Monday, 24 June 2013

Getting money out of Brussels

No wonder people find EU budgets confusing and frustrating.   On one hand we saw a huge media frenzy when the Prime Minister had his all night negotiation in February and secured the first time ever EU budget cut, now months later the details on the seven year Medium Term Financial Framework are still not yet finalised.

Last Monday night my own negotiations ran on until 2.30 am.  This was on "Horizon 2020" the €70 billion program for funding science and research.   It is one of the few areas where the UK gets back roughly what we put into the EU budget, and a very important sources of funds for scientists and entrepreneurs across the East of England.   However these EU research programs have a terrible reputation for bureaucracy and red tape.   I have been gathering evidence and suggestions for reforms for the past 3 years and the negotiations on the detailed changes have been going on for months.   We are edging towards a deal which will (I hope) result in some simplifications for participants, less red tape and more directed assistance for small businesses.  One of my priorities has been to make sure that funds will go to the best bids, based on excellence.  Recent studies have shown that scientific research which is the result of international collaboration tends to have a greater impact.  I believe that we should only fund internationally projects where international collaboration really does add value.

Getting money out of Brussels for local projects can be  really hard work.  On Friday Bernard Jenkin MP and I visited the Essex Wildlife trust who have recently had their funding bid rejected in Europe.   The aim is to try to buy a piece of riverside land next to their site at Fingringhoe Wick and replace salt marsh habitat.   As I write Bernard's office are trying to unlock a crucial part of the bid paperwork and to work out if we in the UK are gold plating the application form - all before a bid deadline of tomorrow!

In the meantime I am about to jump back on a Eurostar and go back into those negotiations on Science funding.

Monday, 10 June 2013

Who is winning Energy battles - UK vs EU

I enjoyed speaking to the Parliamentary Group for Energy Studies in May. It gave me a chance to reflect on what I have seen in the past 4 years and how UK policy affects EU thinking on energy issues and vice versa.  I have written an article for their magazine - which I thought I should also put here.

There are three legs to energy policy; energy security, the cost of energy and how costs affect competitiveness, and how energy and climate policy work together.  All three issues are inter-related and conflict; and often when trying to address one issue it can often make another worse.
A one-size-fits-all policy on Energy is unworkable. The public perception of acceptable energy varies from country to country. Just when the UK is investing in new nuclear, Germany is abandoning it.  What's more, we are at a time when private sector investment is under huge pressure.

Longer standing MEPs tell me that 20 years ago the priority was competitiveness, it then swung towards decarbonisation and climate change, but in this 4 year period security has also been a priority. 
In the UK energy security is important, but it is one of many concerns. However many of my  Eastern European colleagues would list it as their biggest however priority.  They remember how  Gazprom switched off the lights in the depths of winter in early 2009. This has driven a strategy to improve energy security infrastructure especially interconnectors and storage.

It is important to stress that this public money is not meant to fund everything, but is intended to plug infrastructure holes where there no private sector or national funding.
Interconnectors will also help the UK to diversify energy for example linking offshore North Sea wind to Norway's hydro storage capacity. Gas interconnectors are important because the UK has less gas storage than others. I have visited the two-way pipeline running out of remote Bacton in Norfolk, but most people didn’t realise how important it was until it temporarily shut down in March. 

As the House of Lords' committee pointed out in May[1], the required investment in European energy infrastructure is in the order of one trillion euros by 2020.  Whilst the proposed investment from the EU budget will increase to €5bn between 2014 and 2020, it is vital to unlock private sector investment.   Investors are challenged by uncertainty since politicians are increasingly concerned about affordability and are less willing to commit to long-term price contracts.  Furthermore, many EU financial sector laws impact negatively on investment; Solvency II will constrain insurance companies investing in long-dated BBB bonds, new Basel III rules for banks will impact on longer-dated lending, any financial transaction tax will reduce investment returns.
MEPs prioritised competitiveness in the recent vote on proposals to "backload" allowances in the EU Emissions Trading System (ETS).  Businesses supporting backloading said it would help them invest in newer generation technologies.  Others said it would raise energy prices, forcing energy users to re-locate overseas.  Everyone agreed that the proposals were a short-term sticking plaster and did not help long-term certainty.

