Documents considered by the Committee on 11 March 2009 - European Scrutiny Committee Contents


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

Legal baseArticle 272 EC; QMV; the special role of the European Parliament in relation to the adoption of the Budget is set out in Article 272
DepartmentHM Treasury
Basis of considerationMinister's letter of 10 March 2009
Previous Committee ReportHC 19-iii (2008-09), chapter 6 (14 January 2009) and HC 19-viii (2008-09), chapter 7 (25 February 2009)
To be discussed in Council16 March 2009 (General Affairs and External Relations Council) or 19-20 March 2009 (European Council)
Committee's assessmentPolitically important
Committee's decisionNot cleared; further information requested

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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