target for 2020 of 95g/km is considered to be feasible and achievable at a lower cost to the industry than previously thought. In addition, it proposed to retain the current approach enabling manufacturers to have their own specific fleet-based targets; to retain the current 7g/km credit for “eco-innovation”; to maintain the current excess emissions premiums for manufacturers exceeding their target; to retain the current derogations for independent small volume manufacturers.

10.3 The proposal would, however, introduce a de minimis approach for very small manufacturers registering fewer than 500 vehicles in the EU per year, who would be excluded from the obligation to agree and then meet their own specific emissions targets; Regulation (EC) No. 443/2009 would be amended to require manufacturers of between 10,000 and 300,000 cars a year to reduce carbon dioxide emissions in 2020 by 45% from a 2007 baseline; and vehicles with emissions below 35g/km would have to apply super-credits for the period of 2020–23, with a multiplier of 1.3, subject to a cumulative limit of 20,000 vehicles per manufacturer over that period.

10.4 Our Report of 12 September 2012 noted that the Government agreed that an EU target provided a greater likelihood of the industry meeting reduction requirements, although it believed that the current target remained a significant challenge. On the other hand, it said that the extension of the derogations for small volume and niche manufacturers met important principles of Better Regulation, and that these, together with the proposed ‘de minimis’ exclusion, would reduce significantly the administrative burdens, without compromising the environmental benefits. It added that the proposed continuation of the ‘eco-innovation’ flexibility could be expected to provide an incentive for manufacturers to maintain their development and deployment; that it planned a targeted consultation as part of its wider and ongoing engagement with stakeholders on reducing carbon dioxide emissions from road vehicles; and that consideration was being


given to the effect of these amendments on an Impact Assessment produced in 2009 to support the original Regulation.

10.5 We commented that, although the proposal dealt with an area of some economic and environmental importance, it largely confirmed the general thrust of the measures contained in Regulation (EC) No. 443/2009. Consequently, whilst we were drawing it to the attention of the House, we thought it unlikely, on the information available to us, that we would regard it as requiring further consideration. However, as the Government was carrying out a consultation, and considering the extent to which the proposal might affect the Impact Assessment which had been produced in 2009, we decided to hold the document under scrutiny, pending further information.

Subsequent developments

10.6 We subsequently received a letter confirming that the figures in the original impact assessment remained unaffected by this latest proposal, but, as the Government had said that the position of small volume and niche manufacturers needed to be protected, and that there had so far been little discussion of these in Brussels, we felt that it would be prudent to await further developments.

10.7 We next received a letter of 8 October 2013 from the Parliamentary Under- Secretary of State at the Department for Transport (Mr Robert Goodwill) providing a progress report on the two proposals. As we noted in our Report of 9 October 2013, this said that, following three trilogue meetings, a proposed first reading deal had been struck, which was hugely positive for UK in delivering against each of its objectives (where the main priority had been to ensure the retention of the niche and small volume derogations, which are of strategic importance to key UK companies and help to ensure their competitiveness against their much larger European rivals). Thus, the proposed deal saw both derogations continue with a new de minimis threshold which would exclude the very smallest manufacturers from the burden of setting annual carbon dioxide reduction targets, and the negotiation had seen the proposed ceiling threshold limit raised from 500 to 1000 vehicles per annum, which is likely to save up to seven UK SME’s over £20,000 each in administrative burdens out to 2020.

10.8 However, the Minister added that, when the trilogue package was presented to COREPER on 4 October, a Member State had expressed some concerns, and had gained sufficient support to suggest there would be a blocking minority. It then tabled a counter proposal which would increase flexibility by phasing in compliance with the 95g/km target. The Minister said that the Lithuanian Presidency intended to put the matter to the Environment Council on 14 October, and, as discussions were continuing, it was not clear whether formal agreement would be sought then. However, it seemed unlikely such an agreement would be possible, and indeed he considered that it would not be appropriate for this to be sought until more work had been done to reconcile matters on the dossier.

10.9 We said that we were grateful for this update, but that, in view of the continuing discussion within the Council, we proposed to continue to hold the document under scrutiny.


Minister’s letter of 3 December 2013

10.10 We have now received a letter of 3 December 2013 from the Minister of State at the Department for Transport (Baroness Kramer), confirming that there was no agreement at the October Environment Council, and that the Lithuanian Presidency had therefore reopened negotiations with the European Parliament, with the aim of securing a compromise which would generate greater consensus, while still achieving the objectives of the earlier proposed deal.

10.11 The Minister says that these further discussions were completed on 26 November, and that it is now proposed that a new first reading deal should introduce a one year phase-in for manufacturers meeting the 95g target in 2020, requiring 95% compliance by 2020 and 100% by 2021. In addition, there would be additional flexibility on super-credits changing the annual cap of 2.5g into a 7.5g cap on their use over the period 2020–22, meaning that a manufacturer could use all of its flexibility in a single year, provided it had earned it by supplying the market with sufficient numbers of very low emission vehicles. She adds that the package remains hugely positive for the UK when assessed against its negotiating priorities, and still delivers all of its objectives, including the key priority of retaining the derogations for niche and small volume manufacturers, to whom the phase-in will apply equally. The new de minimis threshold for small volume manufacturers reported in the letter of 8 October 2013 is also retained.

