Background
3.1 We reported on the Commission's Preliminary Draft Budget (PDB) for 1997 on 26
June 1996[5]. The PDB was subsequently debated in European
Standing Committee B on Wednesday 10 July.
The Draft General Budget
3.2 The present document is the Council's Draft General Budget, established after
consideration of the PDB and, because it departs from the PDB, after consultation with the
Commission and, where appropriate, the other Institutions concerned.
The Council's general approach
3.3 In the Introduction to Volume 8 of the Budget documents it is explained that in
establishing the Draft Budget (DB) for 1997, the Council's intention was to follow the same
principles of budgetary rigour as those which the Member States themselves imposed upon themselves
and their citizens, defining real priorities within the resources available and ensuring that
budgetary entries were realistic and reflected the scope for their utilisation.
3.4 The Council's approach was to seek a 1 billion ECU (£804 million) reduction
in appropriations, compared with the PDB, in heading 1 of the Financial Perspective (common
agricultural policy) by a reduction across the board, apart from the beef and veal chapter and the
temporary BSE reserve, and a reduction of the same scale (1 billion ECU) in payment appropriations
in heading 2 (Structural Funds). Significant reductions (in the region of 550 million ECU) would
also be sought under headings 3 and 4 (internal policies and external action).
3.5 How this is translated into the Draft General Budget is described in an
Explanatory Memorandum dated 11 October submitted by the Chief Secretary to the Treasury (Mr
Waldegrave), from which the following is an extract:
"The DB is consistent with the expenditure ceilings (the "financial
perspective") which were agreed by the European Council at Edinburgh in December 1992. The
DB respects the commitment ceiling for each category of expenditure, and leaves a considerable
margin below the overall ceiling for both commitments and payments. The DB significantly respects
the new own resources ceiling (1.24 per cent of Community GNP). The categories of expenditure used
in the financial perspective, which were also used in the PDB, are used in this Explanatory
Memorandum. A summary table, comparing the DB with the PDB and the financial perspective ceilings,
in both ECU and sterling, is attached at Annex A.
Content
"The DB consists of 8 volumes. Volume 8 is a summary volume which also
outlines the Council's consideration of the PDB. Volume 1 is a summary of the estimated revenue
and expenditure of each of the Community Institutions. Volume 4 covers the budget of the
Commission, the bulk of Community spending. Other volumes cover the budgets of the other
Institutions: the Parliament (Volume 2); the Council (Volume 3); the European Court of Justice
(Volume 5); the European Court of Auditors (Volume 6); and the Economic and Social Committee and
the Committee of the Regions (Volume 7).
Summary of figures
"Commitments represent the entering into force of legal obligations that will
result in payments, either immediately or in the future. Payments thus flow from commitments. The
table at Annex B sets out the main figures for commitments in the DB in ECU, comparing them to the
PDB and in percentage terms to the 1996 Adopted Budget. The table at Annex C gives sterling
equivalents. The table at Annex D sets out the main figures in the DB, with sterling equivalents
at Annex E.
"The total for commitment appropriations in the DB is 88,461 million
ECU (£71,122 million), which is:
-- 1,611 million ECU (£1,295 million) below the Commission's PDB;
-- 1,768 million ECU (£1,421 million) below the financial
perspective ceiling; and
-- 2.24 per cent above the 1996 budget.
"The total for payment appropriations in the DB is 81,646 million ECU
(£65,643 million), which is:
-- 2,875 million ECU (£2,311 million) below the Commission's PDB;
-- 4,161 million ECU (£3,345 million) below the financial
perspective ceiling; and
-- 0.30 per cent below the 1996 budget.
"The total to be raised from own resources, including payments to reserves is
81,031 million ECU (£65,148 million). This represents some 1.15 per cent of Community GNP,
compared to the own resources ceiling of 1.24 per cent. The cash margin within the own resources
ceiling is some 6,020 million ECU (around £4,840 million).
"Agricultural Guarantee. Commitment appropriations for agricultural
market expenditure total 40,805 million ECU (£32,807 million). The Council established a
budget which is 1 billion ECU (£804 million) below the PDB figure (which was set at the level
of the agricultural guideline) by across-the-board reductions in all agriculture budget lines except
the beef and veal chapter and the temporary BSE reserve (introduced in the PDB).
