34 Draft Budget 2005
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| Draft General Budget for the European Communities for the financial year 2005
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| Legal base | Article 272 EC; the special role of the European Parliament in relation to the adoption of the Budget is set out in Article 272; QMV
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| Department | HM Treasury
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| Basis of consideration | Minister's letter of 6 December 2004
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| Previous Committee Report | HC 42-xxxvii (2003-04), para 16 (17 November 2004)
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| Discussed in Council | 25 November 2004
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| Committee's assessment | Politically important
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| Committee's decision | Cleared (decision reported on 9 September 2004)
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Background
34.1 The Commission's Preliminary Draft Budget (PDB) is the first
stage in the Community's annual budgetary procedure. We reported
on the 2005 PDB in May 2004[89]
and it was debated in European Standing Committee B on 30 June.[90]
The second stage is the adoption by the Council of the Draft
Budget (DB). The 2005 DB was adopted on 16 July 2004 and the
European Parliament completed its first reading of it on 28 October.[91]
The 2005 PDB and the 2005 DB form the basis of the 2005 Adopted
Budget, which is expected to be agreed by the European Parliament
at its plenary session of 13-16 December, following further consideration
by the Council and conciliation with the European Parliament on
25 November 2004.
The Minister's letter
34.2 The Financial Secretary to the Treasury (Mr Stephen Timms)
writes now with an account of the outcome of the discussions on
25 November 2004. He says that after conciliation with the European
Parliament the Council adopted a second reading position on the
2005 DB:
"Across most headings the Council returned to the
DB. However, during conciliation Council and the EP agreed an
overall limit on payments in 2005 and to mobilise the Flexibility
Instrument to secure full funding for Iraq and the PEACE II programme
for Northern Ireland in 2005. Funding agreed for PEACE II in 2005
formed part of a two-year deal to finance its extension in 2005
and 2006. Council also adopted a number of changes to the Preliminary
Draft Budget (PDB) proposed by the Commission in three amending
letters."[92]
34.3 The Minister encloses with his letter annexes, which we reproduce,
helpfully setting out the euro and sterling figures for the eight
budget categories and the changes in these in relation to the
previous stages of the budget process.
34.4 The Minister tells us that the main changes
between the Council's second reading and the European Parliament's
first reading are:
- The totals.
The Council reduced commitment appropriations by €1.19 billion
to €115.97 billion and payment appropriations by €6.19
billion to €105.05 billion. The Council and the European
Parliament also agreed that in the latter's second reading total
payments will not exceed €106.30 billion;
- Heading 1 (Agriculture).
The Council agreed a modified version of the European Parliament's
amendment to the "pilot project on quality promotion"
budget line. Otherwise it returned to the DB, cutting both commitment
and payment appropriations by €1.05 billion to totals of
€49.67 billion and €49.11 billion respectively;
- Heading 2 (Structural Operations).
On payment appropriations the Council returned to the DB with
a cut of €3.82 billion to €32.40 billion. It increased
commitment appropriations by €45 million to €42.42 billion
as part of a two-year agreement with the European Parliament on
funding for the PEACE II programme for Northern Ireland. The deal
will allow €60 million for PEACE II in 2005 — including
€45 million from use of the Flexibility Instrument —
and a minimum of €48 million in 2006;
- Heading 3 (Internal Policies). All
but one of the European Parliament's amendments were rejected
by the Council, reducing commitment appropriations by €91
million to €8.92 billion and payment appropriations by €174
million to €7.69 billion. But during conciliation the Council
agreed to use the Flexibility Instrument for €40 million
to allow the European Parliament to finance EU agencies at its
second reading;
- Heading 4 (External Actions).
All the European Parliament amendments were rejected. Amending
Letter to the PDB No. 1/2005[93]
transferring assistance to Croatia to Heading 7 (Pre-Accession
Aid) was accepted. The net effect was to reduce commitment appropriations
by €269 million to €5.04 billion and payment appropriations
by €538 million to €4.98 billion. To ensure that the
full amount for Iraq was preserved at the European Parliament's
second reading, use of the Flexibility Instrument to cover up
to €100 million of the Iraq contribution was agreed. This
allows reinstatement of some of the European Parliament's first
reading increases to pre-existing budget lines;
- Heading 5 (Administration).
