9 Financial management
| (31839)
12614/10
COM(10) 403
| Draft Decision amending the Inter-Institutional Agreement of 17 May 2006 on budgetary discipline and sound financial management as regards the multiannual Financial Framework, to address the financing needs of the INTER project
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| Legal base | —; co-decision; QMV
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| Document originated | 20 July 2010
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| Deposited in Parliament | 28 July 2010
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| Department | HM Treasury
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| Basis of consideration | EM of 8 September 2010
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| Previous Committee Report | None
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| To be discussed in Council | No date known
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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
9.1 The Inter-Institutional Agreement on budgetary discipline
and sound financial management provides for many aspects of the
planning, preparation, execution and control of the EU Budget.
The agreement is between the Council, the European Parliament
and the Commission — it has no legal base but is politically
binding. It is an important tool of budgetary discipline and includes
a multiannual Financial Framework. The Financial Framework is
intended to ensure that, in the medium term, EU expenditure develops
in an orderly manner and within the limits of own resources. It
contributes to budgetary discipline by setting ceilings on the
amount of funds available to the EU Budget in broad policy areas
for each year it covers. The current Inter-Institutional Agreement
was agreed in June 2006 and its Financial Framework spans spending
over 2007-2013.[18]
9.2 On 4 May 2010 the Commission presented a
Communication, ITER status and possible way forward, which,
amongst other things, identified a shortfall in funding for the
International Thermonuclear Experimental Reactor (ITER).[19]
On 12 July 2010 the Council adopted conclusions that confirmed
the short-term financing need for additional commitment appropriations
for ITER, identified by the Commission as €1.4 billion (£1.2
billion) in 2012 and 2013 — that is includes €800 million
(£660 million) in 2012 and €600 million (£495 million)
in 2013. The Council called on the Commission to propose securing
this funding within the overall ceiling of the current Financial
Framework, based primarily on redeployment of funds within Heading
1a of the budget (competitiveness for growth and employment).
At the same time, Council said that the EU contribution to ITER's
construction phase must be limited to €6.6 billion (£5.4
billion) (in 2008 values) over the period 2007-2020, and called
for greater cost control and containment.[20]
The document
9.3 This draft Decision is intended to amend
the Inter-Institutional Agreement on EU financial management so
as to change the Financial Framework for 2007-2013 in order to
meet the Council's conclusions of July 2010 on ITER financing.
The Commission puts forward a means of securing €860 million
(£709 million) of the €1.4 billion (£1.2 billion)
additionally required for 2012 and 2013 — it suggests that:
- €460 million (£379
million) be secured through redeployment of funds within the 7th
Research Framework Programme under Heading 1a; and
- a further €400 million (€330 million)
be transferred, from the unallocated margin of Heading 2 (preservation
and management of natural resources) in 2010, to Heading 1a in
2012 and 2013.
This would result in no overall increase to the Financial
Framework.
9.4 The Commission explains its analysis underlying
this proposed use of the margins, saying that:
- the actual and estimated margins
under Heading 1a for the remaining years of the current Financial
Framework are too limited to be able to contribute to the ITER
financing solution;
- in particular, there is no margin in 2010, due
to the financing of the European Economic Recovery Plan this year;
- it estimates the margin will be €50.10 million
(£41.30 million) in 2011, €34 million (£28 million)
in 2012 and €47 million (£39 million) in 2013;
- instead, it proposes to redeploy funds for ITER
within existing allocations in Heading 1a — specifically
€100 million (£82 million) in 2012 and €360 million
(£297 million) in 2013, both from the 7th Research Framework
Programme;
9.5 As for available actual and estimated margins
in other budget Headings, from which funding might be reallocated
to ITER, the Commission judges that margins are too limited to
be of use in Headings 1b (cohesion for growth and employment),
3a (freedom, security and justice), 3b (citizenship), 4 (EU as
a global player) and 5 (administration). It suggests that only
the margin for Heading 2 in 2010, amounting to €456.20 million
(£376.30 million), can offer more flexibility — especially
once agriculture expenditure for 2010 has been confirmed. It suggests,
therefore, reducing the Financial Framework ceiling for commitment
appropriations for Heading 2 in 2010 by €400 million (£330
million) and correspondingly increasing the ceiling for commitment
appropriations for Heading 1a by €160 million (£132
million) in 2012 and €240 million (£198 million) for
2013. The Financial Framework ceilings for payment appropriations
would be changed in the same way.
