5 Funding: Multi Annual Financing
Framework
80. The European Commission's proposals for the
External Actions budget (Heading 4: Global Europe) of the Multi
Annual Financial Framework (MFF)—the EU budget—will
be negotiated over the course of this year and possibly into next
year. The Minister, Stephen O'Brien MP stated that:
The UK sees the EU external spending (Heading 4)
as a relative priority and will be arguing for a strong development
outcome in the negotiations with a focus on protection of increasing
the proportion of Official Development Assistance within a reduced
overall post-2013 EU budget.[83]
European Development Fund budgetisation
81. As part of the MFF negotiations comes the
long-standing debate on incorporating the EDF into the European
Commission budget (EDF budgetisation). While the European Commission
and the European Parliament have been proponents of budgetisation
in the past, the EU Member States' views diverge. The UK has traditionally
opposed budgetisation for the following reasons:
- Member States have more influence
over EDF decision-making than European Commission budget-financed
development cooperation.
- The poverty focus of the EDF would be put at
risk by integrating it into the European Commission budget where
funds have the potential to be diverted to different priorities.
- The EDF provides more predictable funding as
it is established for a six year period as opposed to the European
Commission budget which is approved on an annual basis by the
Budgetary Authority (the Council and the European Parliament).
However, the main argument against budgetisation
is the extra cost to some Members States as their shares became
based on a percentage of GNI rather than on voluntary contributions.
This would particularly affect new Member States whose contribution
would increase substantially. The UK contribution will decrease
slightly—by around 3%.
82. In this round of the MFF, the European Commission
has proposed to maintain the EDF outside the European Commission
budget. The reasons given for this are:
- this is the last EDF under
the Cotonou Agreement which expires in 2020. In the eight years
until the Cotonou Agreement ends, the ACP and the European Commission
can work on possible options for the future and plan for more
radical changes; and
- it is unlikely that a consensus between the Member
States in favour of 'budgetising' the EDF would be found.
Commissioner Piebalgs told us:
I know that politically it is more attractive to
look to the north of Africa and to the neighbourhood. I know it,
but I care that the people in the Solomon Islands, Nepal or Burkina
Faso get the money, and the EDF has clout as a poor country or
poor people instrument. In these times of austerity, I did not
want us, in the budget debate, to put away this issue as a secondary
one[84]
An overall amount of €30.3 billion (in 2011
prices) has been proposed for the next seven-year budget, a 13%
increase on the €26.9 billion (in 2011 prices) for the current
six-year budget (2008-13). The overall amount will need to be
agreed by all the Member States.
83. Like the Commission the UK Government has
also changed its position on EDF budgetisation: it is now arguing
for it to be budgetised but only under the following conditions:
— EDF
criteria on purpose and allocation is maintained;
— aid to ACP countries (and Overseas Countries
and Territories) is ring-fenced although it should be frozen at
2013 levels in line with the UK position of no real growth in
any area of European Commission expenditure;
— long term financing on a seven year basis
is ensured with regular reviews to allow for adjustments;
— the fundamental principles of the EU-ACP
partnership are protected with the focus on poverty reduction;
and
— the decision-making process is protected
with the EDF Committee - in which the 27 Member States are represented
- continuing to have the ultimate decision making power.[85]
84. We do not support the European
Development Fund (EDF) becoming part of the main European Commission
budget in 2014, six years before the expiry of the Cotonou Agreement.
EDF budgetisation should only be considered if: there is a shift
in European Commission budget funding away from middle income
countries to the poorest people and the poorest countries; it
can be used as a way to get other Member States to contribute
more; and there is thorough consultation with the ACP. The future
of the EDF should be discussed in parallel to the future of EU-ACP
relations.
Development Cooperation Instrument
85. The European Commission has proposed a 19%
increase in the Development Cooperation Instrument (DCI)[86]
in real terms, from €17.2 billion to €20.6 billion in
2011 prices, compared to a 13% increase in the EDF, from €26.9
billion to €30.3 billion. Commissioner Piebalgs explained
to us that the increase in the DCI was due to two new elements:
the fight against climate change; and the the EU-Africa partnership—supporting
action plans agreed at the EU/African Union summit.[87]
86. The Commissioner's assessment is reflected
in the reorganisation of the five previous thematic programmes
of the DCI (Non-State Actors, Food Security, Investing in People,
Environment, Asylum and Migration) into: Global Public Goods and
Challenges (where 25% of funding must go to climate change); Civil
Society Organisations and Local Authorities; and the Pan-African
programme.
