22 Multiannual Financial Framework 2014-2020:
revenue
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(35806)
5466/14
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(b)
(35807)
5467/14
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(c)
(35808)
5468/14
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Amended Draft Council Decision on the system of own resources of the European Union
Amended Draft Council Regulation laying down implementing measures for the system of own resources of the European Union
Amended Draft Council Regulation on the methods and procedure for making available the traditional, VAT and GNI-based own resources and on the measures to meet cash requirements (Recast)
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| Legal base | (a) Article 311, third paragraph TFEU and Article 106a EURATOM; consultation; unanimity
(b) Article 311(4), fourth paragraph TFEU and Article 106a EURATOM; consent; QMV
(c) Article 322(2) TFEU and Article 106a EURATOM; consultation; QMV
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| Deposited in Parliament | 17 February 2014
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| Department | HM Treasury
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| Basis of consideration | EM of 17 February 2014
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| Previous Committee Report | None
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| Discussion in Council | Possibly May 2014
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
22.1 The February 2013 European Council reached a
political agreement on the revenue side for EU budgeting in the
2014-2020 Multiannual Financial Framework (MFF). The agreed financing
system (the 'Own Resources' system) for the 2014-2020 MFF sees
very little change to the system in place for the 2007-2013 MFF
— there will be no new Own Resource, no EU-wide taxes and
no change to the UK abatement.
The documents
22.2 These Presidency texts to implement the European
Council political agreement replace the Commission's texts of
November 2011.[103]
22.3 The amended draft Council Decision, document
(a), is the final draft text for the so-called Own Resources Decision
(ORD) for the period 2014-2020. The ORD is the most important
document in this legislative package, as it sets out the general
rules for the financing of EU budget expenditure by Member States,
including the budgetary corrections.
22.4 The first amended draft Council Regulation,
document (b), is the final draft text laying down implementing
measures for the Own Resources system. It sets out the requirements
on Member States for the operation of the system and for the control
and supervision measures.
22.5 The second amended draft Council Regulation,
document (c), is the final draft text on the methods and procedure
for making available the traditional, VAT and GNI-based own resources
and on the measures to meet cash requirements. It sets out the
procedures for Member State financing of the annual EU budget
through the Own Resources system, including the arrangements for
the holding of an account into which contributions are made, specifying
the dates on which payments fall due and the penalties for late
payment.
22.6 Member States have provisionally indicated that
they are content with these texts, which are now being transmitted
to the European Parliament to fulfil its Treaty role, before returning
to the Council for formal adoption.
The Government's view
22.7 The Economic Secretary to the Treasury (Nicky
Morgan) comments that:
· the Government believes that this draft
Own Resources legislative package is acceptable;
· the draft ORD, document (a), is faithful
to the European Council deals on the 2014-2020 MFF that the Prime
Minister negotiated and accurately reflects what has been agreed
by the European Council;
· there is little change to the financing
side of the EU budget over the 2014-2020 MFF, particularly to
the language on the UK abatement; and
· the draft ORD text retains the existing
categories of Own Resources and does not introduce any new Own
Resources or EU-wide taxes to finance the EU budget.
22.8 The Minister then explains some of the detail
of the draft ORD, saying that:
· the Member States' "retention rate"
for Traditional Own Resources (TOR), which covers Member States'
collection costs for customs duties, is reduced from 25% to 20%
· this means a larger share of the budget
will be financed from TOR with a corresponding reduction in GNI-based
contributions;
· this change will, however, have no impact
on the ultimate cost of the EU budget to the UK;
· for the period 2014-2020, the draft ORD
re-introduces the reduced rate of call for VAT-based contributions
for Germany, the Netherlands and Sweden, which will be fixed at
0.15% for these Member States compared to 0.3% for all other Member
States;
· Austria, which benefitted from a reduced
call rate for its VAT-based contributions over 2007-2013, will
revert to a standard call rate (0.3%) over the 2014-2020 MFF;
· for the period 2014-2020 the draft ORD
also re-introduces reductions in the GNI-based contributions of
the Netherlands and Sweden and introduces a reduction in these
contributions for Denmark;
· these reductions constitute lump sum corrections
for these Member States and are fixed at €695 million (£570.9
million), €185 million (£152 million) and €130
million (£106.8 million) per year respectively;
· reductions in GNI-based contributions
of €30 million (£24.6 million) in 2014, €20 million
(£16.4 million) in 2015 and €10 million (£8.2 million)
in 2016 are provided also to Austria;
· all amounts are expressed in 2011 prices;
· the draft ORD lays down the Own Resources
ceilings for payment appropriations (1.23% of total Member States
GNI) and commitment appropriations (1.29%) and sets out the method
for calculating subsequent changes to these ceilings following
the introduction of European System of Accounts 2010 (ESA 2010)
by all Member States;
· the draft ORD retains the current mechanism
for the UK abatement and the way it is financed by the other Member
States; and
· several time-limited transitional provisions
in the abatement text have, as expected, been deleted, as they
expired at the end of 2013 (for example, the cap on the total
cost and phase-in schedule of the UK's rebate reduction in 2005).
