1 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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| Department | HM Treasury |
| Basis of consideration | Minister's letter of 10 March 2009
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| Previous Committee Report | HC 19-iii (2008-09), chapter 6 (14 January 2009) and HC 19-viii (2008-09), chapter 7 (25 February 2009)
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| To be discussed in Council | 16 March 2009 (General Affairs and External Relations Council) or 19-20 March 2009 (European Council)
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| Committee's assessment | Politically important
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| Committee's decision | Not cleared; further information requested
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Background
1.1 In the context of the Commission's Communication, A European
Economic Recovery Plan,[1]
the Government told us that:
- the Commission proposes revising the 2007-2013 Financial Framework[2]
(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
- it should be noted that the ECOFIN Council comments
for the European Council of 11-12 December 2008 specifically referred
to considering the Commission's plan "within the existing"
ceilings and headings of the Financial Framework.[3]
1.2 In December 2008 the Commission proposed in this
document the revision of the 2007-2013 Financial Framework to
which we had been alerted. The revision was to 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.[4]
The draft Decision would allow a €5.00 billion (£4.10
billion) increase to the Heading 1a (Competitiveness for Growth
and Employment) 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.
1.3 When we considered this document, in January
2009, we:
- noted that the Government was
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;
- noted that it would work with like-minded Member
States to ensure that the Commission explored 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; and
- asked to hear about progress in securing that
objective.
1.4 When we considered the document again, in February
2009, we heard that:
- the Netherlands, Germany, Sweden,
Denmark, Austria and France had expressed concerns with the proposal
to revise the Financial Framework;
- as well as calling on the Commission to propose
reprioritisation and redeployment of existing resources within
both Headings 1a and 2, the Government and the like-minded Member
States were opposed to use of the 2008 unallocated budget margin
and to any increase in the overall Financial Framework ceiling;
- in the light of this the Commission had revised
its proposal, limiting the overall increase of commitment appropriations
under Heading 1a to €3.50 billion (£2.91 billion), but
proposing an additional €1.50 billion (£1.25 billion)
of expenditure for infrastructure projects under Heading 2, to
make the total up to €5.00 billion (£4.15 billion);
- the Government objected to this revised proposal
as it still drew on the 2008 margin to finance the package; and
- it would continue to take a proactive part in
discussions with the Commission and other Member States.
We applauded the Government's continued efforts to
ensure recourse to revision of the Financial Framework was avoided
and asked to hear about further progress to that end. Meanwhile
the document remained under scrutiny.[5]
The Minister's letter
1.5 The Economic Secretary to the Treasury (Ian Pearson)
writes to tell us that since he last wrote discussion of the Commission's
proposal has continued at official and ministerial level. He says
that:
- at the General Affairs and
External Relations Council on 23 February 2009 there was general
consensus that the Commission's preferred option — to utilise
the 2008 budget margin — was not acceptable;
- at that meeting the Government set out a broad
alternative approach to draw on the redeployment of existing resources
and future year margins which was supported by Sweden and Austria
and opposed by Poland, Ireland and Greece and on which France,
the Netherlands and Germany called for more detailed work to be
done before a decision could be reached;
- the Presidency therefore had no formal mandate
at this stage to discuss the source of financing with the European
Parliament;
- on 4 March 2009 the Presidency issued a list
of questions to guide another COREPER discussion — most
Member States supported maintaining the €5.00 billion reference
amount and the idea of spreading the budgetary commitments over
three years rather than two was broadly supported; and
- a compromise proposal from the Presidency is
expected shortly and the Government will continue to work for
a financing solution that avoids any Financial Framework revision,
or at least limits it to an absolute minimum.
1.6 The Minister continues that:
- the financing package is on
the agenda for the General Affairs and External Relations Council
on 16 March 2009;
- if agreement is not reached then, the Presidency
will seek to reach agreement in time for the Spring European Council
on 19-20 March 2009; and
- as a number of compromise packages could be presented
during both of these Councils and decisions might have to be made
rapidly, the Government may need, regrettably, to override scrutiny
in the interests of securing a favourable negotiating outcome.
Conclusion
1.7 We are grateful to the Minister for his further
account of where matters stand on this proposal. We note that:
- although there has been
some progress towards obtaining a more satisfactory outcome on
this matter, the Government is attempting to secure more; and
- fast moving negotiations in the run-up to
the European Council may require a Government decision on a compromise
before scrutiny is complete, in order to secure a favourable outcome.
1.8 As the Minister says, it would be regrettable
if the Government had to agree to a decision on this matter whilst
the document is still under scrutiny. Nevertheless we do not feel
able to clear the document from scrutiny yet. But given the circumstances
the Government may, if it deems it necessary and in accordance
with paragraph (3) (b) of the Scrutiny Reserve Resolution, agree
to a compromise on this matter. We shall, of course, want a prompt
account of developments on the document, when we shall again consider
whether then to clear it from scrutiny.
1 (30213) 16097/08: see HC 19-i (2008-09), chapter
4 (10 December 2008) and HC Deb, 20 January 2009, cols.
626-53. Back
2
In previous budgetary periods the Financial Framework was known
as the Financial Perspective and is still often referred to as
such. Back
3
(30213) 16097/08: op. cit. Back
4
See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2006:139:0001:0017:EN:PDF. Back
5
See headnote. Back
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