13. 2003 DRAFT BUDGET
(a)
(23844)
11138/02
—
(b)
(23955)
13833/02
SEC (02) 1144
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2003 Draft Budget.
Amending letter No 3 to the 2003 Preliminary Draft Budget.
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| Legal base: | Article 272 EC and Article 14 of the Financial Regulation; the special budgetary decision processes are set out in Article 272
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| Document originated: | (b) 30 October 2002
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| Deposited in Parliament: |
(b) 12 November 2002 |
| Department: | HM Treasury
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| Basis of consideration: |
(a) Minister's letter and EM of 20 November 2002
(b) SEM of 20 November 2002
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| Previous Committee Report:
| (a) HC 152-xxxviii (2001-02), paragraph 10 (16 October 2002)
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| Discussed in Council: |
25 November 2002 |
| Committee's assessment: | Politically important
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| Committee's decision: | (Both) cleared
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Background
13.1 We considered the 2003 Preliminary Draft Budget
on 10 July 2002 and recommended it for debate in European Standing
Committee B. That debate took place on 16 July 2002.[17]
These documents are further stages in the budgetary process.
The documents
13.2 On 16 October 2002 we considered document (a), which
had not then been published, on the basis of a helpful letter
from the Financial Secretary to the Treasury (Ruth Kelly). We
kept the document under scrutiny and asked the Minister to confirm
that the Government was content with the way the budget was developing.
We also asked her to inform us of the outcome of the European
Parliament's first reading and of the approach the Government
was taking, in the light of that outcome, in the concluding stages
of the budgetary process.
13.3 The Minister's Explanatory Memorandum confirms what
she told us about the Draft Budget in her original letter. Her
present letter addresses the questions we asked in October.
13.4 The Minister tells us that the European Parliament
had its first reading of the budget (document (a)) on 24 October,
during which it increased, in comparison with the Council's Draft
Budget, commitment appropriations by euro672 million (£411
million) or 1% and payment appropriations by euro2,942 million
(£1,797 million) or 1%. These totals are made up as follows:
— Category 1 (agriculture) — reversal of most
of the Council's commitment appropriations cut of euro288 million;
— Category 2 (structural funds) — reversal of
payment appropriations cut of euro522 million and addition of
euro500 million in payments for the Cohesion Fund. An increase
of commitment appropriations by euro27 million, in line with a
Commission flexibility instrument proposal rejected by the Council,
to finance fishing fleet restructuring;
— Category 3 (internal policies) — reversal of
commitment appropriations cut of euro41 million and addition of
euro78.3 million;
— Category 4 (external actions) — reversal of
commitment appropriations cut of euro20 million and addition of
euro75 million, largely for the poverty-related diseases budget
line. Within this category is a reduction on spending on the Common
Foreign and Security Policy (CFSP) - on which the Minister notes
the European Parliament is seeking a greater role;
— Category 5 (administration) — in conciliation
in July 2002 the European Parliament agreed to respect the Financial
Perspective and the Council's own budget and to reject use of
the flexibility instrument. The European Parliament have respected
this agreement. However, consequent on bringing forward certain
expenditure to 2002, it was able to reallocate appropriations
from the its own budget to the Commission's budget to enable the
latter to recruit 500 temporary staff for enlargement preparations;
— Category 6 (reserves) — no change to the level
in the Preliminary Draft Budget (the Council had not proposed
change either);
— Category 7 (pre-accession aid) — reversal of
payment appropriations cut of euro300 million and addition of
euro399 million.
13.5 Document (b) is to amend the Preliminary Draft Budget,
principally with updated estimates for Category 1(Agriculture)
and Category 4 (External actions). The details are:
— total savings of euro337.4 million in Category 1A
expenditure, being increases in sugar, textiles and dairy spending
which are more than offset by lower spending on arable crops and
sheep meat. The proposal would leave a margin of approximately
euro2.6 billion under the Category IA ceiling;
— transfer of eurol.5 million of commitment appropriations
and euroO.5 million of payment appropriations for genetic resources
from Category 1A (Agriculture) to Category 3 (Internal Policies),
which is where spending on genetic resources has been in previous
years. There has been opposition to funding this from the EAGGF
Guarantee Section as being unsuitable for multi-national projects
of this kind;
— a proposal, at the request of the European Parliament,
to split the budget lines concerning export refunds for animals,
with different lines for meat and for live animals;
— appropriations for rural development (Category 1B)
to be maintained at the level of the Preliminary Draft Budget,
but the breakdown between various measures has been updated in
line with information from Member States;
— Category 4 (External actions) — following removal
of uncertainties about renewal of some agreements, correction
of the breakdown for appropriations for international fisheries
agreements between the amounts entered in reserve and on the relevant
budget line. This would be a transfer of approximately euro30
million from the reserve to the line. The net budgetary effect
is zero;
— inclusion of an estimated surplus of euro500 million
on the 2002 Budget as revenue in the 2003 Budget. The estimated
surplus takes into account the under-spending in Category 1 (Agriculture).