22.9 The Minister notes that:
· the ORD requires unanimity in Council,
followed by approval by Member States in accordance with their
constitutional requirements (in the case of the UK, approval of
previous ORDs has taken the form of successive amendments to Section
1(2)(e) of the European Communities Act 1972 — most recently
by the European Communities (Finance) Act 2008);
· the European Parliament is consulted,
though its consent is not required; and
· the ORD will enter into force on the first
day of the month following receipt by the Commission of the final
notification of Member State approval, but will apply retrospectively
to 1 January 2014.
22.10 The Minister continues by briefly describing
the two draft Council Regulations accompanying the draft ORD,
noting first that there is a slight change from the current system
where almost all of the detail on implementation and making payments
to the Commission are set out in a single Implementing Regulation.
22.11 The Minister says that:
· the draft implementing Regulation, document
(b), contains elements of the current Implementing Regulation,
as well as elements of Council Regulation (EC, Euratom) No. 1026/1999,
which determines the powers and obligations of agents authorised
by the Commission to carry out controls and inspections of the
EU's Own Resources; and
· it sets out the requirements on Member
States for the operation of the Own Resources system and for the
control and supervision measures.
22.12 As for draft "making available" Regulation,
document (c), the Minister says that:
· it contains the remaining elements of
the current Implementing Regulation and sets out the procedures
for Member States financing of the annual EU budget through the
Own Resources system;
· these include the arrangements for the
holding of an account into which contributions are made, specifying
the dates on which payments fall due and the penalties for late
payment; and
· since this legislative proposal contains
in a single new act the bulk of the original legislative act (the
Implementing Regulation) and all the amendments made to it, it
is presented as a 'recast' of existing Regulations.
22.13 Turning to the financial implications of the
legislative package the Minister says that:
· the actual financial cost to the UK of
the 2014-2020 MFF is contingent on a number of factors, including
the size of each year's EU budget, distribution of spending across
programmes and Member States, implementation, miscellaneous revenues
of the EU (for example, fines and penalties imposed by the Commission
on private companies and Member States) and, most importantly,
economic factors such as relative growth performance and exchange
rates;
· these factors determine the level of EU
spend, relative economic sizes of Member States (which in turn
determine how the financial burdens are divided) and the value
of the UK's abatement;
· in relation to the 2011 amended Commission
proposal for Own Resources legislation,[104]
the UK's contribution to the 2014-2020 MFF was provisionally estimated
to be around 14.5% pre-abatement and 11.4% post-abatement;
· the proportion of TOR that Member States
keep to cover their collection costs is reduced from 25% per cent
of the amount collected to 20% — while this will affect
the UK's in-year contributions, it will not affect the ultimate
cost of the 2014-2020 MFF to the UK, when the abatement is taken
into consideration;
· this is because, through the abatement
mechanism, the UK does not derive any financial benefits or incur
additional costs due to any changes to the financing system of
the EU since 1984;
· this "not a penny more, not a penny
less" principle ensures that the ultimate cost of the EU
budget to the UK today is the same as it would have been under
the system that existed in 1984;
· various changes to the EU financing system
since then are reflected in adjustments to the calculation of
the UK abatement;
· for example, changes in the TOR collections
costs since 1984 are negated by "TOR windfall gains"
adjustments and the effect of the introduction of the Fourth Resource
(GNI-based contributions) on the cost to the UK are corrected
through the "UK advantage" adjustment;
· this approach and the underlying principle
mean that the UK will not be affected by the change in TOR collection
costs when the UK abatement is taken into account;
· the UK contributes to the annual GNI reductions
(lump sum corrections) for other Member States;
· this means that the UK will contribute
to the two new lump sum corrections (for Denmark and Austria)
which average at approximately €138.6 million (£113.8
million) per year for the two Member States over the 2014-2020
period; and
· on the basis of the 2011 estimates for
the UK's financing shares, these would cost the UK approximately
€20.1 million (£16.5 million) per year.
Conclusion
22.14 Given that this legislative package will
implement the European Council's agreement on the current Multiannual
Financial Framework, as it relates to revenue for EU budgets for
the period 2014-2020, we clear the documents. However, we note
that the agreed Own Resources Decision will require an Act to
amend Section 1(2)(e) of the European Communities Act 1972 and
suggest that Members will want to take that opportunity to examine
the Government's assertions in relation to the effects of the
Own Resources system for the UK during the period 2014-2020.
103 (33361) 16844/11 (33362) 16845/11 (33363) 16846/11
(33364) 16847/11 (33365) 16848/11: see HC 428-xlv (2010-12),
chapter 7 (20 December 2011), HC 428-lii (2010-12), chapter 11
(29 February 2012), HC 86-ii (2012-13), chapter 17 (16 May 2012),
HC 86-xi (2012-13), chapter 2 (5 September 2012) and HC Debs,
31 October 2012, cols. 295-346. Back
104
Ibid. Back
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