Select Committee on European Legislation Third Report


1997 BUDGET

2.   We consider that the following raises questions of political importance, and recommend its further consideration by European Standing Committee B, together with the Council's Draft General Budget (17484) 9372/96, already so recommended[3]:--

H M Treasury

(17594) PE 252.724

The European Parliament's proposed amendments and modifications to the Draft General Budget of the European Community for the financial year 1997.

Legal base:

Article 203; qualified majority voting.

  Background

2.1  On 30 October 1996, we reported on the Council's Draft General Budget (DGB) for 1997 and recommended a debate in European Standing Committee B. The present document is the minutes of the sitting of the European Parliament of 24 October 1996 at which it adopted a number of amendments and modifications to the DGB. These are described in an Explanatory Memorandum, dated 12 November, submitted by the Exchequer Secretary (Mr Oppenheim).

  The proposed amendments and modifications

2.2  The Minister reminds us that the European Parliament may propose modifications to compulsory expenditure (mainly agriculture spending) and adopt amendments to non-compulsory expenditure, which amounts to just over 50% of the total budget. Whilst the European Parliament has the last word on non-compulsory expenditure, the Council, the European Parliament and the Commission are committed to the Inter-Institutional Agreement which sets out the main budget priorities over a number of years. It includes the Financial Perspective, which sets ceilings for each of seven expenditure categories.

2.3  The changes proposed by the European Parliament are described in the following extract from the Minister's Explanatory Memorandum:

"A summary table comparing the European Parliament's DB with Financial Perspective ceilings is attached at Annex A[4]. The effect of the European Parliament's changes would be to leave a margin for commitments of 1,042 million ECU (£815 million) and payments of 3,293 million ECU (£2,575 million) below the overall financial perspective ceilings. Payment appropriations at 1.20% of Community GNP are significantly within the new own resources ceiling of 1.24 per cent.

  Summary of figures

"Commitments represent the entering into of legal obligations that will result in payments, either immediately or in the future. Payments thus flow from the commitments. The table at Annex B sets out the main figures for commitments in the European Parliament's proposed DB, comparing them to the Preliminary Draft Budget (PDB) and the Council's DB. The table at Annex C gives sterling equivalents. The table at Annex D sets out the main figures for payments in the European Parliament's proposed DB, with sterling equivalents at Annex E.

"The European Parliament have proposed a DB of 89,187 million ECU (£69,759 million) in commitment appropriations and 82,514 million ECU (£64,540 million) in payment appropriations. These amounts compare with the Council's DB of 88,461 million ECU (£69,191 million) in commitments and 81,646 million ECU (£63,861 million) in payments.

"Agricultural guarantee. Commitment appropriations for agricultural guarantee expenditure total 40,805 million ECU (£31,916 million), 1 billion ECU (£782 million) below the Financial Perspective ceiling, which agree with the Council's proposal.

"Structural operations. Commitment appropriations for structural operations total 31,477 million ECU (£24,620 million), at the Financial perspective ceiling, which agrees with the Council proposal. However, the European Parliament have reallocated expenditure within structural operations and have transferred 100 million ECU (£78 million) for the Irish Peace Process to a new reserve headed 'Union priorities'. It has increased provision by 100 million ECU (£78 million) for Rechar (economic conversion of coal mining areas) and Retex (textiles and clothing industry).

"Other 'internal policies', including Research and Development (R&D) and Trans- European Networks (TENs). The European Parliament have proposed commitments of 5,529 million ECU (£4,325 million), 74 million ECU (£58 million) below the Financial Perspective ceiling. The proposed budget represents an increase of 274 million ECU (£214 million) above the Council's DB. The increases include 77 million ECU (£60 million) for social programmes, 74 million ECU (£58 million) for internal market measures, 62 million ECU (£48 million) for information and communication programmes, 31 million ECU (£24 million) for education and youth policies and 24 million ECU (£19 million) for energy policies. The European Parliament have proposed a small increase for TENs of 7 million ECU (£5 million) and a reduction of 50 million ECU (£39 million) to R&D.

