2000 BUDGET
(a)
(20840)
PE 168.537
(b)
(20900)
13476/99
—
(c)
(20989)
—
SEC(00) 150
(d)
(21061)
OJ No. L 40
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Amendments and proposed modifications proposed by the European
Parliament in its first reading on 28 October 1999 of the draft
General Budget of the European Communities for the financial year
2000.
Amendments made by the Budget Council to the draft General Budget
of the European Communities for the Financial Year 2000 at its second
reading on 26 November 1999.
Overview of the General Budget of the European Union for the
Financial Year 2000 adopted following the European Parliament's
second reading on 16 December 1999.
Final Adoption of the General Budget of the European Union for the
Financial Year 2000.
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| Legal base: |
Article 272 EC; the special rôle of the European Parliament
regarding adoption of the Budget is set out in the Article;
qualified majority voting
|
| |
| Department: |
HM Treasury |
| Basis of consideration:
| (a) EM of 13 January 2000
(b) EM of 8 February 2000
(c) EM of 28 February 2000 and letter of 29 February 2000
(d) EM of 21 March 2000 and letter of 18 March 2000
|
| Previous Committee Report:
| None (but see paragraphs 25.1 - 25.3 below)
|
| To be discussed in Council:
| Not applicable |
| Committee's assessment:
| Politically important |
| Committee's decision:
| Cleared |
Background
25.1 The annual budgetary process begins
with the publication of the Commission's Preliminary Draft Budget
(PDB). We reported on the Commission's overview of the
PDB on 26 May 1999[44]
and on the full PDB on 30 June 1999[45].
We recommended debate in European Standing Committee B, which
took place on 7 July 1999[46].
25.2 After considering the PDB, the Budget
Council publishes its Draft Budget (DB), amending the PDB. We
reported and cleared the DB on 20 October 1999[47].
25.3 On 1 December 1999, we reported[48]
on the Budget Council's second reading on 26 November 1999 which
took account of the European Parliament's position at its first
reading on 28 October 1999. We noted that the European Parliament
held strongly that new spending priorities, in particular for
Kosovo, could not be met without revision of the financial
perspectives[49],
agreed as part of the Inter-Institutional Agreement following
the Berlin European Council in May 1999. The Government told us
that the Council was firmly opposed to any increase in the financial
perspectives, and that the Council might take the European Parliament
to court if it amended the Budget so as to exceed the financial
perspectives.
25.4 In the event conciliation following
the Budget Council led to an agreement between the representatives
of the Council and the European Parliament, and final adoption
of the 2000 Budget following the European Parliament's second
reading on 16 December 1999. The financial perspectives for 2000
were not breached.
The 2000 Adopted Budget
25.5 The Economic Secretary to the Treasury
(Miss Melanie Johnson) provided us with an Explanatory Memorandum
dated 28 February 2000, based on the overview of the Budget
published by the Commission, document (c), summarising the agreed
figures. She has also provided us with a further Explanatory Memorandum,
dated 21 March 2000, on the full version of the Budget, document
(d). In line with our usual practice in reporting on the Budget,
we print these Explanatory Memoranda with this Report, as they
provide a helpful factual analysis of the outcome. We cross-refer
to them where appropriate.
25.6 The Budget is always set in terms of
appropriations for commitments and for payments.[50]
25.7 In terms of commitments, the
Adopted Budget is:
- 3.4 billion euro (3.5%) below the 1999
Budget;
- 0.4 billion euro below the overall financial
perspectives ceiling; and
- 0.8 billion euro above the Budget set
by the Council's second reading.
25.8 In terms of payments, it is:
- 3.8 billion euro (4.4%) above the 1999
Budget;
- 1.9 billion euro below the overall financial
perspectives ceiling; and
- 1.5 billion euro above the Council's second
reading Budget.
25.9 The total to be raised from own
resources,[51]
including payments to reserves, represents 1.11% of Community
GNP compared to the own resources ceiling of 1.27%.
25.10 The decrease in commitments
compared to the 1999 Budget largely reflects the peaking in 1999
of structural spending, caused by the special status agreed
for such spending by the Edinburgh European Council in 1992. Under
that agreement, commitments not spent in one year had to be automatically
re-entered in a subsequent year's budget. That status was ended
by the Berlin European Council in May 1999.
