13 Draft Budget 2011
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12614/10
COM(10) 403
(b)
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COM(10) 750
(c)
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17182/10
COM(10) 760
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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 ITER project
Revised 2011 Draft Budget
Draft Decision on mobilisation of the Flexibility Instrument
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| Legal base | (a) and (c) —; co-decision; QMV
(b) Article 314 TFEU; co-decision; QMV
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| Department | HM Treasury
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| Basis of consideration | Minister's letter of 5 February 2011
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| Previous Committee Reports | (a) HC 428-ii (2010-11), chapter 9 (15 September 2010), HC 428-iv (2010-11), chapter 2 (20 October 2010), HC 428-vii (2010-11) chapter 5 (10 November 2010) and HC 428-x (2010-11), chapter 21 (8 December 2010)
(b) HC 428-ix (2010-11), chapter 6 (24 November 2010) and HC 428-x (2010-11), chapter 22 (8 December 2010)
(c) HC 428-x (2010-11), chapter 22 (8 December 2010)
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| Discussed in Council | 10 December 2010
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| Committee's assessment | Politically important
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| Committee's decision | Cleared (decisions reported on 8 December 2010)
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Background
13.1 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) (which may be amended by subsequent Amending
Letters from the Commission) 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.
13.2 Annual General Budgets are set in the context
of the Inter-Institutional Agreement on budgetary discipline and
sound financial management, which 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.[66]
13.3 The 2011 DB presented by the Commission in May
2010 failed to secure agreement at the conciliation stage of the
budgetary process.[67]
This meant the Commission had to present a revised DB for 2011,
document (b). In presenting this revised DB the Commission said
that:
- the contents of the new DB
were in line with the positions expressed by the Council and the
European Parliament during the conciliation period;
- while based on the Commission's original DB for
2011, as amended by Amending Letters 1-3, the DB reflected some
changes requested by the Council and the European Parliament in
the process of the (failed) negotiations;
- the most significant change is in the level of
payment appropriations, which was reduced to reflect a 2.91% increase
above 2010 levels — this replaced the 5.8% increase originally
proposed by the Commission;
- the economic difficulties facing the EU since
its original budget proposal had become more apparent and a general
consensus had developed across Member States on the need to apply
austerity measures;
- the reduction in payments appropriations was
applied, broadly speaking, in the proportions of one third to
Sub-Heading 1b (Cohesion for Growth and Employment), one third
to Heading 2 (Preservation and management of natural resources)
and one third on Sub-Headings 1a (Competitiveness for Growth and
Employment), 3a (Freedom, security and justice) and Heading 4
(EU as a global player); and
- the new DB was set within the context of the
spending ceilings established by the Financial Framework, which
set out the ceilings in 2011 for the five headings of budget expenditure
— "Sustainable growth", "Preservation and
management of natural resources" "Citizenship, freedom,
security and justice" "EU as a global player" and
"Administration".
13.4 Increases proposed in Sub-Heading 1b and Heading
4 meant that total commitment appropriations exceeded the Financial
Framework ceiling in these areas. The Commission therefore proposed,
in document (c), a mobilisation of the Flexibility Instrument[68]
for €34 million (£29 million) in commitment appropriations
in Sub-Heading 1a — €18 million (£15.5 million)
for the Lifelong Learning Programme and €16 million (£13.5
million) for the Competitiveness and Innovation Programme, and
€71 million (£61 million) in Heading 4 for Palestine.
13.5 In 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).[69]
Subsequently the Commission proposed the draft Decision, document
(a), intended to amend the Inter-Institutional Agreement 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
proposal involved transfers from the 2010 provisions to those
for 2012 and 2013. Discussion of the proposal formed part of the
conciliation negotiations on the original 2011 DB.
13.6 We cleared these three documents from scrutiny
in December 2010.[70]
The Minister's letter of 5 February
13.7 The Economic Secretary to the Treasury (Justine
Greening) writes now to tell us of the final outcome on the General
Budget 2011 and the associated documents. She tells us that:
- on 10 December 2010 the Council
adopted its position on the Commission's second 2011 DB, document
(b), making some minor modifications; and
- on 15 December 2010 the European Parliament approved
the Council's position, meaning therefore that the 2011 General
Budget was finally adopted.