9.6 The Commission suggests that decisions on
financing the outstanding amount of €540 million (£445
million) should be made at a later stage, starting with the conciliation
process between the Council and the European Parliament on the
2011 EU budget in October-November 2010, and using subsequent
annual budgetary procedures if necessary. The Commission also
suggests that the three institutions adopt a joint declaration
to this purpose, by the latest at this autumn's conciliation meeting.
The Government's view
9.7 The Economic Secretary to the Treasury (Justine
Greening) says that the Government supports ITER as a vital step
to practical fusion energy supply, while considering that important
management issues need to be addressed, along with the rising
costs of the project — for this reason the Government supported
the Council conclusions of 12 July 2010 on ITER, including the
call for cost control and containment and for further improvement
of the governance of the ITER project. She then comments on the
actual funding proposal to meet the shortfall, saying that:
- the Government believes it
essential that additional financing for ITER is identified within
the overall ceiling of the Financial Framework and is pleased
that the Commission proposal respects this principle;
- it is disappointed, however, that the proposal
identifies only a portion (€860 million (£709 million))
of the shortfall required;
- it believes that it would be preferable, primarily
for clarity of future budget-setting, for the whole additional
amount to be identified — and its financing agreed —
in negotiations this autumn if possible;
- it is concerned, bearing in mind the July 2010
Council conclusions' call for the additional financing to be identified
'primarily through redeployment within Heading 1a', that, of the
amount identified in the Commission's proposal, almost half is
sourced from unallocated margins in Heading 2;
- it considers that research and innovation expenditure
under Heading 1a represents significantly higher value for money
than expenditure under Heading 2;
- it is concerned, nevertheless, that the balance
of funding sources proposed does not fully reflect the Council
conclusions' emphasis on redeployment of existing funds, before
use of unallocated margins;
- redeployment would not entail eventual additional
cost to Member States, in contrast to the use of unallocated margins;
and
- at a time of fiscal consolidation across the
EU, it is important that future additional financial contributions
for ITER from Member States are limited.
The Minister tells us that the Government will argue,
therefore, for a more substantial proportion of the funding shortfall
for ITER to be met through redeployment of funds within Heading
1a. She adds that it is important to note in this context that
the Financial Framework already foresees a substantial increase
of funding for the 7th Research Framework Programme from 2010-2013,
reflecting the continued strategic importance to the EU of research,
innovation and development work.
9.8 On the future financial implications the
Minister says that:
- the proposal would have the
effect of increasing the level of commitment appropriations in
the EU budget by €400 million (£330 million) over 2012-2013
— €160 million (£132 million) in 2012 and €240
million (£198 million) in 2013;
- as the proposal concerns commitment appropriations
only, there is no immediate financial impact on the UK;
- this would occur when payment appropriations
flow from these commitments in the next Financial Framework from
2014 onwards.
9.9 Finally the Minister tells us that a Council
position on the proposal is likely to be reached before conciliation
with the European Parliament on the 2011 EU Budget begins in mid-October
2010.
Conclusion
9.10 Whilst we recognise the importance of
the ITER project we share the Government's concern about the use
of unallocated margins. So before considering the proposal further
we should like to hear from the Minister about developments in
the Government's push for a more substantial proportion of the
funding shortfall for ITER to be met through redeployment of funds
within Heading 1a. Meanwhile the document remains under scrutiny.
18 See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2006:139:0001:0017:EN:PDF.
Back
19
See http://www.iter.org/. Back
20
(31601) 9424/10 + ADD 1: see HC 428-i (2010-11), chapter 27 (8
September 2010). Back
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