Select Committee on European Communities Seventeenth Report


Letter from Lord Tordoff, Chairman of the Committee, to the Rt Hon Clare Short MP, Secretary of State for International Development, Department for International Development

  At its meetings on 16 March and 20 April, Sub-Committee A (Economic and Financial Affairs, Trade and External Relations) considered this special Report from the European Court of Auditors, together with your Explanatory Memorandum of 5 March.

  The Sub-Committee was concerned about the situation revealed in this report. As far as issues of financial propriety are concerned, the Sub-Committee has noted the conclusion of the Committee of Independent Experts that "there are no grounds for contending, as matters stand at present, that the implementation of nuclear safety programmes in Eastern countries gave rise to fraud or serious irregularities". But, as your Explanatory Memorandum noted, the Court of Auditors found serious problems in the implementation of the programme. This would be worrying in any major expenditure programme, but it is particularly so in this case where matters of nuclear safety are at stake. Your Explanatory Memorandum says that the Government has registered a number of concerns with the Commission, and will continue to work towards "a more focused strategic direction for the programme". We should be grateful for further information about the steps the Government intends to take to make this programme more effective, and how successful you consider those steps are likely to be. In the meanwhile, we are holding this document under scrutiny.

20 April 1999

Letter from the Rt Hon Clare Short MP, Secretary of State for International Development, Department for International Development, to Lord Tordoff, Chairman of the Committee

  Thank you for your letter of 20 April about the European Court of Auditors' Special Report No 25/98 which deals with the nuclear safety assistance provided from 1990-97 under the EU's Phare and Tacis programmes. You asked specifically for further information about the steps which the Government intends to take to make this programme more effective and how successful you consider those steps are likely to be.

  As indicated in the Explanatory Memorandum I submitted on 12 March, the Government has been concerned to ensure that these programmes are managed within the context of a clear strategy agreed with the member states and that the projects can be implemented as quickly as possible consistent, of course, with the need for compliance with the Phare Guidelines and Tacis Regulation. On the question of strategy, some progress has already been made. In the early years, Phare and Tacis were simply seen as vehicles for EU intervention on nuclear safety in support of (a) specific remedial work identified by international agencies and (b) wider activities reflecting the priorities set out in the G7's action plan launched at the 1992 Munich Summit. The Short-to-Medium Term Strategy adopted in 1996 identified self-sufficiency as a key overall objective, set out the broad parameters for Phare and Tacis support and provided the basis for developing annual programmes which reflect the differing needs of the recipient countries.

  Nevertheless, as the Court of Auditors has noted, some confusion remains. This is particularly so when safety hardware is being supplied to higher risk reactors, which should be closed as soon as practicable and are now beginning to reach the end of their design life, as well as to more modern units for which in an ideal world, safety improvements would be paid for out of income from electricity sales, using credit finance (eg EURATOM loans) if needed. Hitherto, the European Commission has claimed that some hardware supply for units of more recent design has been needed to help ease co-operation on operational safety improvements, although it is not easy to see how this argument could be used to justify major engineering programmes of the type now being mooted by the Commission. This is one of the issues which will need to be resolved by the Tacis Management Committee in the light of the draft Short-to-Medium Term Programme for Russia which was circulated last September. There is less concern about the orientation of nuclear assistance to Ukraine since the Tacis budget will not give much scope for assistance beyond that needed to support Chernobyl closure, and to Central European countries since available Phare resources will clearly be channelled to meet needs arising from the accession process eg help to prepare for decommissioning first generation reactors.

  It is, however, clear that even a very tightly focused strategy will be difficult to sustain whilst Tacis continues to be demand driven. This is one of the reasons why, in the course of the on-going discussions on the new Tacis Regulation, my officials have promoted the idea of moving towards a dialogue driven approach which would give member states greater scope in setting priorities, instead of being forced to compromise with recipients on overall programmes designed to spread the projects around the largest number of local entities. As for the Phare programme, this is accession driven. The Commission and candidate countries discuss priorities yearly based on Commission progress reports, but the programme in each case is tied to the Accession agenda.

  On the question of programme implementation, a number of improvements have been initiated by the Commission over the last year or so. One of the more important involves preparation of technical specifications before financial authority is sought so that the tendering process can be carried out more promptly. However, the UK, in co-operation with Germany and France, used the Tacis Management Committee to press the Commission to host a workshop to discuss all of the obstacles to smooth project delivery and how these could be removed. This was held on 21 October and involved representatives from EU Governments and contractors. The various conclusions are now being reviewed by the Common Service (SCR), the new body established by the Commission to, among other things, harmonise contracting arrangements across all EC aid programmes. It is hoped that the SCR will manage to develop a less bureaucratic approach to contract administration which will leave the Phare and Tacis nuclear safety assistance programmes less open to criticism from contractors and recipients, whilst at the same time ensuring that the Court of Auditors are satisfied that prudent financial management has not been compromised (That said, we are concerned that the operations of the SCR and its interaction with the Relex DGs are not so far proving to be as effective as hoped). Again, the Management Committees will be used to maintain pressure on the Commission, for example to urge them to report on their proposed follow-up to the workshop, as well as to contribute ideas about a more focused strategic approach. The Phare nuclear safety programme is on the agenda for July. We will also work to ensure that the new Tacis Regulation gives no scope for the introduction of any unnecessary administrative requirements which would stand in the way of effective project delivery.

  In our view, the publication of this Special Report and the concerted pressure of member states should be sufficient to ensure development of a coherent policy underlying the EU'S assistance effort in this area as well as major improvements in the track record on programme implementation. At this stage, it is too early to speculate on what level of success we might be able to achieve. Largely through pressure from the UK, the Council of Ministers (ECOFIN) has invited the Commission "to present a communication relating to the improvement of these assistance operations in the field of nuclear safety, taking into account the remarks of the Court of Auditors, as well as, in the case of CEEC, the enlargement process". This should provide an opportunity to gauge whether the Commission's plans and expectations coincide with those of the member states. An explanatory memorandum will be prepared at the appropriate time.

12 May 1999

Letter from Lord Tordoff, Chairman of the Committee, to the Rt Hon Clare Short MP, Secretary of State for International Development, Department for International Development

  Thank you for your letter of 12 May, which Sub-Committee A considered at its meeting on 25 May.

  Although the situation is obviously far from ideal, there is some reassurance in the detailed information which you have now provided. We are therefore clearing the document from scrutiny.

25 May 1999

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