"External action. The European Parliament have proposed commitments of 5,495 million ECU (£4,298 million), 127 million ECU (£99 million) below the Financial Perspective ceiling. The proposed budget represents an increase of 185 million ECU (£145 million) above the Council's DB. The European Parliament have proposed a number of amendments including an increase of 296 million ECU (£232 million) in aid to the former Yugoslavia (including a transfer of 154 million ECU (£120 million) for the reconstruction of Central and East European countries), an increase of 51 million ECU (£40 million) for humanitarian aid and 35 million ECU (£27 million) for co-operation with Asia and Latin American countries.

"Administration. Commitment appropriations for administration total 4,284 million ECU (£3,350 million), 68 million ECU (£53 million) below the Financial Perspective ceiling. This represents an increase of 39 million ECU (£31 million) above the Council's DB. The main increases are 19 million ECU (£15 million) for Commission mission expenses and 10 million ECU (£8 million) for Commission delegations overseas.

"Reserves. Commitment appropriations total 1,158 million ECU (£906 million), which agree with the Council's proposal.

"Compensation payments. Commitment appropriations total 21 million ECU (£166 million), which agree with the Council's proposal.

      "Union priorities and negative reserve. The European Parliament have inserted a new heading to cover Union priorities of 300 million ECU (£235 million), balanced by a negative reserve of 73 million ECU (£57 million). This is intended to cover 100 million ECU (£78 million) for the Irish Peace Process, with the remainder being set aside for TENs and R&D."

  The Government's view

2.4  In his Memorandum, the Minister says that the Government will continue to press for strict budget discipline to be maintained and ensure that the Financial Regulation is strictly applied. On the detailed proposals, he tells us:

"The Government is concerned that money for the Irish Peace Process has been put in a reserve and that this expenditure has been reallocated to other Structural Funds projects. The Government will press for the reinstatement of the Council's DB position when the 1997 DB is discussed at the Budget Council on 19 November. The Government will also press for greater margins of expenditure below the Financial Perspective ceilings for categories 3,4 and 5."

  Financial implications

2.5  The Minister notes that the European Parliament has not provided details of the revenue which would be required to be raised from Member States to fund its proposed DB. He continues:

"The 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 and the revenue available to fund their shares of the Budget. As it is unclear what assumptions the European Parliament have made about the latter issue it is not possible to estimate the financial implications for the UK arising from the differences between the European Parliament's and the Council's draft budgets, though these are not expected to be significantly different to those provided in the Explanatory Memorandum on the Council's Draft Budget (9372/96). The UK will continue to seek to ensure that the costs of its contribution to the EC budget are kept as low as possible."

  Conclusions

2.6  We have already recommended a debate in European Standing Committee B on the Council's Draft General Budget because of the differences between it and the Commission's Preliminary Draft Budget: in particular, the significant overall reductions in expenditure proposed by the Council and the increased expenditure foreseen for compensatory measures in the beef and veal sector. As that debate has not yet taken place, we have no hesitation in saying that the European Parliament's proposed modifications and amendments to the DGB should be considered on the same occasion.

2.7  As to the matters which might be addressed during the debate, we draw attention to the European Parliament's Resolution on the Budget[5] which sets out its priorities and the reasons for the modifications and amendments which it has proposed to the Council's Draft Budget. We note in particular that the European Parliament's reasons for transferring certain items of proposed expenditure to a new reserve to cover "Union priorities" and for achieving balance by the undesirable practice of creating a negative reserve appear to arise less from the merits of the proposals which have been place in the reserve than from the European Parliament's pique at the Council's refusal to agree to the Parliament's proposals for amendment of the financial perspective.

