PRELIMINARY DRAFT BUDGET 2002
Preliminary Draft Budget 2002, Political Presentation.
||Article 272 EC; qualified majority voting; the special role of the European Parliament in relation to the adoption of the Budget is set out in the Article
|Basis of consideration:
||EM of 9 July 2001
|Previous Committee Report:
|To be discussed in Council:
||20 July 2001|
||Cleared, but relevant to any debate on the 2002 EC Budget
50.1 The Commission's Preliminary Draft Budget
(PDB) is the first stage in the EC budgetary procedure.
50.2 The PDB for 2002 sets out the Commission's
proposals for Community expenditure in 2002, together with bids
for the other Community institutions. On the basis of the PDB,
the Budget Council will establish a Draft Budget (DB) on 20 July
2001 to be forwarded to the European Parliament for its first
reading. The Budget is not finally adopted until December following
the European Parliament's second reading.
50.3 The Economic Secretary to the Treasury (Ruth
Kelly) submitted an Explanatory Memorandum on 9 July 2001. As
in previous years, we are annexing to this Report tables from
the Explanatory Memorandum.
50.4 The document, which is the Political Presentation
of the PDB for 2002, summarises the PDB and provides a detailed
justification of the overall budget figures.
50.5 In previous years, the PDB has consisted
of ten volumes. Volume 0 provides a summary and more details than
in the overview. Volume 1 gives details of the implications of
the budget for member states' gross contributions to the EC, calculated
under the Own Resources Decision. Volumes 2, 4, 5, 6, 7, 8 and
9 set out the European institutions' respective budgets, of which
Volume 4 (the Commission's budget) is the most important in terms
of overall expenditure.
50.6 In terms of commitments,
the PDB for 2002 totals 100,328 million euros, which is:
- million euros (3.5%) above the 2001 Budget,
comprising increases of 4.6% for compulsory expenditures, of which
5.0% is for agriculture, and only 2.6% for noncompulsory
- 1511 million euros under the ceiling set by the
50.7 Payment appropriations for the PDB for 2002
are 97,771 million euros, which is:
- million euros (4.8%) above the 2001 Budget;
- million euros below the ceiling set by the Financial
50.8 The public expenditure forecasts in the
Member States for 2002, which serves as a reference for the preparation
of the PDB, show an increase of 3.8%, which indicates that EC
payments are forecast to rise faster than total government expenditure
by Member States in 2002.
50.9 In terms of own resources, including payments
to reserves, the EC budget represents 1.06% of Community GNP,
compared with 1.07% in 2001 and an own resources ceiling of 1.27%.
50.10 According to the Commission, the PDB reflects
some of the priorities expressed by the European Parliament and
the Council at the first trialogue held on 29 March, "in
particular the actions to regain consumer confidence in European
food safety and continued efforts in the areas of e-learning and
immigration and asylum."
The Commission also states that the increase in payment appropriations
for noncompulsory expenditure "is mainly driven by
the necessity to finance outstanding commitments (RAL) and the
overall needs have been established with a special attention this
50.11 90% of the Budget (including the structural
funds, agriculture and programmes adopted by co-decision) is determined
initially by decisions made outside the annual budget process.
Expenditure proposals by category
50.12 Agricultural spending (category one), is
to rise to 46,222 million euros, or by 5% compared with the 2001
budget. Marketrelated agricultural expenditure (traditional
CAP spending) is to rise by 5.3% over the same period, despite
a substantial increase for BSE-related costs previously agreed
in the first Supplementing and Amending Budget (SAB 1/2001). A
budget reserve of 1,000 million euros is proposed to deal with
the unknown additional veterinary and market-related expenditure
associated with Foot and Mouth Disease and the beef crisis. For
rural development (category 1b), it is proposed to increase spending
up to the Financial Perspective ceiling in 2002 ( 4,595 million
euros), as was the case in 2001, resulting in an increase of 2.2%
over 2001. Although the PDB 2002 proposes an increase of 5% compared
with 2001, the Financial Perspective ceiling is increased by 5.8%.
