Considerations on COM(2020)854 - Brexit Adjustment Reserve

Please note

This page contains a limited version of this dossier in the EU Monitor.

 
dossier COM(2020)854 - Brexit Adjustment Reserve.
document COM(2020)854 EN
date October  6, 2021
 
table>(1)The Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (5) (the ‘Withdrawal Agreement’) entered into force on 1 February 2020. The transition period referred to in Article 126 of the Withdrawal Agreement ended on 31 December 2020. During the transition period, the Union and the United Kingdom of Great Britain and Northern Ireland (the ‘United Kingdom’) started formal negotiations on a future relationship.
(2)Following the end of the transition period, barriers to trade, to cross-border exchanges and to the free movement of persons, services and capital between the Union and the United Kingdom have become a reality with broad and far-reaching consequences for businesses, particularly for small and medium-sized enterprises (SMEs) and their workers, as well as for local communities, public administrations and citizens. Since those consequences are unavoidable, they need to be mitigated as much as possible and stakeholders need to make sure that they are ready for them.

(3)The Union is committed to mitigating the adverse economic, social, territorial and, where relevant, environmental consequences of the withdrawal of the United Kingdom from the Union and to show solidarity with all Member States, including their regions and local communities, as well as economic sectors, especially the most adversely affected ones in such exceptional circumstances.

(4)The Union is also committed to sustainable fisheries management in line with the objectives of the Common Fisheries Policy established by Regulation (EU) No 1380/2013 of the European Parliament and of the Council (6), including the principle of achieving maximum sustainable yield for all stocks according to the best available scientific advice, as well as ending overfishing, restoring populations of harvested species and protecting the marine environment, as also provided for by international commitments.

(5)A Brexit Adjustment Reserve (the ‘Reserve’) should be established to provide support to counter the adverse consequences of the withdrawal of the United Kingdom from the Union in Member States, regions and sectors, in particular in those that are worst affected by the withdrawal, and thus to mitigate the related negative impact on economic, social and territorial cohesion. It should cover in whole or in part the additional expenditure incurred and paid by public authorities in Member States for measures specifically taken to mitigate those consequences. The reference period, as defined in this Regulation, determining the eligibility of expenditure should apply to payments made by public authorities in Member States at national, regional or local levels, including payments to public or private entities, for measures carried out. Taking into account the importance of the fisheries sector in certain Member States, it is appropriate to earmark a part of the resources of the Reserve for the provision of dedicated support to local and regional coastal communities.

(6)Where Member States choose to support measures to maintain and create jobs, they should aim at quality employment.

(7)The objectives of the Reserve should be pursued in line with the objective of promoting sustainable development as set out in Article 11 of the Treaty on the Functioning of the European Union (TFEU), taking into account the United Nations Sustainable Development Goals, the Paris Agreement adopted under the United Nations Framework Convention on Climate Change (7) (the ‘Paris Agreement’), which was approved by the Union on 5 October 2016 (8), the ‘do no significant harm’ principle within the meaning of Article 17 of Regulation (EU) 2020/852 of the European Parliament and of the Council (9), the European Green Deal, the Digital Agenda for Europe, as well as the principle of partnership and the principles set out in the European Pillar of Social Rights, including the inherent contribution of the Reserve to the elimination of inequalities, and to the promotion of gender equality and gender mainstreaming, while ensuring respect for fundamental rights.

(8)In order to counter the adverse consequences of the withdrawal of the United Kingdom from the Union, Member States, when designing support measures and allocating the financial contribution from the Reserve, should support private and public entities adversely affected by the withdrawal, including SMEs and their workers, as well as the self-employed, as they now face barriers to trade flows, an increase in administrative and custom procedures, and a greater regulatory and financial burden, including disruptions to cooperation and exchange. It is therefore appropriate to provide a non-exhaustive list of the type of measures that are most likely to achieve that objective.

(9)Reflecting the importance of tackling climate change in accordance with the Union’s commitments to implement the Paris Agreement and the United Nations Sustainable Development Goals, the Union funds and programmes are intended to contribute to mainstreaming climate actions and to the achievement of an overall target of 30 % of the Union budget expenditure supporting climate objectives. The Reserve is also expected to contribute to climate objectives according to the specific needs and priorities of each Member State. The Commission should assess the climate contribution based on the information available in the final report on the implementation of the Reserve.

(10)It is important to clearly specify any exclusions from support provided by the Reserve. In addition to the exclusion of entities that benefit from the withdrawal of the United Kingdom from the Union, including those from the financial sector, value added tax (VAT) should be excluded from support provided by the Reserve as it constitutes a Member State revenue, which offsets the related cost for the Member State budget. In line with the general approach for cohesion policy, expenditure linked to relocations or contrary to any applicable Union or national law should also be excluded from support provided by the Reserve.

(11)In order to reduce the administrative burden, technical assistance for the management, monitoring, information and communication, control and audit of the Reserve could be implemented through a flat rate based on the amount of eligible expenditure accepted by the Commission. Technical assistance could be used to help local, regional and national authorities to implement the Reserve by assisting SMEs, in particular, which due to their size lack the resources and knowledge to overcome the increased administrative burden and costs related to the withdrawal of the United Kingdom from the Union.

