Documents considered by the Committee on 20 October 2010 - European Scrutiny Committee Contents

2 Financial management



COM(10) 403

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

Legal base—; co-decision; QMV
DepartmentHM Treasury
Basis of considerationMinister's letter of 30 September 2010
Previous Committee ReportHC 428-ii (2010-11), chapter 9 (15 September 2010)
To be discussed in CouncilNot known
Committee's assessmentPolitically important
Committee's decisionNot cleared; further information requested


2.1 The Inter-Institutional Agreement on budgetary discipline and sound financial management 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 its 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.[8]

2.2 On 4 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).[9] On 12 July 2010 the Council adopted conclusions that confirmed the short-term financing need for additional commitment appropriations for ITER, identified by the Commission as €1.4 billion (£1.2 billion) in 2012 and 2013 — that includes €800 million (£660 million) in 2012 and €600 million (£495 million) in 2013. The Council called on the Commission to propose securing this funding within the overall ceiling of the current Financial Framework, based primarily on redeployment of funds within Heading 1a of the budget (competitiveness for growth and employment). At the same time, Council said that the EU contribution to ITER's construction phase must be limited to €6.6 billion (£5.4 billion) (in 2008 values) over the period 2007-2020, and called for greater cost control and containment.[10]

2.3 This draft Decision is intended to amend the Inter-Institutional Agreement on EU financial management so as to change the Financial Framework for 2007-2013 in order to meet the Council's conclusions of July 2010 on ITER financing. In July 2010 the Commission put forward this as a means of securing €860 million (£709 million) of the €1.4 billion (£1.2 billion) additionally required for 2012 and 2013 — it suggested that:

  • €460 million (£379 million) be secured through redeployment of funds within the 7th Research Framework Programme under Heading 1a; and
  • a further €400 million (€330 million) be transferred, from the unallocated margin of Heading 2 (preservation and management of natural resources) in 2010, to Heading 1a in 2012 and 2013.

This would result in no overall increase to the Financial Framework.

2.4 When we considered this document, in September 2010, we heard that:

  • the Government supports ITER as a vital step to practical fusion energy supply, while considering that important management issues need to be addressed, along with the rising costs of the project;
  • for this reason the Government supported the Council conclusions of 12 July 2010 on ITER, including the call for cost control and containment and for further improvement of the governance of the ITER project;
  • it would argue, therefore, for a more substantial proportion of the funding shortfall for ITER to be met through redeployment of funds within Heading 1a; and
  • it was important to note in this context that the Financial Framework already foresees a substantial increase of funding for the 7th Research Framework Programme from 2010-2013, reflecting the continued strategic importance to the EU of research, innovation and development work.

We commented that, whilst we recognised the importance of the ITER project, we shared the Government's concern about the use of unallocated margins. So before considering the proposal further we asked to hear from the Minister about developments in the Government's push for a more substantial proportion of the funding shortfall for ITER to be met through redeployment of funds within Heading 1a. Meanwhile the document remained under scrutiny.[11]

The Minister's letter

2.5 The Economic Secretary to the Treasury (Justine Greening) tells us now that:

  • UK officials continue to engage with their counterparts in other Member States, to encourage support for the Government's approach;
  • the Council's budget committee discussed the Commission's financing proposal on 6 September 2010 and a substantial majority of Member States had concerns about the proposal, specifically referring to the need fully to respect Council's call for the financing shortfall to be funded "primarily through redeployment within Heading 1a";
  • in addition the majority, like the Government, wished to see the entire funding shortfall addressed at once, rather than in a series of decisions as suggested by the Commission;
  • the Commission and the Presidency are now considering how to proceed towards a solution on this matter, given the negative view of Council on the Commission's financing proposal; and
  • the Government will continue to work hard, with Member States, the Commission and the European Parliament, to achieve its goals in the financing of the funding shortfall for ITER.


2.6 We are grateful to the Minister for this interim account of where matters stand on this document and look forward to hearing further about developments. Meanwhile the document remains under scrutiny.

8   See  Back

9   See  Back

10   See (31601) 9424/10 + ADD 1: HC 428-i (2010-11), chapter 27 (8 September 2010). Back

11   See headnote. Back

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