House of Commons European Scrutiny Committee Third Report of Session 2019–21 Documents considered by the Committee on 26 March 2020 Report, together with formal minutes Ordered by the House of Commons to be printed 26 March 2020 HC 229-i Published on 1 April 2020 by authority of the House of Commons Notes Numbering of documents Three separate numbering systems are used in this Report for European Union documents: Numbers in brackets are the Committee’s own reference numbers. Numbers in the form “5467/05” are Council of Ministers reference numbers. This system is also used by UK Government Departments, by the House of Commons Vote Office and for proceedings in the House. Numbers preceded by the letters COM or SEC or JOIN are Commission reference numbers. Where only a Committee number is given, this usually indicates that no official text is available and the Government has submitted an “unnumbered Explanatory Memorandum” discussing what is likely to be included in the document or covering an unofficial text. Abbreviations used in the headnotes and footnotes AFSJ Area of Freedom Security and Justice CFSP Common Foreign and Security Policy CSDP Common Security and Defence Policy ECA European Court of Auditors ECB European Central Bank EEAS European External Action Service EM Explanatory Memorandum (submitted by the Government to the Committee) * EP European Parliament EU European Union JHA Justice and Home Affairs OJ Official Journal of the European Communities QMV Qualified majority voting SEM Supplementary Explanatory Memorandum TEU Treaty on European Union TFEU Treaty on the Functioning of the European Union Euros Where figures in euros have been converted to pounds sterling, this is normally at the market rate for the last working day of the previous month. Further information Documents recommended by the Committee for debate, together with the times of forthcoming debates (where known), are listed in the European Union Documents list, which is published in the House of Commons Vote Bundle each Monday, and is also available on the parliamentary website. Documents awaiting consideration by the Committee are listed in “Remaining Business”: www.parliament.uk/escom. The website also contains the Committee’s Reports. *Explanatory Memoranda (EMs) and letters issued by the Ministers can be downloaded from the Cabinet Office website: http://europeanmemoranda.cabinetoffice.gov.uk/. Staff The staff of the Committee are Ravi Abhavarante (Office Support Assistant), Joanne Dee (Deputy Counsel for European Legislation), Alistair Dillon and Leigh Gibson (Clerk Adviser), Nat Ireton and Apostolos Kostoulas (Committee Assistant), Luanne Middleton (Second Clerk), Daniel Moeller (Senior Committee Assistant), Jessica Mulley (Clerk), Foeke Noppert (Clerk Adviser), Indira Rao (Counsel for European Legislation), Paula Saunderson (Office Support Assistant), Sibel Taner (Second Clerk), Emily Unwin (Deputy Counsel for European Legislation) George Wilson (Clerk Adviser), Beatrice Woods (Committee Assistant) Contacts All correspondence should be addressed to the Clerk of the European Scrutiny Committee, House of Commons, London SW1A 0AA. The telephone number for general enquiries is (020) 7219 3292/5467. The Committee’s email address is [email protected]. Contents Documents to be reported to the House as legally and/or politically important 1 BEIS EU Research Programme: Horizon Europe 1 2 DCMS Privacy and Electronic Communications 4 3 DEFRA Future of the Common Agricultural Policy 11 4 DEFRA Extension of the Common Agricultural Policy 14 5 DEFRA Organic products 16 6 DIT Enforcement of international trade rules 20 7 DIT Trade preferences for developing countries 26 8 HMT VAT threshold for small businesses 32 9 HMT Possible UK participation in EU funding programmes post-Brexit 36 10 HMT Trade in financial services: equivalence with the EU 43 11 HO EU Fund for Aid to the Most Deprived 54 Documents not raising questions of sufficient legal or political importance to warrant a substantive report to the House 57 Formal Minutes 61 Standing Order and membership 62 Third Report of Session 2019–21 1 1 EU Research Programme: Horizon Europe1 This EU document is politically important because: • it is relevant to the future EU-UK relationship. Action • Write to the Government, as detailed below, to seek further information. Overview 1.1 Research is one of the areas in which the EU and UK agreed in the Political Declaration to seek continued cooperation post-Brexit. Any such cooperation will take place within the context of the EU’s Framework Programme for research, the ninth of which—beginning on 1 January 2021—will be known as “Horizon Europe”. The Commission’s proposal for Horizon Europe has been under scrutiny by this Committee since 2018. Arrangements for the association of non-EU countries to Horizon Europe have yet to be agreed. 1.2 EU research policy is designed to encourage cooperation across countries and across disciplines. Our predecessors summarised the Commission’s proposal for the latest Framework Programme, Horizon Europe, in their Report of 21 November 2018.2 The overall budget envelope proposed for Horizon Europe over the 2021–27 period is €94.1bn (£82.5bn), up from €77bn (£68bn) over 2014–20. 