10.12 The Minister comments that the phase-in represents a significant concession from the European Parliament, reflecting the importance of securing a first reading deal, which she says will deliver regulatory certainty and ensure that carbon dioxide emissions will continue their long-term downward trend. She also points out that, whilst there may be some reduction in absolute emissions savings during 2020 and 2021, the UK has to date over-achieved in this area, and that the impacts from some of the alternative proposals put forward during negotiations could have been much worse. She also expects the deal now proposed to be acceptable to all Member States, and says that it would then need to be formally agreed at a Council following its consideration by the European Parliament Plenary, currently scheduled for January 2014.

Conclusion

10.13 We are grateful to the Minister for this further update, and, in the light of what she has said, we are now content to clear the document.


11 Further amendments to EU restrictive measures against the Syrian regime

(a) (35603) 16911/13 + ADD1 — (b) (35604) JOIN(13) 28 —

Council Decision amending Council Decision 2013/255/CFSP concerning restrictive measures against Syria Council Regulation amending Regulation (EU) No. 36/2012 concerning restrictive measures in view of the situation in Syria

Legal base (a) Article 29 TEU; unanimity

(b) Article 215 TFEU; QMV Document originated (a) —; (b) 28 November 2013 Deposited in Parliament (a) and (b) 3 December 2013 Department Foreign and Commonwealth Office Basis of consideration EM of 4 December 2013 Previous Committee Report None; but see (35122) 10759/13: HC 83-xiii (2013–

14), chapter 45 (4 September 2013) Discussion in Council 16 December Foreign Affairs Council Committee’s assessment Politically important Committee’s decision Cleared

Background

11.1 The full range of EU restrictive measures in Council Decision 2013/255/CFSP is summed up thus:

• embargo on certain goods which might be used for the manufacture and maintenance of products which could be used for internal repression;

• ban on provision of certain related services;

• control of export of certain other goods which might be used for the manufacture and maintenance of equipment which might be used for internal repression;

• control of provision of certain services;

• import ban on arms and related materiel;

• ban on provision of certain related services;

• embargo on telecommunications monitoring and interception equipment;


• ban on provision of certain services (related to such equipment);

• import ban on crude oil and petroleum products;

• ban on provision of certain services (related to crude oil and petroleum products);

• embargo on key equipment and technology for the oil and natural gas industries;

• ban on provision of certain services (to the oil and natural gas industries);

• ban on provision of new Syrian banknotes and coins;

• ban on trade in gold, precious metals and diamonds with the Government of Syria;

• embargo on luxury goods;

• ban on certain investment (in the oil and natural gas industries, in construction of power plants for electricity production);

• prohibition to participate in the construction of new power plants for electricity production;

• restraint on commitments for public and private financial support for trade with Syria and ban on new long term commitments of Member States;

• ban on new commitments for grants, financial assistance and concessional loans to the Government of Syria;

• prohibition for the European Investment Bank to make certain payments;

• restrictions on issuance of and trade in certain bonds;

• restrictions on establishment of branches and subsidiaries of and cooperation with Syrian banks;

• restrictions on provision of insurance and re-insurance;

• restrictions on access to airports in the EU for certain flights inspection of certain cargoes to Syria and prior information requirement on cargoes to Syria;

• restrictions on admission of certain persons;

• freezing of funds and economic resources of certain persons, entities and bodies; and

• prohibition to satisfy claims made by certain persons, entities or bodies.42

11.2 Scrutiny by the Committee of the adoption of and subsequent amendments to this Council Decision and Council Regulation (EU) No. 36/2012 is set out in our previous Reports.43

42 For full information, see http://www.eeas.europa.eu/cfsp/sanctions/docs/measures_en.pdf and http://eur-

lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:147:0014:0045:EN:PDF.


The Draft Council Decision and Regulation

11.3 In his Explanatory Memorandum of 4 December 2013, the Minister for Europe (Mr David Lidington) explains that the Draft Council Decision and Regulation seek to:

— apply restrictions to trade in Syrian cultural property goods which have been illegally removed from Syria since 11 May 2011 to protect Syria’s cultural heritage;

— amend the exemption for the release of frozen assets for humanitarian purposes in order to facilitate the delivery of humanitarian assistance to Syria while avoiding the risk of misuse of released funds or economic resources;

— add an exemption allowing the processing of payments by or through the Commercial Bank of Syria to ensure that current legitimate humanitarian trade with Syria is not affected by the aforementioned humanitarian amendment; and

— introduce an exemption to allow Member States to provide support to the activities undertaken by the Organization for the Prohibition of Chemical Weapons (OPCW) for the elimination of chemical weapons in the Syria.