Structural operations underspending has not been included in this
provisional estimate as the Commission intends still to make as
many payments as it can before the end of the year, and because
some appropriations to be used for the new Solidarity Fund will
also have to be subtracted.
13.6 The Council's budget committee discussed document
(b) in early November. It accepted the Commission's proposals,
with the exception of the split of the export refunds line between
live and dead animals, and proposed to include these in the Draft
Budget at the Council's second reading of the budget instead of
the cuts made at the Council's first reading.
The Government's view
13.7 In her letter the Minister tells us of the Government's
approach to the European Parliament's amendments to document (a)
at the Council's second reading of the 26 November 2002 draft
Budget and conciliation on 25 November 2002. She says:
"The Government's view of the [European] Parliament's increases
to the Draft Budget is that, in general, they will need to be
reduced at second reading in order to maintain budget discipline
and keep within the Financial Perspective ceilings. This view
is broadly shared by other Member States. The Council will, however,
need to make some concessions to the [European] Parliament's changes
as part of the normal process of conciliation.
"Notwithstanding the need to reduce the overall levels of
expenditure proposed by the [European] Parliament, the Government
welcomes the priority which the EP has given to spending on poverty-related
diseases. We are working within the Council to ensure that this
priority is recognised in conciliation with the EP.
"The Government's priorities for the Council meeting and
conciliation are therefore to maintain budget discipline by reversing
or reducing most of the EP's first reading amendments, while increasing
the poverty focus of the external aid budget by encouraging Council
to accept as much as possible of the EP's increase for poverty-related
diseases. The Government also wishes to protect the budget for
Afghanistan and to reject EP demands for greater involvement in
CFSP, which, under the EU Treaty is a matter for Member States.
"On payments appropriations the Government would expect the
Council to press for a significant reduction in the increases
made by the EP as the level of payments in the Council's Draft
Budget should be sufficient to cover all outstanding commitments
and it would wish to avoid repeating the large surpluses of recent
years.
"In Category 5 the Government is pleased that the
Parliament has been able to assist the Commission with its pre-enlargement
expenditure. There may be some room for a further increase in
the Category 5 margin due to a downward revision of assumptions
for staff pay rises.
"In its report on my letter of 6 August the Committee asked
for confirmation that the Government was generally content with
the way the 2003 budget was developing. We are content that the
Council's Draft Budget maintained budget discipline and achieved
an incremental increase in the poverty focus of external aid.
Ideally we would have liked it to go further in terms of a greater
poverty focus and for this reason we are keen to reach an agreement
with the EP that will help achieve that aim."
13.8 On document (b) the Minister tells us:
"The Government welcomes the savings in the agriculture budget.
These are approximately euro46 million larger than the cuts made
at Council's first reading of the budget, and therefore the Government
wishes to see them included in the Council's Draft Budget. The
Government also agrees with the transfer of genetic resources
to Category 3 and the proposal concerning international fisheries
agreements. The Government could also accept, in the interest
of transparency, the proposed changes to nomenclature for export
refunds.
"The Government considers the Commission's estimate of the
surplus rather conservative, but can accept the Commission's view
that the estimates need to be prudent considering the possibility
of an end-year rush in payments. The Government also welcomes
the Commission's intention of presenting an updated estimate of
the surplus, to the next budget trialogue on 15 November."
Conclusion
13.9 We are grateful to the Minister for these updates
on, and clarifications of, the 2003 budgetary process and the
Government's view of developments. We are content to clear the
documents, but ask the Minister to report back on the outcome
of the final stages of the process.
17 Official
Report, European Standing
Committee B, 16 July 2002, cols. 1-32. Back
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