1.3 The predecessor Committee last considered the proposal at its meeting of 2 October 2019,3 raising a series of questions about the Government’s approach to continued research cooperation with the EU post-Brexit and about research funding under a “no-deal” Brexit. 1.4 Since the Committee last reported, the Government has written on two occasions. In his letter of 21 October 2019, the then Minister of State for Universities, Science, Research and Innovation (Rt Hon. Chris Skidmore MP) confirmed the Government’s ongoing commitment to association with Horizon Europe. Regardless of whether association was agreed, he said, the “Government is committed to continuing to back UK researchers and innovators by supporting measures to enable world-class collaborative research, including support for small businesses”. 1.5 In a later letter, of 21 December 2019, the Minister explained that the Government supported a Partial General Approach on the Horizon Europe Regulation at the EU’s Competitiveness Council on 28–29 November even though the parliamentary scrutiny reserve remained in place. The Government took this decision, said the Minister, after much deliberation. 1 Proposal for a Regulation establishing Horizon Europe—the Framework Programme for Research and Innovation, laying down its rules for participation and dissemination; EU reference numbers: 9865/18 + ADDs 1–6, COM(18) 435; Legal base: Article 173(3) TFEU, Article 182(1) TFEU, Article 183 TFEU, Article 188 TFEU (second paragraph), ordinary legislative procedure, QMV;. Department: Business, Energy and Industrial Strategy; Devolved Administrations: Consulted; ESC number: 39882. 2 Forty-fifth Report HC 301–xliv (2017–19), chapter 3 (21 November 2018). 3 Seventy-fourth Report HC 301-lxxii (2017–19), chapter 1 (2 October 2019). Third Report of Session 2019–21 3 1.6 The main issue of interest to the UK in the ongoing EU negotiation regarding Horizon Europe is the matter of third country access, including the conditions of such access. This remains outstanding, along with the overall budget. 1.7 As the Committee reported in October, the European Parliament’s position on the draft Regulation establishing Horizon Europe would require the scope of each EU-third country association agreement to take into account, in addition to the objective specified by the Commission (“driving economic growth in the Union”), the aim to “avoid the brain drain from the Union”—an addition which could potentially affect the scope of any UK association to the Programme. Action 1.8 We note the outstanding matters in the negotiation and have therefore written to the Minister seeking an update on the arrangements for third country association. Letter from the Chair to Amanda Solloway MP We considered your predecessor’s letters of 21 October 2019 and 21 December 2019 regarding the proposed Horizon Europe Regulation at our meeting of 26 March 2020. We note that the matters of budget and third country participation remain outstanding but note the Government’s continued commitment to research collaboration with the EU under the future relationship. Based on the information available to you—which we appreciate will be more limited than it previously was—we would welcome information on the progress of the EU’s deliberations concerning third country participation in Horizon Europe. We would ask that you explain how that progress is informing the UK’s own position on association. We look forward to receiving your response by the end of April 2020. We are copying this letter to the Earl of Kinnoull, Chair of the EU Select Committee in the House of Lords and Christopher Johnson, Clerk of the Lords EU Select Committee; your Departmental EU Scrutiny team; and Les Saunders and Donald Harris in the Cabinet Office. 4 Third Report of Session 2019–21 2 Privacy and Electronic Communications4 This EU document is legally and politically important because: • just like the General Data Protection Regulation (GDPR), the proposal once operative will apply to providers outside the EU if they offer electronic communications services to EU end users. This ‘extraterritorial’ application will impact the UK regardless of whether the proposal becomes operative during transition (which seems unlikely) or afterwards; • the UK’s provision of equivalent protection of personal data relating to electronic communications will form part of the Commission’s data adequacy assessment. Even if a data adequacy decision is adopted, the Commission is under a duty to keep it under review and repeal, amend or suspend a decision if a third country is no longer providing adequate protection of EU citizens’ data; and • any provisions relating to national security and combatting child protection could therefore have implications for the UK, even after transition. Action • To write to the Digital Secretary (Rt Hon. Oliver Dowden MP), asking him to share any information he obtains about the progress of the proposal and highlighting the issues above.