11.4 With regard to the OPCW element, Article 1 of the Council Decision currently prohibits the sale, supply or export of certain equipment that might be used for internal repression or for the manufacture and maintenance of products which could be used for internal repression, and also prohibits Member States from providing technical assistance, brokering services or other services related to these items. The exemption to this Article would permit Member States now to provide support to the activities undertaken by the OPCW for the elimination of chemical weapons in Syria that would otherwise be prohibited, as long as it is in accordance with paragraph 10 of UN Security Council Resolution 2118 (2013) and the relevant decisions of the Executive Council of the OPCW, consistent with the objective of the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on their Destruction. The list of equipment, goods or technology that can be authorised for sale, supply, transfer or export, if for this purpose, is listed in Annex IA of the Syria Council Regulation. Without this amendment EU Member States would be unable to assist the OPCW in the destruction of Syria’s chemical weapons i.e. to assist in successfully removing, extracting and destroying chemical weapons in Syria.

11.5 The Council Decision and Council Regulation are due to be adopted by 16 December 2013.


11.6 The Minister says that there are concerns that Syria’s cultural heritage is being plundered for private profit, and that a proportion of these goods are being imported into Europe, or traded in Europe.

11.7 The Minister continues as follows:

43 See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:2012R0036:20130423:EN:HTML for the text of

Council Regulation (EU) No. 36/2012 and links to subsequent amendments.


“It is important that Syria is able to retain its cultural heritage, not least because income from the tourism industry will play a large part in the reconstruction of Syria’s damaged infrastructure. This amendment seeks to make clear that involvement in trade relating to artefacts illegally removed from Syria is prohibited, and thereby help safeguard Syria’s cultural heritage for the future.”

“The brutal Assad regime has subjected its own people to incendiary bombs, SCUD missiles and chemical weapons. 100,000 Syrians have died. At the same time, the regime prevents aid from getting to some of the 9.3 million Syrians who desperately need it. Regime figures and financiers have their European assets frozen under the Syria sanctions, but an exemption exists for ‘humanitarian purposes’. The Syrian regime and its financial backers are misusing this exemption for their own profit, and so that they can effectively boost their cash reserves, enabling them to spend more money waging war against their own people.

“This amendment will ensure money unfrozen for humanitarian purposes goes direct to the UN’s Syria appeal, so that it can be distributed impartially to those who most need it, and so that the regime and its financial backers do not enjoy any financial benefit.”

Conclusion

11.8 Although no questions arise, we are drawing these measures to the attention of the House because of the widespread interest in the crisis in Syria.

11.9 We now clear the Council Decision and Council Regulation.


12 EU General Budgets

(a) (35232) 12769/13 COM(13) 557 (b) (35259) 12770/13 COM(13) 559 (c) (35319) 13822/13 COM(13) 644 (d) (35320) 13824/13 COM(13) 647

Draft Amending Budget No. 7 to the General Budget 2013 — General statement of revenue — Statement of expenditure by section: Section III — Commission Draft Decision on the Mobilisation of the Flexibility Instrument Amending letter No. 1 to the draft general budget 2014: Statement of expenditure by Section —Section III — Commission Draft Decision on the Mobilisation of the Flexibility Instrument

Legal base Article 314 TFEU and 106a, EURATOM Treaty; co-

decision; QMV Document originated (d) 18 September 2013 Date deposited (d) 25 September 2013 Department HM Treasury Basis of consideration Minister’s letter of 4 December 2013 Previous Committee Reports (a)–(b) HC 83-xxi (2013–14), chapter 11 (20

November 2013, HC 83-xvii (2013–14), chapter 7 (16 October 2013) and HC 83-xiii (2013–14), chapter 20 (4 September 2013) (c) HC 83-xxi (2013–14), chapter 11 (20 November 2013 and HC 83-xviii (2013–14), chapter 18 (23 October 2013) (d) None

Discussion in Council (a)–(b) 7 October 2013 (c)–(d) 19 November 2013

Committee’s assessment Politically important Committee’s decision Cleared

Background

12.1 The Draft Budget (DB) 2014 set out the Commission’s proposals for EU expenditure in 2014. It was the basis for negotiations between the two arms of the Budgetary Authority


(the Council and the European Parliament), which concluded the EU General Budget for 2014 last month.

12.2 During negotiation of the annual DB the Commission may present amendments to its original proposal in Amending Letters.

12.3 During the course of a financial year the Commission presents to the Budgetary Authority Draft Amending Budgets (DABs) proposing increases or reductions for revenue and expenditure in the current EU General Budget — there are normally about ten DABs each year.

12.4 The Interinstitutional Agreement of 17 May 2006 on EU budgetary and financial management allows mobilisation of a Flexibility Instrument to meet financing of clearly identified expenditure which could not be financed within the limits of the ceilings available for one or more Headings of the Multiannual Financial Framework (MFF).