"Structural Operations. Commitment appropriations for Structural
Operations total 31,477 million ECU (£25,307 million) which is unchanged from the PDB and is
equal to the financial perspective ceiling. Payment appropriations were reduced by 1 billion ECU
by across-the-board cuts in all sections except the Cohesion Fund and the EEA Financial Mechanism.
"Internal policies (including research and development (R&D)).
Commitment appropriations for internal policies total 5,255 million ECU (£4,225 million), 1.3
per cent below the 1996 budget, 268 million ECU (£216 million) below the Commission's PDB and
348 million ECU (£280 million) below the financial ceiling. R&D accounts for 3,450 million
ECU (£2,774 million), 8.4 per cent higher than the 1996 budget and the same as the PDB. Trans
European Networks have been reduced by 37 million ECU (£30 million) from the PDB figure. Other
significant reductions have been in information and communications policies down 58 million ECU
(£47 million), other social operations down 46 million ECU (£37 million) and education
and youth policies down 23.5 million ECU (£19 million).
"External Action.Commitment appropriations for external action total
5,310 million ECU (£4,269 million), 0.9 per cent above the 1996 budget, 218 million ECU
(£176 million) below the Commission's PDB and 312 million ECU (£251 million) below the
financial perspective ceiling. The DB includes provision of 853 million ECU (£686 million)
for food and humanitarian aid, 6.5 per cent below the 1996 budget and 50 million ECU below the PDB.
Assistance to Central and Eastern Europe and the new Independent States of the former Soviet Union
totals 1,814 million ECU (£1,458 million), 3.0 per cent higher than the 1996 budget and the
same as the PDB. Assistance to the Mediterranean region totals 1,000 million ECU (£804
million), 45 per cent above the 1996 budget and the same as the PDB."
"Administration. Commitment appropriations for administration total
4,245 million ECU (£3,413 million), an overall increase of 2.8 per cent over the 1996 budget,
125 million ECU (£100 million) below the Commission's PDB and 107 million ECU (£86
million) below the financial perspective ceiling. Of the total, 421 million ECU (£339 million)
is for pensions, a 6.2 per cent increase over the 1996 budget. Total administrative expenditure
breaks down into 2,760 million ECU (£2,219 million) for Commission administration, an increase
of 2.4 per cent above the 1996 budget, and 1,484 million ECU (£1,193 million) for the other
Institutions, an increase of around 3.7 per cent over 1996."
The tables mentioned in this extract from the Minister's Memorandum are reproduced
below.
The Government's views
3.6 The Minister says in his EM that the Government supports the Council's first
reading DB "which established considerable margins below the financial perspective and is
significantly below the resources ceiling of 1.24 per cent of Community GNP."
Implications for the United Kingdom
3.7 The Minister tells us:
"The net financial cost to the UK of the 1997 Budget will depend not only on
the size of the Budget that is finally adopted but also on the balance between different spending
programmes. The DB shows a gross contribution after abatement for the UK of 9,258 million ECU
(£7,443 million). It contains amounts of 2,552 million ECU (£2,052 million) for the UK's
abatement in 1997 and a 0.421 million ECU (£0.338 million) reduction to our contributions for
UK exemption from the costs of social policy. The figure for the UK abated gross contribution
includes a contribution of 152 million ECU (£122 million) to the Budget's reserves, which will
not be paid unless called up."
Conclusion
3.8 The Draft General Budget is clearly a matter of political importance. It is
pleasing to note the robust line which the Council has taken in reducing the DB below the level of
the Commission's PDB and that, even if commitment appropriations are 2.24 per cent above the 1996
Budget, payment appropriations have been reduced. We also note the significant amount for BSE
compensation measures. There was a debate on the Commission's Preliminary Draft Budget as recently
as 10 July 1996, and we would not normally recommend a further debate on the Budget so shortly
afterwards. In this case, however, there has been a significant change both of emphasis and
substance. The Draft Budget seeks to secure significant reductions in expenditure, whilst at the
same time acknowledging the inevitability of increased expenditure on compensation measures in the
beef and veal sector. These measures are reflected in the Commission's Letter of Amendment to its
Preliminary Draft Budget which we consider in paragraph 4 of this Report.
3.9 Our conclusion is that there should be a further debate in European Standing
Committee B to consider the Draft General Budget and the Commission's Letter of Amendment. The
debate will provide an opportunity to consider, in particular, the proposed additional expenditure
in the beef and veal sector and the economies which are to be sought in other areas of the Budget.
The debate should take place as soon as possible, and certainly before the Council is required to
consider the European Parliament's response to the Draft Budget.
