WEDNESDAY 5 DECEMBER 2007

Mr Reimer Boege

  Q600  Lord Cameron of Dillington: Lord Ullswater and I want to ask you a little bit about where the money is going to come from. I gather that the European Parliament thought with the accession of the new Member States, particularly Bulgaria and Romania, that if the needs were to outstrip the available money some sort of compulsory co-financing was in order. I wondered what reaction you have had from the Council of Ministers and the Commission to that statement.

  Mr Boege: My farmer colleagues in Germany have criticised me a lot because I proposed this, but I took it on the shoulder. There were certain elements in it. First, we wanted to stick to the political agreements which were made on agricultural policy. On the other side, co-financing has something to do with budgetary discipline because we are all more careful with money where we have to co-finance and not just taking 100% from other people's pockets. It is also one of the elements where in the future a solution could be found not only with the so-called British rebates but we have many rebates in the budget. If the expenditure side of the budget is a bit more balanced and there is a certain element of co-financing—I have not talked about the real percentage which is needed—it could help as a certain correction mechanism between Member States, especially for those so-called net payer countries. I also have the impression that the situation will change with France, as I indicated, and the position presented by Parliament in the report on own resources from Alain Lamassoure was a first step to abolish all these different sorts of correction mechanisms and rebates because there was more than ten billion and the Council was negotiating on extra conditions which are not bound by common rules. Some countries got additional amounts for rural development—Austria more than one billion and even Luxembourg got 20 million—and others got extra conditions for house building from structural funds, and so on, which were not linked to common rules. There we have to start to talk about how the system can be made more transparent within this idea of co-financing because agricultural direct payment is the only multi-annual programme without any co-financing.

  Q601  Lord Cameron of Dillington: If you move to area payments across Europe then co-financing is a perfectly logical next step, is it not?

  Mr Boege: I know the situation of our regional and national budget in Germany quite well and even my federal state has always had big problems in co-financing all the European programmes and the national programmes on economic development as well. As a principle that Member States feel more committed to budgetary discipline, they feel more committed to invest in the right programmes, co-financing is very helpful. It does not automatically mean that it must be 50%. It could be linked to certain pillars but as a principle, and linked to this approach that we want to stick to our agreements and the element of the budgetary discipline on the other side, there are only one or two national delegations in Parliament resisting this idea. It is still on the cards for the future.

  Q602  Viscount Ullswater: Do your thoughts about co-financing direct you to only some programmes being suitable for co-financing and is that not going to lead to re-nationalisation of the CAP payments? I can see that there are many dangers and I would like to hear from you what you see the dangers might be.

  Mr Boege: Nobody is talking about re-nationalisation but regional funds which are co-financed and rural development programmes which are co-financed as well. If you go in a direction where, let us say, 50 or 60% has to be financed from the national budget then it is a step towards re-nationalisation, this is very clear. Facing all the budgetary problems on rebates and special commitments to individual Member States, it could help to find a balance. I know it is very difficult and it is linked to the question of own resources where no-one really knows, although it is foreseen we will talk about it, and Member States will accept coming to a more transparent system than the existing one. It is linked to this question.

  Q603  Viscount Ullswater: Do you think it will upset the level playing field between Member States in competitive terms if there is too much co-financing or too much availability for either regions or Member States being able to co-finance in certain areas?

  Mr Boege: If the co-financing rate is too high that might happen. As I explained with the example of my federal state, our former government was not able to co-finance some of the national programmes and part of those amounts foreseen for Schlewsig-Holstein later went to the federal state of Saxonia because they were prepared to take the money.

  Q604  Viscount Ullswater: Are there any extensions of using co-financing that you would see that you are not talking about just now?

  Mr Boege: It is mainly linked to this question of the first pillar on agricultural policy. All the other multi-annual programmes are more or less regions and Member States' national authorities are involved where we have a certain sort of co-financing. Our experience with budgetary discipline and Article 44 of the Inter-Institutional Agreement that Member States should be ready to present a summary of the available accounts done by the Court of Auditors to be given to the European level and the European Court of Auditors have a more precise evaluation of how money is spent and how reluctant many Member States are, including my own, show there is a certain need.

