2 Financial management
| (31839)
12614/10
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
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| Legal base | —; co-decision; QMV
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| Department | HM Treasury
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| Basis of consideration | Minister's letter of 30 September 2010
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| Previous Committee Report | HC 428-ii (2010-11), chapter 9 (15 September 2010)
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| To be discussed in Council | Not known
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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
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.
Conclusion
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 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2006:139:0001:0017:EN:PDF.
Back
9
See http://www.iter.org/. 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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