Comments on the Court of Auditors' report on "Sales of reduced-price butter within the Community"

General observations on the main points and the conclusions

1. Preliminary comments

This report examines the disposal, by special and generally expensive measures, of the surplus part of butter production. The Court of Auditors'report contains a detailed survey and a valuable analysis of the various measures for the disposal of butter at reduced prices.

It is the Commission's view that certain conclusions drawn by the Court of Auditors should be qualified. Further, the data on which the Court bases its analysis end at 1979 and therefore do not take sufficient account of recent developments. Thus the situation in the butter sector has changed considerably, particularly due to a reduction in the quantities of this product in public storage. Stocks fell from 270 750 tonnes at 31 December 1979 to 9 986 tonnes at 31 December 1981. Expenditure for storage and disposal operations, which amounted to 657 79 million ECU in 1979 fell to 433 (1) million ECU in 1981.

2. The objective of the measures

In this report, the Court expresses the view that "the objective of the legislation has not been achieved, for instead of increasing, consumption can be seen to have declined". The Commission would like to point out that the main objective of the legislation (Article 12 of Regulation (EEC) No 804/68) is the disposal of surplus production. It was impossible for consumption to increase in absolute terms due to the structural development of diminishing consumption of oils and fats in general and the increased competition between butter and vegetable-based oils and fats. In this context, the sale of 200 000 tonnes of surplus butter resulting from these measures in 1979 (12 % of consumption) constitutes a check on the decline in internal consumption. The effect of these measures should be assessed in the light of what would have been the probable development of consumption in their absence and in comparison with the other possibilities of disposal.

3. Cost of the measures

The Court of Auditors mentions that the average cost of the measures divided by the additional quantity disposed of varies considerably according to the measure in question. This finding is correct, but care is needed if conclusions are to be drawn as to future changes in the measures. A typical example is the sale of butter to the armed forces. This measure is extremely effective (95 %) and its average cost is not too high (180 ECU/100 kg). An increase in aid would not, however, result in an appreciable increase in consumption. A similar effect may equally occur in the case of the other measures. Once a certain threshold of saturation is reached, increase of the aid results in hardly any increase in consumption.

4. Exports

The Court finds that, considered as an additional means of disposal, export with refund is 100 % (1) Provisional figure based on 11 months of recorded expenditure and estimated expenditure for the 12th month. effective. It stresses therefore that, considering the lower level of effectiveness of internal disposal measures, export definitely appears to be the least expensive of all the internal measures. This finding is also correct, but here again any conclusions should be drawn with care. The removal of internal measures would necessitate additional exports of 200 000 tonnes (an extra ±40 % over present exports). There is reason to believe that such an additional quantity could only be disposed of on the world market at a price lower than that at present obtained, with even the risk of a collapse of prices on the world market. In that case, the basis of the present assessment would be radically altered.

5. Assessment of the effectiveness of the measures

As far as assessing the economic effectiveness of the measures is concerned, in particular determining the average cost per additional quantity disposed of or, what is more difficult, assessing the additional quantity which it is hoped will be disposed of in the event of intensification of the existing measure, the Commission departments are not in a position to carry out detailed enquiries for all these measures or in each Member State. The Commission, therefore, must limit itself to enquiries, calculations and estimates made by administrative departments in the Member States or derived from other specialized sources. Together with the Commission's data on quantities, conditions of sale, costs, etc., this information affords an overall view (admittedly sometimes approximate) which has improved over the years and which the Commission's departments are still seeking to improve and to supplement.

Considerable efforts have also been made recently to harmonize and speed up the transfer of information from the Member States, as illustrated by recent Commission Regulations. There is thus a minimum of delay in obtaining information for day-to-day management. In particular with regard to tenders, the Commission receives the necessary details (level of stocks, prices and other market factors) at the time of the decision.

6. The audit provisions

It is first and foremost the Member States who are responsible for implementing the various disposal measures. Their controls must comply with the requirements of Community legislation. How detailed these rules are depends upon the scale of the measure and the fraud risks involved. The Member States inform the Commission of the audit and control procedures used and these are examined by the Commission's departments.

The latter may also carry out special audits at any time, in particular where there is doubt as to the regularity of the operations and controls. The system of audit and control used by the Member States is also examined when checks are made for the purposes of clearance of accounts.