The Minister comments that:
- the Government was pleased
that an EU budget for 2011 was successfully agreed in this timeframe
and that it increases by just 2.91% from 2010;
- this is the level that the majority of Member
States supported early in negotiations in the summer of 2010,
while the Government wanted a budget freeze;
- it worked hard throughout negotiations to ensure
that the EU budget for 2011 was no higher than this, rejecting
earlier calls from the European Parliament and Commission for
a 6% increase, which was completely unacceptable at a time of
deep fiscal consolidation across the EU;
- the Government was also clear that it was inappropriate
for the European Parliament to condition agreement to this budget
on negotiations on an increased European Parliament role in strategic
budget decision-making; and
- it is welcome therefore that the final agreement
reached was to the 2011 General Budget alone, with no strings
attached—his was the responsible course of action for all
the institutions to take.
13.8 The Minister then sets out the detail of the
adopted budget. She sends us tables summarising, in euros and
sterling, this detail, which we annex.
OVERVIEW OF THE ADOPTED BUDGET FOR 2011
13.9 The Minister says that:
- the budget agreed for 2011
set commitment appropriations at €141,909 million (£122,169
million) and payment appropriations at €126,527 million (£108,927
million), corresponding to approximately 1.01% of EU GNI;
- compared to the Commission's first DB 2011, from
May 2010, commitment appropriations decreased by €656 million
(£565 million) and payment appropriations by €3.6 billion
(£3.1 billion);
- both the Council and the European Parliament
agreed to mobilise the Flexibility Instrument, as in document
(c), to provide €34 million (£29 million) in commitment
appropriations for the Lifelong Learning and Competitiveness and
Innovation Programmes and €71 million (£61 million)
for Palestine;
- in adopting its position on the second DB 2011
the Council made slight changes to reflect the impact of the European
Court of Justice judgment of 24 November 2010 in respect of the
2009-2010 salary increase for EU officials;
- that judgment overturned the Council's decision
to award a 1.85% pay increase for the relevant reference period,
meaning that the Commission's original proposal of a 3.7% pay
increase had to be implemented;
- much of the funding necessary to do this was
found within existing resources in the 2010 General Budget;
- some of the funding required from the 2011 planned
budget was generated through savings within the DB's allocation
for Heading 5 (Administration) — €17 million (£15
million) from a reduction in the 2010-2011 pay increase, from
0.4% to 0.1%, and €3.3 million (£2.8 million) from the
budget of the European Schools;
- an outstanding amount of €91.1 million (£78
million) remained to be found — the Commission said that
reprioritisation of commitment appropriations of this amount was
not possible;
- the sum was therefore added to the overall commitment
appropriations total of the budget for 2011, compared to the Commission's
second DB;
- payment appropriations were, however, reprioritised
to accommodate this figure, with one third coming from each of
Sub-Heading 1b and Heading 2 and the remaining third split proportionally
between Sub-Headings 1a and 3a and Heading 4;
- the Government was disappointed by the European
Court of Justice judgment on the 2009-2010 salary adjustment and
did not support the Council's adoption of a 3.7% pay increase
for EU institutions' staff for this period;
- it believes this to be completely unacceptable
in the current period of deep fiscal consolidation around the
EU and to be inconsistent with the tough decisions being taken
by Member States on public sector pay; and
- while it was necessary, in order to comply with
the judgment, to finance this increase partially from the 2011
budget, the Government believes the entire amount should have
been found through reprioritisation within Heading 5 — it,
and several other Member States, put these views firmly on record
at the time.
DETAIL OF PROPOSED EXPENDITURE BY HEADING
13.10 The Minister's account of the detail of the
adopted 2011 General Budget is set out in the following paragraphs.
Sub-Heading 1a (Competitiveness for Growth and
Employment)
13.11 Under this Sub-Heading commitment appropriations
were set at €13,021 million (£11,210 million), excluding
an amount of €500 million (£430 million) for the European
Globalisation Adjustment Fund. This was €416 million (£358
million) lower than in the Commission's first DB 2011 and €1,841
million (£1,585 million) lower than the 2010 budget, which
had included €1.98 billion (£1.7 billion) for the European
Economic Recovery Plan. No changes were made to commitment appropriation
allocations proposed in the Commission's second DB 2011 proposal.
