13 Draft Budget 2010
| (a) (30860) —
—
(b) (31190) 16763/09 SEC(09) 1635
| Draft General Budget of the European Communities for the financial year 2010
Amending letter No. 3 to the preliminary draft budget for 2010
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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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| Documents originated | (b) 26 November 2009
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| Deposited in Parliament | (b) 1 December 2009
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| Department | HM Treasury |
| Basis of consideration | Minister's letter of 7 December 2009
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| Previous Committee Report | (a) HC 19-xxvii (2008-09), chapter 34 (14 October 2009), HC 19-xxxi (2008-09), chapter 14 (11 November 2009) and HC 5-i (2009-10), chapter 18 (19 November 2009)
(b) None
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| Discussed in Council | 18 November 2009
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| Committee's assessment | Politically important
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| Committee's decision | (a) Cleared (decision reported 14 October 2009)
(b) Cleared
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Background
13.1 The Commission's Preliminary Draft Budget (PDB) is the first
stage in the Community's annual budgetary procedure. We reported
on the 2010 PDB in June 2009[40]
and it was debated in European Committee on 6 July 2009.[41]
The second stage is the adoption by the Council of the Draft Budget
(DB). The 2010 DB was adopted on 10 July 2009 and we reported
on it in October 2009.[42]
The 2010 PDB and the 2010 DB form the basis of the 2010 Adopted
Budget which is expected to be agreed in mid-December 2009, after
consideration by the European Parliament in October 2009, further
consideration by the Council in November 2009 and negotiations
between the Council and the European Parliament.
13.2 During the negotiations of its budget proposals
in the PDB the Commission presents a number of Amending Letters,
normally to update assumptions in the PDB numbers or to take account
of new developments.
The Minister's letter
13.3 The Economic Secretary to the Treasury (Ian
Pearson) writes now to tell us about the outcome of the Council's
second consideration of its DB, following the European Parliament's
first reading of it, and the accompanying conciliation process.
The Minister encloses with his letter annexes, which we reproduce,
helpfully setting out the euro and sterling figures for the five
budget categories and the changes in these adopted by the Council
from those adopted in the European Parliament's first reading.
THE COUNCIL'S SECOND READING AND CONCILIATION
13.4 The Minister says that on 18 November 2009 the
Council formally agreed its second reading of the 2010 DB, following
conciliation with the European Parliament and that the amended
DB was agreed under the qualified majority voting procedure, with
unanimous support from Member States. The Minister then continues
with the detail of all this, first telling us that:
- the Council's agreed position
ahead of conciliation was based on a package put together by the
Swedish Presidency, and supported by the Government, following
discussions in Council's Budget Committee;
- the Presidency package proposed total commitment
appropriations of €140,555 million (£128,130 million);
- this represented an increase of €2.60 billion
(£2.40 billion) from the Council's first reading position,
although was still €518 million (£472 million) lower
than the level proposed by the Commission's PDB and the Amending
Letters to it;
- the increase is largely explained by the Presidency
package incorporating €2.00 billion (£1.80 billion)
of the €2.40 billion (£2.20 billion) required to finance
the outstanding tranche of the European Economic Recovery Plan,
which had not been included in the Council's first reading position;
- the Presidency package proposed total payment
appropriations of €121,488 million (£110,748 million),
an increase of €967 million (£882 million) from the
Council's first reading position and representing 1.04% of EU
GNI;
- the Presidency package incorporated the changes
to the overall Financial Framework and individual heading ceilings
in 2009 and 2010, as proposed by Commission, with an increase
to the 2010 overall commitment appropriations ceiling of €1.30
billion (£1.20 billion), with a corresponding decrease to
the 2009 ceiling;[43]
- at heading level, this meant an increase to the
2010 ceiling for Sub-Heading 1a (Competitiveness for growth and
employment) of €1.60 billion (£1.50 billion), entirely
offset by decreases to Sub-Heading 1b (Cohesion for growth and
employment) in 2010 and to Headings 2 (Preservation and management
of natural resources) and 5 (Administration) in 2009 and 2010;
and
- once this revision of the Financial Framework
ceilings had been taken into account, the Presidency package left
a margin of €1.00 billion (£0.90 billion).
