4 EU General Budget 2014
| Committee's assessment
| Politically important |
| Committee's decision | Not cleared from scrutiny; For debate in European Committee B, together with the 2015 Draft Budget
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| Document details | (a) Draft Amending Budget for 2014: (36067), 10340/14, COM(14) 329;
(b) Draft Decision concerning finance for the Draft Amending Budget (36068), 10341/14, COM(14) 328.
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| Legal base | Article 314 TFEU and Article 106a EURATOM; co-decision; QMV
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| Department | HM Treasury
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Summary and Committee's conclusions
4.1 During the course of a financial year the Commission
presents to the Council and European Parliament Draft Amending
Budgets (DABs) proposing increases or reductions for revenue and
expenditure in the current EU General Budget. The Contingency
Margin is a mechanism set out in the Multiannual Financial Framework
(MFF) Regulation, which allows for mobilisation of 0.03% of Gross
National Income for all Member States to react, as a last resort,
to unforeseen circumstances.
4.2 With document (a), DAB No. 3/2014, the Commission
asks for an increase in payment appropriations of €4,738
million (£3,853 million) in 2014. These appropriations are
requested through two routes. First is a mobilisation of the Contingency
Margin by the draft Decision, document (b). The request for mobilisation
of the Contingency Margin is for the full potential amount available,
calculated by the Commission as €4,026 million (£3,274
million). The Commission proposes that the remainder of the payment
appropriations in this DAB come from the unallocated in-year margin
between the agreed budget for 2014 and the annual payment ceiling
set out in the MFF for 2014-20. The Commission specifies this
margin as €711 million (£578 million).
4.3 When we considered this matter in June we asked
to hear, before we would consider these documents again, from
the Government which of the significant proposed increases of
expenditure, if any, it thought justified, to what extent, if
at all, the Commission's case met the Contingency Margin requirement
of use only as a last resort in reaction to unforeseen circumstances
and whether it intended to oppose the proposals as a whole, or
only in part. Meanwhile the documents remained under scrutiny.
The Government now responds to that request.
4.4 We remain concerned that the Government's
claimed success in limiting budgetary increases is in danger of
being eroded. This is particularly so now that negotiation of
these proposals has been linked to that of the budget for 2015,
for which, as we show in another chapter in this Report, there
is already an unacceptable compromise tabled by the Presidency.
Accordingly, we recommend that these documents should be included
in the debate in European Committee B on the Draft Budget 2015,[12]
which we have recommended previously. Meanwhile the documents
remain under scrutiny.
Full details of the documents: (a)
Draft Amending Budget to the General Budget 2014: General statement
of revenue; Statement of expenditure by section: Section III —
Commission, Section VII — Committee of the Regions and Section
IX — European Data Protection Supervisor: (36067), 10340/14,
COM(14) 329; (b) Draft Decision on the mobilisation of the Contingency
Margin in 2014: (36068), 10341/14, COM(14) 328.
Background
4.5 During the course of a financial year the Commission
presents to the Council and European Parliament Draft Amending
Budgets (DABs) proposing increases or reductions for revenue and
expenditure in the current EU General Budget — there are
normally about ten DABs each year.
4.6 The Contingency Margin is a mechanism set out
in Article 13 of the Multiannual Financial Framework (MFF) Regulation.
It allows for mobilisation of 0.03% of Gross National Income for
all Member States to react, as a last resort, to unforeseen circumstances.
4.7 With document (a), DAB No. 3/2014, the Commission
asks for an increase in payment appropriations of €4,738
million (£3,853 million) in 2014. These appropriations are
requested through two routes: a mobilisation of the Contingency
Margin by the draft Decision, document (b), and from the remaining
"in year margin" between the agreed annual budget and
the 2014 ceiling set out in the MFF for 2014-20.
4.8 The request for mobilisation of the Contingency
Margin is for the full potential amount available, calculated
by the Commission as €4,026 million (£3,274 million).
Article 13 of the MFF Regulation requires that amounts made available
through the mobilisation of the Contingency Margin be fully offset
against the margins for current or future financial years. This
is to say that the mobilisation of the Contingency Margin and
the related offsetting measures have to respect the total payment
ceiling for the 2014-20 MFF period, €1,024 billion (£833
billion) in current prices, €908 billion (£739 billion)
in 2011 prices. Consequently, the Commission proposes reducing
the payment ceilings in the years 2018, 2019 and 2020 by three
equal amounts totalling the size of the Contingency Margin being
requested now.
4.9 The Commission proposes that the remainder of
the payment appropriations in this DAB come from the unallocated
in-year margin between the agreed budget for 2014 and the annual
payment ceiling set out in the MFF. The Commission specifies this
margin as €711 million (£578 million). As with the Contingency
Margin, the Commission is requesting these funds to cover a range
of requirements.
4.10 When we considered these proposals in June we
heard that the Government's view was that the Commission should
always look first to reallocate funds from within existing agreed
budgets to meet emerging in-year pressures, rather than coming
to Member States with requests for additional money. However,
we noted the Government had only commented in a very general way
on the Commission's proposals. So we asked, before we would consider
these documents again, to hear from the Government which of the
significant proposed increases of expenditure, if any, it thought
justified, to what extent, if at all, the Commission's case met
the Contingency Margin requirement of use only as a last resort
in reaction to unforeseen circumstances and whether it intended
to oppose the proposals as a whole, or only in part. Meanwhile
the documents remained under scrutiny.