13.12 Payment appropriations were set at €11,580
million (£9,969 million), €530 million (£456 million)
lower than the first DB 2011 and €238 million (£205
million) or 2% higher than the 2010 budget. Payment appropriations
decreased by €17.9 million (£15.4 million) compared
to the second DB 2011. The bulk of this made up of a €10
million (£8.6 million) decrease in the Research Framework
Programme. Compared to the 2010 budget the most significant changes
in payment appropriation levels in the adopted 2011 General Budget
were:
- an increase of €366 million
(£315 million) for the Research Framework Programme;
- a decrease of €41 million (£35 million)
for the Trans-European Transport and Energy Networks; and
- a decrease of €54m (£47m) for the Competitiveness
and Innovation Framework Programme.
Sub-Heading 1b (Cohesion for Growth and Employment)
13.13 Under this Sub-Heading commitment appropriations
were set at €50,981 million (£43,890 million). This
was €11 million (£9.5 million) higher than in the first
DB 2011 and €1,593 million (£1,371 million) higher than
in the 2010 budget. No changes were made to commitment appropriation
allocations within the Sub-Heading between the final 2011 Budget
and the second DB 2011.
13.14 Payment appropriations were set at €41,652
million (£35,858 million), €889 million (£765 million)
lower than in the first DB 2011 and €5,267 million (£4,534
million) or 14% higher than in the 2010 budget. Payment appropriations
decreased by €30 million (£25.8 million) between the
second DB 2011 and the adopted 2011 Budget, with €26 million
(£22.4 million) of this from the Structural Funds and €4
million (£3.4m) from the Cohesion Fund. Compared to the 2010
budget, the most significant changes in payment appropriation
levels in the adopted 2011 budget were:
- an increase of €3,311
million (£2,850 million) in funding under the convergence
objective; and
- an increase of €775 million (£667 million)
for the Cohesion Fund.
Heading 2 (Preservation and Management of Natural
Resources)
13.15 Under this Heading commitment appropriations
were set at €58,659 million (£50,500 million). This
was €827 million (£712 million) lower than in the first
DB 2011 and €840 million (£723 million) lower than in
the 2010 budget. No changes were made to commitment appropriation
allocations within the Heading between the adopted 2011 budget
and the second DB 2011.
13.16 Payment appropriations were set at €56,379
million (£48,537 million), €1,757 million (£5,513
million) lower than in both the first DB 2011 and the 2010 budget.
This represented a decrease of 3% from the 2010 budget. Payment
appropriations decreased by €30 million (£25.8 million)
between the second DB 2011and the adopted budget 2011, including
€29 million (£25 million) from the rural development
area. Compared to the 2010 budget, the most substantial differences
in payment appropriation levels in the adopted 2011 budget were:
- a decrease of €907 million
(£781 million) in agriculture markets payments under market-related
expenditure and direct aids;
- a decrease of €838 million (£721 million)
for rural development;
- a decrease of €23 million (£20 million)
for the European Fisheries Fund; and
- an increase of €46 million (£40 million)
for the Life Plus instrument.
Sub-Heading 3a (Freedom, security and justice)
13.17 Under this Sub-Heading commitment appropriations
were set at €1,139 million (£981 million). This was
€4 million (£3.4 million) higher than in the first DB
2011, and €132 million (£114 million) higher than in
the 2010 budget. No changes were made to commitment appropriation
allocations within the Sub-Heading between the adopted 2011 budget
and the second DB 2011.
13.18 Payment appropriations were set at €813
million (£700 million). This was €39 million (£34
million) lower than in the first DB 2011 and €75 million
(£65 million) or 10% higher than in the 2010 budget. Payment
appropriations decreased by €1 million (£0.86 million)
between the second DB 2011 and the final 2011 budget. Compared
to the 2010 budget, the most significant changes in payment appropriations
for 2011 were:
- an increase of €62 million
(£53 million) for solidarity and the management of migration
flows;
- an increase of €23 million (£20 million)
for the decentralised agencies; and
- a decrease of €14 million (£12 million)
for security and safeguarding liberties.
Sub-Heading 3b (Citizenship)
13.19 Under this Sub-Heading commitment appropriations
were set at €683 million (£588 million). This was €15
million (£13 million) higher than in both the first DB 2011
and the 2010 budget. No changes were made to either commitment
or payment appropriation allocations within the Sub-Heading between
the adopted 2011 budget and the second DB 2011.
