11 Draft Budget 2008
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| Draft General Budget of the European Communities for the financial year 2008
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| Legal base | Article 272 EC; QMV; the special role of the European Parliament in relation to adoption of the Budget is set out in Article 272
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| Department | HM Treasury |
| Basis of consideration | Minister's letter of 25 July 2007
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| Previous Committee Report | None
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| Discussed in Council | 13 July 2007
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
11.1 The Commission's Preliminary Draft Budget (PDB) is the first
stage in the Community's annual budgetary procedure. We reported
on the 2008 PDB in June 2006[32]
and it was debated in European Standing Committee on 9 July 2007.[33]
The second stage is the adoption by the Council of the Draft Budget
(DB). The 2008 DB was adopted on 13 July 2007. The 2008 PDB and
the 2008 DB form the basis of the 2008 Adopted Budget which is
expected to be agreed in mid-December 2007, after consideration
by the European Parliament in October 2007, further consideration
by the Council in November 2007 and subsequent negotiations between
the Council and the European Parliament.
The Draft Budget
11.2 The Economic Secretary to the Treasury (Kitty Ussher) has
written in advance of publication of the DB (which will be later
in the Autumn) to tell us what the Council decided in relation
to the DB. The Minister encloses with her letter annexes, which
we reproduce, helpfully setting out the euro and sterling figures
for the six budget categories and the changes in these in relation
to the PDB. She tells us that the DB was based on a package put
together by the Portuguese Presidency and that its main features
are as follows.
SUMMARY OF THE FIGURES
11.3 For commitment appropriations the 2008 PDB proposed a total
of €129.17 billion (£87.85 billion). This was an increase
of 2% over 2007. For payment appropriations[34]
the 2008 PDB proposed a total of €121.58 billion (£82.69
billion). This was an increase of 5.3% over 2007. The DB proposes
a total of €128.40 billion (£86.54 billion) in commitment
appropriations, a reduction of 0.5% on the PDB number, and €119.41
billion (£80.48 billion) in payment appropriations, a reduction
of 1.7%. These figures are within the ceilings set by the multi-annual
Financial Perspective leaving an increased margin of €3.90
billion (£2.63 billion) under the ceiling for commitment
appropriations and €10.34 billion (£6.97 billion) under
that for payment appropriations.
11.4 The decreases are made up of:
- targeted reductions to the
proposed increases for specific programmes reflecting the Council's
estimate of actual financing needs for 2008;
- across-the-board reductions to increases for
Headings, 1a, 1b, and 2 taking into account implementation trends;
and
- reductions to increases in budgets of decentralised
agencies to ensure these are subject to the same budget discipline
as other institutions.
THE INDIVIDUAL EXPENDITURE HEADINGS
Heading 1: Sustainable growth
11.5 Overall expenditure under this heading is now
set by the DB at €56.88 billion (£38.34 billion) for
commitment appropriations and €49.12 billion (£33.10
billion) for payment appropriations, leaving a margin of €354.00
million (£238.60 million) under the Financial Perspective
ceiling for commitment appropriations.[35]
Heading 1a: Competitiveness for growth and employment
11.6 Expenditure under this sub-heading in the PDB
was €10.27 billion (£6.98 billion) for commitment appropriations,
an increase of 9.6% over 2007, and €9.60 billion (£6.53
billion) for payment appropriations, an increase of 35.4% over
2007 levels. Under the DB commitment appropriations are reduced
by €266.40 million (£179.30 million) and payment appropriations
by €548.40 million (£370.00 million), leaving a margin
of €343 million below the Financial Perspective ceiling for
commitment appropriations. These overall decreases consist of:
- across-the-board reductions
to commitment appropriations of €250.00 million (£168.50
million);
- reductions to the subsidies for decentralised
agencies of €16.40 million (£11.05 million);
- a transfer of commitment appropriations for Galileo
into the Reserve, pending a decision on the issue;[36]
and
- similar across-the-board reductions for payments.