12.5 DAB No. 7/2013, document (a), concerned an increase of €150 million (£125 million) in commitment appropriations in Heading 1b of the current MFF. The Commission proposed that the increase in commitment appropriations for 2013 would be covered by the margin under the ceiling of Heading 1b, that is €16 million (£13 million), and by mobilisation of the Flexibility Instrument for €134 million (£112 million), as proposed with the draft Decision, document (b).

12.6 Amending Letter No. 1, document (c), proposed small revisions to the Commission’s original 2014 DB. The Amending Letter also included additional assistance to Cyprus through €100 million (£84.62 million) of Structural Funds commitment appropriations in 2014. This would be covered by mobilisation of the Flexibility Instrument for €100 million, as proposed with the draft Decision, document (d).

12.7 When, in November, we last considered DAB No. 7/2013 and the associated Flexibility Instrument, documents (a) and (b), we were unclear as to the implications of the Government’s statement that the criterion for use of the Flexibility Instrument “was felt to be satisfied on this proposal”. We asked for clarification as to whether this meant that it was the Government that felt the criterion to be satisfied and, if so, whether the Government voted for the proposal. Until we were clear on these points the documents would remain under scrutiny.44

The Minister’s letter 4 December 2013

12.8 The Economic Secretary to the Treasury (Nicky Morgan) responds to our questions on DAB No. 7/2013 and the associated Flexibility Instrument, saying that she can confirm that the Government felt that this proposal for a one-off increase in commitment appropriations to tackle youth unemployment, poverty and social exclusion satisfied the criterion for use of the Flexibility Instrument. She says that the Government abstained on the measures on the grounds of parliamentary scrutiny.

44 See headnote.


12.9 The Minister takes this opportunity to clarify also that the additional assistance to Cyprus through €100 million of Structural Fund commitment appropriations presented in Amending Letter No. 1, document (c), was to be covered by the associated draft Decision on mobilisation of the Flexibility Instrument, document (d), as agreed in the settlement on the 2014 EU General Budget, which was adopted at the General Affairs Council on 19 November and on which the UK voted against.

Conclusion

12.10 We thank the Minister for these further clarifications and, having no further questions, now clear the documents.

13 Firearms and the internal security of the EU

(35448) 15369/13 COM(13) 716

Commission Communication: Firearms and the internal security of the EU: protecting citizens and disrupting illegal trafficking

Legal base — Document originated 21 October 2013 Deposited in Parliament 30 October 2013 Department Home Office Basis of consideration EM of 14 November 2013 Previous Committee Report None Discussion in Council No date set Committee’s assessment Politically important Committee’s decision Cleared

Background

13.1 The UN Firearms Protocol is one of three Protocols to the United Nations Convention against Transnational Organised Crime. It entered into force in July 2005 and seeks to promote cooperation in preventing, combating and eradicating the illicit manufacture of, and trafficking in, firearms, their component parts and ammunition. We have recently considered a draft Council Decision authorising the EU to ratify those parts of the Firearms Protocol that are within EU competence.45 The Firearms Protocol and the recently adopted United Nations Arms Trade Treaty establish an international framework for controlling the transfer of, and trade in, firearms and weaponry.

45 See (34793) 7933/13: HC 86-xxxix (2012–13), chapter 10 (24 April 2013).


13.2 The EU already has in place minimum harmonised rules on the acquisition, possession and movement of firearms for lawful civilian uses which were adopted in 1991, in anticipation of the lifting of internal border controls on 1 January 1993.46 The so-called Firearms Directive is intended to ensure public safety within the EU internal market and was amended in 2008 to bring it into line with the requirements of the Firearms Protocol by, for example, strengthening the rules on record keeping, the marking and registration of weapons (to improve traceability), and including provision for regulating the activities of brokers.47 A further Directive, adopted in 2009, establishes harmonised rules and procedures for the transfer between Member States of defence-related products (including firearms and ammunition), whilst a 2012 Regulation harmonises procedures for authorising the export of non-military firearms to third (non-EU) countries in line with the Firearms Protocol.48 Other EU measures include Common Positions (replacing an earlier Code of Conduct) on the control of exports of military technology and equipment and on the control of arms brokering, as well as a Strategy agreed in 2005 to combat the illicit accumulation and trafficking of small arms, light weapons and their ammunition. Action to disrupt illicit manufacturing and trafficking in firearms is one of the EU’s law enforcement priorities for tackling serious international and organised crime for the period 2014–17.

13.3 Through these measures, the Commission suggests, the EU has sought:

“a balanced approach to regulating the lawful circulation of civilian (i.e. non-military) firearms in the internal market, to disrupting the illicit circulation and use of civilian firearms, and to [developing] standards on the transfer and brokering of conventional military arms.”49

The Commission Communication

13.4 The Commission estimates that there are approximately 80 million legally-held civilian firearms in the EU. Whilst recognising that these firearms have legitimate civilian uses, the Commission also highlights the devastating impact for citizens and communities if they fall into the wrong hands. It notes the involvement of organised crime in the illegal production, importation and sale of firearms, as well as their use by “terrorists and extremists” to instil fear and carry out mass killings. Since the mid-1990s, powerful military grade weapons have been trafficked to the EU from areas of conflict in the EU’s neighbourhood, and there is a growing online trade in firearms and their components, as well as concerns that non-lethal weapons (such as air guns or alarm guns) are being illegally converted into lethal weaponry.