13.20 Payment appropriations were set at €646
million (£556 million). This was €7 million (£6
million) higher than in the first DB 2011 and €13 million
(£11 million) or 2% lower than in the 2010 budget. In comparison
to the 2010 budget, the main changes in payment appropriations
for 2011 were:
- a decrease of €37 million
(£32 million) for 'other actions and programmes';
- an increase of €11 million (£9.5 million)
for the public health and consumer protection programme;
- an increase of €9 million (£7.7 million)
for the decentralised agencies; and
- an increase of €6 million (£5.2 million)
for the Civil Protection Financial Instrument.
Heading 4 (EU as a global player)
13.21 Under this Heading commitment appropriations
were set at €8,500 million (£7,318 million), excluding
€254 million (£219 million) for the Emergency Aid Reserve.
This was €114 million (£98 million) lower than in the
DB 2011 and €359 million (£309 million) higher than
in the 2010 budget. No changes were made to commitment appropriation
allocations within the Heading between the final 2011 budget and
the second DB 2011.
13.22 Payment appropriations were set at €7,238
million (£6,231 million). This was €364 million (£313
million) lower than in the first DB 2011 and €550 million
(£473 million) or 8% lower than in the 2010 budget. Compared
to the 2010 budget, the most significant changes in payment appropriations
were:
- an increase of €99 million
(£85 million) in the Development Cooperation Instrument;
- an increase of €46 million (£40 million)
for the Common Foreign and Security Policy;
- a decrease of €338 million (£291 million)
for the Instrument for Pre-Accession;
- a decrease of €16 million (£14 million)
for democracy and human rights; and
- a decrease of €15 million (£13 million)
for humanitarian aid (excluding the Emergency Aid Reserve).
Heading 5 (Administration)
13.23 Under this Heading commitment appropriations
were set at €8,173 million (£7,036 million). This was
€82 million (£71 million) lower than the first DB 2011
and €284 million (£244 million) higher than the 2010
budget. The commitment appropriation level increased by €91
million (£78 million) between the second DB 2011 and the
adopted 2011 budget.
13.24 Payment appropriations were set at €8,172
million (£7,035 million), €84 million (£72 million)
lower than in the first DB 2011 and €91 million (£78
million) higher than the second DB 2011. This was an increase
of €283 million (£244 million) or 3.6% on the 2010 budget.
Significant changes in payment appropriations from the 2010 budget
included:
- a reduction of €289 million
(£249 million) in the Commission's budget, in part reflecting
the transfer of some Commission resources to the European External
Action Service; and
- reflection for the first time of an annual operating
budget for the European External Action Service, of €464
million (£400 million).
FINANCING FOR THE ITER NUCLEAR FUSION PROJECT
13.25 In relation to the draft Decision about ITER,
document (a), the Minister reminds us that she had told us in
December 2010 that the Presidency had proposed a solution for
funding the ITER financing shortfall in 2012-2013. She says that
this proposal achieved broad consensus in the Council. Its main
elements were to:
- reduce the overall shortfall
from €1.4 billion (£1.21 billion) to €1.3 billion
(£1.12 billion);
- finance €460 million (£396 million)
through reprioritisation within Heading 1a in 2012 and 2013; and
- secure the balance through transferring available
budget margins in 2010 and 2011 to Heading 1a in 2012 and 2013.
The Government was disappointed that the European
Parliament was not able to agree this at the end of last year.
It will continue to work actively towards a funding solution,
based on the types of elements already proposed and agreed by
the Council and is determined that this issue will be resolved
before the additional commitment appropriations agreed on are
required.
Conclusion
13.26 We are grateful to the Minister for her
account of how matters turned out on the General Budget for 2011.
We note the success in maintaining the Council's commitment to
an increase of no more that 2.91% in payment appropriations. We
hope to see even greater moderation in the General Budget for
2012 and a Financial Framework for 2014-2020 that matches the
need for realistic public expenditure proposals.
66 See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2006:139:0001:0017:EN:PDF.
Back
67
(31644) -: see 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), HC 428-ix (2010-11),
chapter 6 (24 November 2010) and HC Deb, 13 October 2010,
cols 409-459. Back
68
The Flexibility Instrument, established under the Inter-Institutional
Agreement of 17 May 2006 which governs budget and financial management
matters, provides for additional financing for clearly identified
expenditure which cannot be made available within a spending category
of the budget. Back
69
See http://www.iter.org/. Back
70
See headnote. Back
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