Heading 1b: Cohesion for growth and employment
11.7 Expenditure under this sub-heading in the PDB
was €46.88 billion (£31.88 billion) for commitment appropriations,
an increase of 3.1% over 2007, and €40.62 billion (£27.62
billion) for payment appropriations, an increase of 7.5% over
2007 levels. Under the DB commitment appropriations are not reduced,
leaving a margin under the Financial Perspective ceiling of €11.10
million (£7.20 million). The PDB's proposed increase in payment
appropriations is reduced by €498.00 million (£335.70
million), consisting of:
- reductions to budget lines
relating to the completion of 2000-2006 programmes, particularly
the European Regional Development Fund, of €298.80 million
(£201.39 million); and
- reductions to 2007-2013 programmes, taking into
account completion and implementation rates, of €199.20 million
(£134.26 million).
Heading 2: Preservation and management of natural
resources
11.8 Overall expenditure under this heading in the
PDB was €56.28 billion (£38.27 billion) for commitment
appropriations, an increase of 0.05% over 2007, and €54.77
billion (£37.25 billion) for payment appropriations, an increase
of 0.1% over 2007. Under the DB commitment and payment appropriations
for agricultural expenditure are each reduced by €553.20
million (£372.70 million) leaving a margin of €3.08
billion (£2.07 billion) below the Financial Perspective ceiling.
Rural development spending has not been affected by these deceases,
which come from:
- an across-the-board commitment
and payment appropriations reduction of €350.00 million (£235.90
million) for interventions in agricultural markets, except for
budget lines relating to food programmes, free distribution of
fruit and vegetables and school milk;
- a targeted commitment and payment appropriations
reduction of €200.00 million (£134.80 million) to the
budget line relating to the clearance of accounts; and
- reductions to the subsidies for decentralised
agencies of €3.20 million (£2.16 million).
Heading 3: Citizenship, freedom, security and
justice
11.9 Overall expenditure under this heading is now
set by the DB at €1.28 billion (£0.86 billion) for commitment
appropriations and €1.13 billion (£0.76 billion) for
payment appropriations, leaving a margin of €91.40 million
(£61.60 million) under the Financial Perspective ceiling
for commitment appropriations.
Heading 3a: Freedom, security and justice
11.10 Expenditure under this sub-heading in the PDB
was €691.00 million (£470.00 million) for commitment
appropriations, an increase of 10.8% over 2007, and €496.00
million (£337.00 million) for payment appropriations, a decrease
of 4.8%, as against 2007. Under the DB commitment appropriations
are reduced by €4.30 million (£2.70 million) and payment
appropriations by €18.3 million (£12.10 million), leaving
a margin of €60.30 million (£40.60 million) under the
Financial Perspective ceiling for commitment appropriations. These
overall decreases were achieved through:
- a targeted reduction to commitment
appropriations for the PRINCE programme[37]
of €1.00 million (£0.67 million);
- a targeted reduction to payment appropriations
for budget lines relating to the European fund for the integration
of third country nationals, the European return fund, fundamental
rights and citizenship, and the fight against violence of €15.00
million (£10.11 million) in line with absorption capacities
and past implementation rates; and
- reductions to the subsidies for decentralised
agencies of €3.3 million (£2.22 million).
Heading 3b: Citizenship
11.11 Expenditure under this sub-heading in the PDB
was €597.00 million (£406.00 million) for commitment
appropriations, a decrease of 7.8% as against 2007 levels, and
€693.00 million (£471.00 million) for payment appropriations,
a decrease of 4.8% as against 2007. Under the DB commitment appropriations
are reduced by €14.60 million (£8.80 million) and payment
appropriations by €44.60 million (£29.00 million), leaving
a total margin of €31.10 million (£21.00 million) under
the Financial Perspective ceiling for commitment appropriations.
