7 Financial Management
| (30280)
17606/1/08
COM(08) 859
| Commission Communication concerning the revision of the Multiannual Financial Framework (2007-2013)
Draft Decision amending the Interinstitutional Agreement of 17 May 2006 on budgetary discipline and sound financial management as regards the Multiannual Financial Framework
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| Legal base | Article 272 EC; QMV; the special role of the European Parliament in relation to the adoption of the Budget is set out in Article 272
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| Document originated | 16 December 2008
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| Deposited in Parliament | 18 December 2008
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| Department | HM Treasury |
| Basis of consideration | EM of 18 December 2008
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| Previous Committee Report | None
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| To be discussed in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | Not cleared; further information awaited. But relevant to the debate on a response to the financial crisis and the aftermath[50]
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Background
7.1 In the context of the Commission's Communication, A
European Economic Recovery Plan, which we have recommended
for debate,[51] the Government
told us that:
(i) the Commission proposes revising the 2007-2013 Financial
Framework[52] (which
sets overall expenditure ceilings for the budget) for the purposes
of mobilising €5.00 billion (£4.10 billion) for trans-European
energy interconnections and broadband infrastructure; and
(ii) it should be noted that the ECOFIN Council
comments for European Council of 11-12 December 2008 specifically
refer to considering the Commission's plan "within the existing"
ceilings and headings of the Financial Framework.[53]
The document
7.2 In this document the Commission proposes
the revision of the 2007-2013 Financial Framework to which the
Government had alerted us. The revision would be achieved by amendment
to the Inter-Institutional Agreement of 17 May 2006 on budgetary
discipline and sound financial management, which set the current
Financial Framework.[54]
The draft Decision would allow a €5.00 billion (£4.10
billion) increase to the Heading 1a (Competitiveness for Growth
and Employment) framework ceiling for 2009 and 2010, with a corresponding
€5.00 billion (£4.10 billion) reduction to the Heading
2 (Preservation and Management of Natural Resources) ceiling for
2008 and 2009, as in the following table:
| Budget Heading | Commitments
| 2007 | 2008
| 2009 | 2010
| 2011 | 2012
| 2013 | 2007-2013
|
| 1a — Competitiveness for Growth and Employment
| €, millions | 0
| 0 | 3,000
| 2,000 | 0
| 0 | 0
| 5,000 |
| £, millions
| 0 | 0
| 2,490 | 1,660
| 0 | 0
| 0 | 4,150
|
| 2 — Preservation and Management of Natural Resources
| €, millions | 0
| -3,500 | -1,500
| 0 | 0
| 0 | 0
| -5,000 |
| £, millions
| 0 | -2,905
| -1,245 | 0
| 0 | 0
| 0 | -4,150
|
7.3 The Commission justifies its proposal in
the terms required by the Inter-Institutional Agreement, saying
that:
(i) a crisis of the scale facing the global financial
markets and economy would represent an "unforeseen circumstance"
within the meaning of the agreement and requires swift, ambitious
and well targeted actions, such as proposed in its European Economic
Recovery Plan;
(ii) the plan foresees a fiscal stimulus of about
€200.00 billion (£166.00 billion), or 1.5% GDP, with
€170.00 billion (£141.10 billion) provided by coordinated
Member State actions and €30.00 billion (£24.90 billion)
to be met from the Community budget and the European Investment
Bank. As part of the Community contribution to this stimulus the
plan proposes mobilisation of an additional €5.00 billion
(£4.10 billion) for energy interconnections and broadband
infrastructure in 2009 and 2010;
(iii) it has, as required, examined the scope
for reallocating expenditure between programmes within Heading
1a, with reference to any expected under-utilisation of appropriation
commitments;
(iv) it has concluded that it is not possible
at this stage to reprioritise or re-profile significantly the
envelopes within the annual ceilings, given that programmes within
this heading have been adopted to accord with the envelopes;
(v) furthermore in order to ensure, as required,
