Various Documents considered by the Committee - European Scrutiny Committee Contents

4 General Budget 2011




COM(11) 9




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

Legal baseArticle 314 TFEU; co-decision; QMV
DepartmentHM Treasury
Basis of considerationMinister's letter of 1 March 2011
Previous Committee ReportHC 428-xvi (2010-11), chapter 9 (9 February 2011)
Discussion in Council15 March 2011
Committee's assessmentPolitically important
Committee's decisionNot cleared, further information requested


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.


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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