The margin below the financial perspective for this category is
365 million euros.
50.13 Proposed expenditure on structural operations
(category two), comprising the Structural Funds and the Cohesion
Fund, is to rise to 33,638 million euros, equal to the ceiling
in the Financial Perspective. This includes the 6,153 million
that was unused in 2000 for the years 2002-2006.
The effect of this re-budgeting is to increase the ceiling for
2002 by 870 million euros. Commitment appropriations for Structural
Funds are to rise by 2.8% in 2002 compared with 2001, to 30,849
million euros. Payment appropriations for structural operations
are set at 32,450 million euros, an increase of 2.8 per cent on
50.14 Proposed commitments for Internal Policies
(category 3) are to rise by 4.1% compared with 2001. The margin
below the ceiling is proposed to be 68 million euros, exactly
half the size of the margin proposed in last year's PDB 2001 (136
million euros). Payments are to rise to 6,057 million euros, an
increase of 3.5% on 2001.
50.15 Proposed commitments for External Actions
(category 4) are down 2.1% compared with the 2001 budget to 4,826
million euros. This fall reflects the fact that the flexibility
instrument was previously used to allow the budget-line in the
2001 budget to be increased by 200 million euros above the Financial
Perspective ceiling to support actions in the Western Balkans.
The proposed margin for the PDB 2002 amounts to 47 million euros.
Payments for External Actions are to rise 9.6% compared with 2001
to 4,296 million euros.
50.16 The ceiling on administrative spending
(category 5) has been increased by 5.6% compared with 2001, although
proposed expenditure is set to rise to 5,149 million euros, or
by 5% compared with 2001.
The Commission's administrative spending is to rise by about 3.9%
(excluding pensions) after taking account of the need to finance
317 new posts that were approved in 2001 and an increase in salaries
The estimated margin is 30 million euros.
50.17 For Reserves, category 6, there is a 26%
reduction in proposed expenditure for the three instruments compared
with the 2001 budget. This reflects a halving in monetary reserves
for agriculture as decided in Berlin. The total spending for this
category equals the ceiling for 2002.
50.18 Preaccession aid (category 7) comprises
aid to the candidates for EU membership under PHARE and two new
programmes: ISPA (structural aid) and SAPARD (agricultural aid).)
Funding for all three instruments matches the subceilings
for 2002. Preaccession aid commitments for 2002 are 3,328
million euros. This is split in the 2002 PDB into 555 million
euros for agriculture, 1,109 million euros for structural aid,
and 1,664 million euros for PHARE. Payments are set at 2,920 million,
an increase of 39% over 2001, which reflects the fact that no
payments were made in 2000, the first year for SAPARD and ISPA,
but that significant catchup is expected this year.
50.19 There are no figures for Accession (category
eight) in the PDB 2002 since no accession is foreseen for 2002.
The Government's view
50.20 The Economic Secretary to the Treasury
(Ruth Kelly) 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. Working with likeminded member states, the Government
will continue to apply this approach to its detailed examination
of the budget. However it must be borne in mind that some 90%
of the budget (including the structural funds, agriculture, and
programmes adopted by codecision) is initially determined
by decisions made outside the annual budget process, and that
the final decision for almost all of the remainder is in the hands
of the European Parliament.
"The UK Government welcomes the broad thrust
of the Commission's proposals for 2002. However it is keen, together
with budget disciplinarian member states, to see a reduction in
the proposed spend on administration in order to keep this firmly
"The UK Government has also signalled the intention
to seek reimbursement of the costs incurred in dealing with the
Foot and Mouth outbreak which it is entitled to claim from the
EU budget. However, this expenditure should come from within the
financial perspective ceiling for category 1. The UK Government
also supports the Commission's reform programme, but will want
to ensure that the 317 posts requested by the Commission in 2002
are fully justified before agreeing to them.