The Council returned to the DB and adopted Amending Letter to
the PDB No. 2/2005,[94]
with the net effect of reducing commitment and payment appropriations
by €56 million to €6.30 billion; and
- Heading 7 (Pre-Accession).
The European Parliament amendments were rejected and Amending
Letter to the PDB No. 1/2005 was adopted, placing assistance for
Croatia and northern Cyprus in this heading. Overall commitment
appropriations increased by €225 million to €2.08 billion,
whilst payment appropriations were cut by €551 million to
€3.03 billion.
The Government's view
34.5 The Minister tells us:
"Overall, the Government believes the
Council's second reading goes a long to meeting its key objectives.
In general, budget discipline and flexibility have been maintained.
In particular, we have reached agreement to limit total payments
and preserved the financial perspective ceilings with reduced
use of the Flexibility Instrument (€185 million) compared
to the EP's first reading proposals (€244 million). From
a policy perspective, we have secured funding for Iraq and the
Union's Common Foreign and Security Policy (CFSP), and a two-year
deal for the extension of the PEACE II programme for Northern
Ireland."
Conclusion
34.6 We are grateful to the Minister for this
report on progress in setting the 2005 Budget.
Annex 34.1 - Outcome of the Council's second reading
of the 2005 EC Budget
| Heading
| Preliminary Draft Budget
| Draft Budget |
EP First Reading |
Council Second Reading
| Change EP1 / C2 |
| CA (€m)
| PA (€m) | CA (€m)
| PA (€m) | CA (€m)
| PA (€m) | CA (€m)
| PA (€m) | CA (€m)
| PA (€m) |
| 1 Agriculture | 50,675
| 50,114 | 49,675
| 49,114 | 50,722
| 50,160 | 49,676
| 49,114 | -1,046
| -1,046 |
| Margin | 764
| n/a | 1,764
| n/a | 717
| n/a | 1,763
| n/a |
| |
| 2 Structural Actions | 42,378
| 35,396 | 42,378
| 32,396 | 42,378
| 36,219 | 42,423
| 32,396 | +45
| -3,823 |
| Margin | 108
| n/a | 108
| n/a | 108
| n/a | 63
| n/a |
| |
| 3 Internal Policies | 8,959
| 7,729 | 8,903
| 7,686 | 9,012
| 7,878 | 8,921
| 7,704 | -91
| -174 |
| Margin | 53
| n/a | 109
| n/a | 0
| n/a | 91
| n/a |
| |
| 4 External Actions | 5,234
| 5,010 | 5,105
| 4,986 | 5,309
| 5,514 | 5,040
| 4,976 | -269
| -538 |
| Margin | -115
| n/a | 14
| n/a | -190
| n/a | 79
| n/a |
| |
| 5 Administration | 6,389
| 6,389 | 6,308
| 6,308 | 6,357
| 6,357 | 6,301
| 6,301 | -56
| -56 |
| Margin | -29
| n/a | 52
| n/a | 3
| n/a | 59
| n/a |
| |
| 6 Reserves | 223
| 223 | 223
| 223 | 223
| 223 | 223
| 223 | 0
| 0 |
| Margin | 223
| n/a | 223
| n/a | 223
| n/a | 223
| n/a |
| |
| 7 Pre-Accession Aid | 1,856
| 3,180 | 1,856
| 2,980 | 1,856
| 3,576 | 2,081
| 3,025 | +225
| -551 |
