3 Multiannual Financial Framework,
2014-20
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(35096)
11295/13
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(b)
(35097)
11298/13
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(c)
(35098)
11307/13
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Draft Council Regulation laying down the Multiannual Financial Framework for the years 2014-2020
Draft Interinstitutional Agreement on budgetary discipline, cooperation in budgetary matters and on sound financial management
Draft Council Regulation laying down the multiannual financial framework for the years 2014-2020 and Inter-Institutional Agreement on budgetary discipline, cooperation in budgetary matters and on sound financial management: Draft Declarations
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| Legal base | (a) Article 312 TFEU and Article 106a EURATOM; consent; unanimity
(b) Article 295 TFEU; inter-institutional agreement; QMV
(c) —
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| Deposited in Parliament | 26 June 2013
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| Department | HM Treasury
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| Basis of consideration | EM of 27 June 2013
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| Previous Committee Report | None
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| Discussion in Council | 27 June 2013 (European Council)
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| Committee's assessment | Politically important
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| Committee's decision | For debate on the Floor of the House, together with a Draft Amending Budget for the 2013 EU Budget already recommended for debate[6]
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Background
3.1 In February the European Council reached agreement on
the Multiannual Financial Framework (MFF) for the period 2014-2020.[7]
Since then there have been negotiations with the European Parliament
to secure its consent to the proposals.
3.2 In May the Government informed us of two
documents, for which official texts were not available, setting
out the Irish Presidency's interpretation of the European Council
conclusions — they were proposals for a new Council Regulation
on the MFF and an Inter-Institutional Agreement (IIA) between
the three institutions. We heard that:
- the draft MFF Regulation was
to cover the key policies agreed at the European Council, including
the expenditure ceilings, expenditure instruments outside the
MFF and rules for the functioning of the budget;
- the draft IIA was to cover more technical aspects
of the budget, within the rules set out in the TFEU, including
mobilisation of instruments outside the MFF, the process for agreeing
annual budgets and cooperation between institutions in agreeing
the budget and individual instruments;
- some elements of the documents would change as
discussions progressed, reflecting negotiation with the European
Parliament; and
- the Government would be depositing the final,
formal documents for scrutiny in the normal way.
3.3 Whilst we cleared the documents from scrutiny,
we alerted the Government that we would be recommending the final,
formal documents for debate, probably on the Floor of the House.[8]
We also recommended that a Draft Amending Budget for 2013, DAB
No. 2/2013, should be included in the same debate, since its outcome
was tied to that of the MFF proposals.[9]
The documents
3.4 These documents are the Irish Presidency's
proposals for a new Council Regulation on the MFF, document (a),
the IIA between the three institutions on the MFF and budgetary
cooperation, document (b), and a set of accompanying draft declarations,
document (c). As described to us previously the draft MFF Regulation
covers the key policies agreed at the February European Council
and the draft IIA covers more technical aspects of the budget.
Four draft joint declarations cover own resources, duration, improving
effectiveness of public spending in matters subject to the EU's
action and gender-responsive elements. The two draft declarations
by the Commission cover national management declarations and review
and revision.
3.5 In addition to covering the key policies
agreed at the February European Council, the draft MFF Regulation
covers additional areas of agreement between the Council and the
European Parliament. Matters covered in the proposal include:
- budget ceilings corresponding
to the ceilings agreed by Heads of State and Government at the
European Council, that is a ceiling for commitment appropriations
of 960 billion (£820 billion) and a ceiling for payment appropriations
of 908 billion (£775 billion) (2011 prices);
- limits for 'off-budget' instruments outside the
MFF; that is the European Union Solidarity Fund, 500 million (£427
million) per annum, the Flexibility Instrument, 471 million (£402
million) per annum, the Emergency Aid Reserve, 280 million (£239
million) per annum, the European Globalisation Adjustment Fund,
150 million (£128 million) per annum and the Contingency
Margin (representing up to 0.03% of EU Gross National Income);
- maximum amounts for expenditure on large scale
projects within the budget, that is the European Satellite Navigation
Programmes (EGNOS and Galileo), €6.3 billion (£5.4 billion),
the International Thermonuclear Experimental Reactor Project (ITER),
2.7 billion (£2.3 billion) and the European Earth Monitoring
Programme (Copernicus) 3.8 billion (£3.2 billion);
- rules for the status of the Own Resources ceiling,
the rules for the annual inflationary technical adjustment to
the ceilings (as set out in the Treaty) and rules relating to
adjustment of the framework, including for Treaty amendment, enlargement,
Cypriot reunification and review of cohesion policy envelopes;
- rules for flexibilities between years and headings;
and
- provision for a mid-term review of the financial
framework by the end of 2016, which could be followed, if appropriate,
by proposals from the Commission for revision of the MFF ¯
this mid-term revision must be by unanimity in accordance with
the Treaty.