50.21 As regards the UK's share of financing
the 2002 PDB, the Minister says:
"Currently, the Government
expects that the UK's euro financing share of the 2002 PDB will
be around 19% (which implies a UK gross contribution, before abatement,
of around £11.2 billion or 18.6 billion euro in 2002). This
compares with a share of some 19.6% or 17.8 billion euros in the
2001 Adopted Budget. The UK's actual contribution will, of course,
be significantly lower after the abatement which the Government
successfully protected during the Agenda 2000 negotiations
is taken into account."
50.22 This Report is based solely on our assessment
of the General Introduction (Political Presentation) of the Preliminary
Draft Budget. We have reported on this document because it provides
our only opportunity to do so before 20 July, when the Budget
Council establishes the Draft Budget for 2002.
50.23 Last year, the Preliminary Draft Budget
was considered by the previous Committee and debated in European
Standing Committee before the Budget Council on 20 July. Unfortunately,
this year, owing to a delay by the Commission in publishing the
documents, we are unable to recommend a similar debate. However,
we will have the opportunity to consider the Draft Budget 2002
and, if necessary, recommend a debate before the Council's second
reading of the Draft Budget in November.
50.24 We note that the 2002 Preliminary Draft
Budget provides a margin of 511 million euros (for commitment
appropriations) below the limits set by the Financial Perspective,
compared with a margin of 1,492 million euros in the Draft Budget
2001 budget. We also note that the 2002 Preliminary Draft Budget
shows a 5% growth in commitments for agriculture and administration
compared with the 2001 budget, the largest growth for any major
budget category. The allocation of commitments for traditional
Common Agricultural Policy is set to rise by 5.3% compared with
the 2001 budget, despite a substantial increase for BSE-related
costs previously being agreed in the first Supplementing and Amending
Budget for 2001. We welcome the setting up of a budget reserve
of 1,000 million euros to deal with the unknown additional veterinary
and market-related expenditure associated with Foot and Mouth
Disease and the beef crisis.
50.25 As regards the proposed 5% increase
in spending on administration, we note that this compares unfavourably
with the forecasts of 3.8% increase in public spending in the
Member States for 2002. We find it unacceptable that spending
on administration in EU institutions should increase significantly
faster than the growth of public spending in Member States. Like
the Minister we are keen to see a reduction in the proposed increase
when the Draft Budget is established on 20 July.
50.26 We clear the document, but it is relevant
to any debate on the 2002 EC Budget.
79 Section A of Volume 4 covers the Commission's administrative
budget, section B the Community's programme spending and a series
of annexes provide further details. Back
EC Budget distinguishes between appropriations for commitments
and appropriations for payments. Commitment appropriations are
the total cost of legal obligations which can be entered into
during the current financial year for activities which will lead
to payments in the current and future financial years. Payment
appropriations are the amount of money which is available to be
spent during the year. These cash payments arise from commitments
in the Budgets for the current or preceding years. Commitments
appropriations are important, not least because the legal limits
in the Financial Perspective are presented in this form. Payments
appropriations are important because they determine the contributions
made by Member States. Unused payment appropriations can, in exceptional
circumstances, be carried forward into the following year. Back
Adopted budget plus the first Supplementing and Amending Budget. Back
PDB 2002 is 5.6 % over the adopted 2001 budget. The increase in
payment appropriations for noncompulsory expenditure arises
mainly from the need to finance outstanding commitments. Back
Draft Budget 2002, Political Presentation, European Commission Back
agricultural guideline has been calculated in accordance with
the new Council regulation budgetary discipline. It represents
an overall limit for the expenditure related to category 1, the
pre-accession aid in agriculture SAPARD and the amount left available
for accession in respect of agriculture (category 8, not represented
in the table). Back
Financial Perspective has been adjusted by a decision of the budgetary
authority taken at the beginning of May, which increases the ceiling
for 2002 by 870 million euros. Back
since some institutions have not provided their provisional estimate
for 2002, there is some uncertainty over this figure. The Commission
has used an estimated growth assumption of 4.3%. Pension expenditure
is to rise by 11.3% compared with 2001 budget. Back
second tranche of the posts was foreseen by the PeerGroup
of Commissioners that looked into the Commission's activities
and resources. Back