Documents considered by the Committee on 24 November - European Scrutiny Committee Contents

6 Draft Budget 2011



SEC(10) 473



Statement of estimates of the European Commission for the financial year 2011 (Preparation of the 2011 Draft Budget)

Revised 2011 Draft Budget

Legal baseArticle 314 TFEU; co-decision; QMV
DepartmentHM Treasury
Basis of considerationMinister's letter of 23 November 2010
Previous Committee Report(a) HC 428-i (2010-11), chapter 5 (8 September 2010), HC 428-iii (2010-11), chapter 6 (13 October 2010), HC 428-vii (2010-11), chapter 12 (10 November 2010) and HC Deb, 13 October 2010, cols 409-459

(b) None

To be discussed in Council10 December 2010
Committee's assessmentPolitically important
Committee's decision(a) Cleared (Debate on the Floor of the House on 13 October 2010)

(b) Not cleared; further information awaited


6.1 The Lisbon Treaty has established a new procedure for considering and adopting the EU's annual General Budget. In simplified outline the process is:

  • the Commission submits to the Council and the European Parliament a Draft Budget (DB) for the following financial year no later than 1 September;
  • the Council adopts and forwards to the European Parliament its position on the DB (commonly referred to as its first reading position) by 1 October;
  • within 42 days the European Parliament adopts its position on the DB (also commonly referred to as its first reading position);
  • if that position is the same as the Council's the DB is adopted as the General Budget;
  • if that position is different from the Council's a Conciliation Committee is convened;
  • if the Conciliation Committee agrees within 21 days on a reconciliation of the two positions the Council and the European Parliament have 14 days to adopt the joint text as the General Budget;
  • if either rejects the joint text the Commission prepares a new DB and the process begins again;
  • if the Conciliation Committee fails to agree a reconciliation within 21 days the Commission prepares a new DB and the process begins again; and
  • if the General Budget is not adopted by 1 January EU activity is financed by "provisional twelfths" — that is one-twelfth of each budget appropriation for the previous year may be spent each month until a General Budget is adopted.

6.2 The Commission presented the 2011 DB in May 2010. We have reported three times on this DB and it has been debated on the Floor of the House. Earlier this month we reported that the European Parliament's first reading position, adopted on 24 October 2010, differed from that of the Council and that the conciliation process was under way.[15]

The Minister's letter

6.3 The Economic Secretary to the Treasury (Justine Greening) writes now to report the outcome of the conciliation process and the next steps, first recapitulating how the Council going into that conciliation was standing firm on a limit to the overall increase of the 2011 General Budget of 2.91%, as opposed to the European Parliament's wish for a 6% increase. The Minister then tells us that:

  • at Budget ECOFIN meetings on 11 and 15 November 2010 the Council position was very clear and firm — that no further increase beyond the level of 2.91% could be agreed;
  • the European Parliament side also said that, in principle, it could accept this budget level;
  • she therefore believes that agreement could have been reached at these meetings on this budget level;
  • however, the European Parliament set certain conditions for its agreement — it requested a Council-European Parliament political declaration giving the latter an increased role in future decisions on the next Multi-Annual Financial Framework and the EU's Own Resources;
  • it also, late in proceedings on 15 November 2010, stated that there must be agreement too on flexibility to increase the Multi-Annual Financial Framework in future;
  • the Government was not prepared to agree to these demands as the price for securing the EU budget in 2011 — it had already demonstrated flexibility in showing willingness to accept a budget increase of 2.91%;
  • its view was that the European Parliament had introduced into the negotiation longer-term, strategic issues that had no place in discussions on the 2011 budget and that did not need to be decided alongside those budget discussions;
  • nor could the Government accept any proposal to alter the institutional roles enshrined in the Lisbon Treaty;
  • a number of other Member States shared the Government's concerns, including France, Germany, the Netherlands, Sweden and Denmark — these represent nearly half the population of the EU and contribute more than half of all financing of the EU budget;
  • talks ended at midnight on 15 November 2010, with the European Parliament declaring that time had run out on the conciliation process — it was also the European Parliament side that ended discussions at the 11 November 2010 ministerial level conciliation meeting.

6.4 The Minister comments that:

  • in these circumstances, the Government believes it was better not to reach agreement during the conciliation process at all, rather than making a bad agreement which was counter to the interests of UK taxpayers; and
  • it Government is continuing to engage constructively in further negotiations aimed at securing agreement to a 2011 EU budget — at the level that all sides have already said they can accept.