| Margin | 1,616
| n/a | 1,616
| n/a | 1,616
| n/a | 1,391
| n/a |
| |
| 8 Compensations | 1,305
| 1,305 | 1,305
| 1,305 | 1,305
| 1,305 | 1,305
| 1,305 | 0
| 0 |
| Margin | 0
| n/a | 0
| n/a | 0
| n/a | 0
| n/a |
| |
| Total | 117,019
| 109,345 | 115,754
| 104,998 | 117,162
| 111,233 | 115,970
| 105,045 | -1,192
| -6,188 |
| FP Ceiling | 119,594
| 114,235 | 119,594
| 114,235 | 119,594
| 114,235 | 119,594
| 114,235 | 119,594
| 114,235 |
| Margin | 2,575
| 4,890 | 3,840
| 9,237 | 2,432
| 3,002 | 3,624
| 9,190 | -1,192
| -6,188 |
| Heading | Preliminary Draft Budget
| Draft Budget |
EP First Reading |
Council Second Reading
| Change EP1 / C2 |
| CA (£m)
| PA (£m) | CA (£m)
| PA (£m) | CA (£m)
| PA (£m) | CA (£m)
| PA (£m) | CA (£m)
| PA (£m) |
| 1 Agriculture | 33,779
| 33,405 | 33,113
| 32,738 | 33,810
| 33,436 | 33,113
| 32,739 | -697
| -697 |
| Margin | 509
| n/a | 1,176
| n/a | 478
| n/a | 1,175
| n/a |
| |
| 2 Structural Actions | 28,249
| 23,594 | 28,249
| 21,594 | 28,249
| 24,143 | 28,278
| 21,594 | +30
| -2,548 |
| Margin | 72
| n/a | 72
| n/a | 72
| n/a | 42
| n/a |
| |
| 3 Internal Policies | 5,972
| 5,152 | 5,935
| 5,123 | 6,007
| 5,251 | 5,947
| 5,135 | -61
| -116 |
| Margin | 36
| n/a | 72
| n/a | 0
| n/a | 61
| n/a |
| |
| 4 External Actions | 3,489
| 3,340 | 3,403
| 3,324 | 3,539
| 3,676 | 3,360
| 3,317 | -179
| -359 |
| Margin | -77
| n/a | 10
| n/a | -127
| n/a | 53
| n/a |
| |
| 5 Administration | 4,259
| 4,259 | 4,205
| 4,205 | 4,237
| 4,237 | 4,200
| 4,200 | -37
| -37 |
| Margin | -19
| n/a | 35
| n/a | 2
| n/a | 39
| n/a |
| |
| 6 Reserves | 149
| 149 | 149
| 149 | 149
| 149 | 149
| 149 | 0
| 0 |
| Margin | 149
| n/a | 149
| n/a | 149
| n/a | 149
| n/a |
| |
| 7 Pre-Accession Aid | 1,237
| 2,120 | 1,237
| 1,986 | 1,237
| 2,384 | 1,387
| 2,017 | +150
| -367 |
| Margin | 1,077
| n/a | 1,077
| n/a | 1,077
| n/a | 927
| n/a |
| |
| 8 Compensations | 870
| 870 | 870
| 870 | 870
| 870 | 870
| 870 | 0
| 0 |
| Margin | 0
| n/a | 0
| n/a | 0
| n/a | 0
| n/a |
| |
| Total | 78,002
| 72,887 | 77,159
| 69,989 | 78,098
| 74,145 | 77,303
| 70,020 | -795
| -4,125 |
| FP Ceiling | 79,719
| 76,147 | 79,719
| 76,147 | 79,719
| 76,147 | 79,719
| 76,147 | 79,719
| 76,147 |
| Margin | 1,716
| 3,259 | 2,560
| 6,157 | 1,621
| 2,001 | 2,416
| 6,126 | -795
| -4,125 |
All figures converted at a rate of £1 = €1.5002. 'CA'
indicates commitment appropriation, 'PA' indicates payment appropriation.
89
See (25654) - ; HC 42-xxi (2003-04), para 3 (26 May 2004). Back
90
Stg Co Deb, European Standing
Committee B, 30 June 2004, cols 3-26. Back
91
See headnote. Back
92
Ibid. Back
93
Ibid. Back
94
Ibid. Back
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