"sufficient margins" under the ceilings it has concluded
that the margins for Heading 1a would be insufficient to contribute
to the financing of the plan;
(vi) it has, as required, the scope for offsetting
the raising of one ceiling by lowering another;
(vii) it considers that additional appropriations
can be made available to Heading 1a by using the margins for Heading
2 (Preservation and Management of Natural Resources), with an
increase to the ceiling of Heading 1a by €3.00 billion (£2.50
billion) for 2009 and €2.00 billion (£1.70 billion)
for 2010 with a corresponding reduction in Heading 2 ceilings
of €3.50 billion for 2008 and €1.50 billion (£1.20
billion) for 2009; and
(viii) in relation to maintaining, as required,
"an appropriate relationship" between commitment and
payment appropriations, it considers, based on the payment profiles
foreseen relative to the increase in commitment appropriations
in Heading 1a and the reduction in commitment appropriations to
Heading 2, that payment appropriations should be modified as in
the following table:
| Payment appropriations (current prices)
| 2007 | 2008
| 2009 | 2010
| 2011 | 2012
| 2013 | 2007-13
|
| Current IIA ceiling |
€, millions | 122,190
| 129,681 | 123,858
| 133,505 | 133,452
| 140,200 | 142,408
| 925,294 |
| £, millions
| 101,405 | 107,622
| 102,790 | 110,796
| 110,752 | 116,352
| 118,184 | 767,901
|
| Required modification |
€, millions | 0
| -3,500 | -1,110
| 1,070 | 1,590
| 1,450 | 500
| 0 |
| £, millions
| 0 | -2,905
| -921 | 888
| 1,320 | 1,203
| 415 | 0
|
The Government's view
7.4 In his Explanatory Memorandum of 18 December 2008, the
Economic Secretary to the Treasury (Ian Pearson) comments that
the Government:
(i) welcomes the Commission's European Economic Recovery Plan,
which represents a comprehensive and wide-ranging response to
the current economic situation;
(ii) is concerned, however, about the lack of
detail in relation to the energy and broadband infrastructure
programmes to be funded through this proposal and will be pressing
the Commission to provide further information in relation to these;
(iii) is keen, as a strong believer and advocate
of budget discipline and sound financial management, to avoid
any further revision of the 2007-2013 Financial Framework, an
important tool for budget discipline; and
(iv) will work with like-minded Member States
to ensure that the Commission explores all other possibilities
for additional resources to be met from within the existing Financial
Framework through, in the first instance, appropriate redeployment,
reprioritisation, and re-profiling.
7.5 The Minister adds, in relation to the financial
implications of the proposal, that the UK contributes to the budget
as a whole, not to specific programmes. And, although the expected
increase in commitment appropriations do not directly impact on
Member State contributions to the Community budget, it will have
an indirect impact through a corresponding increase to payment
appropriations, expected in the years 2010-13.
7.6 Finally, the Minister tells us that, following
the agreement on the Commission's European Economic Recovery Plan
by the European Council on the 12 December 2008, the Commission,
the European Parliament and a number of Member States are pressing
hard for rapid agreement on this proposal.
Conclusion
7.7 We note that the Government hopes, perhaps
ambitiously, that recourse to revision of the Financial Framework
can be avoided. So before considering the matter further we should
like to hear about progress to that end. Meanwhile the document
remains under scrutiny.
7.8 However, as the Minister points out, this
proposal is a consequence of the Commission's European Economic
Recovery Plan. So we note that the document is relevant to the
debate we have recommended on the financial crisis and the aftermath,
which includes the Commission Communication about that plan.[55]
50 (30092) 14938/08: see HC 16-xxxvi (2007-08), chapter
4 (26 November 2008) and (30213) 16097/08: see HC 19-i (2008-09),
chapter 4 (10 December 2008). Back
51
See headnote. Back
52
In previous budgetary periods the Financial Framework was known
as the Financial Perspective and is still often referred to as
such. Back
53
(30213) 16097/08: see HC 19-i (2008-09), chapter 4 (10 December
2008). Back
54
See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2006:139:0001:0017:EN:PDF. Back
55
Op. cit. Back
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