11 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
|
| Legal base | Article 314 TFEU; co-decision; QMV
|
| Department | HM Treasury
|
| Basis of consideration | Minister's letter of 18 March 2011
|
| Previous Committee Reports | HC 428-xvi (2010-11), chapter 9 (9 February 2011), HC 428-xviii (2010-11), chapter 4 (2 March 2011) and HC 428-xix (2010-11), chapter 4 (9 March 2011)
|
| Discussed in Council | 15 March 2011
|
| Committee's assessment | Politically important
|
| Committee's decision | Cleared
|
Background
11.1 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.
11.2 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.
11.3 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).
11.4 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.
11.5 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.
11.6 On 2 March 2011 we heard that:
- in a range of contacts over
the previous several weeks the Government had stressed to other
Member States and the Commission that, while it supported the
purpose of the proposed expenditure, the suggested increase to
the 2011 budget was unacceptable;
- 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;
- more recently, discussion had 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;
- 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 had attracted majority support
amongst Member States in the Council's Budget Committee;
- while the Government accepted that the solution
met the key condition of protecting the 2.91% budget cap for 2011,
it nevertheless did not support the use of the negative reserve;
- it and several other Member States had 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
believed that it was an unnecessary provision and it had suggested,
in the context of ongoing negotiations on the Financial Regulation,
that its deletion should be considered;[51]
- the proposal would 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 was maintaining a Parliamentary
scrutiny reserve and had stressed the seriousness with which it
viewed these proposals.
11.7 We commented that, like the Government, we would
much prefer reprioritisation to be done now, rather than later
under the negative reserve procedure. We encouraged the Government,
therefore, to continue to resist this element of the revised proposal.
Meanwhile the documents remained under scrutiny, pending a further
report on developments.
11.8 On 9 March 2011 we heard that:
- despite the Government's continued
engagement with other Member States, and while some shared its
view of the use of the negative reserve, a qualified majority
of Member States had stated that they would support its use for
the DAB
- COREPER had not taken this item on 2 March 2011,
as had been expected;
- COREPER was now expected to endorse, by qualified
majority, the use of the negative reserve and the decision to
mobilise the EUSF at its meeting on 9 March 2011;
- the Council Secretariat had confirmed that Council
adoption was still scheduled for ECOFIN on 15 March 2011;
- while the Government supported the proposed use
of the EUSF, the negative reserve procedure was not its preferred
financing option, but, unfortunately, the Government and those
who shared its view were in the minority in Council and had not
been able to prevent this.
We said that:
- like the Government, we continued
to much prefer reprioritisation to be done now, rather than later
under the negative reserve procedure;
- therefore, although adoption of the negative
reserve procedure now seemed likely, we encouraged the Government
to continue to resist this element of the revised proposal; and
- the documents would again remain under scrutiny,
pending a further report on developments.[52]
The Minister's letter
11.9 The Economic Secretary to the Treasury (Justine
Greening) now reports that:
- on 15 March 2011 the Council
adopted both the draft Decision and the DAB;
- it was agreed that the funding would be through
use of the negative reserve procedure; and
- the Government abstained from the agreement.
The Minister explains that the abstention was for
two reasons:
- it best reflected both the
Government's support, in principle, for financial assistance to
the flood-damaged countries concerned and its concern about use
of the negative reserve procedure; and
- it best accommodated our urging of continued
resistance to use of the negative reserve procedure and the Lords
EU Committee's expressed understanding of the merits of delaying
reprioritisation of the budget until later in the year.
Conclusion
11.10 We are grateful to the Minister for her
latest account of developments. We now clear the documents from
scrutiny. But in doing so we note both that:
- the Government did what
it could to prevent use of the negative reserve procedure; and
- the Government's abstention on the proposal
meant that our scrutiny reserve was not breached.
51 (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
52
See headnote. Back
|