Some argued that it would help the UK if backloading pushed up the continental price of carbon towards the UK's carbon floor price.  But colleagues especially in Germany and Eastern Europe were concerned about the impact on competitiveness. Backloading was eventually rejected by just 19 votes, showing how finely balanced the issue was.
UK MEPs can influence EU energy policy. A year ago, we were concerned about pending EU rules on derivatives trading and their impact on energy hedges and about the proposed EU Regulation on offshore oil and gas.

Through Parliament amendments we have exempted hedges for business risks from the derivatives trading rules, thus neutralising the impact on costs. We have also completely rewritten the offshore oil and gas legislation. In fact I tabled over 300 amendments to the draft legislation to alter the text line by line.  Instead of a heavy-handed, one-size-fits-all Regulation we have a Directive.  The high quality North Sea safety standards will not be dumbed down but will be followed in the rest of Europe.  An estimated £146m of implementation costs have been saved. This required huge assistance from UK DECC and HSE experts, cross-party co-ordination by British MEPs and close work with members from other countries, in particular with the Belgian rapporteur.
Another major problem is that EU laws are often insufficiently impact assessed and thousands of amendments are tabled through the Parliament without detailed analysis.

For example on the Energy Efficiency Directive the Parliament was split between those who thought energy savings policies should enable households and businesses to save on their energy bills and those who pursued a target-driven, headline-grabbing approach. My own view is that EU targets are easily set but rarely met. But even the best impact assessments are not a crystal ball. I was extremely concerned to read recently that the UK's Energy Company Obligation programme may add up to £100 to household bills, especially as the UK was often cited by other European countries as a standard-setter in this area. 
Public concern about energy bills is growing.. If we want public support for decarbonisation policies we must be highly attentive to the impact of policies on prices. MEPs are now more wary of taking first-mover actions on climate policy in Europe if it impacts our global competitiveness and want to push back on EU legislation if it places extra costs on consumers and businesses. Climate policy has to be flexible and there are many technologies which will help us meet our goals. It was therefore alarming to see momentum (from certain corners) behind an outright EU ban on shale gas fracking.  Under the European Treaty countries are entitled to the economic benefits from their resources and we need to uphold this principal.

To conclude, the UK can play a key part in reforming EU policy, but there are vast differences in Member States' energy mixes and domestic energy policies so we cannot accept a top-down, rigid approach from Brussels. Energy security, energy prices and decarbonisation all pull against each other, reconciling them is not easy, but it is important to try to keep them balanced.

Friday, 7 June 2013

Helping businesses to grow.

In Europe MEPs often talk about small and medium sized businesses but then also seem to do very little to help them.  The truth is that small businesses are a very diverse bunch and there is no one size fits all solution.  

In Brussels this week I supported Robert Sturdy MEP who was hosting a workshop on “Inadvertent Doping”. This was co-ordinated by HFL, a world leading company based in Cambridgeshire.  They want to help athletes to avoid taking banned substances by mistake.   They brought together experts from all across Europe to brainstorm solutions.  There is a lot of money at stake too. The market for Food supplements used by amateur athletes is already over a billion pounds and has doubled in the last decade.  The companies described how they would like stronger global standards.
Today, I met a group of small businesses in Freckenham with Matt Hancock MP who has just been made the Government’s new Small Business champion.  Businesses asked me what we could do to unlock some of the bureaucracy of EU regulation in public procurement contracts so I described the work we are doing to change the style of contract negotiations to favour innovation.  I discussed my campaign to exempt micro businesses from all EU regulations (lots of head nodded. There is much to be done in ensuring that European red tape does not strangle our small businesses.   After four years of campaigning the EU has finally listed  ‘Top 10 most burdensome EU Acts for SMEs?’ – now I want to see some Action to repeal or change those Acts - we will be debating it next week in Strasbourg.

Having the right infrastructure for business growth is also essential.  So, at the other end of the scale, this week, it was great to see the huge £40m investment in the North Terminal Railhead at Felixstowe Port.  This will help to double the amount of freight travelling by rail get even more trucks off our roads – from Suffolk, through Cambridgeshire and all the way to the Midlands and further afield. I have been working on this project for more than five years.   Every time we get public or private investment for a bit of the route to be upgraded I help to get a bit of match funding from the EU budget.  Of course we need the road improvements too but the rail is a good start.