ANNEX A
					(million ECU)
Commitment appropriations	FP ceiling (1997 prices)	1997 PDB	1997 Council DB (first reading)	1997 European Parliament DB (first reading)	Headroom below ceiling
1. EAGGF Guarantee	41,805	41,805	40,805	40,805	-1,000.0
2. Structural Operations	31,477	31,477	31,477	31,477	-
3. Internal policies	5,603	5,523	5,255	5,529	-74.1
4. External Action	5,622	5,528	5,310	5,495	-126.7
5. Administration	4,352	4,369	4,245	4,284	-68.4
6. Reserves	1,158	1,158	1,158	1,158	-
7. Compensation	212	212	212	212	-
8. Union priorities reserve	-	-	-	300	300.0
Negative reserve	-	-	-	-73	-73.2
Total: Commitment appropriations	90,229	90,072	88,461	89,187	-1,042.4
Total: Payment appropriations	85,807	84,521	81,646	82,514	-3,292.6
					(£ million)
Commitment appropriations	FP ceiling (1997 prices)	1997 PDB	1997 Council DB (first reading)	1997 European Parliament DB (first reading)	Headroom below ceiling
1. EAGGF Guarantee	32,698	32,698	31,916	31,916	-782.2
2. Structural Operations	24,620	24,620	24,620	24,620	-
3. Internal policies	4,382	4,320	4,110	4,325	-58.0
4. External Action	4,397	4,324	4,153	4,298	-99.1
5. Administration	3,404	3,418	3,320	3,350	-53.5
6. Reserves	906	906	906	906	-
7. Compensation	166	166	166	166	-
8. Union priorities reserve	-	-	-	235	234.6
Negative reserve	-	-	-	-57	-57.3
Total: Commitment appropriations	70,574	70,452	69,191	69,759	-815.3
Total: Payment appropriations	67,115	66,110	63,861	64,540	-2,575.4

ANNEX B
Commitment appropriations	1996 Budget	1997 PDB	1997 Council DB (first reading)	1997 European Parliament DB (first reading)	Variance (1997 EP DB - PDB)	(million ECU) %change EP DB on 1996
1 EAGGF Guarantee
Total 1	40,828.0	41,805.0	40,805.0	40,805.0	-1,000.0	-0.06%
2 Structural Operations
- Structural Funds	26,579.0	28,620.0	28,620.0	28,620.0	0.0	7.68%
- Cohesion Fund	2,444.0	2,749.0	2,749.0	2,749.0	0.0	12.48%
- EEA Financial Mechanism	108.0	108.0	108.0	108.0	0.0	0.00%
Total 2	29,131.0	31,477.0	31,477.0	31,477.0	0.0	8.05%
3 Internal Policies
- Research	3,183.1	3,450.0	3,450.0	3,400.0	-50.0	6.81%
- Trans-European Networks	410.0	526.0	489.0	496.0	-30.0	20.97%
- Other Policies	1,731.2	1,547.0	1,315.8	1,632.9	85.9	-5.68%
Total 3	5,324.3	5,523.0	5,254.8	5,528.9	5.9	3.84%
4 External Action
- Food & humanitarian aid	912.4	903.0	853.0	904.2	1.2	-0.90%
- Co-operation with:
a) Asia/Latin America	669.5	694.9	616.5	651.8	-43.1	-2.64%
b) Mediterranean	688.0	1,000.0	1,000.0	994.7	-5.3	44.58%
c) Central & Eastern Europe	1,233.5	1,273.0	1,273.0	1,106.5	-166.5	-10.30%
d) new Independent States	528.0	540.7	540.7	540.5	-0.2	2.37%
e) republics of former Yugoslavia	98.0	100.0	100.0	396.2	296.2	304.29%
- CFSP	62.0	50.0	50.0	30.0	-20.0	-51.61%
- Other actions	1,069.1	966.5	876.5	871.4	-95.1	-18.50%
Total 4	5,260.5	5,528.1	5,309.7	5,495.3	-32.8	4.46%
5 Administration
- Commission	2,696.7	2,844.7	2,760.5	2,798.1	-46.6	3.76%
(of which: pensions)	(396.5)	(432.5)	(421.3)	(421.3)	(11.2)	(6.24%)
- other Institutions	1,431.9	1,524.7	1,484.2	1,485.5	-39.2	3.75%
Total 5	4,128.6	4,369.4	4,244.6	4,283.6	-85.8	3.75%
6 Reserves
- Monetary Reserve	500.0	500.0	500.0	500.0	0.0	0.00%
- Loan Guarantee Fund	326.0	329.0	329.0	329.0	0.0	0.92%
- Emergency Aid	326.0	329.0	329.0	329.0	0.0	0.92%
Total 6	1,152.0	1,158.0	1,158.0	1,158.0	0.0	0.52%
7 Compensation
Total 7	701.0	212.0	212.0	212.0	0.0	-69.76%
Priorities for the Union				300.0	300.0
Negative reserve (Chapter B0-42)				-73.2	-73.2
Grand Total: Commitment appropriations	86,525.5	90,072.5	88,461.1	89,186.6	-885.9	3.08%
of which: compulsory expenditure	43,419.1	43,799.0	42,773.1	42,777.4	-1,021.6	-1.48%
non-compulsory expenditure	43,106.4	46,273.5	45,688.0	46,409.2	135.7	7.66%