13.5 The purpose of the Communication is to propose “an integrated policy” to address, by means of legislation, operational action, training and EU funding, the manifold security risks associated with the misuse of all types of firearms, civilian or military, whether obtained legally or illicitly. It responds to calls from the European Parliament for more

46 Council Directive 91/477/EEC, OJ No. L 256, 13.09.91, p.51.

47 See Directive 2008/51/EC, OJ No. L 179, 08.07.08.

48 See Regulation 258/2012, OJ No. L 94, 30.03.12.

49 See p.7 of the Communication.


action to “identify and to address vulnerabilities in the lifecycle of firearms, to safeguard lawful production, sale and possession of firearms, to disrupt criminal supply chains and to deter illicit use”.50

13.6 The Communication identifies four priority areas of activity, each accompanied by a set of tasks to be undertaken between 2014 and 2017. These are listed in Annex 1 at the end of this chapter and include:

• Safeguarding the licit market for civilian firearms by:

o clarifying which firearms are banned and which require a licence;

o establishing an EU standard on the marking of firearms, components and ammunition; and

o simplifying the rules for firearms licensing and considering the need for compulsory registration and screening of brokers.

• Reducing the diversion of firearms into criminal hands by:

o updating controls on the sale and illegal manufacture or diversion of firearms, with a particular focus on arms fairs and online sales;

o preventing theft and loss of legally-held firearms;

o reducing the threat of diversion from third (non-EU) countries; and

o promoting destruction rather than deactivation as the preferred means of disposal of surplus firearms.

• Increasing pressure on criminal markets by:

o updating guidance to law enforcement officers;

o strengthening cross-border cooperation to prevent illegal possession and circulation of firearms;

o building cooperation to trace firearms used by criminals; and

o strengthening deterrence by ensuring greater consistency amongst Member States in the definition of criminal offences associated with the misuse of firearms and in the level of criminal sanctions.

• Building a better intelligence picture by:

o gathering more accurate and comprehensive data on firearms-related crime; and

o better targeting of law enforcement training.

50 See p.7 of the Communication.


13.7 The Commission says that it will only put forward new and proportionate legislative proposals if they are necessary, after carrying out further, thorough analysis of the problems identified in the Communication and the underlying causes, and consulting stakeholders. The timing of any new legislative action will be determined by a report to be produced by the Commission by July 2015 on the application of the existing Firearms Directive.51


13.8 The Minister for Crime Prevention (Norman Baker) says that the UK has comprehensive firearms controls as well as “some of the toughest gun laws in the world”.52 He expresses the Government’s full support for the general objectives of the Communication, which seek to protect citizens and disrupt illegal trafficking in firearms, and notes that the Government’s recent Serious and Organised Crime Strategy (published in October 2013) highlights the threat presented by illegal firearms and the need to do more to develop effective counter measures and capabilities. He particularly welcomes discussions on strengthening cooperation, improving intelligence sharing, and increasing pressure on criminal markets.

13.9 Turning to the justification for further action at EU level, the Minister continues:

“Overall the objective of protecting citizens and disrupting illegal trafficking is, by reason of the international nature of the problem, better addressed at the Union level. Therefore, we are satisfied that this is a proper area of Europe-wide discussion, and that proposals for collaborative working between Member States complies (sic) with the principle of subsidiarity.”53

13.10 He adds that any legislative proposals brought forward by the Commission in 2015 will require separate analysis to determine whether they are compliant with the subsidiarity principle.

Conclusion

13.11 Protecting citizens against the misuse of firearms and establishing better controls on illegal trafficking are clearly of paramount importance. We think it a leap of faith to conclude, as the Minister suggests, that these general objectives, “by reason of the international nature of the problem”, can be better addressed at EU level. We note that some of the ideas put forward in the Communication — for example, the introduction of mandatory health checks to supplement existing criminal record checks — may prove to be contentious. We are therefore pleased to note that no new legislation will be proposed until the Commission has undertaken a further, thorough analysis and produced an accompanying impact assessment. Once it has done so, we expect the Government to provide a far more detailed assessment of the legal and policy

51 See Article 1(12) of Directive 2008/51/EC amending Council Directive 91/477/EEC on the acquisition and possession of

weapons.

52 See para 16 of the Minister’s Explanatory Memorandum.



implications of, and justification for, further EU action. Meanwhile, we are content to clear the Communication from scrutiny while drawing it to the attention of the House.