(12)In order to take into account the impact of the adverse economic, social, territorial and, where relevant, environmental consequences of the withdrawal of the United Kingdom from the Union on Member States and their economies and, where appropriate, the measures carried out by Member States to mitigate the expected negative effects of the withdrawal prior to the end of the transition period, the reference period should start on 1 January 2020 and be concentrated for a limited period of 4 years.

(13)The Commission should provide the European Parliament and the Council with an assessment analysing the impact of the withdrawal of the United Kingdom from the Union on Union businesses and economic sectors while taking into account the effects of currency fluctuations on trade.

(14)It is necessary to specify that the budget allocated to the Reserve should be implemented by the Commission under shared management with Member States within the meaning of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council (10) (the ‘Financial Regulation’). It is therefore appropriate to determine the principles and specific obligations that Member States should respect, in particular the principles of sound financial management, transparency and non-discrimination and the absence of conflict of interest.

(15)Member States should ensure the coordinated use of the Reserve with other Union funds and programmes, including through consultations with the relevant local and regional authorities, as appropriate.

(16)Horizontal financial rules adopted by the European Parliament and by the Council on the basis of Article 322 TFEU apply to this Regulation. Those rules are laid down in the Financial Regulation and determine in particular the procedure for establishing and implementing the Union budget, and provide for checks on the responsibility of financial actors. Rules adopted on the basis of Article 322 TFEU also include a general regime of conditionality for the protection of the Union budget as established in Regulation (EU, Euratom) 2020/2092 of the European Parliament and of the Council (11).

(17)For the purpose of sound financial management, specific rules should be laid down for budget commitments, payments, carry-overs and the recovery of the Reserve. While respecting the principle that the Union budget is set annually, this Regulation should, on account of the exceptional and specific nature of the Reserve, provide for possibilities to carry over unused funds beyond those set out in the Financial Regulation, thus maximising the Reserve’s capacity to counter the adverse consequences of the withdrawal of the United Kingdom from the Union on Member States, including at regional and local levels, and their economies.

(18)In order to enable Member States to deploy the additional resources and to ensure sufficient financial means to swiftly implement measures under the Reserve, a substantial amount thereof should be disbursed as pre-financing, in three instalments, in 2021, 2022 and 2023. The allocation methodology for the resources of the Reserve should take into account the importance of fisheries in the United Kingdom’s exclusive economic zone, the importance of trade with the United Kingdom and the importance of the neighbouring links for the maritime border regions with the United Kingdom and their communities, based on reliable and official statistics. Given the unique nature of the withdrawal of the United Kingdom from the Union and the uncertainty that has surrounded key aspects of the relationship between the Union and the United Kingdom after the end of the transition period, it is difficult to anticipate the appropriate measures that Member States will have to take rapidly to counter the effects of the withdrawal. It is therefore necessary to grant Member States flexibility and in particular to allow the Commission to adopt the financing decision providing the pre-financing without the obligation pursuant to Article 110(2) of the Financial Regulation to provide a description of the actions to be financed.

(19)Within 2 months from the date of the entry into force of this Regulation and prior to the payment of the first instalment of pre-financing, Member States should notify the Commission of the identity of the designated bodies and of the body to which the pre-financing shall be paid, and confirm that the descriptions of the management and control systems for the Reserve have been drawn up.

(20)To ensure equal treatment of all Member States, there should be one single deadline applicable to all Member States for the submission of applications for a financial contribution from the Reserve. The specific nature of the Reserve and the relatively short implementation period justify the establishment of a tailor-made reference period and would make disproportionate the requirement for Member States to provide, on an annual basis, the documents required in Article 63(5), (6) and (7) of the Financial Regulation. Given also that the risks for the Union budget are mitigated by the requirement to make use for the Reserve of a reliable management and control system already existing in Member States or, where appropriate, to be set up by Member States, it is justified to derogate from the obligation of Member States to submit the required documents by February or March of each year. In order to enable the Commission to check the correctness of the use of the financial contribution from the Reserve, Member States should also be required to submit, as part of the application for a financial contribution from the Reserve, implementation reports providing more detail on the actions financed, which describe the adverse consequences of the United Kingdom’s withdrawal from the Union on businesses and economic sectors, the elements of accounts, a summary of the final audit reports and of controls carried out, a management declaration as well as an opinion of an independent audit body drawn up in accordance with internationally accepted audit standards.

(21)Pursuant to paragraphs 22 and 23 of the Interinstitutional Agreement of 13 April 2016 on Better Law-Making (12), the Reserve should be evaluated on the basis of information collected in accordance with specific monitoring requirements, while avoiding administrative burden, in particular on national, regional and local authorities, and overregulation. Those requirements, where appropriate, should include measurable indicators as a basis for evaluating the effects of the Reserve on the ground.