ANNEX C
Commitment appropriations	1996 Budget	1997 PDB	1997 Council DB (first reading)	1997 European Parliament DB (first reading)	Variance (1997 EP DB - PDB)	(million ECU) %change EP DB on 1996
1 EAGGF Guarantee
Total 1	31,934.3	32,698.5	31,916.3	31,916.3	-782.2	-0.06%
2 Structural Operations
- Structural Funds	20,789.2	22,385.6	22,385.6	22,385.6	0.0	7.68%
- Cohesion Fund	1,911.6	2,150.2	2,150.2	2,150.2	0.0	12.48%
- EEA Financial Mechanism	84.5	84.5	84.5	84.5	0.0	0.00%
Total 2	22,785.3	24,620.3	24,620.3	24,620.3	0.0	8.05%
3 Internal Policies
- Research	2,489.7	2,698.5	2,698.5	2,659.4	-39.1	6.81%
- Trans-European Networks	320.7	411.4	382.5	387.9	-23.5	20.97%
- Other Policies	1,354.1	1,210.0	1,029.1	1,277.2	67.2	-5.68%
Total 3	4,164.5	4,319.9	4,110.1	4,324.5	4.6	3.84%
4 External Action
- Food & Humanitarian aid	713.6	706.3	667.2	707.2	0.9	-0.90%
- Co-operation with:
a) Asia/Latin America	523.7	543.5	482.2	509.8	-33.7	-2.64%
b) Mediterranean	538.1	782.2	782.2	778.0	-4.1	44.58%
c) Central & Eastern Europe	964.8	995.7	995.7	865.5	-130.2	-10.30%
d) new Independent States	413.0	422.9	422.9	422.8	-0.2	2.37%
e) republics of former Yugoslavia	76.7	78.2	78.2	309.9	231.7	304.29%
- CFSP	48.5	39.1	39.1	23.5	-15.6	-51.61%
- Other actions	836.2	756.0	685.6	681.6	-74.4	-18.50%
Total 4	4,114.6	4,323.9	4,153.1	4,298.2	-25.7	4.46%
5 Administration
- Commission	2,109.3	2,225.0	2,159.2	2,188.6	-36.4	3.76%
(of which: pensions)	(310.1)	(338.3)	(329.5)	(329.5)	(8.8)	(6.24%)
- other Institutions	1,120.0	1,192.6	1,160.9	1,161.9	-30.6	3.75%
Total 5	3,229.3	3,417.6	3,320.0	3,350.5	-67.1	3.75%
6 Reserves
- Monetary Reserve	391.1	391.1	391.1	391.1	0.0	0.00%
- Loan Guarantee Fund	255.0	257.3	257.3	257.3	0.0	0.92%
- Emergency Aid	255.0	257.3	257.3	257.3	0.0	0.92%
Total 6	901.1	905.7	905.7	905.7	0.0	0.52%
7 Compensation
Total 7	548.3	165.8	165.8	165.8	0.0	-69.76%
Priorities for the Union				234.6	234.6
Negative reserve (Chapter B0-42)				-57.3	-57.3
Grand Total: Commitment appropriations	67,677.3	70,451.7	69,191.3	69,758.8	-692.9	3.08%
of which:
compulsory expenditure	33,960.9	34,258.1	33,455.7	33,459.0	-799.1	-1.48%
non-compulsory expenditure	33,716.4	36,193.6	35,735.6	36,299.7	106.2	7.66%

