House of Commons - European Scrutiny

Select Committee on European Scrutiny Twenty-Fourth Report

PRELIMINARY DRAFT BUDGET 2001

(21422)
—
COM(00) 300

Preliminary Draft General Budget of the European Communities for
the financial year 2001.

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

Document originated:	15 June 2000
Department:	HM Treasury
Basis of consideration:	EM of 10 July 2000
Previous Committee Report:	None, but see paragraph 3.1 below
To be discussed in Council:	20 July 2000
Committee's assessment:	Politically important
Committee's decision:	For debate in European Standing Committee B (debate held on 12 July 2000)

Background

3.1 On 28 June we reported[16] on the provisional version of Volume 0 of the Commission's Provisional Draft Budget (PDB) for 2001. At that stage that was the only document on the 2001 PDB available and we wished to report in sufficient time to allow a debate before the Budget Council on 20 July 2000. In our Report, we recommended a debate in European Standing Committee B on that document and also on the main Volumes of the Budget, which we expected would be available before the debate was held, but before we would have the opportunity to consider them. European Standing Committee B debated all these documents on 12 July 2000.

3.2 We now report on the available published volumes of the 2001 PDB[17].

The documents

3.3 Our Report of 28 June 2000 provides a summary of the main features of this year's PDB in terms of proposed expenditure. Volume One of the PDB provides information that was not available to us earlier about the revenue side of the Budget and we now report more fully on that aspect. Volume Four contains more details of the breakdown of proposed expenditure which enables us to report particularly on proposed expenditure on fraud prevention. As usual in respect of our Reports on the Budget, we publish with our Report the Explanatory Memorandum of 10 July 2000 provided by the Economic Secretary to the Treasury (Miss Melanie Johnson), and cross-refer as appropriate to it.

3.4 Commitment[18] appropriations in the PDB total 96,924 million euro, 3.9% above the 2000 Budget. As we noted in our Report of 28 June 2000, this is largely due to an increase of 7.6% (3,127 million euro) in agriculture expenditure (the remaining increase in the rest of the Budget is 517 million euro). The Minister comments (Explanatory Memorandum, paragraph 6) that this mainly reflects implementation of Agenda 2000 reforms agreed last year, including a 24.9% increase for rural development measures. The main commodity areas with increased expenditure are arable crops, beef and wine, as envisaged in the Agenda 2000 reforms. The Government told us last year[19] that, as a result of the agreements reached on Agenda 2000, spending on the Common Agricultural Policy (CAP) would peak in 2002 to pay for the reforms and would then decrease.

3.5 As last year, the Minister has provided comparative figures on proposed expenditure on anti-fraud activities (Explanatory Memorandum, paragraphs 7 and 9). These show commitments of 168 million euro — 85 million euro (102%) more than in the 2000 Budget. This includes a large growth (36%) in the costs of the new anti-fraud office (OLAF) to which we referred in our Report of 28 June.

3.6 Table A to the Minister's Explanatory Memorandum shows fraud prevention appropriations by Budget heading. The bulk of provision goes on monitoring and prevention measures in the EAGGF (agricultural support payments) where the administration of payments rests largely with Member States but direct Community payments are made to support monitoring and control mechanisms. The reference to measures to combat fraud in the "co-operation sector" is to measures related to the diverse programmes of external aid provided in category four (external actions outside the Community).

3.7 Volume One of the PDB deals with revenue. The size of the Budget directly affects the contributions Member States make to fund it under the Own Resources Decision. The Minister explains the effect of the PDB on the UK's gross and net (after abatement) contribution on the basis of the PDB (Explanatory Memorandum, paragraphs 10-15). The UK's sterling contribution before abatement would be £10,927 million, an increase of 8.1% over 2000.

3.8 The Minister says that if account is taken of the reduction in the UK contribution in 2000 resulting from underspends in 1999, the increase in 2001 over 2000 comes down to 4.3%, not 8.1%. She says that the bulk of this increase is due to funding the UK's share of a larger Budget and the balance broadly due to the relatively higher growth in the UK economy.

3.9 After abatement, the Minister says that the UK would pay £226 million less in 2001 than after abatement in 2000, and £592 million less if the underspends in 1999 are discounted. She points out, however, that:

"Since the UK's abatement is paid a year in arrears, the UK's contribution, post-abatement, does not represent our underlying contribution to the individual Community budget."

The Government's views

3.10 We referred to the Government's views on the PDB as a whole in our earlier Report. In her Explanatory Memorandum of 10 July 2000, the Minister adds that:

"The Government welcomes the measures included in the 2001 PDB to fund specific actions aimed at preventing and detecting fraud, and improving financial management. Financial management of the European Union budget has had an extremely high profile since the European Parliament's postponement in 1998 of discharge of the 1996 budget. The Government also welcomes the increase in appropriations for OLAF proposed in the PDB 2001, financing the establishment of 76 new posts for OLAF, in order to deal with anti-fraud activities in the EC budget."

Conclusion

3.11 We commented on the PDB as a whole in our Report of 28 June 2000, with particular reference to the issue of expenditure proposals for the Western Balkans and whether these could be accommodated within the financial perspective ceiling for category four of the Budget (external actions). These issues have now been debated in European Standing Committee B and we do not repeat our comments here.

3.12 We note the Government's general support for increased Community expenditure on anti-fraud measures. We recall that we reported[20] on 26 January 2000 on the Commission's Annual Report on the fight against fraud and protection of the Communities' financial interests. We noted there that combatting fraud is largely a matter for Member States who are responsible for collection of the Community's resources and administer over 80% of its expenditure. We also noted that, in 1998, Member States notified the Commission of over 5000 cases of fraud or irregularity, involving 577 million euro. The Commission estimated that about 20% of these cases in number and value involved suspicions of fraud. Our Report highlighted the growing scale of, and concern about, trans-national fraud. This serves to underline the case for Community action and expenditure in this area, in support of actions by Member States, and for the strengthening of the Community's central capacity, especially OLAF, to tackle trans-national fraud along with Member States. So we are glad to see the strengthening of the Commission's capacity in this area, as proposed in the PDB. We hope that we shall in due course be able to see some measurable increase in fraud prevention and detection.

3.13 In our Report of 28 June 2000, we recommended these documents for debate in European Standing Committee B. As indicated in the headnotes to this paragraph, that debate has now taken place.

16 (21337) - ; see HC 23-xxiii (1999-2000), paragraph 2. Back

17 The full set of documents making up the 2001 PDB are:

Volume 0 - General Introduction (an overview of proposed expenditure)

Volume 1 - Revenue

Volume 2 - Parliament (not yet available)

Volume 4 - Commission (covering its administrative costs and expenditure programmes)

Volume 5 - the Court of Justice

Volume 6 - the Court of Auditors

Volume 7 - the Economic and Social Committee

Volume 8 - the Committee of the Regions

The PDB does not include a Volume on Council expenditure. This is added as Volume 3 when the Council adopts its Draft Budget (DB), following its consideration of the PDB. Back

18 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