PRELIMINARY DRAFT BUDGET 2001
(21337)
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Preliminary Draft Budget 2001, Volume 0, general introduction (provisional version).
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| Legal base:
| Article 272 EC; qualified majority voting; the special rôle of the European Parliament in relation to the adoption of the Budget is set out in the Article
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| Department: |
HM Treasury |
| Basis of consideration:
| EM of 27 June 2000 |
| Previous Committee Report:
| None |
| To be discussed in Council:
| 20 July 2000 |
| Committee's assessment:
| Politically important |
| Committee's decision:
| For debate in European Standing Committee B (with the two Commission Communications on revision of the financial perspectives (see paragraph 1 above), and the main Budget volumes not yet available (see paragraph 2.22 below))
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Background
2.1 The Commission's Preliminary Draft Budge
(PDB) is the first stage in the procedure whereby the Budgetary
Authority (the Council and the European Parliament) determines
the Community Budget.
2.2 The PDB for 2001 sets out the Commission's
proposals for Community expenditure in 2001, together with bids
for the other Community institutions. The Council will consider
the PDB and establish a Draft Budget (DB) to be forwarded to the
European Parliament. The Council's first reading will be on 20
July 2000. The Budget is not finally adopted until December.
2.3 The framework for the Budget is set
by the multi-annual financial perspective, which forms
part of the Inter-Institutional Agreement (IIA), signed following
the Berlin European Council in March 1999. We reported on the
IIA on 30 June 1999[11].
The financial perspective sets an overall ceiling for expenditure,
year by year, from 2000 to 2006, and for each of the main categories
of expenditure (agriculture, structural operations, internal policies,
external action, administration, reserves and pre-accession instruments).
It is set in terms of commitments, not payments[12].
The IIA provides a procedure for revising the financial perspective
in the event of "unforeseen circumstances". The Commission
must make a proposal which is then agreed by both arms of the
budgetary authority (the Council and the European Parliament).
2.4 At this stage, the only document available
is a provisional version of Volume 0 of the Budget, which
provides a general introduction and summary. We will report later
on the full Budget Volumes when they are deposited.
2.5 As last year, we are publishing with
our Report the Explanatory Memorandum (dated 27 June 2000) provided
by the Economic Secretary to the Treasury (Miss Melanie Johnson).
It provides a summary and analysis of the document. Where appropriate
we cross-refer to her Memorandum.
The document
2.6 We look first at the overall
picture and then at specific elements and in particular category
four — external actions — where the Commission seek
a revision of the financial perspective to take account of the
special needs of the Western Balkans. We have reported separately
in paragraph 1 of this Report on the Commission's proposals for
an enhanced multi-annual programme for the Western Balkans and
how it should be funded. We cross-refer to that paragraph as appropriate.
In considering the Commission's proposals, we note that some 90%
of the Budget (including the structural funds, agriculture and
programmes adopted by co-decision) is initially determined by
decisions made outside the annual budget process.
2.7 Commitment appropriations in
the PDB total 96,924 million euro, 3.9% above the 2000 Budget.
Payment appropriations are 93,874 million euro, 5% above
the 2000 Budget. The public expenditure forecasts in the Member
States for 2001, which serves as a reference for the preparation
of the PDB shows an increase of 3.1%. The overall financial
perspective ceiling is 97,352 million euro — 328 million
euro above the proposed level of commitments.
2.8 The proposed increase in commitments
is largely due to the substantial expansion proposed in agricultural
expenditure of 3,127 million euro or 7.6%, stemming from obligations
in the Agenda 2000 agreement reached in Berlin in March 1999.
The proposed increase in commitments, for the rest of the
Budget is 517 million euro.
2.9 The 5% increase proposed in payments
reflects two elements — the volume of commitment appropriations
due to be paid in 2001, and the volume of previous commitments
(RAL) due to be settled in that year. RAL represents a very substantial
part of the payments increases.
Expenditure proposals by category
2.10 We have already noted the bulk of the
proposed increased in commitments in category one reflects
agricultural expenditure, flowing from the decision of
the Berlin European Council in March 1999. Nevertheless, the margin
(430 million euro) below the financial perspective for category
one is such that the Commission has proposed revising the
financial perspective for that category so as to transfer 300
million euro to contribute to the additional financial requirements
which the Commission considers are necessary for the Balkans (see
paragraph 1 above).
