6 2012 salary adjustment for EU staff
(34206)
13327/12
COM(12) 476
| Commission Report on the exception clause (Article 10 of Annex XI of the Staff Regulations)
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Legal base |
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Document originated | 31 August 2012
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Deposited in Parliament | 7 September 2012
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Department | HM Treasury
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Basis of consideration | EM of 20 September 2012
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Previous Committee Report | None; but see (33018) 12919/11: HC 428-xl (2010-12), chapter 12 (2 November 2011)
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Discussion in Council | No date set
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Committee's assessment | Politically important
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Committee's decision | For debate in European Committee B
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Background
6.1 Each year the European Commission proposes changes to the
remuneration of EU institutions' staff pay, on the basis of a
calculation, known as the 'normal method'. The process for this
is set in legislation, the Staff Regulations, which set out the
terms of employment of EU officials.[13]
The parameters for this calculation have been established with
the intention of reflecting economic conditions and purchasing
power, including the evolution of civil service remuneration,
in eight EU Member States (including the UK).
6.2 Within the Staff Regulations, Article 10 of Annex
XI, hereafter referred to as the 'Exception Clause', allows the
Commission to put forward alternative proposals, departing from
the method when there is a serious or sudden deterioration in
the economic or social conditions in the EU, which the method
is not able to measure.
6.3 The Commission is responsible for determining
whether or not there has been such deterioration by assessing
objective data. In that context, in March 2012, the Council called
upon the Commission to make this assessment in preparation for
the 2012 salary adjustment.
6.4 In asking the Commission to undertake this assessment,
the Council noted that it had made the same request in 2011, and
that the Commission's decision that there was no sudden and serious
deterioration in 2011 and the Council's corresponding refusal
to approve the 2011 salary adjustment are currently the subject
of two court cases before the European Court of Justice. The
UK will be intervening in support of the Council Legal Service
in both cases.
6.5 Since the Council considered that the 'objective
data' used by the Commission in 2011 did not accurately reflect
the economic situation in the EU, it also requested the Commission
to take into account the number of Member States with an ongoing
excessive deficit procedure.
The document
6.6 In this report the Commission presents the third
assessment (since 2011) on the application of the Exception Clause,
on this occasion in relation to the annual salary adjustment for
2012.
6.7 The Commission recalls the principles underlying
the method and the legal interpretation of the Exception Clause
based on the judgment of the Court of Justice in Case C-40/10,
Commission v Council. The Commission then assesses the
economic and social situation of the EU from 1 July 2011 until
mid-May 2012, when the 2012 Spring European Economic Forecast
was issued.
6.8 In the judgment in Case C-40/10, the Court of
Justice stressed that the Exception Clause enables account to
be taken of the consequences of a deterioration in the economic
and social situation which is both serious and sudden where, under
the 'normal method', the remuneration of officials would not be
adjusted quickly enough. The Court clarified that the procedure
laid down in Article 10 of Annex XI to the Staff Regulations constitutes
the only means of taking account of an economic crisis in the
adjustment of remuneration and therefore of disapplying the criteria
laid down in Article 3(2) of that Annex.
6.9 The method thoroughly measures, through the principle
of parallelism, the relevant economic and social situation within
the EU, as reflected in decisions of Member States on the salaries
of national civil servants. The legislator carefully chose the
criteria to be taken into account for the adjustment of remuneration
and pensions; these criteria can be applied during both an upswing
and a downturn in the economy.
6.10 The Exception Clause is not an economic cycle
clause, the Commission says: it is therefore to be used only
when there are extreme developments in the EU and only if the
method is not able to measure them. It is not to be used whenever
the EU is in the downward phase of the economic cycle.
6.11 The Commission has used 15 indicators to assess
whether it is necessary to use the exception clause in 2012.
The last forecasts of DG ECFIN show that the EU economy is likely
to stagnate in 2012 (0.1% GDP growth) and the economic growth
will gain momentum in 2013 (1.3% GDP growth). Salaries in the
total economy are expected to increase by 2.1% in 2012 and 2013.
National officials and EU staff are expected to lose purchasing
power in 2012. Until the end of May, none of the Member States
had forecast a salary cut in the second half of 2012. The Commission
has also addressed the Council's request to examine the number
of the Member States in an ongoing excessive deficit procedure
and assessed the link of this indicator to government deficit
and public debt.
6.12 The report concludes that there has been no
sudden and serious deterioration in the economic and social situation
within the EU which could not be reflected under the normal method
during the reference period of 1 July 2011 to mid-May 2012, and
that it is not justified to submit a proposal under Article 10
of Annex XI to the Staff Regulations for the application of the
Exception Clause.