This represents:
- targeted reductions to commitment
and payment appropriations, for the budget lines for multimedia
actions, information for the media and specific actions under
the "Going Local" communication article, of €5.00
million (£3.37 million);
- targeted reductions to payment appropriations,
for the budget lines for Media 2007, Culture 2007-2013 and Youth
in action of €30.00 million (£20.22 million); and
- reductions to the subsidies for decentralised
agencies of €9.60 million (£6.47 million).
Heading 4: The EU as a global partner
11.12 Overall expenditure under this heading
in the PDB was €6.91 billion (£4.70 billion) for commitment
appropriations, an increase of 1.5% over 2007 levels and €7.92
billion (£5.38 billion) for payment appropriations, an increase
of 7.7% over 2007 levels. Under the DB commitment appropriations
are increased by €217.60 million (£146.90 million) and
payment appropriations reduced by €364.20 million (£245.30
million) (including a reduction of €239.20 million (£161.21
million) to the Emergency Aid Reserve), leaving a total margin
of €112.20 million (£75.60 million) below the Financial
Perspective ceiling for commitment appropriations. This allows
for increases in commitment appropriations of €80.00 million
(£53.92 million) for assistance to Palestine and of €180
million (£121.32 million) for assistance to Kosovo, both
of which are entered in the Reserve. The decreases were mainly
achieved through:
- targeted reductions to commitment
appropriations for the instrument for pre-accession — €18.50
million (£12.47 million), the evaluation of results, the
co-ordination and promotion of awareness and the PRINCE programme
— €10.50 million (£7.08 million) and regional
and horizontal programmes — €13.40 million (£9.03
million), taking into account absorption capacities and past implementation
rates;
- targeted reductions to payment appropriations,
for the same budget lines and those relating to transition and
institution-building, and completion of former cooperation with
Turkey, taking into account absorption capacities and past implementation
rates, totalling €125.00 million (£84.25 million); and
- a reduction of €239.20 million (£161.21
million) in payment appropriations to the Emergency Aid Reserve.
Heading 5: Administration
11.13 Overall expenditure under this heading in the
PDB was €7.34 billion (£4.99 billion) for both commitment
and payment appropriations, an increase of 5.7% against 2007 levels.
In the DB both commitment and payment appropriations are reduced
by €96.20 million (£64.70 million), leaving a total
margin of €266.80 million (£179.80 million) below the
Financial Perspective ceiling for commitment appropriations. The
approach taken by the Council was to set an appropriate level
for the administrative budget of each institution, taking into
account their own specificities and their real and justified needs,
while accepting all new posts relating to the 2004 and 2007 enlargements.
In particular, the reductions were achieved through:
- limiting the global increase
of the Council's own budget to 0.2%;
- applying for other institutions a 2% reduction
taking into account efficiency gains and the impact of inter-institutional
co-operation;
- retaining specific decreases on individual budget
lines for some institutions, taking into account real needs;
- increasing the standard flat rate abatement on
salaries for some institutions taking into account their current
vacancy rate; and
- accepting only a few new posts for new tasks,
on the basis of justified needs.
Heading 6 Compensation
11.14 Overall expenditure under this heading in the
PDB was €206.00 million (£140.09 million) for both commitment
and payment appropriations, a decrease of 53.5% against 2007 levels.
The DB made no changes to this heading. This leaves a margin €0.36
million (£0.22 million) under the Financial Perspective ceiling
for commitment appropriations.
The Government's view
11.15 First the Minister tells us that during a conciliation
meeting between the Council and the European Par1iament five joint
statements relating to the budget were agreed, concerning:
- Structural and Cohesion Funds
and Rural Development 2007-2013 programmes;
- recruitment in relation to the 2004 and 2007
enlargement;
- decentralised agencies;
- Executive Agencies; and
- assigned revenues.
She comments that the Government is supportive of
these statements, which call for a greater degree of transparency,
sound financial management and budget discipline in the areas
they concern.
