THE FUTURE OF THE EC DEVELOPMENT BUDGET
The Financial Perspective
7. The EC disburses development assistance both through
the EC budget and also, for countries of Africa, the Caribbean
and the Pacific (ACP), under the Lomé Convention, which
is funded separately through the European Development Fund (EDF)
and agreed among member states through a separate decision-making
process, as shown in Figure 1. The focus of this inquiry has been
on the EC budget. We have discussed the Lomé Convention
in some detail in a previous Report,[11]
and shall no doubt return to it in the future. We limit our discussion
of the EDF in this Report to those aspects which relate to the
budget and to broader questions of development policy.
Figure 1: Organisation Chart
8. The allocation of resources by the EC is made
through a budget, agreed annually by the "Budgetary Authority",
that is, between the European Parliament and the Council of Ministers.
The Commission proposes a preliminary draft budget in Spring,
and this is discussed and amended by the Budgetary Authority before
being agreed in December. This annual allocation of resources
takes place within a longer-term framework called the financial
perspective. The financial perspective sets ceilings for each
year's expenditure under the following Categories:
1. Agriculture (Common Agriculture
Policy);
2. Structural Operations (including Structural Funds
and the Cohesion Fund);
3. Internal Policies;
4. External Action;
5. Administrative Expenditure; and
6. Financial Reserves.
The financial perspective does not normally include
a breakdown of expenditure within each category.
9. The current Financial Perspective, agreed in Edinburgh
in 1992, lasts for seven years, from 1993 to 1999, and discussions
are now underway on the Financial Perspective for the years 2000-2006.
We discuss the new Financial Perspective in detail later in this
Report.[12] The current
Financial Perspective set out ceilings for expenditure under Category
4 for 1993-99 as shown in Table 1 below.
Table 1: Category 4 Financial Perspective Ceilings
1993-99
|
1993
|
1994 |
1995
|
1996 |
1997
|
1998 |
1999
|
Category 4 Commitments (million ecu at current prices)
|
4,120 |
4,311
|
4,895 |
5,264
|
5,622 |
6,201
|
6,870 |
Increase on previous year (per cent)
|
- |
4.6
|
13.5 |
7.5
|
6.8 |
10.2
|
10.7 |
Category 4 Commitments (Percentage total EC budget)
|
5.7 |
5.8
|
6.0 |
6.1
|
6.2 |
6.5
|
6.6 |
Source: EC Preliminary Draft Budget 1999, Overview,
p.5
10. In 1998, Category 4 amounted to 6.2 billion ecu
(about £4.4 billion), or 6.5 per cent of the total EC budget.
Category 4, the external action category of the budget, relates
to expenditure outside the EC in pursuit of both development and
foreign policy objectives. This includes Official Development
Assistance (ODA) — aid to countries on Part I of the OECD
DAC list, which comprises least-developed and other low income
countries, lower middle income countries, upper middle income
countries, and some high income countries — and Official
Aid (OA) — aid to countries on Part II of the OECD DAC list,
which includes countries and territories in transition.[13]
ODA and OA together amount to about 90 per cent of Category 4
expenditure, with the UK contribution for both being attributed
to DFID.[14] Category
4 also includes a relatively small amount of expenditure relating
to external aspects of other EC policies, such as fisheries, which
do not count as either ODA or OA. The UK contribution to this
expenditure is attributed to other Whitehall departments.[15]
This Report does not examine those elements of the EC budget which
are not attributable to DFID, but concentrates on OA and ODA expenditure
within Category 4 of the EC Budget.
11. During the seven years covered by the current
Financial Perspective (1993-99), ceilings for Category 4 expenditure
increased by over 60 percent, a rate of growth higher than that
of the overall budget, which increased by 43.5 per cent.[16]
Category 4 therefore represents an increasing proportion of the
overall EC budget. This has led to an increase in the proportion
of DFID resources being channelled through the EC from 12 per
cent in 1980 to about 30 per cent now.[17]
The primary reason for this significant increase in the budgetary
allocations to Category 4 has been the expansion of the EC's assistance
to the countries of Central and Eastern Europe (Phare), the former
Soviet Union (TACIS), and the Mediterranean and Middle East (MEDA).
12. The external action budget of Category 4 is currently
managed by four Directorates-General (DGs) and the European Community
Humanitarian Office (ECHO). They are often known as the 'Relex
DGs' ('relations extérieurs'). Their responsibilities
are set out in Table 2 below. The Budgets Directorate-General,
DGXIX, is responsible for coordinating Commission proposals for
financial perspectives and annual budgets.
Table 2: The Management of Category 4 Expenditure
Directorate-General for Development, DGVIII
|
- Cooperation with African, Caribbean and Pacific (ACP) Countries
- Aid for some budget lines benefiting all developing countries ("horizontal budget lines"), eg NGO co-financing.
|
Directorate-General for External Relations, DGI
|
- Relations with Hong Kong, China and Chinese Taipei
- International negotiations eg the GATT
|
Directorate-General for External Relations, DGIA
|
- Cooperation with central and eastern European countries (CEECs) and new independent states (NIS), Mongolia, Turkey, Cyprus and a number of southern eastern European countries
- Management of the Phare and Tacis programmes.
|
Directorate-General for External Relations, DGIB
|
- Cooperation with developing countries in the southern Mediterranean, Middle East, Latin America and most Asian countries.
|
European Community Humanitarian Office, ECHO
|
- Management of humanitarian aid and coordination with the efforts of member states.
|
Source: Understanding EC Aid, ODI 1997, p.19
1. The Directorates-General are responsible for the
main regional programmes administered under the Category 4 heading
of the EC budget. In addition to these regional programmes, there
are also cross-cutting, thematic budget lines (for example on
drugs, environment...) known as 'horizontal' budget lines. Development-related
horizontal budget lines (other than emergency aid, which is managed
by ECHO) are managed, for the main part, by DGVIII, but can be
spent in any country. We will consider the effectiveness of the
current organisation of Directorates-General later in this Report.[18]
11 Fourth Report from the Committee, Session 1997-98,
'The Renegotiation of the Lomé Convention', HC 365. Back
12 see
paras 29-36 Back
13 Development
Assistance Committee of the Organisation for Economic Cooperation
and Development (OECD). For a full list, see Evidence p.7 Back
14 Evidence
p.1 Back
15 Evidence
p.1 Back
16 Preliminary
Draft General Budget of the European Communities for the financial
year 1999, Overview, May 1998, p.5 Back
17 Evidence
p.2 Back
18 paras64-75 Back
|