25.11 The increase in payments over
the 1999 Budget arises mainly from slow implementation of the
1994-99 structural programmes, and also of some of the
research and external action programmes.
25.12 Details of the changes in respect
of each specific category in the financial perspectives are set
out in paragraphs 7 to 16 of the Minister's Explanatory Memorandum
of 28 February. All categories show an increase in commitments
over 1999, save for structural operations and reserves.
The biggest proportionate increase has been for pre-accession
aid (131%). In its overview document, document (a), the
Commission summarises the Budget as follows:
"This Budget manages
to comply with the tight spending targets set by the Commission
in its original proposals and by the two arms of the budgetary
authority throughout the budgetary procedure, while at the same
time covering the Union's priorities for 2000, in particular reconstruction
in Kosovo.
"Agricultural expenditure totals 40,494 million
euro. The bulk is for market organisation measures (36,889 million
euro). An across-the-board cut kept the appropriations well below
the sub-ceiling 1(a) (37,352 million euro). The other 4,105 million
euro is for the 'second agricultural pillar', expenditure on rural
development and accompanying measures, including 50 million euro
for improving the processing and marketing of agricultural products
(in connection with the dioxin crisis). The margin remaining beneath
the ceiling for the heading is 744 million euro.
"As this will be the first year of a new programming
period, the commitment appropriations for structural measures
(32,678 million euro) are down on the exceptionally large amounts
in 1999 (EUR 39 billion), while payment appropriations (31,801
million euro) continue to increase (+4.5%) to clear outstanding
commitments. Of these amounts 2,660 million euro for commitments
and 2,800 million euro for payment are for the Cohesion Fund.
"The internal policies have a total allocation
of 6,027 million euro in appropriations for commitments, 2.8%
up on the 1999 budget, and 5,674 million in euro in appropriations
for payments (+ 13%).
"The resources are concentrated on a number
of top priorities because of the leverage they exert on growth
and employment, and on the development and distribution of new
technologies. Research is allocated 3,630 euro million in commitment
appropriations and EUR 3,600 million euro in payment appropriations,
a sharp increase (of around 20%) warranted by the large volume
of outstanding commitments. The second major spending area is
the Trans-European networks (688 million euro in commitment appropriations,
up by 17.6%). Measures on education, vocational training and youth
policy receive a substantial 9% increase at 481.5 million euro
in commitment appropriations. The budgetary impact of the ratification
of the Treaty of Amsterdam is also accommodated, in particular
as it affects justice and home affairs, with the insertion of
a new title covering all the operations for setting up an area
for freedom, security and justice and an allocation totalling
97 million euro (including 26 million euro for the European Refugee
Fund alone).
"The allocations for external action come to
a total of 4,806 million euro for commitments, an increase of
2.9% over 1999 (2.4% in the preliminary draft), and 3,613 million
euro for payments. The 2000 budget will cover the immediate needs
for reconstruction in Kosovo. After the entire 200 million euro
has been drawn under the flexibility instrument, a total of 360
million euro will be available for Kosovo in 2000; the Union will
commit a further 140 million euro at the forthcoming donors' conference.
The appropriations will also cover new needs for aid to East Timor
(20 million euro), Turkish earthquake victims (30 million euro)
and the fisheries agreement with Morocco (125 million euro).
"In accordance with the new financial perspective
the pre-accession strategy is identified in a new heading 7 with
an allocation of 3,167 million euro for commitments and 1,696
million euro for payments, with a new instrument for agriculture
(SAPARD, 529 million euro for commitments and 200 million euro
for payments) and one for infrastructure (ISPA, 1,058 million
euro for commitments and 245 million euro for payments) in addition
to the PHARE programme, whose allocation is raised to 1,580 million
euro for commitments and 1,251 million euro for payments.
"The 4,704 million euro for administrative expenditure
is divided into 2,505 million euro for the Commission and 1,634
million euro for the other institutions, a balanced increase of
around 3.4%, while expenditure on pensions for all the institutions
increases by 13.4%. A feature of the 2000 Budget is that all the
technical and administrative assistance expenditure borne by the
operational items is identified."