ANNEX D
Commitment appropriations	1996 Budget	1997 PDB	1997 Council DB (first reading)	1997 European Parliament DB (first reading)	Variance (1997 EP DB - PDB)	(million ECU) %change EP DB on 1996
1 EAGGF Guarantee Total 1	40,828.0	41,805.0	40,805.0	40,805.0	-1,000.0	-0.06%
2 Structural Operations
- Structural Funds	23,727.0	24,866.0	23,866.0	23,866.0	-1,000.0	0.59%
- Cohesion Fund	1,919.3	2,326.0	2,326.0	2,326.0	0.0	21.19%
- EEA Financial Mechanism	108.0	108.0	108.0	108.0	0.0	0.00%
Total 2	25,754.3	27,300.0	26,300.0	26,300.0	-1,000.0	2.12%
3 Internal Policies
- Research	3,096.6	3,220.0	3,071.0	3,110.4	-109.6	0.45%
- Trans-European Networks	277.0	380.2	346.4	346.2	-34.0	24.97%
- Other Policies	1,658.9	1,590.3	1,402.8	1,630.2	39.9	-1.73%
Total 3	5,032.4	5,190.4	4,820.1	5,086.7	-103.7	1.08%
4 External Action
- Food & Humanitarian aid	746.5	787.5	727.5	772.2	-15.3	3.44%
- Co-operation with:
a) Asia/Latin America	355.0	389.3	345.0	368.6	-20.7	3.83%
b) Mediterranean	527.5	681.0	631.0	675.7	-5.3	28.09%
c) Central & Eastern Europe	1,145.5	1,168.0	1,095.0	994.3	-173.7	-13.20%
d) new Independent States	445.0	490.0	445.0	489.8	-0.2	10.07%
e) republics of former Yugoslavia	85.5	80.0	80.0	353.0	273.0	312.87%
- CFSP	68.3	40.0	40.0	30.0	-10.0	-56.04%
- Other actions	918.9	850.8	743.1	758.6	-92.1	-17.44%
Total 4	4,292.1	4,486.5	4,106.5	4,442.2	-44.3	3.50%
5 Administration
- Commission	2,696.7	2,844.7	2,760.5	2,798.1	-46.6	3.76%
(of which: pensions)	(396.5)	(432.5)	(421.3)	(421.3)	(11.2)	(6.24%)
- other Institutions	1,431.9	1,524.7	1,484.2	1,485.5	-39.2	3.75%
Total 5	4,128.6	4,369.4	4,244.6	4,283.6	-85.8	3.75%
6 Reserves
- Monetary Reserve	500.0	500.0	500.0	500.0	0.0	0.00%
- Loan Guarantee Fund	326.0	329.0	329.0	329.0	0.0	0.92%
- Emergency Aid	326.0	329.0	329.0	329.0	0.0	0.92%
Total 6	1,152.0	1,158.0	1,158.0	1,158.0	0.0	0.52%
7 Compensation
Total 7	701.0	212.0	212.0	212.0	0.0	-69.76%
Priorities for the Union				300.0	300.0
Negative reserve (Chapter B0-42)				-73.2	-73.2
Grand Total: Payment appropriations	81,888.4	84,521.3	81,646.3	82,514.4	-2,007.0	0.76%
of which:
compulsory expenditure	43,425.6	43,951.3	42,918.6	42,920.2	-1,031.1	-1.16%
non-compulsory expenditure	38,462.9	40,570.1	38,727.7	39,594.2	-975.8	2.94%