2.11 Proposed expenditure on category
two — structural operations (including the structural
funds and the Cohesion Fund) equates with the financial perspective,
for that category, in line with the requirements of the Structural
Funds regulations.
2.12 Commitment appropriations for category
three (internal policies) are 6,136 million euro, an
increase of 1.4% compared to 2000 and 13.6 million euro under
the financial perspectives ceiling. More than four-fifths
is pre-determined by the amounts already agreed by co-decision
for multi-annual programmes. Nearly two-thirds of the total relates
to research, where an 8% increase is proposed, reflecting in part
restoration of funds deducted in 1999 to meet urgent needs in
Kosovo.
2.13 Category four — external action
— covers the following policy areas: external relations,
development and relations with the ACP (African, Caribbean and
Pacific Countries), trade, humanitarian aid and part of the fisheries
policy relating to international agreements. Total commitments
proposed are 4,933 million euro, 3% up on 2000 and above
the financial perspective set for that category (4,735 million
euro). This reflects the significant increase of 343 million euro
(72.6%) proposed for assistance for the Western Balkans. To accommodate
this, the Commission proposes to increase the financial perspective
for this category by 280 million euro[13]
and to compensate by reducing the financial perspective for category
one (agriculture) by 300 million euro. We report in more detail
on that proposal in paragraph 1 of this Report.
2.14 In brief, the Commission says that
it has absorbed a substantial amount of the extra costs of the
proposed Western Balkans programme by redeployment within category
four but that the total cost cannot be absorbed in 2001 or in
later years of the financial perspective. Hence its conclusion
that the financial perspective for category four must be raised.
2.15 Proposed commitments for category
five (administration) are up by 4,861 million euro (3.4%).
If pension increases are excluded, the increase is about 2.5%.
No new posts are requested save for the new anti-fraud office
(OLAF) established last year because the Commission says it has
not yet completed its across-the-board exercise in matching policies
and resources. The budget proposed for OLAF would increase by
34% to 34.7 million euro, as a result of 76 new posts (bring its
total to 300) and expenditure on buildings and IT systems.
2.16 There are proposed increases of 2.5%
in the commitments for two of the three reserves (category
six) — the emergency aid reserve and the guarantee reserve.
The monetary reserve is to be phased out by 2003 (see Explanatory
Memorandum, paragraph 26).
2.17 The increase proposed for category
seven (pre-accession aid) commitments is 77 million euro (2.4%).
2.18 Turning now to the funding of
the PDB, the own resources[14]
required to finance payments comprise:
- 1,968 million euro in agricultural and sugar
levies;
- 12,292 million euro in customs duties;
- 33,467 million euro in VAT resource, at the uniform
rate;
- 45,452 million euro in the GNP-based fourth resource;
and
- 695 million euro anticipated in the form of "other
revenue".
The Government's view
2.19 The Minister says:
"The Community budget
has significant financial and policy implications. Since the UK
is a net contributor to the EC budget it is in the UK's interests
to restrict growth in the budget as much as possible while working
to achieve a more efficient use of existing resources. The desire
for rigour in the EC budget is shared by a majority of Member
States.
"The Government cannot support the Commission's
proposal to revise the Berlin financial perspective. The Government
does not agree with the proposals presented by the Commission.
It believes it is important that the Berlin Financial Perspective
expenditure ceilings be respected, both overall and for each budget
category. The Government notes that the Commission has said elsewhere
that money in category four has been inefficiently spent in the
past. Financial assistance to the Balkans from the EC budget must
be funded through re-prioritisation of spending on EU aid programmes,
within the existing spending ceilings agreed at Berlin. The EU
spending plans for the Western Balkans must be set in context
of all sources of finance — from budget, EIB lending, bilateral
commitments, commitments from international financial institutions
(IFIs), and must be properly assessed for needs. It must also
take account of the ability of recipients to absorb spending.
"The Government recognises the importance of
EU co-operation in providing assistance to the Balkans region,
and will work closely with other Member States in seeking now
to set priorities for EU aid that allow sufficient resources for
the Balkans, whilst respecting the agreed ceilings. As part of
this process the Government will also seek to increase the proportion
of EU external aid directed at the poorest regions."
