European Scrutiny Committee Contents


5 Statistics

(30664)

10343/09

COM(09) 238

Draft Council Decision on the allocation of financial intermediation services indirectly measured (FISIM) for the establishment of the gross national income (GNI) used for the purposes of the European Communities' budget and its own resources

Legal baseArticle 269 EC; consultation; unanimity
DepartmentHM Treasury
Basis of considerationMinister's letter of 14 July 2009
Previous Committee ReportHC 19-xxii (2008-09), chapter 4 (1 July 2009)
To be discussed in CouncilNot known
Committee's assessmentPolitically important
Committee's decisionNot cleared; further information requested

Background

5.1 "Financial intermediation services indirectly measured" (FISIM) is an estimate of the value of the services provided by financial intermediaries, typically banks, for which no explicit price is charged — rather these services are paid for as part of the margin between rates applied to savers and borrowers. The allocation of FISIM within the Community system of national and regional accounts (the European System of Accounts 1995, ESA 95) in order to establish gross national income (GNI) was defined in Council Regulation (EC) No. 448/98 and was implemented from 1 January 2005 by Commission Regulation (EC) No. 1889/2002. However, for the purposes of the Communities' budget and own resources[15] the allocation of FISIM is not automatically applied, instead:

  • adoption of a Council Decision modifying ESA 95 is required under Article 8(1) of Council Regulation (EC) No. 448/98; and
  • if it is established that the allocation of FISIM constitutes a significant change in GNI, the Council shall decide, under Article 2(7) of the Own Resources Decisions (ORDs) of 29 September 2000 and 7 June 2007, that such modifications apply for the purposes of both the ORDs.

5.2 In May 2009, in presenting this draft Decision the Commission:

  • considered that allocation of FISIM in establishing GNI used for the purposes of the Communities' budget and own resources would have a significant impact on Member States' estimated own resources contributions and would also modify the ceilings for payments and commitments as established under the ORDs;
  • noted that Commission Regulation (EC) No. 1889/2002 required Member States to allocate FISIM in their annual ESA 95 data transmissions and that this requirement had not been complied with fully until the transmission of ESA data in September or October 2008; and
  • noted that, as the requirement had now been complied with, the Commission was able to put forward this proposal.

5.3 The draft Decision is intended to allocate FISIM for establishing GNI used for the purposes of own resources by modifying ESA 95 in accordance with Council Regulation (EC) No. 448/98 and to apply the modification in accordance with the ORDs. The proposal would enter into effect retrospectively to 1 January 2005, in line with the entry into effect of Commission Regulation (EC) No. 1889/2002 (and so affect own resource calculations made under the first ORD).

5.4 When we considered this proposal earlier this month we:

  • said that, clearly, FISIM would have to be taken into account in calculating GNI for the purposes of assessing the own resources liabilities of Member States;
  • noted, however, the Government's seemingly well-founded caution on the timing of the proposal;
  • said, therefore, that before considering the draft Decision further we wanted to hear the outcome of the Government's attempt to secure a cautious approach to the matter; and
  • asked also to hear about the clarification being sought of the possible financial impact of the proposal.

Meanwhile the document remained under scrutiny.[16]

The Minister's letter

5.5 The Economic Secretary to the Treasury (Ian Pearson) tells us that there was an initial discussion of the proposal in the Council's Own Resources Working Group on 6 July 2009. The Minister says that at this meeting:

  • a number of Member States, notably the Netherlands, Germany and Ireland, shared the Government's concerns over the timing of the proposal;
  • other Member States voiced concerns about the proposal being retrospective; and
  • no conclusions were formed, although it was suggested to the Commission that a better time to deal with the issue would be as part of any change to the own resources system resulting from decisions on the next Financial Perspective and from the next change to the ESA, both of which are due in 2014.

5.6 The Minister adds that there will be further meetings of the Working Group in September and October 2009 and that the Commission has undertaken to provide Member States with data on the financial implications of the proposal before the first of those meetings.

Conclusion

5.7 We are grateful to the Minister for this interim report and look forward to hearing about both further developments on the timing of the proposal and the Commission's promised information on the possible financial impact of the proposal.

5.8 Meanwhile the document continues to remain under scrutiny.





15   There are four sources of Community revenue, or "own resources" - customs duties including those on agricultural products, sugar levies, contributions based on VAT and GNI-based contributions.

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16   See headnote. Back


 
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