11.16 More generally the Minister tells us that the
Government believes the Council's 2008 DB goes a considerable
way to meeting its key objectives for the negotiations. The 2008
DB:
- maintains budget discipline;
- significantly reduces the level of payment appropriations
in Headings 1 and 2, to bring the budget closer to the likely
implementation rate and to reduce the likelihood of another large
surplus;
- protects allocations for Afghanistan and Iraq
and other Government priority areas — adjustment support
for Sugar Protocol countries, cooperation with developing countries
in Asia, humanitarian aid and the Common Foreign and Security
Policy;
- takes a rigorous approach to expenditure in Headings
3 and 5, delivering savings and increased flexibility; and
- remains fully consistent with the financial settlement
agreed in December 2005 (the agreement on the Financial Perspectives
for the period 2007-2013) and continues to cater for the needs
of enlargement in a budget-disciplined way.
11.17 The Minister concludes that, whilst the Government
would have welcomed a more ambitious reduction to administrative
expenditure, the DB represents a balanced overall package to put
to the European Parliament and that the Government will continue
to pursue its key objectives in the subsequent stages of the 2008
budget process.
Conclusion
11.18 We are grateful to the Minister for her
report on progress in setting the 2008 Budget. We note that the
Government appears to be achieving some successes in securing
budgetary discipline and look forward to hearing that these gains
are retained in the later stages of the process. Meanwhile we
clear the document.
ANNEX
1: TABLE 1: SUMMARY OF 2008 PDB AND DRAFT EC BUDGET - EUR MILLION
| Heading
| Financial Framework Ceiling
| 2008 PDB
| 2008 DB
Council 1st Reading
| Difference DB/PDB
|
| |
| CA (1)
| PA (2)
| CA |
PA | CA
| PA |
| 1. Sustainable Growth
1a. Competitiveness for Growth and Employment
Margin1
1b. Cohesion for Growth and Employment
Margin
| 56,736
9,847
—
46,889
—
| 57,148
10,270
76.6
46,878
11.1
| 50,161
9,539
—
40,623
—
| 56,882
10,004
343.0
46,878
11.1
| 49,115
8,990
—
40,125
—
| -266
-266
266
0
0
| -1,046
-549
—
-498
—
|
| 2. Preservation and Management of Natural Resources
Margin
| 58,800
— | 56,276
2,524.2
| 54,770
— | 55,723
3,077.3
| 54,217
— | -553
553
| -553
— |
| 3. Citizenship, Freedom, Security and Justice
3a. Freedom, Security and Justice
Margin
3b. Citizenship
Margin
| 1,362
747
—
615
—
| 1,289
691
56.0
598
17.7
| 1,190
496
—
694
—
| 1,271
687
60.3
584
31.1
| 1,128
478
—
650
—
| -18
-4
4.3
-14
14
| -62
-18
—
-44
—
|
| 4. European Union as a Global Partner2
Margin
| 7,002
— | 6,911
329.8
| 7,917
— | 7,129
112.2
| 7,553
— | 218
-218
| -364
— |
| 5. Administration
Margin
| 7,380
— | 7,336
121.2
| 7,336
— | 7,190
266.8
| 7,190
— | -96
96
| -96
— |
| 6. Compensation
Margin
| 207
— | 207
363.7
| 207
— | 207
363.7
| 207
— | 0
0
| 0
— |
| TOTAL (3)
Margin
| 131,487
— | 129,167
3,137
| 121,581
— | 128,401
3,902
| 119,410
— | -715
715
| -2,121
— |
| Appropriations for payment as % of GNI
| | | 0.97%
| | 0.95% |
| |
Notes
(1) CA = commitment appropriations
(2) PA = payment appropriations
(3) Due to rounding, the sum of the lines may not
equal the total.
1 The margin for
Heading 1 (sub-heading 1a) does not take into account the appropriations
related to the European Globalisation Adjustment Fund (€500m).