  Q605  Baroness Jones of Whitchurch: I want to talk a little bit about enlargement and some of the tensions that might be coming from the original EU-15 and the new Member States. You have talked a lot about budgetary discipline and obviously if you follow the logic of that through one of the areas is around the Single Farm Payment that ought to then be reduced to the original EU-15. Is that still going to happen? What is the timetable for that? Is that causing tensions between the original Member States and the incoming Member States about how the money is divided?

  Mr Boege: There have been debates from the very beginning and it will happen again in the context of the Commission's proposals and the idea of modulation. Some countries will reject the proposal from the Commission because their agricultural industry is affected more than others. For the same reasons there will be some countries asking for a very strict cut in payments from a certain level onwards. Again, there will be some countries questioning the historical basis because they are not so productive. We know which these countries are. With each step of these reforms, starting with the McSharry Reform, we have always had this debate. This is not news; it is just the same debate. As I said, we have found a certain balance and, therefore, the Commission should take a prudent approach. I have the impression that what is coming from the initiative report of the Agriculture Committee is to say let us take a new average, not 5,000 but 10,000 direct payments, no modulation, because the administrative burden is very high and complicated, and to have a certain higher modulation in a degressive form between 2009 and 2013 but not with those amounts the Commission is proposing that will affect the UK, Eastern Germany, France a little bit, and Spain and Italy to an enormous amount. If you look into the statistics it is interesting how much Spain and Italy will be affected by the Commission proposal which will be to find a modest way of growing modulation to shift it to Pillar II but leave it in the Member States and not redistribute it. That is very important otherwise it will affect the balance of the budget again and there will be no majority for that. It was difficult enough to get a Qualified Majority in the Council of Finance Ministers last Friday on Galileo. Everybody must know what Qualified Majority means in this context.

  Q606  Baroness Jones of Whitchurch: Did I understand you were saying that you would recommend a small increase across the board before the changes start being phased in? Is that what you are saying?

  Mr Boege: When we faced the enlargement Bulgaria and Romania were not really integrated, but then we said if the agricultural spending goes up to more than 200 million below the ceiling the Commission is committed to do something and that means cutting payments. Of course, market expenditures are limited in the existing budget and, therefore, our idea was to link it with co-financing to remind them you cannot start again and again in a transitional period when the farming community is just going to adopt the new systems to change things again and again. Now we have enough margin within the agricultural ceiling that there is no real need for those cuts based on the enlargement of Bulgaria and Romania. We are talking about 8.9 billion over the period, of growing importance at the end until 2013 but not so important until 2009 or 2110. What is more important in this aspect is the elements of budgetary control function well and the Commission gave a warning to one of these two new countries and we have to have a very precise look at it.

  Chairman: We have saved the best until last: Lord Plumb.

  Q607  Lord Plumb: Thank you, my Lord Chairman. You started off, interestingly, first talking about the Financial Perspective. The comments you have just made are interesting. Expenditure on the CAP got up to 75% in my day and it will be down to 35% cent in yours, so well done, it is moving in the right direction, but I note that the Parliament recalled that once the distinction between compulsory and non-compulsory expenditure has been abolished, "the ring-fencing of resources for market-related expenditure and direct payments under Heading 2 will no longer exist". You have already referred to this in the comments you have made but are there any other points you would like to make on that? The second thing is what implications are likely from the extension of Parliament's powers with respect to the budget and what they have for the process of further reforming the CAP? I heard that yesterday the President made a great speech in which he said that the European Parliament would not in any way be taking away the powers of national parliaments. It is a question of the role that the European Parliament is playing in further reforming the CAP because whilst we as a Committee are looking at 2013 we have to keep reminding each other this is a Health Check, we are not reforming the CAP, we are looking at the process at the moment, how it is working and how it is operating and, therefore, it is very much a Health Check. Looking at the future and reforming the CAP, what role do you see the European Parliament playing and how should it be directed?