6.13 The Commission recalls that, in reply to the
difficult general economic context, it has already submitted a
draft proposal to the European Parliament and the Council which
would lead to significant savings in the next years and to even
higher savings in the long term. The proposal includes a new
and revised method as well as amendments to the mechanism of the
exception clause.
The Government's view
6.14 The Financial Secretary at the Treasury (Greg
Clark) deposited an Explanatory Memorandum on this report in Parliament
on 20 September. He says EU annual pay adjustments have important
implications for the overall staff costs of all EU institutions,
which in turn affect overall administrative costs in Heading 5
of the EU Budget. The Government is taking a very tough position
on EU administrative expenditure, reflecting significant efforts
to reduce public administrative expenditure domestically.
6.15 In particular, the Government is firmly against
any proposals for additional spending under Heading 5 in 2011,
on the basis that new requirements should be found through reprioritisation
and compensatory efficiency savings, including annual salary adjustments.
6.16 Each year Council has an opportunity to vote
on proposals to adjust the salaries and pensions of EU officials,
and the UK has continued to vote against all proposals which increase
remuneration. The Government supported Council's action to invoke
the Exception Clause in March 2012.
6.17 While recognising that the normal method reflects
the outcome of the process stipulated in the Staff Regulations
(taking data provided by Member States into account), given the
significant disparity in overall remuneration between EU and Member
States' officials, the Government has been clear that it does
not support further increases in remuneration for EU officials.
The overwhelming majority of UK civil servants earn significantly
less than the minimum salary for EU officials, while the majority
of EU officials earn very significantly more than the minimum.
6.18 The Government is therefore disappointed that
the Commission has reached the conclusion in its Report that a
divergence from the normal method is not warranted. The Government
considers that the Commission's analysis has not assessed the
'objective data' in the appropriate context; for example, the
report makes substantial use of speculative assessments of potential
future growth/employment, rather than robust factual data from
the period July 2011-July 2012, which is the period which should
be under consideration.
6.19 It is also disappointed that the number of Member
States with an ongoing deficit procedure was not appropriately
taken into account by the Commission.
6.20 The Government will raise its concerns in official-level
discussions, emphasising that all data under consideration should
be consistent in timescale and that future trends should not be
admissible. It cannot accept that the report is a valid analysis
of the economic and social situation in the EU as it currently
stands.
6.21 The Minister notes that the report is also an
additional demonstration of the failings of the current method
for adjusting EU officials' salaries, which are under review as
part of the ongoing negotiation on changes to the EU Staff Regulations.
The Government will continue to support the Council proposal
for an alternative method which would ensure the Council has genuine
political oversight of and input into any salary adjustments for
EU officials.
6.22 The Minister explains that the Commission's
report means that the Council will therefore be obliged to pay
the salary adjustment of around 0.9% for EU officials in 2013
(final figure to be calculated on the basis of data from Member
States). The 2012 and 2013 budget proposals have been prepared
on the basis of this adjustment.
6.23 That said, he considers it a likely option that
this report will lead again to legal action between the Council
and the Commission regarding the use of the exception clause,
as has happened for the last two years. Such legal action would
be the only recourse for Council attempting to successfully invoke
the exception clause at this stage.
Conclusion
6.24 We thank the Minister for his Explanatory
Memorandum.
6.25 As we have stated before, the wording of
Article 10 of Annex XI of the Staff Regulations, the Exception
Clause, as interpreted by the Court of Justice, appears to mean
that it can only be invoked in extraordinary circumstances, in
other words when there is a "serious and sudden deterioration"
of the economic situation in the EU where the principle of parallelism
can no longer be applied, rather than in periods of economic downturn.
Because Article 10 leaves it to the Commission to make that assessment,
it seems unlikely that the Council will succeed in impugning the
Commission's assessment before the Court of Justice in the absence
of flagrant omissions or distortions of the relevant economic
data.
6.26 We await with interest the outcome of the
applications before the Court of Justice on the 2011 salary adjustment,
and of the negotiations on the amendment of Annex XI (the methodology
for adjusting the salaries and pensions of EU officials), which
we retain under scrutiny. These negotiations appear to us to
offer the best chance of redressing the balance of institutional
control over the annual salary adjustments.
6.27 We recommend this document for debate in
European Committee B because of the political importance the Government
attaches to achieving a salary freeze for EU officials, together
with the European Court of Auditors' reports on EU staffing (documents
11964/12 and 13270/12) reported in the previous chapter.
13 http://ec.europa.eu/civil_service/docs/toc100_en.pdf. Back
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