13.5 The Minister summarises by saying that the Presidency
package substantially reverted back to the Council's first reading
position, with the following amendments and additions:
- the package partially accepted
Amending Letter No 1,[44]
incorporating €95 million (£87 million) in commitment
appropriations and €60 million (£55 million) in payment
appropriations for support to Palestine;
- the package accepted in full Amending Letter
No 2,[45] providing €75
million (£68 million) in commitment appropriations for decommissioning
of the Kozloduy nuclear plant in Bulgaria, €1,587 million
(£1,447 million) and €377 million (£344 million)
in commitment and payment appropriations respectively for energy
projects under the European Economic Recovery Plan, and emergency
support to the dairy sector, small adjustments to some budget
lines under Heading 2 (Preservation and management of natural
resources) and €420 million (£383 million) in commitment
appropriations for the rural development/CAP "health check"
component of the European Economic Recovery Plan, resulting in
a net increase under that heading of €739 million (£674
million) and €414 million (£377 million) in commitment
and payment appropriations respectively;
- it reverted to PDB levels on several budget lines
under Heading 2, leading to an increase compared to the Council's
first reading of €71 million (£65 million) in both commitment
and payment appropriations, while maintaining the substantial
reduction in the Council's first reading to the European Agriculture
Guarantee Fund clearance of accounts budget line of €230
million (£210 million); and
- it accepted some comparatively small amendments
made by the European Parliament in its first reading, including
increases for the European Parliament's administration budget,
as well as in Sub-Heading 1a and Heading 4 (EU as a global player).
13.6 Turning to the agreement reached between the
Council and the European Parliament the Minister reports that
before proceeding with the second reading of the DB, the Council
held its customary conciliation meeting with a delegation from
the European Parliament. During this it was clear that no agreement
would be found on the budget without first agreeing on the financing
of the full €2.4 billion (£2.2 billion) remaining tranche
for the European Economic Recovery Plan. This, and key elements
of the budget were agreed as follows:
- total payment appropriations
were set at €122,937 million (£112,069 million), corresponding
to approximately 1.04% of EU GNI, below the level proposed by
the Commission in its PDB and Amending Letters, and €4.6
billion (£4.20 billion) below that proposed by the European
Parliament in its first reading;
- political agreement was reached on a revision
of the Financial Framework in 2009 and 2010 in order to finance
in full the outstanding €2.4 billion (£2.2 billion)
tranche of the European Economic Recovery Plan — this was
achieved without any overall increase to the Financial Framework
for 2009 and 2010;
- the Sub-Heading 1a ceiling in 2010 was increased
by €1.8 billion (£1.6 billion), with corresponding decreases
in Heading 2 of €1.3 billion (£1.2 billion) in 2009
and €158 million (£144 million) in 2010, in Heading
5 of €174 million (£159 million) in 2009 and €126
million (£115 million) in 2010, in Sub-Heading 1b of €1.00
million (£0.90 million) in 2009 and €6 million (£5
million) in 2010 and in Sub-Heading 3a (Freedom, security and
justice) of €5 million (£5 million) in 2009;
- mobilisation of €195 million (£178
million) from the Flexibility Instrument in 2010, meaning €315
million (£287 million) would be available under the Instrument
for the 2011 budget negotiation;[46]
- €120 million (£109 million) of the
amount mobilised was allocated towards financing energy projects
under the European Economic Recovery Plan, €75 million (£68
million) was allocated towards financing the decommissioning of
the Kozloduy nuclear plant (an expenditure demand contained in
Amending Letter No 2 that the European Parliament did not wish
to see financed from the Sub-Heading 1a margin before the European
Economic Recovery Plan energy component was fully financed);
- acceptance of Amending Letter No 2, amended to
include €1.98 billion (£1.80 billion) in commitment
appropriations for the energy component of the European Economic
Recovery Plan, resulting from the revision of the Financial Framework,
the mobilisation of the Flexibility Instrument and redeployment
of €81 million (£74 million) of commitment appropriations
from within Sub-Heading 1a in 2010; and
- the amount of the Common Foreign and Security
Policy budget for 2010 was set at €282 million (£275
million) in commitment appropriations, subject to the European
Parliament's final vote on discharge in relation to the Council's
accounts in 2007, which subsequently took place, on 25 November
2009.
13.7 The Minister tells us that four joint statements,
with the European Parliament and the Commission, were agreed by
the Council. These concern continuity of the 2010 budgetary procedure
in view of the entry into force of the Lisbon Treaty on 1 December
2009, the building policy of EU institutions and bodies, simplification
and a more targeted use of structural and cohesion funds in the
context of the economic crisis and the use of the margin in Heading
5 in 2010.[47] In addition
the Council, the European Parliament and the Commission also agreed
that, before 1 December 2009, they would agree a joint declaration
on transitional measures applicable to the budgetary procedure
after the entry into force of the Lisbon Treaty — the Minister
adds that this declaration has now been agreed by written procedure
and is expected to be formally approved by both institutions shortly.
