11 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 29 March 2009
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| Previous Committee Report | HC 19-iii (2008-09), chapter 6 (14 January 2009), HC 19-viii (2008-09), chapter 7 (25 February 2009) and HC 19-x (2008-09), chapter 1 (11 March 2009)
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| Discussed in Council | 19-20 March 2009 (European Council)
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
11.1 In the context of the Commission's Communication, A
European Economic Recovery Plan,[35]
the Government told us that:
- the Commission proposes revising the 2007-2013 Financial Framework[36]
(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.[37]
11.2 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.[38]
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.
11.3 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.
11.4 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.
11.5 When we last considered the document, on
11 March 2009, we heard that:
- at a General Affairs and External
Relations Council on 23 February 2009 the Government had 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;
- a compromise proposal from the Presidency was
expected shortly and the Government would continue to work for
a financing solution that avoided any Financial Framework revision,
or at least limited it to an absolute minimum; and
- the financing package was on the agenda for the
General Affairs and External Relations Council on 16 March 2009
— if agreement was not reached then, the Presidency would
seek to reach agreement in time for the Spring European Council
on 19-20 March 2009.
11.6 We noted that:
- although there had been some
progress towards obtaining a more satisfactory outcome on this
matter, the Government was attempting to secure more;
- fast moving negotiations in the run-up to the
European Council might require a Government decision on a compromise
before scrutiny was complete, in order to secure a favourable
outcome;
- as the Government acknowledged, it would be regrettable
if it had to agree to a decision on this matter whilst the document
was still under scrutiny;
- nevertheless, we did not yet feel able to clear
the document from scrutiny;
- but, given the circumstances, the Government
could, if it deemed it necessary and in accordance with paragraph
(3) (b) of the Scrutiny Reserve Resolution, agree to a compromise
on this matter; and
- we should, of course, want a prompt account of
developments on the document, when we would again consider whether
then to clear it from scrutiny.
Meanwhile the document remained under scrutiny.[39]
The Minister's letter
11.7 The Economic Secretary to the Treasury (Ian
Pearson) writes to tell us of the final outcome of discussion
of this proposal. He says that:
- at the European Council of
19-20 March 2009 agreement was reached on financing the additional
€5.00 billion Community contribution to the European Economic
Recovery Plan;
- the basis for final agreement was a Presidency
compromise as an alternative financing solution to that originally
proposed by the Commission;
- the Government was instrumental in arguing for
an alternative budget-disciplined financing mechanism for the
whole €5.00 billion package which will draw on existing budget
resources; and
- consistent with the Government's long-standing
concerns and objectives, the agreement involves no overall increase
to the 2007-2013 Financial Framework or use of funds from previous
years, as originally proposed by the Commission.
11.8 The Minister continues that the main elements
of the agreed package were:
- the overall €5.00 billion
reference amount was maintained — €1.02 billion would
go toward broadband internet and "CAP Health Check"
related measures[40]
and €3.98 billion for energy infrastructure projects;
- financing of the former would be exclusively
from within Heading 2, €600 million of which would be covered
by the existing 2009 Heading 2 budget margin;
- financing the energy projects in 2009 would be
done by a revision of the Financial Framework ceilings such that
an increase of €2.00 billion to the 2009 ceiling of Heading
1a would be offset by a decrease of the 2009 ceiling of Heading
2 by the same amount;
- at least €2.60 billion of the existing 2009
Heading 2 margin has been allocated to finance the recovery plan;
- the remaining €2.40 billion will be secured
during the course of the 2010 and 2011 annual budget negotiations;
- available resources under Heading 2 will be committed
to meet the remaining €420 million for broadband internet
and CAP Health Check measures; and
- to finance the outstanding €1.98 billion
for energy projects, the remaining margins available under the
2009, 2010 and 2011 budget ceilings will be used.[41]
11.9 The Minister comments that:
- The Government worked with
like-minded Member States to delete any reference in the compromise
text to the possibility of increasing the overall Financial Framework
ceiling;
- the €5.00 billion package is part of a wider
Community fiscal stimulus which the Government supports in line
with policies it is pursuing nationally and internationally to
help the global economy recover;
- guaranteed access to funding across the Community
should leverage additional investment and create jobs and could
make the vital difference between projects going ahead or not;
- carbon capture and storage technology development
in the Community as a whole will receive over €1.00 billion
as a consequence of this package;
- agreement on the €5.00 billion package represents
a good and hard-fought outcome for the UK that ensures an estimated
€265 million (£237 million) additional investment for
UK energy projects (for electricity interconnection, off-shore
wind and carbon capture and storage) and for the provision of
broadband infrastructure in rural areas;
- the UK post-abatement gross contribution associated
with the Presidency compromise package will be an estimated €488
million (£435 million), some €70 million (£62.50
million) less than what it would have been with the original Commission
proposal;
- in avoiding an increase to the overall Financial
Framework ceiling the Government has ensured that at least €2
billion of 2009 CAP budget margins will be reallocated to energy
infrastructure projects; and
- this represents a good outcome consistent with
the Government's broader aims for re-shaping the budget and for
a fundamental review of Community expenditure.
Conclusion
11.10 We are grateful to the Minister for
this account of the final outcome on this proposal. We have no
further questions to ask and now clear the document.
35 (30213) 16097/08: see HC 19-i (2008-09), chapter
4 (10 December 2008) and HC Deb, 20 January 2009, cols.
626-53. Back
36
In previous budgetary periods the Financial Framework was known
as the Financial Perspective and is still often referred to as
such. Back
37
(30213) 16097/08: op. cit. Back
38
See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2006:139:0001:0017:EN:PDF. Back
39
See headnote. Back
40
See http://ec.europa.eu/agriculture/healthcheck/index_en.htm.
Back
41
The text of the compromise proposal is at http://register.consilium.europa.eu/pdf/en/09/st07/st07848-re01.en09.pdf.
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