13 Integration of the European Development
Fund into the EU general budget
| (24951)
13465/03
COM(03) 590
| Commission Communication: Towards the full integration of co-operation with ACP countries in the EU budget.
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| Legal base | — |
| Document originated | 8 October 2003
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| Deposited in Parliament | 15 October 2003
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| Department | International Development
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| Basis of consideration | EM of 3 November 2003
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| Previous Committee Report | None
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| To be discussed in Council | 17/18 November 2003
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
13.1 The European Development Fund (EDF) provides 75% of all EC
development finance for the ACP (African, Caribbean and Pacific)[21]
countries. It is intergovernmental and is managed by the Commission
outside the general budget, but with the European Parliament granting
the discharge. Member States contribute to the Fund through voluntary
contributions, the level of which is negotiated between Member
States before the start of each five-year EDF period.
The Commission Communication
13.2 The Commission points out that the Convention on the Future
of Europe has recommended integration of EU/ACP cooperation into
the general budget ("budgetisation"). Negotiations
will start in 2004 on possible amendments to the Cotonou Agreement.
At the same time, the Community will have to determine the future
level of resources to support financial cooperation with ACP countries
after the expiry of the current financial protocol for the 9th
EDF.
13.3 If incorporated into the general budget, the
EDF will become subject to co-decision by Council and European
Parliament and to Commission decision-making on the use of funds.
Contributions will be in line with the general budget shares.
As with the new Financial Perspective, the target date is 2007,
but there could be a transitional phase.
13.4 Budgetisation of the EDF was last discussed
during the negotiations on the 9th EDF. The Commission
says that, in spite of a positive reaction from most Member States,
no final consensus could be reached, and it said that it would
prepare this Communication on the advantages and disadvantages
of budgetisation.
13.5 The Commission enumerates a number of the advantages
of budgetisation, which it clearly favours. These include:
- improved efficiency. The rate
of EDF spending has historically been slow compared with the EC
budget overall. The funds would be available rapidly, after adoption
of the necessary Regulation by the European Council and the EP,
without the need to wait for ratification of a financial protocol
by 25 or more EU Member States and two-thirds of the ACP countries.;
- greater flexibility. The Commission claims the
EDF does not respond well to crises. Bureaucracy would be reduced;
- increased transparency through the greater involvement
of the European Parliament. The EDF envelope is negotiated by
Member States and ACP states and then allocated to partner countries
on a five-year multi-annual basis. If the EDF is budgetised,
the overall allocation would be decided annually by the Council
and the EP;
- harmonised management procedures would make
for greater effectiveness and efficiency;
- a historical anachronism would be removed and
the risk of the ACP group being marginalised would be reduced.
13.6 The Commission argues that the time is right
to opt for budgetisation, but points out that the timing is tight.
A substantial legislative programme will have to be launched
within the coming months, but it will be worth the effort. It
attaches a "road map" showing the deadlines, starting
with a communication on broad guidelines for the post-2006 financial
framework and a presentation to the Council in December 2003 of
items to be amended in the Cotonou Agreement. The EU proposals
would be presented to the ACP in February 2004.
The Government's view
13.7 The Secretary of State for International Development
(Mr Hilary Benn) says
"Ideally, the EC would have a single, effective,
global development instrument, which allocated resources according
to likely impact on poverty and applied best practice. Best practice
European financial management points to supporting unification
of Europe's budgets and the European Parliament does have legitimate
concerns about transparency. There are, however, two main concerns
with budgetisation: cost ... and risks to poverty focus/effectiveness.
"A far higher proportion of EDF resources (89%)
went to low-income countries (LICs) in 2002 than from the Budget
(31%). EDF country allocations are based on need and performance
criteria. Although efficiency has been historically poor, the
approaches and instruments used in EDF now tend to follow good
practice e.g. giving partners voice through consultative strategies,
supporting local priorities and Poverty Strategy Papers, and multi-annual
budgeting etc. The EC's Development Policy Statement guides the
EDF's work and commitment to better donor behaviour is demonstrated
through increasing use of direct budget support. Little of this
is true of the main EU Budget. Both poverty focus and good practice
would be at risk once brought into the Budget.
"Given these concerns, HMG is not prepared to
support budgetisation. But given the case for a single EC development
instrument, we will explore the options for achieving improvements
to all EC development assistance. Such options might include
commitments to increase the level of grant resources to low income
countries overall, simplified budgeting structures and the application
of the good practice exhibited in the EDF in the main EC Budget.
If this is not possible the UK can, and will, veto budgetisation."
13.8 On the financial implications, the Minister
comments:
"The UK contributes 12.69% of the current (Ninth)
EDF compared to around 19% of the EC Budget (in 2003). Budgetisation
would, therefore, increase UK EU contributions. It is difficult
to cost budgetisation due to uncertainty about the level of spend
and country shares post enlargement. Under conservative assumptions,
budgetisation would cost the UK an additional €90
million (£63 million) per year. This additional cost would
be attributed by HMT to DFID's budget. There would be a cost
in terms of taking resources away from other parts of the DFID
programme."
13.9 The Minister suggests that the Presidency may
seek a discussion of this issue at the 17/19 November GAERC.
A formal proposal would then be negotiated over the next few months.
Conclusion
13.10 The Commission purports to put forward the
advantages and disadvantages of budgetisation of the EDF, as it
had volunteered to do some time ago. In this Communication it
spells out at length the considerable advantages and emphatically
advocates support for budgetisation.
13.11 The Minister says that the UK will not support
budgetisation which, if in operation in 2003, would have increased
the UK contribution from the current 12.69%, which it contributes
to the 9th EDF, to around 19% of the EC budget . He
admits that it is difficult to cost budgetisation but believes
that substantial resources would have to be taken from other
parts of his Department's programme.
13.12 The Minister also fears that the effectiveness
of the Government's focus on poverty would be undermined. We
have seen recently how this could happen. The powerful lobby
for Latin America in the European Parliament ensures that, according
to Commissioner Chris Patten in a recent speech to the All-Party
Parliamentary Group on Overseas Development, three times as much
EC development assistance is given to Latin America as to Asia,
where 800 million people live in absolute poverty.
13.13 We clear this document but ask the Minister
to ensure that we have ample opportunity to scrutinise any subsequent
legislative proposal.
21 Those African, Caribbean and Pacific countries
which are signatories to the ACP-EU Partnership Agreement, also
known as the Cotonou Agreement. Back
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