The Government's view
25.13 In her Explanatory Memorandum of 21
March 2000, the Minister says that:
"The Government supports
the Adopted Budget, which it believes demonstrates that it is
possible to achieve significant savings on the overall level of
EC Budget commitments while respecting the Community's existing
obligations.
"The Government welcomes the fact that the Adopted
Budget has been agreed, giving provision for Kosovan reconstruction,
without recourse to revising the financial perspective ceilings.
"..... the key issue in the agreement of the
budget of the EU for 2000 was that of preserving the tight spending
ceilings agreed at the Berlin European Council in March 1999 while
at the same time covering the EU's priorities for 2000, in particular
reconstruction in Kosovo. The two arms of the budgetary authority,
the Council and the European Parliament, agreed to make use of
the flexibility instrument (which has a maximum availability of
200 million euro per year) as set out in the Inter-Institutional
Agreement on budgetary discipline of 6 May 1999. After the entire
200 million euro has been drawn under the flexilibility instrument,
a total of 360 million euro will be available for Kosovo in the
year 2000."
25.14 In our Reports of 20 October 1999
and 1 December 1999, and subsequent correspondence, we asked the
Minister a number of specific questions. These are summarised
below, with the Minister's response.
- Whether the additional provision for Kosovo
had affected the Government's objective of achieving an increase
in aid to the poorest regions?
- In her letter of 29 February 2000, the Minister
told us that aid for Africa, Asia and Latin America had increased
(from 18.82% of the external aid spending in 1999 to 18.87% in
2000 — an addition of 134 million euro).
- Clarification of the basis for any legal action
by the Council against the European Parliament, should the latter
create a Budget which exceeded the financial perspectives (as
the Council apparently had such action in contemplation).
- In paragraph 6 of her Explanatory Memorandum
of 21 March 2000 the Minister says that any such action would
have been on the basis that the European Parliament was in breach
of the Inter-Institutional Agreement[52].
She says:
"The legal status of
the IIA cannot be stated with complete certainty since it has
no express legal base in the Treaty. However, HM Treasury legal
advisers' opinion is that there are thought to be good grounds
for supposing that a court, most likely the ECJ, would conclude
in an appropriate case that the IIA has legal, as well as political,
force. Notably, the language of the IIA (see in particular paragraphs
2 and 4) indicates that the parties intended it to be legally
binding. Moreover its terms are sufficiently precise and unconditional
to give rise to legal obligations and are more detailed than are
normally seen in a purely political agreement. The ECJ has recognised
the importance of inter-institutional agreements as part of the
Community legal order, in the budgetary sphere in particular,
in cases such as Council v Parliament (Case 34/86, [1986]
ECR 2155), Greece v Council (Case 204/86, [1988] ECR 5323)
and UK v Commission (Case C-106/96, [1988] ECR I-2729)."
- In order to secure an agreement on the Budget,
did the European Parliament and the Council agree to any review
of the financial perspectives, should that appear necessary when
the Commission had completed its review of the medium term needs
of the Balkans? (The European Parliament's position had been that
needs in Kosovo could not be met in the 2000 Budget without increasing
the financial perspective ceilings).
- In her letter of 18 March 2000, the Minister
says that the Council has not agreed to revise the financial ceilings
for 2000-2006 for category 4 (external action) or for any other
Budget need.
25.15 As regards the financial implications
for the UK, in her Explanatory Memorandum of 21 March 2000,
the Minister says that:
"The 2000 Adopted Budget
forecasts a gross contribution, after abatement, for the UK of
about 11.9 billion euro (corresponding to approx. 13% of the total).
In 1999 the UK made gross contributions, after abatement, to the
EU budget of 10.4 billion euro (or approx. 12% of the total)."
Conclusions
25.16 As the Minister notes, this is
the first Budget to be established under the new financial perspectives
for the period 2000-2006, agreed at the end of the Agenda 2000
negotiations. We reported on 30 June 1999[53]
on that agreement. In that Report, the Minister welcomed the new
perspectives as providing for "relatively rigorous control".