ANNEX: Priorities and tasks

Priority Task Lead (in collaboration with)

Timing

1. Safeguarding the licit market for civilian firearms

1. Clarifying which firearms are banned and which require a licence

COM (EFE, Firearms industry)

2015

2. Establishing an EU standard on marking

COM (Firearms industry, CIP, European Standardisation Organisation)

2015

3. Simplifying the rules for firearms licensing

COM (Member States, industry, owners)

2015

2. Licit to illicit: reducing diversion of firearms into criminal hands

1. Updating controls on sale and illegal manufacture of firearms

COM (Member States, Europol, European Defence Agency)

2015

2. Preventing theft and loss COM (Members States, CIP, Firearms industry)

2015

3. Leveraging external action and the enlargement process to reduce the threat of diversion from third countries

EEAS (COM, UN) 2013–15

4. Promoting destruction as the preferred means of disposal of surplus firearms

COM and EEAS (European Defence Agency)

2013–15

3. Increasing pressure on criminal markets

1. Guidance to law enforcement officers

COM (Member States, Europol)

2014–15

2. Cross-border cooperation to stop illegal possession and circulation of firearms

COM, EEAS, Member States and Europol

2013–17

3. Building cooperation for tracing firearms used by criminals


2015

4. Strengthening deterrents against the abuse of firearms

COM 2015

4. Building a better intelligence picture

1. Gathering more accurate and comprehensive data on firearms-related crime in EU and globally


2014–17

2. Targeting law enforcement training where it is most needed

CEPOL (COM) 2014


14 Croatia’s accession to the EU/Switzerland Agreement on the Free Movement of Persons

(a) (35455) 14367/13 COM(13) 674 (b) (35460) 14368/13 COM(13) 673

Draft Council Decision on the signing of a Protocol to the Agreement between the European Community and its Member States, and the Swiss Confederation, on the free movement of persons, to take account of the accession of the Republic of Croatia to the European Union Draft Council Decision on the conclusion of a Protocol to the Agreement between the European Community and its Member States, and the Swiss Confederation, on the free movement of persons, to take account of the accession of the Republic of Croatia to the European Union

Legal base (a) Articles 217, 218(5) and 218(8) TFEU; unanimity

(b) Articles 217, 218(6)(a) and 218(8) TFEU; unanimity; EP consent

Department Home Office Basis of consideration Minister’s letter of 5 December 2013 Previous Committee Report HC 83-xxii (2013–14), chapter 9 (27 November 2013)Discussion in Council 13 December 2013 Committee’s assessment Legally important Committee’s decision Cleared

Background and previous scrutiny

14.1 In June 1999, the (then) European Community and its Member States signed an Agreement with Switzerland on the free movement of persons to enable EU and Swiss nationals to live and work in each others’ territories (“the Agreement”). The Agreement entered into force on 1 June 2002. Croatia acceded to the European Union on 1 July 2013. Under the terms of its Accession Treaty, Croatia undertakes to accede to agreements concluded by the EU and Member States with third countries. In September 2012, the Council authorised the Commission to open negotiations with Switzerland with a view to concluding a Protocol providing for Croatia’s accession to the Agreement. The Protocol resulting from these negotiations is annexed to the draft Council Decisions deposited for scrutiny. These Decisions authorise signature and conclusion of the Protocol on behalf of the EU and its Member States. Both cite Articles 217 and 218 TFEU on the signature and conclusion of international agreements as their substantive legal bases.

14.2 The Government raised no objection to the substance of the Protocol, which the Minister for Immigration (Mr Mark Harper) described as “a technical measure resulting


from Croatian accession, which has no impact on the UK”,54 but disputed the legal bases proposed by the Commission. The Government considers that Article 79(2)(b) TFEU on the rights of legally resident third country nationals is the correct legal base and that the UK’s Title V (justice and home affairs) opt-in applies.

14.3 The Government drew our attention to an earlier draft Council Decision amending the social security provisions of the same Agreement. In that case, the Commission proposed Article 48 TFEU (on social security coordination) as the substantive legal base. The Council agreed, overriding UK objections that Article 79(2)(b) TFEU should be cited instead and that the UK’s Title V (justice and home affairs) opt-in applied. The Government initiated proceedings to challenge the validity of the Decision in the Court of Justice. Pending the Court’s ruling on validity, and on the application of the UK’s opt-in to EU measures which do not cite a Title V legal base, the draft Decision remains under scrutiny. The Government considers that “similar principles are at stake” with regard to the draft Council Decisions providing for Croatia’s accession to the Agreement but added that, as the measures are intended to apply from 1 January 2014, it would have to decide whether or not to opt in by early December, several weeks short of the three-month opt-in period provided for in the UK’s Title V Opt-in Protocol.

14.4 We noted that the Government intended to “take an opt-in decision” on the strength of its conviction that Article 79(2)(b) TFEU is the correct legal base, even though it accepted that there was little prospect of securing a change to the legal base for the draft Council Decisions. We reiterated our position that the UK’s opt-in does not apply in the absence of a Title V legal base and suggested that there were two options open to the UK: to veto the draft Decisions if the Government was unable to persuade other Member States to amend the legal bases, or to abstain and challenge the validity of the Decisions post-adoption in the Court of Justice. We asked the Minister to clarify which course of action the Government intended to take and to explain the apparent contradiction in his Explanatory Memorandum which stated (in paragraph 18) that the Government would “need to consider whether to launch another ECJ challenge” and (in paragraph 23) that “there will be no legal challenge to the proposal from the UK.”