13.8 The Minister tells us also that the Council
agreed to adopt Preliminary Draft Amending Budget No 10 to the
2009 budget,[48] as updated
by the Commission on 11 November 2009 in the light of the latest
information on revenue and expenditure, providing:
- an overall decrease to revenue
from VAT- and GNI-based contributions of €1,386 million (£1,321
million);
- an overall increase to Traditional Own Resources
revenue of €600 million (£572 million);
- an overall reduction in payment appropriations
of €3,204 million (£3,052 million), which now includes
a reduction of €135 million (£129 million) in both commitment
and payment appropriations for the European Agriculture Guarantee
Fund in Heading 2; and
- a reduction of payment appropriations under the
European Agricultural Fund for Rural Development of €1.70
billion (£1.60 billion).
In addition, the Preliminary Draft Amending Budget
was further modified by the Council to include a decrease in both
commitment and payment appropriations under Heading 5 of €42.50
million (£40.5 million), a €40.00 million (£38.10
million) underspend from the Council's budget and €2.50 million
(£2.40 million) from the budgets of the European Economic
and Social Committee and the Committee of the Regions. The effect
of these changes result in a total reduction in Member States'
GNI-based contributions of €3,488 million (£3,322 million),
of which the UK share is €442 million (£421 million).
THE AMENDING LETTER
13.9 Amending Letter No. 3, document (b), is to cover
additional resources for changes to the functioning of the European
Council and the Council in 2010, following entry into force of
the Lisbon Treaty. On this the Minister, reminding us that he
had already alerted us to the proposal,[49]
says that:
- largely as a result of the
Government's lobbying, this proposal was not adopted but merely
"noted" at the Council of 18 November 2009 and it was
instead to be adopted under a written procedure by 30 November
2009;
- at the Council the Government stressed the importance
of Member States and national parliaments being given adequate
time to consider all budgetary proposals related to the implementation
of the Lisbon Treaty;
- for the purpose of the written procedure the
Amending Letter was formally issued by the Commission on 26 November
2009;
- the text and substance of the proposal was unchanged
from the elements to which we had been alerted, with the exception
of a reduction of €1.50 million (£1.40 million) in the
contingency reserve, for which the Government and other Member
States had argued strongly; and
- due to the underspend in the Council's administration
budget in 2009 (outlined in the previous paragraph) it will be
possible to finance the full amount of €23.50 million (£21.00
million) requested in the Amending Letter while still reducing
the overall level of administration expenditure in 2009 and 2010.
The Government's view and the next stage
13.10 The Minister says that, in line with the approach
and objectives that the Government had told us of as the 2010
Budget was negotiated, it believes the it achieved the best possible
outcome from this stage of the negotiations. He comments that:
- through tough negotiation and
close engagement with other Member States, the Government secured
a 2010 Budget with payment appropriations below the level of the
Commission's proposals in the PDB and Amending Letters;
- at the same time, the budget contains the full
financing for the remaining tranche of the European Economic Recovery
Plan, which was achieved without any overall increase to the Financial
Framework for 2007-2013;
- this was done through redirecting resources towards
competitiveness and growth and away from areas that represent
poorer value for money, such as administration and agricultural
spending;
- the consensus reached at the Council meeting
of 18 November 2009 set overall payment appropriations for the
2010 Budget;
- the Council has now concluded its second reading
of the budget and compulsory expenditure, mainly on agriculture,[50]
has been settled; and
- the European Parliament will formally agree the
non-compulsory expenditure part of the 2010 Budget in its second
reading, culminating in the plenary session on 14-17 December
2009 — this will mark the formal adoption of the 2010 Budget.
Conclusion
13.11 We are grateful to the Minister for his
report on the outcome of the negotiations on the 2010 Budget,
including the resolution of the issue of Amending Letter No 3,
document (b), which we clear.
40 (30692): see HC 19-xx (2008-09) chapter 2 (17 June
2009). Back
41
Gen Co Deb, European Committee,
6 July 2009, cols. 3-38. Back
42
See headnote. Back
43
(31063) 15208/09 (31068) 15173/09: see HC 19-xxxi (2008-09), chapter
15 (11 November 2009). Back
44
(30888) 12793/09 + ADD 1: see HC 19-xxxi (2008-09), chapter 14
(11 November 2009). Back
45
(31100) 15172/09: see HC 19-xxxi (2008-09), chapter 14 (11 November
2009). Back
46
The Flexibility Instrument permits up to €200 million (£182
million) to be budgeted each year above the ceilings of the Financial
Framework, which funds can be carried over for up to two years. Back
47
See http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/111307.pdf
pages 13-17. Back
48
See footnote 43. Back
49
(30860): see HC
5-i (2009-10), chapter 18 (19 November 2009). Back
50
EU expenditure is regarded as either "compulsory" or
"non-compulsory". Compulsory expenditure is expenditure
necessarily resulting from the Treaty or from acts adopted in
accordance with the Treaty. The Council has the final say in fixing
its total. The European Parliament has the final say in determining
the amount and pattern of non-compulsory expenditure. Back
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