6.5 Turning to the next steps and reminding us that the Commission must now present a new DB proposal for 2011 as a basis for further negotiations and that, if agreement cannot be reached on a final budget by the end of this year, the "provisional twelfths" system will come into play, the Minister says that:

  • the Commission and Presidency are pushing to ensure that agreement can finally be reached on the 2011 budget by the end of this year;
  • the European Parliament is scheduling an exceptional plenary session on 21 December 2010 to that end;
  • the Government expects the Commission to publish its new DB proposal (which would be document (b)) on 1 December 2010, setting out the detail of a budget increase of 2.91% that has garnered consensus so far;
  • as this would be based on the Council's own adopted position from the summer, the Presidency is hoping to be given a mandate by the Council to negotiate with the European Parliament on it almost immediately;
  • the Government understands that there is a budgetary trilogue scheduled between the Council and the European Parliament on 6 December 2010 for that purpose;
  • if both sides can agree, the Presidency intends that the Council would adopt its position on the DB formally on 10 December 2010 (as an "A" point at the Competitiveness Council); and
  • if the European Parliament then approves the Council's position, the budget will be adopted.

6.6 The Minister also tells us that:

  • at the same time the Presidency is taking forward negotiations on the Multi-Annual Financial Framework, including the 'contingency margin' provision we have reported previously;[16]
  • this would move, into the appropriate negotiating process, the European Parliament's demand for discussion of flexibility to increase the Financial Framework in future;
  • this negotiation would also encompass agreement on the €1.4 billion funding shortfall for the ITER nuclear fusion project — this is inextricably linked to the draft Multi-Annual Financial Framework Regulation, as the Commission's proposal to transfer available budget margins from 2010 to 2012 and 2013 for ITER would take effect through the Regulation itself;[17] and
  • the Government's goals for these negotiations remain as we reported previously.

6.7 The Minister then addresses a parliamentary scrutiny problem arising from the next steps she describes, saying that:

  • the Presidency's proposed timeline is obviously very compressed and ambitious;
  • insofar as it is a theoretically feasible option for securing agreement to the 2011 budget by the end of this year, the Government will continue to engage constructively on it;
  • the Government is keenly aware, however, that this timeline allows hardly any time for national parliamentary scrutiny of the Commission's proposed DB;
  • the Presidency has suggested that it will propose that the Council should decide that, in these exceptional and pressing circumstances, the normal TFEU eight-week scrutiny period for national parliaments will not apply;
  • the Government considers parliamentary scrutiny to be a very important part of the process of making EU policy and on an issue such as the EU's annual budget, in the current economic and financial climate, this is particularly true;
  • the Presidency's proposal for a Council decision on the scrutiny period is not acceptable and the Government will not support it; and
  • nevertheless it is likely to be adopted by a qualified majority.

6.8 The Minister comments that she appreciates that the Committee will be concerned by this and the prospect that this may set a very unwelcome precedent. She believes, however, that it will not — the circumstances are extremely unusual and she hopes will not be repeated in future. Finally the Minister undertakes to let us have an Explanatory Memorandum on the Commission's new DB by 3 December 2010 and she will endeavour to answer any questions we might have before the proposed Council adoption of its position on 10 December 2010.


6.9 We are grateful to the Minister for this account of how matters stand on negotiating the EU General Budget for 2011. We are, however, very concerned at the apparent Presidency intention to override the national parliamentary rights of adequate time for scrutiny enshrined in Protocol 1 of the TFEU. We recognise that the Government's opposition to this may prove futile. But we wish the Government to make it very plain to the Council that this approach to legitimate national parliament involvement in EU business sends out a very bad message.

6.10 As for the revised DB, document (b), we shall of course scrutinise it once it and the Government's Explanatory Memorandum are with us. Meanwhile it remains uncleared from scrutiny.

15   See headnote.


16   (31400) 7182/10: see HC 5-xiv (2009-10), chapter 6 (17 March 2010) and HC 428-vii (2010-11), chapter 5 (10 November 2010). Back

17   (31839) 12614/10: see HC 428-ii (2010-11), chapter 9 (15 September 2010), HC 428-iv (2010-11), chapter 2 (20 October 2010) and HC 428-vii (2010-11), chapter 5 (10 November 2010).


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