Select Committee on European Communities Second Report


4.  COURT OF AUDITORS SPECIAL REPORT NO. 3 ON THE MANAGEMENT AND CONTROL OF INTEREST RATE SUBSIDIES BY THE COMMISSION (10121/99)

Letter from Lord Tordoff, Chairman of the Committee, to Melanie Johnson MP, Economic Secretary to the Treasury

  At its meeting on 21 October, Sub-Committee A considered this document with the help of your Explanatory Memorandum. It decided to clear the document, but asked me to write to you expressing its concerns. We understand that much of the financial and technical work in this area is delegated to the European Investment Bank. However, it is certainly the case (as stated in the Commission's reply to the report) that the Commission "bears the overall budgetary and political responsibility of the measures discussed". As we understand it, the EIB is not subject to audit by the European Court of Auditors. Is the Government satisfied that the criticisms made in this report will be properly taken on board (pending the fundamental change in the system for which you say that the Government is arguing)?

26 October 1999

Letter From Melanie Johnson MP, Economic Secretary to the Treasury, to Lord Tordoff, Chairman of the Committee

  Thank you for your letter of 26 October, a copy of which your office sent me on 10 January, the original apparently having gone astray.

  You ask whether the Government is satisfied that the criticisms made in the Court of Auditors report on interest rate subsidies will be properly taken on board given that the EIB, which manages many of the subsidies on behalf of the Commission, is not subject to audit by the European Court of Auditors.

  I should explain first that although the EIB is not subject to audit by the Court of Auditors in respect of its own resources, the Court has access to information held by the Bank which is necessary for the audit of Community resources. This is in accordance with an agreement between the Court, the Bank and the Commission as provided for under Article 248 of the EC Treaty. We can therefore expect the Bank to co-operate closely with the Court and the Commission in accounting for the use of Community resources, including interest rate subsidies.

  The terms under which the Bank manages such resources on behalf of the Commission are set out in various agreements concerned with specific measures or facilities. I note that the Commission's reply to the report states (paragraph 4.3) that the "EIB provides the Commission with sufficient financial and technical data to allow for an efficient control". I believe that this statement provides some reassurance that the Commission does not see the Bank as undermining its responsibility to ensure that proper controls are in place.

  In addition to the controls exercised by the Commission, there are certain Committees of Member States which examine all EIB operations involving Community finance and give an opinion on proposed projects. Ultimately, all EIB operations, including those involving Community finance, are subject to approval by the Bank's Board of Directors, on which both the Treasury and the Department for International Development are represented. I should also mention that the Bank's accounts are submitted to both internal and external auditors, overseen by an independent Audit Committee which is directly accountable to the Board of Governors (Finance Ministers).

  All of these arrangements should help to ensure that proper account is taken of the points made in the Court of Auditors report. This is of particular importance following recent agreement between the EU and the African, Caribbean and Pacific States that interest-rate subsidies will continue to be a feature of Community finance for projects in these countries. The UK will continue to argue against interest-rate subsidies in other contexts and for their improved management in cases where they continue to operate.

22 January 2000

Letter from Lord Tordoff, Chairman of the Committee, to Melanie Johnson MP, Economic Secretary to the Treasury

  At its meeting on 15 February, Sub-Committee A considered your letter of 22 January (replying to mine of 26 October). Members were grateful for your explanation of the various pressures which would encourage the EIB to take account of any criticisms in the Court of Auditors' Report, and hope that these will result in any necessary changes being made. They will, of course, maintain their interest in the issue of the degree of access which the European Court of Auditors should have to the EIB.

17 February 2000


 
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