3.6 The draft IIA, document (b), covers more
technical aspects of the budget and the procedures for institutional
cooperation on budgetary issues, within the rules set out in the
TFEU. Part One covers provisions relating to updating forecasts
beyond 2020 and provisions relating to the running of instruments
outside the MFF. Part Two covers collaboration between institutions
in agreeing the EU budget each year, rules relating to expenditure
in fisheries agreements, financing of the Common Foreign and Security
Policy, collaboration between institutions regarding the European
Development Fund and cooperation of institutions on administrative
expenditure. Part Three covers financial management of the EU
budget, including rules relating to financial programming and
timing of the annual budgets and rules relating to agencies and
European schools. An Annex to the IIA gives further detail on
inter-institutional cooperation during the annual budget procedure,
including the calendar for the procedure, rules relating to the
draft budget, to conciliation and to amending budgets.
3.7 The first of the draft joint declarations
in document (c) concerns Own Resources. It does not alter the
2014-20 Own Resources system agreed by all Member States at the
February European Council. It sets out a process to carry out
a non-binding general review of the Own Resources system. As a
result of this work the Commission will consider if a new Own
Resource initiative is appropriate for the next financial framework.
Article 311 TFEU, cited in the declaration, is clear that any
decision to create a new own resource or abolish an existing one
will be taken unanimously by the Council, with a consultative
role for the European Parliament and subject to ratification by
the Member States.
3.8 The other declarations concern consideration
of the duration of the MFF (currently seven years) from 2021 in
relation to the five terms of the European Parliament and the
Commission, gender-responsive elements in EU budgets and various
aspects of better budgetary management.
The Government's view
3.9 The Financial Secretary to the Treasury (Greg
Clark) comments that:
- these documents are draft Presidency
compromise texts and are subject to further negotiation between
Member States and the institutions;
- the Prime Minister set out to Parliament in February
the Government's position on these ceilings[10]
— the payment limit is €80 billion (£68.30 billion)
lower than the original Commission proposal and €35 billion
(£29.99 billion) lower than the deal agreed in December 2005;
- the total of instruments outside the MFF in the
2014-2020 period is to be lower than that agreed for 2007-13;
- the February European Council conclusions indicated
that the final deal on the MFF legal texts should include some
flexibilities on how spending is divided between different budget
years and different areas of spending — the Government position
remains that this flexibility must be within the framework that
the Member States have agreed; and
- the Government position on Own Resources remains
unchanged — it will not sign up to anything that allows
any alteration to the UK abatement.
3.10 As for the financial implications for the
UK the Minister says that:
- the UK contribution to the
MFF is provisionally estimated to be 14.5% pre-abatement and 11.5%
post-abatement;
- the actual financial cost to the UK of the 2014-2020
MFF is contingent on the level of actual spending agreed through
the annual budget process and the distribution of spending across
programmes within the MFF;
- these factors determine the level of UK receipts
and also affect the size of the UK's abatement;
- while the actual amount that the UK contributes
depends on these factors, as well as economic performance and
exchange rates, as a result of this deal, the Government expects
that the UK's contribution to the EU will fall as a share of Gross
National Income; and
- the estimated impact of the February European
Council agreement on the UK's contribution was reflected in the
Office of Budget Responsibility's March 2013 forecast.
Conclusion
3.11 Following approval by the European Council
of the deal with the European Parliament secured by the Irish
Presidency,[11]
it has been endorsed by COREPER.[12]
But we understand that it will not be formally agreed by the Council
until accepted in plenary by the European Parliament, possibly
in September.
3.12 We now recommend that these documents
be debated on the Floor of the House. In addition to hearing of
any changes to the proposals in the documents made during the
final stages of negotiation, we suggest that Members will wish
to explore the value of the settlement reached and what it means
for the UK as a major contributor to EU budgets. As we have recommended
previously,[13]
given its connection to the MFF negotiations, Draft Amending Budget
for 2013, DAB No. 2/2013, should be debated at the same time.
6 (34805) 8041/13: see HC 86-xxxix (2012-13), chapter
3 (24 April 2013) and HC 83-iv (2013-14), chapter 2 (5 June 2013). Back
7
See the European Council Conclusions: http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/135344.pdf. Back
8
(34381) 15599/12, (34805) 8041/13, (34956) -: see HC 83-iv (2013-14),
chapter 2 (5 June 2013). Back
9
Op cit. Back
10
HC Deb, 11 February 2013,
cols. 569-591. Back
11
See http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/137634.pdf,
para 7. Back
12
See http://ue.eu.int/uedocs/cms_data/docs/pressdata/EN/genaff/137642.pdf. Back
13
Op cit. Back
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