14.5 We also noted that two earlier Protocols extending the EU/Switzerland Agreement to central and eastern European countries acceding to the EU in 2004 and 2007 were based on Treaty provisions equivalent to those cited in the current draft Decisions,55 and asked the Minister to explain why he considered that a different legal base was justified for the latest Protocol on Croatian accession.


14.6 The Minister (Mr Mark Harper) informs us that the Government has decided to opt into the draft Council Decisions, adding:

“The proposal seeks to amend the Agreement to reflect the accession of the Republic of Croatia to the European Union on 1 July 2013. The amendment is a natural step


55 The relevant provisions are Articles 300(2) and (3) and 310 of the EC Treaty.


following accession and will extend the Agreement to apply to nationals of Croatia in Switzerland, and to nationals of Switzerland in Croatia. The proposed amendment will not extend a right of free movement in the UK to persons who do not already enjoy such a right. Therefore, the proposed amendment will have no impact on the UK.”

14.7 The Minister expects the draft Decisions to be adopted at the Environment Council on 13 December and indicates that the Government wishes to vote in favour. Turning to the application of the UK’s Title V opt-in and the possibility of a legal challenge by the UK if a Title V legal base is not included, he explains:

“I accept that your Committee takes a different view to the Government on the applicability of the opt-in where a Title V legal base has not been cited. On the issue of legal challenge, the point I sought to make in the EM [Explanatory Memorandum] is that the general principle of whether a Title V legal base should be cited in respect of proposals concerning the EU-Swiss Free Movement Agreement will be decided in the context of the ongoing case on the proposal to amend the social security annex to that Agreement, and that a ruling in that case will naturally read across to the current proposal in respect of Croatia. I regret that the EM was not as clear as it might have been on this point. However, given the Government has now decided to opt into these Council Decisions, I can confirm that we are content for the disagreement on the issue of legal base to be settled in the ongoing CJEU case, and that we will not be pursuing a separate challenge in the context of this proposal. We will, however, put our disagreement with the cited legal base in this case on the record by means of a minutes statement when the Council Decisions are adopted by the EU.”

14.8 Turning to the absence of a justice and home affairs legal base in earlier draft Decisions extending the Agreement to Member States acceding to the EU in 2004 and 2007, the Minister notes:

“The decisions on the earlier Protocols [...] were made by a previous Government. This Government takes a robust position in ensuring that the UK’s opt-in is asserted where appropriate. As set out in the EM of 18 November, it is the UK’s position that Article 79(2)(b) is the appropriate substantive legal base for the EU/Switzerland Agreement, and therefore also for any proposed amendment to the Agreement. Furthermore, it should be noted that the UK is currently arguing the case for an Article 79(2)(b) legal base for a proposal to amend the social security annex of the EU/Switzerland Agreement in a case at the CJEU, which, by definition, could not have been a factor when the earlier Protocols were considered by the previous administration. In view of the ongoing CJEU case, it is particularly important that the UK Government talks a consistent approach in this matter by asserting the opt-in on the decision.”

Conclusion

14.9 We thank the Minister for his letter informing us of the Government’s decision to opt into the draft Council Decisions. We note that the Government has not succeeded in securing the insertion of a Title V (justice and home affairs) legal base and does not intend to pursue a legal challenge but will rely, instead, on “a minutes statement” made


at the time the draft Decisions are adopted by the Council recording the UK’s dissatisfaction with the choice of legal base. In our view, this course of action exposes the weakness of the Government’s position: neither the minutes statement, nor the outcome of the separate legal challenge to the amendment of the social security provisions of the EU/Switzerland Agreement, will have any effect on the legal validity of these draft Decisions. As, however, the Government supports Croatia’s accession to the Agreement, there will be no impact on the UK, and we have no further issues to raise, we agree to clear the draft Decisions from scrutiny.


15 Documents not raising questions of sufficient legal or political importance to warrant a substantive report to the House

Department for Business, Innovation and Skills

Anti-Dumping Measures

(35558) 15380/13 COM(13) 748

Draft Council Implementing Regulation imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of biodiesel originating in Argentina and Indonesia.

(35573) 14593/13 COM(13) 687

Draft Council Implementing Regulation imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of certain stainless steel wires originating in India.

Other

(35546) — —

Court of Auditors Report on the annual accounts of the Galileo Joint Undertaking in liquidation for the financial year ended 31 December 2012.

Department for Culture, Media and Sport

(35502) — —

Court of Auditors Report on the annual accounts of the Education, Audiovisual and Culture Executive Agency for the financial year 2012 together with the Agency’s replies.

Department of Energy and Climate Change

(35542) 16454/13 COM(13) 791

Commission Report on the implementation of the European Energy Programme for Recovery.

(35547) — —

Court of Auditors Report on the annual accounts of the Fuel Cells and Hydrogen Joint Undertaking for the financial year 2012 together with the Joint Undertaking’s replies.