  Mr Boege: Let me give one small example from the ongoing budget procedure of 2008. We decided to table a certain reserve on administrative expenditure for implementation of the rural development programmes from the Commission staff because we had the impression that there was a delay in evaluation of the presented programmes and the Commission was going back to micro-management which should be in the hands of the Member States and the regions and they were trying to get certain things back that they lost during the legislative procedures. That is a very small example of how we have tried to find the right balance between Member States and the European Union in implementing these programmes. The next step will be that based on the Inter-Institutional Agreement there will be an adjustment of the existing budget agreements based on the Reform Treaty. It is very clear there is no longer any distinction between compulsory and non-compulsory expenditure which mainly has to do with agriculture but also international fishery agreements and some other aspects. Co-decision will grow and will happen in the agricultural sector as well. On the other side, the budget authority is obliged to implement those figures which were agreed within the co-decision procedures of the multi-annual programmes. It is very clear that Parliament had to insist on co-decision on those elements and on the other side, if you see it from the agricultural point of view, things will not be easier in Parliament. We cannot hide any longer and say, "It is compulsory expenditure, we can table the amendment how we like it" because now we have to take real responsibility and this is a different story. This is helpful as well. It is very important that we have two elements, we are part of the budgetary authority but also a legislative authority and those agreements that are done there have to be respected by the budget authority. If there is an agreement on a certain amount, whether it is for lifelong learning or for structural funds or the first pillar, we have to implement it within the annual budgets. We are facing new challenges in agricultural policy and it will be a very interesting time, especially not knowing what will happen in the Council until the European elections in June 2009.

  Lord Plumb: Thank you very much. That is interesting because the Chairman decided that after we have decided on whatever report we produce with the findings from all the evidence we have taken the next problem we will consider is fishing, so we shall be back again looking at the fisheries policy.

  Q608  Chairman: Can I ask you to take up the business of co-decision making in agriculture and ask you to speculate a bit. In the UK there are clearly two schools of thought about what the effect of that will be. One is very similar to what you said about the European Parliament having to move away from gesture politics effectively to accepting responsibility and facing reality, so that could well make reform easier, and the other is this is just a further opportunity for narrow protectionist interests to assert themselves in the agricultural area.

  Mr Boege: I do not think so. Of course, we will have a very new structure of debate and decision-making in Parliament and also between the specific committees in the European Parliament. Having done our first reading on the agriculture budget, everything is over for us. In future, based on the Reform Treaty, there will be a co-decision procedure or conciliation procedure on the budget and after the first reading there will be a conciliation period of 21 days to find an agreement between the Council and Parliament. If not, based on the restrictions of the European budget, Parliament can vote at second reading with an absolute majority and three of five members to decide on the budget. The pressure to come to an agreement between the Council and Parliament in those areas where we have this compulsory expenditure will grow and this strengthens Parliament's role. I do not think it is a question of protectionism. There will be a lot of different approaches from special national interests and there could be protectionism as well and to find a balance for the agricultural sector, including the budget, including these elements of sustainability and food production at a level of high quality and acceptable prices, is a new challenge and real challenge for the institutions, and not only for Parliament but also the Council and the agriculture ministers to acknowledge that they have to negotiate with Parliament and not behind closed doors.

  Q609  Lord Cameron of Dillington: If you were an MEP from a net recipient country, what motivation would you have to control your budgetary demands?

  Mr Boege: I have been a Member of the European Parliament since 1989 and I come from a so-called net payer because the benefit the German industry had from enlargement was overwhelming. I do not know how our economic situation would be if we did not have this European aspect and aspect of globalisation. There must be an agreement between the leading Member States as to what we are going to do in this globalised context with the agricultural policy in the next step. Nobody knows what will happen in the Doha Round, whether there will be some development not only on tariffs but non-tariff issues, for example, which are becoming more and more important—I have certain doubts about that sometimes—and what this will mean for the agricultural budget. I am quite sure if you look at the development on the international market we will not go down to cereal prices of €8, €9 or €10 in the next few years. This may create some room for manoeuvre and to modernise the farming sector in the international context. I am quite convinced that for the young farmers today facing this globalisation, and talking about budget and how they get a reasonable income, it is a better situation than I had when I started farming.

  Lord Plumb: Hear, hear!

  Q610  Lord Greaves: When you say three out of five, it needs a 60% majority for all budget items.

  Mr Boege: Yes. The absolute majority of the House plus three out of five voting members in case of rejection of a conciliation result.

  Q611  Lord Greaves: When you said that some MEPs will have special interests, are those special interests from their state not inevitably protectionist as far as those states are concerned?

  Mr Boege: Of course, in Parliament you have the same situation as in the Council because first we are obliged to fight for the interests of our constituency and then for our national interests but never to forget that we have a common interest and we have to find the right balance. This is part of the exercise and the challenge.

  Chairman: Thank you very much indeed.