ANNEX E
Commitment appropriations	1996 Budget	1997 PDB	1997 Council DB (first reading)	1997 European Parliament DB (first reading)	Variance (1997 EP DB - PDB)	(million ECU) %change EP DB on 1996
1 EAGGF Guarantee
Total 1	31,934.3	32,698.5	31,916.3	31,916.3	-782.2	-0.06%
2 Structural Operations
- Structural Funds	18,558.4	19,449.4	18,667.2	18,667.2	-782.2	0.59%
- Cohesion Fund	1,501.2	1,819.3	1,819.3	1.819.3	0.0	21.19%
- EEA Financial Mechanism	84.5	84.5	84.5	84.5	0.0	0.00%
Total 2	20,144.1	21,353.1	20,571.0	20,571.0	-782.2	2.12%
3 Internal Policies
- Research	2,422.0	2,518.6	2,402.0	2,432.8	-85.8	0.45%
- Trans-European Networks	216.7	297.3	270.9	270.8	-26.6	24.97%
- Other Policies	1,297.5	1,243.9	1,097.2	1,275.1	31.2	-1.73%
Total 3	3,936.2	4,059.8	3,770.2	3,978.7	-81.1	1.08%
4 External Action
- Food & Humanitarian aid	583.9	616.0	569.0	604.0	-12.0	3.44%
- Co-operation with:
a) Asia/Latin America	277.7	304.5	269.8	288.3	-16.2	3.83%
b) Mediterranean	412.6	532.7	493.5	528.5	-4.12	8.09%
c) Central & Eastern Europe	896.0	913.6	856.5	777.7	-135.9	-13.20%
d) new Independent States	348.1	383.3	348.1	383.1	-0.21	0.07%
e) republics of former Yugoslavia	66.9	62.6	62.6	276.1	213.5	312.87%
- CFSP	53.4	31.3	31.3	23.5	-7.8	-56.04%
- Other actions	718.7	665.4	581.2	593.4	72.0	-17.44%
Total 4	3,357.2	3,509.2	3,212.0	3,474.6	-34.7	3.50%
5 Administration
- Commission	2,109.3	2,225.0	2,159.2	2,188.6	-36.4	3.76%
(of which: pensions)	(310.1)	(338.3)	(329.5)	(329.5)	(8.8)	(6.24%)
- other Institutions	1,120.0	1,192.6	1,160.9	1,161.9	-30.6	3.75%
Total 5	3,229.3	3,417.6	3,320.0	3,350.5	-67.1	3.75%
6 Reserves
- Monetary Reserve	391.1	391.1	391.1	391.1	0.0	0.00%
- Loan Guarantee Fund	255.0	257.3	257.3	257.3	0.0	0.92%
- Emergency Aid	255.0	257.3	257.3	257.3	0.0	0.92%
Total 6	901.1	905.7	905.7	905.7	0.0	0.52%
7 Compensation
Total 7	548.3	165.8	165.8	165.8	0.0	-69.76%
Priorities for the Union				234.6	234.6
Negative reserve (Chapter B0-42)				-57.3	-57.3
Grand Total: Payment appropriations	64,050.4	66,109.8	63,861.0	64,540.0	-1,569.8	0.76%
of which:
compulsory expenditure	33,966.0	34,377.2	33,569.5	33,570.7	-806.5	-1.16%
non-compulsory expenditure	30,084.4	31,732.5	30,291.5	30,969.3	-763.3	2.94%

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3.  17484 (9372/96; see HC 36-i (1996-97), paragraph 3 (30 October 1996).

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4.  The Annexes referred to in this extract are reproduced above.

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5.  A4-0310/96.

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Prepared 2nd December 1996