2 Excludes €234.5m
from the Emergency Aid Reserve.
TABLE
2: 2008 PDB AND DRAFT EC BUDGET — GBP MILLION
| Heading
| Financial Framework Ceiling
| 2008 PDB
| 2008 DB
Council 1st Reading
| Difference DB/PDB
|
| |
| CA (1)
| PA (2)
| CA |
PA | CA
| PA |
| 1. Sustainable Growth
1a. Competitiveness for Growth and Employment
Margin3
1b. Cohesion for Growth and Employment
Margin
| 38,240.1
6,636.9
—
31,603.2
—
| 38,517.8
6,922.0
51.6
31,595
7.2
| 33,808.5
6,429.3
—
27,380.0
—
| 38,338.5
6,742.7
231.2
31,595.8
7.2
| 33,103.5
6,059.3
—
27,044.3
—
| -179.3
-179.3
179.3
0
0
| -705.0
-370.0
—
-335.7
—
|
| 2. Preservation and Management of Natural Resources
Margin
| 39,631.2
— | 37,930.0
1,701.3
| 36,915.0
— | 37,557.3
2,074.1
| 36,542.3
— | -372.7
372.7
| -372.7
— |
| 3. Citizenship, Freedom, Security and Justice
3a. Freedom, Security and Justice
Margin
3b. Citizenship
Margin
| 918.0
503.5
—
414.5
—
| 868.7
465.7
37.7
403.1
11.9
| 802.1
334.3
—
467.8
—
| 856.7
463.0
40.6
393.6
21.0
| 760.3
322.2
—
438.1
—
| -12.1
-2.7
2.9
-9.4
9.4
| -41.8
-12.1
—
-29.7
—
|
| 4. European Union as a Global Partner4
Margin
| 4,719.3
— | 4,658.0
222.3
| 5,336.1
— | 4,804.9
75.6
| 5,090.7
— | 146.9
-146.9
| -245.3
— |
| 5. Administration
Margin
| 4,974.1
— | 4,944.5
81.7
| 4,944.5
— | 4,846.1
179.8
| 4,846.1
— | -64.7
64.7
| -64.7
— |
| 6. Compensation
Margin
| 139.5
— | 139.5
245.1
| 139.5
— | 139.5
245.1
| 139.5
— | 0
0
| 0
— |
| TOTAL (3)
Margin
| 88,622.2
— | 87,058.6
2,114.3
| 81,945.6
— | 86,542.3
2,629.9
| 80,482.3
— | -481.9
481.9
| -1,429.6
— |
| Appropriations for payment as % of GNI
| | | 0.97%
| | 0.95% |
| |
Notes
(1) CA = commitment appropriations
(2) PA = payment appropriations
(3) Due to rounding, the sum of the lines may not
equal the total.
Sterling figures converted the exchange rate on 29
June 2007: €1=£0.674
3 The margin for
Heading 1 (sub-heading 1a) does not take into account the appropriations
related to the European Globalisation Adjustment Fund (£337m).
4 Excludes £158.1m
from the Emergency Aid Reserve.
32 (28681): See HC 41-xxv (2006-07), para 2 (13 June
2007). Back
33
Stg Co Deb, European Standing Committee, cols 3-24. Back
34
Commitment appropriations are the cost of legal obligations that
can be entered into during the current financial year for payments
in the current and future years. Payment appropriations are the
amounts available to be spent in the current financial year on
commitments made in the current or past years. In exceptional
circumstances unused payment appropriations may be carried forward
into the following year. Back
35
An equivalent breakdown of the total margin for payment appropriations
is not available. Back
36
We expect to report on developments on Galileo shortly. Back
37
"The PRINCE programme is designed to provide assistance to
implement the information and communication strategy for the European
Union. The focus is on information and communication actions on
enlargement issues targeting mainly the general public in EU member
states." Commission website.
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