25.17 In that connection, we note that
the Adopted Budget for 2000 stays within the financial perspectives
and is 3.5% lower in commitment terms than the 1999 Budget. However
we note that:
- expenditure is increased in all areas, save
for structural funds (where expenditure in 1999 was exceptionally
high — see paragraph 25.10 above);
- of the 360 million euro for Kosovo in 1999,
200 million had to be found by use of the new flexibility instrument;
- it was only possible to keep within the financial
perspective for external actions (category 4)
by drawing on the flexibility instrument to the maximum allowable
amount (200 million euro). Without that instrument, the proposed
expenditure would have exceeded the perspective ceiling for external
actions by about 178 million euro;
- the Government effectively failed to achieve
its objective of increasing the proportion of aid for the poorest
countries (the proportionate increase was purely nominal —
see paragraph 25.14 above).
25.18 Overall, when taking into account
the special circumstances causing high appropriations on commitments
for structural programmes in 1999, we do not wholly share the
Government's view that the Adopted Budget "demonstrates that
it is possible to achieve significant savings on the overall level
of EC Budget commitments ..."
25.19 We thank the Minister for her responses
to our questions on the grounds for any legal action had the European
Parliament created a Budget in excess of any of the financial
perspectives. We remind her that she has yet to answer two of
the questions we asked in our Report of 20 October 1999 (on the
new anti-fraud office (OLAF) and on the effect of the exchange
rate on the UK contribution to the EC Budget).
25.20 We note that the Minister says
in her Explanatory Memorandum of 21 March 2000 that the Council
made no commitment to revise the financial perspective ceilings
for 2000-2006 for category 4 (external actions) or for any
other budget heading. We had actually asked whether the Council
had agreed to review the financial perspective for external
aid, if necessary, in the light of the likely needs of the Balkans
for the period of the perspectives, which is not quite the question
the Minister addresses. However, we do not wish to pursue that
point any further beyond noting that the special needs of the
Balkans area will no doubt prove to be a significant issue for
the 2001 Budget later this year. We have no further questions
on the 2000 Budget and clear the full Budget document, document
(d), and the overview document, document (c), accordingly.
25.21 The Minister has also provided
us with an Explanatory Memorandum, dated 13 January 2000, on the
European Parliament's first reading on 28 October 1999 of the
Council's draft Budget, document (a); and a further Explanatory
Memorandum dated 8 February 2000, on the Council's Second Reading
on 26 November 1999, document (b). Deposit of these two documents
and Explanatory Memoranda was delayed until the English versions
of the amended Budgets were available. We thank the Minister for
providing these Memoranda. We reported on both these stages of
the Budgetary process on 1 December 1999, on the basis of Ministerial
correspondence. We formally clear both these documents also.
44 (20154) SEC(99) 600; see HC 34-xxi (1998-99), paragraph
2. Back
45 (20235)
COM(99) 200; see HC 34-xxiv (1998-99), paragraph 3. Back
46 Official
Report, European Standing
Committee B. Back
47 (20490)-;
see HC 34-xxviii (1998-99), paragraph 33. Back
48 (20490)
-; see HC 23-ii (1999-2000), paragraph 7. Back
49 The
financial perspectives set ceilings for commitment appropriations
in each category of expenditure, and for the total of payment
appropriations. New perspectives were set in 1999 for each of
the years 2000-2006. Back
50 Commitment
appropriations are the total cost of legal obligations which can
be entered into in the Budget year which will lead to payments
in that year and later years. Payment appropriations are the
amount of money available to be spent in the Budget year, arising
from commitments in the Budget year or earlier years. Back
51 The
Own Resources Decision sets a ceiling on the overall size of the
contributions of Member States to the Budget and defines the four
sources of Community revenue - agricultural and sugar levies,
customs duties, VAT contributions, and a GNP-based contribution. Back
52 The
Inter-Institutional Agreement of 29 October 1993 (IIA) sets out
the way the three institutions - Commission, Council and European
Parliament - will exercise their Treaty responsibility for settling
the Community Budget. In particular, it provides for the annual
Community Budget to be set in the context of a multi-annual financial
framework - the financial perspectives. See OJ No. C 331,
7.12.93. Back
53 (20232)
7698/99; see HC 34-xxiv (1998-99), paragraph 2. Back
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