(22)To ensure equal treatment of all Member States and consistency in the evaluation of the applications for a financial contribution from the Reserve, the Commission should assess the applications as a package. It should look in particular into the eligibility and the accuracy of the expenditure declared, the direct link of the adverse consequences of the United Kingdom’s withdrawal from the Union with the measures carried out, and the arrangements put in place by the Member State concerned to avoid double funding. The Commission should assess the content of the implementation report in a proportionate manner, taking into account the total expenditure included in the application for a financial contribution from the Reserve. Upon assessment of the applications for a financial contribution from the Reserve, the Commission should clear the pre-financing paid, recover the unused amount, and decide on payments up to the limits of the provisional allocation. Given the extent of the expected economic shock, the unused amounts from the provisional allocation should be made available to Member States whose total accepted amount exceeds their respective provisional allocation.

(23)Given the exceptional and specific nature of the Reserve and its objectives, the Commission should assist Member States in order to help them identify measures to counter the adverse consequences of the withdrawal of the United Kingdom from the Union, including on how to assess the direct link of the expenditure with the withdrawal.

(24)In order to ensure the proper functioning of shared management, Member States should establish a management and control system for the Reserve. Each Member State should designate a body or, where required by the Member State constitutional framework, bodies responsible for the management of the Reserve, and a separate independent audit body, and notify the Commission of the identity of the designated body or bodies. It should be possible for the Member States to make use of existing designated bodies, at the appropriate territorial level, and management and control systems that are already in place for the purpose of the implementation of cohesion policy funding or the European Union Solidarity Fund established by Council Regulation (EC) No 2012/2002 (13). It is necessary to specify the responsibilities of Member States and lay down the specific requirements for the designated bodies.

(25)To enhance the protection of the Union budget, the Commission should make available an integrated and interoperable information and monitoring system, including a single data-mining and risk-scoring tool to access and analyse the relevant data, and should encourage its use with a view to a generalised application by Member States.

(26)In order to reduce administrative burden, Member States could reimburse those who benefit from a financial contribution from the Reserve through simplified cost options, such as flat rates, lump sums or unit costs, where these are a reliable proxy to real costs.

(27)In accordance with the Financial Regulation, Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council (14) and Council Regulations (EC, Euratom) No 2988/95 (15), (Euratom, EC) No 2185/96 (16) and (EU) 2017/1939 (17), the financial interests of the Union are to be protected through proportionate measures, including measures relating to the prevention, detection, correction and investigation of irregularities, including fraud, to the recovery of funds lost, wrongly paid or incorrectly used and, where appropriate, the imposition of administrative penalties. In particular, in accordance with Regulations (Euratom, EC) No 2185/96 and (EU, Euratom) No 883/2013, the European Anti-Fraud Office (OLAF) has the power to carry out administrative investigations, including on-the-spot checks and inspections, with a view to establishing whether there has been fraud, corruption or any other illegal activity affecting the financial interests of the Union. The European Public Prosecutor’s Office (EPPO) is empowered, in accordance with Regulation (EU) 2017/1939, where relevant, to investigate and prosecute criminal offences affecting the financial interests of the Union as provided for in Directive (EU) 2017/1371 of the European Parliament and of the Council (18). In accordance with the Financial Regulation, any person or entity receiving Union funds is to fully cooperate in the protection of the Union’s financial interests, grant the necessary rights and access to the Commission, OLAF, the Court of Auditors and, in respect of those Member States participating in enhanced cooperation pursuant to Regulation (EU) 2017/1939, the EPPO, where relevant, and ensure that any third parties involved in the implementation of Union funds grant equivalent rights.

(28)With a view to alleviating the negative impact on businesses and economic sectors, and to avoid administrative bottlenecks, Member States and regions should target their information campaigns to raise awareness of the Union contribution from the Reserve and, since transparency, communication and visibility activities are essential in making Union action visible on the ground, inform the public accordingly. Those activities should be based on accurate and updated information.

(29)In order to enhance transparency on the use of the Union contribution from the Reserve, the Commission should provide a final report on the implementation of the Reserve to the European Parliament, to the Council, to the European Economic and Social Committee and to the Committee of the Regions.

(30)In order to ensure uniform conditions for setting out the financial resources available to each Member State, implementing powers should be conferred on the Commission.

(31)The European Data Protection Supervisor was consulted in accordance with Article 42 of Regulation (EU) 2018/1725 of the European Parliament and of the Council (19) and delivered an opinion on 14 April 2021.

(32)Since the objectives of this Regulation, namely to maintain economic, social and territorial cohesion and to provide a solidarity tool for Member States when dealing with the effects of the withdrawal of the United Kingdom from the Union which affects the Union as a whole, nevertheless with different severity among regions and sectors, cannot be sufficiently achieved by the Member States but can rather, by reason of the scale and effects of the action, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives.

(33)In light of the overriding need to counter without delay the adverse economic, social, territorial and, where appropriate, environmental consequences of the withdrawal of the United Kingdom from the Union in Member States, including their regions and local communities, and sectors, in particular those that are most adversely affected by the withdrawal, and to mitigate the related negative impact on the economic, social and territorial cohesion, this Regulation should enter into force as a matter of urgency on the day following that of its publication in the Official Journal of the European Union,