87. In addition to the regrouping of the thematic
programmes there are further changes to the DCI. One proposal
is to simplify the programming process—country strategy
papers will be superseded by national development plans which
the European Parliament will no longer have a formal programming
role with. Instead the European Commission proposes consulting
an advisory committee of Member States. Another proposal is to
make the instrument more flexible to respond to evolving situations
by cutting out the legislative process for changing geographic
and thematic programmes and reducing it to a delegated act which
will just require consent from the Member States and the European
Parliament.[88] The final
proposal is that of differentiated development partnerships as
discussed in the previous chapter under An Agenda for Change.
88. In light of the results
of DFID's Multilateral Aid Review we are not convinced that the
Development Cooperation Instrument (DCI) should get a larger percentage
increase in its funding than the European Development Fund. We
recommend the UK Government negotiates for a smaller increase
to the DCI unless efficiency and effectiveness is significantly
improved.
The 0.7% target
89. In 2005 the EU and its Member States agreed
to achieve a collective target for Official Development Assistance
of 0.7% of GNI by 2015 and an interim target of 0.56% by 2010.
The EU missed its 2010 target, providing €53.8 billion of
development assistance (0.43%) missing the target by €15
billion.
90. A recent academic paper argues that, if EU
Member States are to meet the pledges they have made for 2015
then aid will need to roughly double. The paper maintains that
if the Commission is to keep its 'market share' of this target,
its aid would also need to double its spending and continue to
increase it throughout the period of the MFF.[89]
91. However this comes at a time of recession
in some EU Member States and with governments under pressure domestically
to reduce overseas spending. Some Member States have taken the
position that the European Commission budget as a whole including
the EDF should be reduced by €100 billion.[90]
Commissioner Piebalgs described the situation to the Committee
as "an uphill struggle" but one with which he "will
not admit failure because what gives [him]courage is the UK [achievement]".[91]
92. We asked the Minister what the UK was doing
to encourage other Member States to keep their promise to meet
the 0.7% target. The Minister replied that the most effective
means was leading by example.[92]
While the UK met its target for 2010 of 0.56% and is on track
to meeting its 0.7% target by 2013, other member states need to
improve. Although in 2011 a majority of members of the German
Bundestag expressed their support for the 0.7% target,[93]
Germany is still some way off meeting this target (currently 0.4%
of GNI); as is France, whose aid dropped (-5.6%) to 0.46% of GNI.
In other countries declines in ODA spending have been even greater.
93. We agree with the Minister
that the UK should continue to lead by example in making progress
towards the 0.7% target. It is only by meeting the target ourselves
can we continue to put pressure on other EU Member States to do
the same, particularly Germany, France and Italy.
83 Ev 77 Back
84
Q 112 Back
85
Information from informal meetings in Brussels with DFID /EU officials
Back
86
Development Cooperation Instrument (DCI) concentrates on Asia,
Latin America, the Middle East and South Africa as well as containing
a set of crosscutting thematic programmes which are applicable
to all developing countries. Back
87
Q113 Back
88
Gavas, Mikaela 'The European Commission's legislative proposals
for financing EU Development Cooperation', ODI, February 2012 Back
89
European Think-Tanks Group, The EU's Multi Annual Framework
post 2013: Options for EU development cooperation, June 2011 Back
90
Kilnes, Keijzer and Seters and Sheriff, More or less? A financial
analysis of the proposed 11th European Development
Fund, ECDPM March 2012 briefing note Back
91
Qq 88, 114 Back
92
Q 183 Back
93
Keeping our Promise! Appeal for a cross-bench development policy
consensus on the achievement of the 0.7% target http://entwicklungspolitischer-konsens.de/DP_Appeal.pdf
Back
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