4 General Budget 2011
| (a)
(32443)
5330/11
COM(11) 9
(b)
(32444)
5331/11
COM(11) 10
|
Draft amending budget No. 1 to the general budget 2011: Statement of expenditure by section: Section iii: Commission
Draft Decision on the mobilisation of the EU Solidarity Fund
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| Legal base | Article 314 TFEU; co-decision; QMV
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| Department | HM Treasury
|
| Basis of consideration | Minister's letter of 1 March 2011
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| Previous Committee Report | HC 428-xvi (2010-11), chapter 9 (9 February 2011)
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| Discussion in Council | 15 March 2011
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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
4.1 During the course of a financial year the Commission presents
to the Council and European Parliament Draft Amending Budgets
(DABs) proposing increases or reductions for revenue and expenditure
in the current EU Budget — there are about ten DABs each
year.
4.2 In 2002 a European Union Solidarity Fund (EUSF)
was established to assist financially Member States or candidate
countries affected by a "major natural disaster with serious
repercussions on living conditions, the natural environment or
the economy". The criteria for financial assistance are contained
in Council Regulation (EC) No 2012/2002 and the 2006 Inter-Institutional
Agreement on budgetary matters provides that the EUSF may be "mobilised"
within an annual ceiling of €1 billion (£0.861 billion),
over and above the relevant headings of the Financial Framework.
The Commission's view is that solidarity aid should be progressive
— the allocation of funding should be 2.5% of the total
direct damage below the threshold for mobilising the EUSF (0.6%
of GNI or €3 billion (£2.6 billion) in 2002 prices,
whichever is the lower amount) and 6% of the total direct damage
above it.
4.3 In February 2011 we considered:
- Draft Amending Budget (DAB)
No. 1/2011, document (a), which would amend the 2011 General Budget
to implement the EUSF Decision proposed in document (b); and
- the draft Decision, document (b), which would
mobilise the EUSF to give budgetary assistance to alleviate the
impact of severe flooding in May, June and July 2010 in Poland,
Slovakia, Hungary, the Czech Republic, Croatia and Romania.
The total aid proposed was €182.4 million (about
£157 million).
4.4 We heard that:
- the Government supports the
broad objectives of the EUSF in providing financial assistance
to Member States and countries engaged in accession negotiations
in the event of major natural disasters, where the country concerned
cannot alone handle the repercussions;
- given the impact on the agricultural sector,
infrastructure, residential and commercial buildings of the Polish,
Slovak, Hungarian and Romanian regions affected by heavy rainfall,
the Government was content that these applications met the "extraordinary
regional disaster" criterion;
- the Government was satisfied that the Czech and
Croatian applications met the condition whereby a country affected
by the same major disaster as a neighbouring country might exceptionally
benefit from the EUSF;
- the Government therefore supported the proposed
mobilisation of the EUSF;
- it did not, however, support the proposed method
of financing this mobilisation through an overall increase to
the 2011 EU Budget;
- in the light of the Council's successful limitation
of the increase, over 2010, in the 2011 EU Budget of just 2.91%
the proposal now to increase the budget from that level was completely
unacceptable;
- furthermore, the Government did not consider
it necessary — appropriations required to mobilise the EUSF
for the six applications could and should be allocated by reprioritising
existing resources from areas of the budget that routinely underspend;
and
- the Government had already begun making this
case to other Member States and the Commission.
4.5 We said that, whilst we had no problem about
the principle of the EU providing EUSF assistance in these six
cases, we were concerned, like the Government, about the possibility
of such assistance breaching the agreed 2.91% increase over 2010
for the 2011 EU Budget. So we asked to hear about progress in
persuading other Member States and the Commission of need to avoid
this, before we would consider these proposals further. Meanwhile
the documents remained under scrutiny.[18]
The Minister's letter
4.6 The Economic Secretary to the Treasury (Justine
Greening) now reports that:
- in a range of contacts over
the last several weeks the Government has stressed to other Member
States and the Commission that, while it supports the purpose
of the proposed expenditure, the suggested increase to the 2011
budget is unacceptable;
- it has urged that, at a time when national governments
are taking tough decisions to consolidate public finances and
reduce deficits, the EU budget cannot simply grow to meet new
demands and that decisions must be taken rather to reprioritise
existing allocations towards unforeseen needs;
- as a result, there was a consistent blocking
minority in the Council's Budget Committee against the Commission's
proposed means of financing DAB No. 1/2011 by increasing the overall
budget size;
- in the last ten days, discussion has focused
on financing the expenditure from the so-called "negative
reserve", which is encapsulated in article 44 of the Financial
Regulation, was in use in the 1980s and 1990s and was last used
in 1997;
- essentially it allows expenditure that was not
foreseen in the adopted annual budget, up to a limit of €200
million (172.18 million), which is entered as a negative amount
in this budget reserve — as the budget must always balance
at the end of the year, a transfer of funds within the budget
is necessary to pay back the reserve;
- this procedure enables expenditure to be made
now, with the reprioritisation of funds to finance it occurring
later in the year — as such, it does not increase the overall
size of the EU budget, but enables decisions on reallocation of
existing funds to be delayed until implementation rates and needs
are clearer later in the year;
- this solution has attracted majority support
amongst Member States in the Council's Budget Committee;
- while the Government accepts that the solution
meets the key condition of protecting the 2.91% budget cap for
2011, it nevertheless does not support the use of the negative
reserve;
- it and several other Member States have consistently
argued rather that a decision on reprioritisation within the budget
need not be delayed until later in the year, but could and should
be made now;
- while the negative reserve was a more regular
feature of annual budget management in the past, the Government
believes that it is an unnecessary provision and it has suggested,
in the context of ongoing negotiations on the Financial Regulation,
that its deletion should be considered;[19]
- the proposal will now pass to COREPER on 2 March
2011, and from there to the European Parliament for consideration
before final adoption in Council, scheduled for ECOFIN on 15 March
2011; and
- the Government is maintaining a Parliamentary
scrutiny reserve and has stressed the seriousness with which we
view these proposals.
Conclusion
4.7 We are grateful to the Minister for her account
of these developments. We note that it is now accepted that the
proposed EUSF assistance will not be funded by an increase in
the 2011 EU Budget, but rather by reprioritisation within the
budget. However, like the Government, we would much prefer reprioritisation
to be done now, rather than later under the negative reserve procedure.
4.8 Therefore we encourage the Government to continue
to resist this element of the revised proposal. Meanwhile the
documents remain under scrutiny, pending a further report from
the Minister.
18 See headnote. Back
19
(32428) 5129/11: see HC 428-xvi (2010-11), chapter 1 (9 February
2011) and Gen Co Debs, European Committee B, 14 February
2011, cols. 3-18. Back
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