21 Revision of the EU Budget and Financial
Perspective
| (a)
(26028)
13515/04
SEC(04)1234
(b)
(26029)
13517/04
COM(04)666
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Preliminary Draft Amending Budget No 11 to the General Budget for 2004
Draft Decision on a revision of the Financial Perspective 2000-2006
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| Legal base | (a) Article 272 EC; the special role of the European Parliament in relation to the Budget is set out in Article 272; QMV
(b) Paragraphs 19, 20 and 21 of the Inter-Institutional Agreement on the budget; co-decision; QMV
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| Documents originated | 13 October 2004
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| Deposited in Parliament | 21 October 2004
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| Department | HM Treasury |
| Basis of consideration | EMs of 3 November 2004
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| Previous Committee Report | None
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| To be discussed in Council | (a) 25 November 2004
(b) Not known
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
21.1 The Inter-Institutional Agreement (IIA) of 6 May 1999, between
the Commission, the Council and the European Parliament, is a
politically and legally binding agreement which clarifies the
Community's budgetary procedure. It was designed to reinforce
budgetary discipline and improve the budgetary procedure. The
IIA establishes a Financial Perspective (FP) — that is,
annual budgetary ceilings — and implementing provisions
for the period 2000-2006. (The FP numbers were amended in the
final stages of negotiation of the 2004 enlargement.) The IIA
provides for the possibility of revisions of the FP ceilings to
meet unforeseen circumstances. Such revisions are agreed by the
Council and the European Council on the basis of a proposal from
the Commission.
21.2 During the course of the financial year the
Commission routinely makes proposals to the Budgetary Authority
(the Council and the European Council) for amendments to the current
Community budget to meet changing circumstances.
The documents
21.3 Document (a) is Preliminary Draft Amending Budget
No. 11 to the General Budget for 2004 (PDAB 11/2004), which would
increase total payment appropriations under Heading 2 (Structural
Operations) of the Budget by €3.4 billion (£2.396 billion).
The Commission says the increase is required because structural
funds payments have been paid out faster than was estimated at
the beginning of the year. On 30 September 2004 75% of budgeted
resources had been used compared to 50-60% at the same point in
2002 and 2003, suggesting that a further €3.4 billion will
be needed by the end of the year.
21.4 The Commission proposes that the additional
appropriations would be found through:
- transfer of €1.1 billion
(£0.775 billion) from Heading 1a (Common Agricultural Policy)
to Heading 2; this is available because payments in the cereals,
sugar, textile plants, wine, milk and milk products, beef, and
sheep and goat meat sectors have been lower than was estimated
when the 2004 Budget was adopted;
- an increase in Community revenue estimated at
€1.3 billion (£0.916 billion). The Commission estimates
higher levels than originally budgeted for import duties (€1.2
billion), fines, periodic penalties and other penalties (€80
million) and interest on late payments (€20 million); and
- a call on Member States to provide €1.0
billion (£0.705 billion) of additional funding to the Budget.
21.5 In document (b) the Commission proposes three
amendments to the current FP. These would:
- allow transfer of appropriations
from Heading 1a (Common Agricultural Policy) to Heading 1b (Rural
Development) in 2006;
- increase the commitment appropriations ceiling
for Structural Funds within Heading 2 (Structural Actions) by
€60 million (£42.3 million) in 2005 and €59 million
(£41.6 million) in 2006; and
- decrease the commitment appropriations ceiling
for the Cohesion Fund within Heading 2 by €61 million (£43.0
million) in 2005 and €60 million (£42.3 million) in
2006.
21.6 The first amendment results from the reforms
to the Common Agricultural Policy (CAP) agreed in September 2003,
under which direct CAP payments will be gradually reduced ("modulated")
from 2005 to 2012 and the savings used to increase rural development
spending. The other two amendments are required to allow the continuation
of the PEACE II programme in 2005 and 2006. The PEACE II programme
supports projects in Northern Ireland and the north of Ireland
which help consolidate the peace process. The PEACE II programme
was intended to finish at the end of 2004 but the Commission says
it has made an "essential and original" contribution
to peace and reconciliation and should be continued in 2005 and
2006. A draft Regulation to allow this to take place has been
put forward by the Commission.[53]
21.7 Additional resources for this extension can
be met by a reduction in the commitment appropriations ceiling
for the Cohesion Fund. Room is available under this ceiling because
Ireland became ineligible for new Cohesion Fund receipts in 2004,
when its per capita gross national product, measured at purchasing
power parity, rose above 90% of the Community average.
The Government view
21.8 On PDAB 11/2004 in document (a), the Financial
Secretary to the Treasury (Mr Stephen Timms) tells us:
"The Government is pleased with the apparent
improvement to structural funds implementation made by the Commission
and [Member States] in 2004 compared to previous years. However,
we will want to be convinced that the additional appropriations
requested under PDAB 11/2004 are necessary as the Government has
concerns about the accuracy of the Commission's estimate of total
payment appropriations that will be required by the end of 2004.
We will also want the Commission to demonstrate that the additional
resources required cannot be found through further redeployment
of under-utilised resources in other sections of the budget."
He adds that "The UK would meet a portion of
the call on [Member States] to provide an additional €1.0
billion to the EC Budget through its normal contribution —
in 2004 this will be 17.4% before abatement".
21.9 On document (b), about amendments to the FP,
the Minister says:
"The Government supports both the redirection
of CAP funds from subsidy to rural development ('modulation')
and the continuation of the PEACE II programme and will seek to
ensure mechanisms are in place to finance both operations."
Conclusion
21.10 We are pleased to see that the problem of
timely implementation of the Structural Funds is beginning to
improve. However we commend the Government's intention to ensure
the accuracy of the Commission's estimates and that there is all
possible redeployment of under-utilised resources elsewhere to
fund the extra requirement in Heading 2. We clear document (a).
21.11 We note the Government's support for the
financing proposals for "modulation" and for an extended
PEACE II programme. We note also that the former will not alter
the Heading 1 (Agriculture) Financial Perspective ceiling and
that the latter will lead to a reduction in the Heading 2 (Structural
Operations) Financial Perspective commitments appropriations for
2005 and 2006. We also clear document (b).
53 See para 22 of this Report. Back
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