2.20 As regards the financial implications
of the PDB for the UK, the Minister says:
"The Government expects
that the UK's euro financing share of the 2001 PDB will be around
19.6% before abatement and 13.98% after abatement. The UK gross
contribution in 2001 will be around 18.3 billion euro or 13 billion
euro after abatement. This compares with a share of some 17.65%
before abatement and 13.54% after abatement in the 2000 Budget.
The UK's actual contribution in 2001 will therefore be significantly
lower after the abatement, which the Government successfully protected
during the Agenda 2000 negotiations. The UK Government expects
a significantly higher abatement in 2001 than for previous years,"
Conclusion
2.21 It is clear that the main focus
of attention in respect of the Budget 2001 will be on the scale
of the much enhanced programme of assistance proposed for the
Western Balkans; and how any such programme is to be funded whilst
not weakening the budgetary discipline agreed by the Berlin European
Council in March 1999 and confirmed in the subsequent Inter-Institutional
Agreement. This issue came to a head over the 2000 Budget where
the deadlock between the Council and the European Parliament over
funding for Kosovo was only resolved temporarily by drawing on
the financial instrument to the full extent (200 million euros).
The European Parliament representatives have already made it clear
that they consider a revision of the financial perspective for
external actions (category four) is essential in order
to accommodate the needs of a multi-annual programme for the Balkans,
given that the scale of those requirements could not be foreseen
when the 2000-2006 financial perspective was agreed. It remains
to be seen whether the Council will take the tough line adopted
by the Minister of rejecting any revision of the financial
perspective for category four, notwithstanding the Commission's
proposal to offset that entirely by reduction in the perspective
for category 1 (agriculture). We note that category four expenditure
is non-compulsory, which means that it is the European
Parliament, not the Council, which has a the final say on the
level of expenditure. We recall also the Minister's view, to which
we refer in our Report of 5 April 2000[15]
on the adopted Budget for 2000, that there could be a case for
legal action against the European Parliament if it set a budget
in excess of any of the financial perspectives (on the grounds
that such action was in breach of the Inter-Institutional Agreement).
In our Report on the Commission's proposals for a Western Balkans
programme and redeployment of category four expenditure (paragraph
1), we raise a number of issues and recommend a debate in European
Standing Committee B. As last year, we also think it appropriate
to recommend a debate on the PDB and that it should be taken in
European Standing Committee B on the same occasion as those other
documents. That will provide the House with an opportunity to
consider the Balkan proposals in the wider Budgetary context,
as well as to question the Minister more generally on the expenditure
proposals in the Budget and related activities. These include
the work of the new anti-fraud office (OLAF), for which significant
additional resources are requested, but about whose activities
and intentions we have so far heard little.
2.22 This Report is based solely on our
assessment of a provisional version of volume 0 of the PDB (the
general introduction). We decided to report on it because there
might not otherwise have been an opportunity to have a debate
before the Budget Council on 20 July. If they are available in
time, we shall report on the full set of Budget documents at our
next meeting which is on 12 July. However, it is possible that
the debate we have recommended may have to be held before then.
With that in mind, we think it right to anticipate matters by
recommending that the full set of the Budget documents should
be debated at the same time as volume 0 (with the final version
substituted for the provisional version on which we now report).
We invite the Minister to provide an Explanatory Memorandum on
these documents in time for it to be available for the debate,
along with the Explanatory Memorandum she has already provided.
11 (20232) 7698/99: see HC 34-xxiv (1998-99), paragraph
2 (30 June 1999). Back
12 The
Budget distinguishes between appropriations for commitments and
for payments. Commitments are the total cost of legal obligations
that can be entered into in the Budget year, leading to payments
in that or later years. Payment appropriations are the amount
available to be spent in the Budget year arising from commitments
entered into in the current or previous years. Back
13 The
Commission also proposes an increase in the financial perspective
for pre-accession instruments by 20 million euro so as to enable
aid for Cyprus and Malta to be re-classified to that category
from category four. Back
14 The
Own Resources Decision lays down the four sources of Community
revenue - the "own resources" - and sets a ceiling
for that revenue, currently 1.27% of Community GNP. Back
15 (21061)
OJ No. L 40; see HC 23-xiii (1999-2000), paragraph 25 (5 April
2000). Back
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