The Minister's letter of 14 July 2014
4.11 In her letter of 14 July the then Financial
Secretary to the Treasury (Nicky Morgan) says first, in response
to our question as which of the proposed increases of expenditure
the Government thinks is justified, that it does not think that
the Commission is justified in requesting additional funding for
these measures at this time.
4.12 The Minister then describes how DAB No. 3/2014
can be broken down into three broad areas of expenditure, in part
recapitulating what she said in her Explanatory Memorandum, which
we drew on in our previous report on the documents. She says that
the most significant element of the DAB covers payments to be
made to Member States through the European Regional Development
Fund, totalling around €3.3 billion (£2.6 billion),
which sum is being requested to meet payments flowing from a higher-than-expected
value of claims from Member States in 2013.
4.13 The Minister, noting that the second element
of the DAB, coming to around €600 million (£500 million),
relates to a package of payments to be made in various programmes
under Sub-Heading 1a (Competitiveness for Jobs and Growth), says
that:
· the Commission states that this request
follows previous political commitments to "frontload"
the delivery of various projects linked to growth and jobs earlier
into the MFF period;
· the conclusions of the June 2013 European
Council set out plans for a "comprehensive approach"
to combat youth unemployment and boost investment; and
· these conclusions made some reference,
in very high-level terms, to the desire to frontload some spending
in these areas, although made no request for additional overall
spending in 2014.
4.14 The Minister says that the third element of
the DAB relates to payments overseas, covering €250 million
(£200 million) for Ukraine and €350 million (£280
million) for wider humanitarian aid. She says that:
· the Government supports EU spending in
these areas;
· specifically, it supported the proposal
for the European Neighbourhood Instrument (ENI) grant assistance
for Ukraine, to which this request relates, when it was put to
the Council in April;
· the Government does not, however, consider
that the request for additional funds included in the DAB is justified
at this time; and
· its view is that the Commission should
always look first to reallocate funds from within existing agreed
budgets to meet emerging in-year pressures, rather than coming
to Member States with requests for additional money.
4.15 The Minister comments further that:
· this principle applies to all areas of
spending within the DAB;
· for example, in supporting the request
for ENI grant assistance for Ukraine at the Council, the Government
issued the following statement: "The UK strongly supports
this European Neighbourhood Instrument assistance to Ukraine,
financed within the existing budgetary envelope agreed for Heading
4 of the 2014 EU Budget";
· the Commission published a press release[13]
on the disbursement of €250 million grant assistance to Ukraine
under the ENI on 13 June;
· this came just over two weeks after the
Commission's request for the exact same amount of additional financing
to Ukraine under the ENI as part of the DAB; and
· it would appear that the Commission has
been able to find this money, which will rightfully provide much
needed support to Ukraine, through a reprioritisation.
4.16 The Minister continues, in relation to the Contingency
Margin, that:
· the Government does not consider that
this request meets the criteria for mobilising an instrument defined
by Article 13 of the MFF Regulation as "a last-resort instrument
to react to unforeseen circumstances";
· first, with the exception of the expenditure
for Ukraine, it is unclear why these pressures should not have
been anticipated by the Commission in preparing the detail of
the 2014 Budget, which was finalised in November 2013;
· the Government is therefore sceptical
whether the Contingency Margin can be justified on the ground
of "unforeseen circumstances";
· more fundamentally, it disagrees with
the suggestion that the current circumstances merit the use of
the Contingency Margin as a "last resort instrument";
· the Government interprets "last resort"
as essentially once all alternative avenues have been exhausted;
· it does not think that the Commission
has exhausted all possible alternatives, such as reallocation
from other lines of the budget;
· in addition, this request is coming relatively
early in the year — this means that neither Member States
nor the Commission are in a proper position to make an informed
decision about the implementation of budget 2014, and therefore
whether such additional money is actually needed; and
· this adds to the Government view that
the current situation does not merit the deployment of a "last
resort instrument".
4.17 Finally, the Minister tells us that:
· the Government has put its views on this
DAB clearly and repeatedly to the Commission and other Member
States;
· it did this initially via a joint statement
to the Commission, agreed with seven other like-minded Member
States (Germany, France, the Netherlands, Denmark, Sweden, Austria
and Finland), ahead of the publication of DAB No. 3/2014;
· the key line in this statement, from a
UK perspective, is that the mobilisation would be "unnecessary,
premature and not a 'last resort' option";
· the Government has made these points this
subsequently in the Council Budget Committee and other meetings
and been supported by this group of Member States in doing so;
and
· as a result of this, the Italian Presidency
has indicated that the DAB will not be pursued imminently and
negotiations on it will be taken forward in the autumn alongside
those on the annual budget for 2015.
Previous Committee Reports
Fourth Report HC 219-iv (2014-15), chapter 5 (25
June 2014).
12 See (36139), -, (36140), -, (36141), -, (36142),
-: Fifth Report HC 219-v (2014-15) chapter 3 (2 July 2014).
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13
See http://europa.eu/rapid/press-release_IP-14-676_en.htm. Back
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