Department for Environment, Food and Rural Affairs

(35577) 16811/13 COM(13) 805

Commission Report to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the Interim Evaluation of the European Earth Monitoring Programme (GMES) and its Initial Operations (2011–2013).

(35583) 16675/13 COM(13) 818

Draft Council Regulation fixing for 2014 the fishing opportunities for certain fish stocks and groups of fish stocks in the Black Sea.

Food Standards Agency

(35539) — —

Court of Auditors Report on the annual accounts of the European Food Safety Authority for the financial year 2012 together with the Authority’s replies.

Foreign and Commonwealth Office

(35541) 16074/13 COM(13) 793

Commission Report to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: EU Relations with the Principality of Andorra, the Principality of Monaco and the Republic of San Marino: Options for their participation in the Internal Market.

(35602) — —

Draft Council Decision on EU activities in support of the implementation of the Arms Trade Treaty, in the framework of the European Security Strategy.

Home Office

(35537) — —

Court of Auditors Report on the annual accounts of the European Police Office (Europol) for the financial year 2012 together with the Office’s replies.

(35538) — —

Court of Auditors Report on the annual accounts of the Europol Pension Fund for the financial year 2012 together with the Fund’s replies.


Formal minutes

Wednesday 11 December 2013

Members present:

Mr William Cash, in the Chair

Andrew Bingham Michael Connarty Nia Griffith Kelvin Hopkins

Chris KellyJacob Rees-Mogg Henry Smith

The Committee deliberated. Draft Report, proposed by the Chair, brought up and read. Ordered, That the draft Report be read a second time, paragraph by paragraph. Paragraphs 1.1 to 15 read and agreed to. Resolved, That the Report be the Twenty-seventh Report of the Committee to the House. Ordered, That the Chair make the Report to the House.

****

[Adjourned till Wednesday 18 December at 2.00 p.m.


Standing Order and membership The European Scrutiny Committee is appointed under Standing Order No.143 to examine European Union documents and—

a) to report its opinion on the legal and political importance of each such document and, where it considers

appropriate, to report also on the reasons for its opinion and on any matters of principle, policy or law which

may be affected;

b) to make recommendations for the further consideration of any such document pursuant to Standing Order

No. 119 (European Committees); and

c) to consider any issue arising upon any such document or group of documents, or related matters.

The expression “European Union document” covers —

i) any proposal under the Community Treaties for legislation by the Council or the Council acting jointly with

the European Parliament;

ii) any document which is published for submission to the European Council, the Council or the European

Central Bank;

iii) any proposal for a common strategy, a joint action or a common position under Title V of the Treaty on

European Union which is prepared for submission to the Council or to the European Council;

iv) any proposal for a common position, framework decision, decision or a convention under Title VI of the

Treaty on European Union which is prepared for submission to the Council;

v) any document (not falling within (ii), (iii) or (iv) above) which is published by one Union institution for or

with a view to submission to another Union institution and which does not relate exclusively to consideration

of any proposal for legislation;

vi) any other document relating to European Union matters deposited in the House by a Minister of the Crown.

The Committee’s powers are set out in Standing Order No. 143.

The scrutiny reserve resolution, passed by the House, provides that Ministers should not give agreement to EU

proposals which have not been cleared by the European Scrutiny Committee, or on which, when they have been

recommended by the Committee for debate, the House has not yet agreed a resolution. The scrutiny reserve

resolution is printed with the House’s Standing Orders, which are available at www.parliament.uk.

Current membership

Mr William Cash MP (Conservative, Stone) (Chair)

Andrew Bingham MP (Conservative, High Peak)

Mr James Clappison MP (Conservative, Hertsmere)

Michael Connarty MP (Labour, Linlithgow and East Falkirk)

Geraint Davies MP (Labour/Cooperative, Swansea West)

Julie Elliott MP (Labour, Sunderland Central)

Stephen Gilbert MP (Liberal Democrat, St Austell and Newquay)

Nia Griffith MP (Labour, Llanelli)

Chris Heaton-Harris MP (Conservative, Daventry)

Kelvin Hopkins MP (Labour, Luton North)

Chris Kelly MP (Conservative, Dudley South)

Stephen Phillips MP (Conservative, Sleaford and North Hykeham)

Jacob Rees-Mogg MP (Conservative, North East Somerset)

Mrs Linda Riordan MP (Labour/Cooperative, Halifax)

Henry Smith MP (Conservative, Crawley)

Mr Michael Thornton MP (Liberal Democrat, Eastleigh)

The following members were also members of the committee during the parliament: Mr Joe Benton MP (Labour, Bootle) Jim Dobbin MP (Labour/Co-op, Heywood and Middleton) Tim Farron MP (Liberal Democrat, Westmorland and Lonsdale)


Penny Mordaunt MP (Conservative, Portsmouth North) Sandra Osborne MP (Labour, Ayr, Carrick and Cumnock) Ian Swales MP (Liberal Democrat, Redcar)